The global price of food has risen again to a new high, breaking the records set in 2008. In Britain this matters, especially if you are on a low income or benefits. In the poorer parts of the world where nearly a billion people are hungry it becomes a matter of life and death. The reason is simple – we must have food to live. This is why food prices are politically explosive, including in the upheavals in the Middle East. The lower your income, the more you must spend to buy food to survive. For the very poor perhaps 50 to 60 percent of their income goes this way – and if times get really bad it’s 100 percent.
Economists call this Engel’s law. This has nothing to do with Marx’s collaborator but rather refers to his contemporary Ernst Engel, who studied what happened to workers’ spending in his era when prices and incomes changed. Writing in the mid-19th century he was also aware of what happened in the countryside as prices changed and how famine, such as that in Ireland in the 1840s, could kill millions.
But why have prices risen? For the right wing the answer is that there is too much demand caused by too many people. But this is wrong. In the 1840s Ireland exported grain while people starved. The same thing is happening today. Think, for example, of the flowers in British shops. Grown, cut and packed in countries like Kenya and India, they arrive here two to three days later. These are countries where malnutrition is widespread and food riots have occurred – but the priority is to grow profitable flowers, rather than desperately needed food.
The world’s population is larger than ever before – but so is world food production. Indeed the surplus potentially available is greater than it has ever been. Some claim that the equivalent of twice the minimum nutritional level for everyone in the world is already being produced. And with world transport and storage better than ever, it should be easy to overcome any local shortages, or even out shortfalls in one year with stocks accumulated in good times. After all, this was a policy recommended in the Old Testament to the Egyptian pharaoh by Joseph.
So what is going wrong? “The global food system is broken,” say Oxfam. They are right, but the system has always been perverse. What makes it this way, what stands between production and consumption, is capitalism and the drive for profit.
Most people imagine that the global food system is based on markets and that the buying and selling that goes on there has something to do with the economics taught in schools and colleges. But this is not the case. Billions of people consume and a couple of billion still scratch a living alongside the big farmers, but in the middle, with a stranglehold on the “market”, are the giant agribusinesses. It’s not just their critics who say this. Dwayne Andreas, the boss of Archer Daniels Midland – one of the global giants – said in 1995, “There isn’t one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians.”
Not so free markets
The figures on the concentration of power in world food production are shocking for those who believe that capitalism is about free markets and broad competition. Farmers need inputs like seeds, fertilisers, tools and machinery. The production of each of these is now controlled by a small number of multinationals. Six firms dominate 75 percent of global agrochemical production and four dominate 50 percent of seed production. Four giant companies, known as ABCD, after their initials, dominate much of the world trade in basic foodstuffs – Archer Daniels Midland, Bunge, Cargill and Dreyfus. They are the invisible giants controlling perhaps 90 percent of global grain trading. Cargill, the biggest, has a turnover of around $115 billion. By this measure, it is the world’s largest private company. This means that it can hide much of what it does from prying eyes. But its eyes are everywhere. It boasts of using the latest satellite imagery to track the global harvest. Cynics say that this scale of business intelligence operations matches that of the CIA.
Other output is taken by the giant food processing companies – Kraft, Nestlé, Altria (once Philip Morris) and Unilever. Three companies buy up 80 percent of the world’s cotton. Another three buy 80 percent of its bananas. Ninety percent of tea goes through the hands of six or seven companies. The third type of player is the big supermarket chains – the likes of Walmart and Tesco which all now have direct links to producers all over the world.
Add up all the companies involved across the globe and you get a few hundred which dominate. And for good measure these companies route much of their activity through tax havens of one kind or another.
The biggest profits come not from producing the food but from processing it and producing the ready meals, cans, fizzy drinks, sweets and so on that we are encouraged to buy. Billions are spent each year trying to create new foods and to encourage us to consume them. This system is spreading across the world as supermarket chains have rushed to take over the retail sectors in new towns and cities in Latin America and Asia. But much of what we buy ends up in the dustbin. The rest, which we rush to heat up, contributes to our increasing waistlines. Despite what some call the “food pornography” on TV, we are cooking less fresh, healthy food than ever before.
While supermarket shelves boast ever-increasing varieties of prepared foods, 75 percent of the diversity of real agricultural crops has been lost in the last century. This is because agribusiness demands standardisation so it can buy and sell everywhere. Cargill, for example, has boasted, “We are the flour in your bread, the wheat in your noodles, and the salt on your fries. We are the corn in your tortillas, the chocolate in your dessert, and the sweetener in your soft drink. We are the oil in your salad dressing and the beef, pork or chicken you eat for dinner. We are the cotton in your clothing, the backing in your carpet and the fertiliser in your feed.” Nonetheless, if you can push up the price by pretending that you have a superfood – that this yoghurt contains special healthy bacteria or that this packet of frozen food contains organic vegetables – then so much the better.
But it is not just big business that is at work here. States are working hand in glove with corporate power. Global production is distorted by huge subsidy regimes, in which most money goes to big farmers and the big agribusinesses. Pass a field of cows and you will see animals enjoying a daily European Union subsidy that enables them to be better supported than most of the population of Africa. Look at a field of wheat – the British subsidy is perhaps £100 an acre. When Tate & Lyle dumps sugar on the world market it gets government help. When Gate Gourmet puts sugar and milk on planes for tea and coffee for passengers it even gets rewarded for exporting.
The problem in the poor world
From the 1970s to the 1990s the number of hungry people seems to have declined from around 870 million to 770 million. Food was cheaper, enabling the standard of living of many of the poorest to creep up. It seemed possible at the 1996 World Food Summit to commit to halving the numbers of hungry people by 2015. That promise is now forgotten. In the next decade and a half the numbers of the hungry rose, hitting one billion plus in 2009 and again in 2011.
A big part of the explanation for this is that the commitment to reduce hunger was based on the idea that we should trust to big business operating in markets that it helped to rig. Poor countries would improve their lot by growing crops for export. Investment would come from multinationals and big farmers within the poorer countries, and small farmers and peasants would give up and move to a better life in the towns. Accordingly agricultural development aid was cut back. Its share of total development aid was reduced from 20 percent to 4 percent.
But this argument did not apply in the advanced countries which helped to set the rules. In Europe and North America subsidies have risen to some $250 billion – 70 times the assistance given to help farming among the world’s poor.
An increasing number of poor countries today are net importers of food, usually from the rich countries. In fields near me in the Midlands beans are growing that will be exported to Egypt and the Middle East to feed animals and people. By 2050, if current trends continue it is estimated that 70 percent of the world’s population will live in food deficit countries. This has nothing to do with production capacity. The decline in the amount of land given over to producing basic food crops is a product of the perverse way in which the drive to export crops works.
The boss of Cargill set out the logic: “There is a mistaken belief that the greatest agricultural need in the developing world is to develop the capacity to grow food for local consumption. This is misguided. Countries should produce what they produce best – and trade.” This could mean food, but it will often be fruits, vegetables or “exotic” produce for Tesco, Asda or Sainsbury’s. It could mean soya bean production for animal feed or cooking oil, or the palm oil which fills out processed foods. It can also mean non-food crops like biofuels and flowers. These export crops are now where the bulk of research into agricultural improvement grows.
At the same time local production in poor countries is undermined by dumping the subsidised surpluses produced in the rich countries onto the world market. Sugar, milk, even meat for canning undermine local unsubsidised production, which may in fact be more efficient in strict economic terms. This produces a situation where some in the countryside work for export production (often seasonally) while others hang on trying to produce for local markets. The irony is that 80 percent of the world’s poor live in the countryside, close to the food – but without the means to buy it. Here the world looks very different. “Being rich”, said one peasant, “means having enough food for the whole year.”
Breaking this cycle is also hard because the terms on which exports come into the advanced world are set by governments there and agribusiness lobbies in such a way as to protect their businesses through the use of tariffs and other barriers to trade. The message is that we will import your raw materials and unprocessed foods but tax whatever you make yourself.
Now add in speculation. Some agricultural markets have always been known for their price swings. But now sharp rises and falls are apparent in trading wheat, maize, rice and other basic foodstuffs. Economists are divided on why this is. Supporters of the market deny that speculation can make much difference. They claim that price changes are a product of real shortages and surpluses and they even get support from more critical economists like Paul Krugman.
Others insist that speculation is growing in importance. Sixty percent of global food stocks are controlled by big business. When you speculate you purchase not only output produced now but also what are called futures – you get contracts for the output next year or the year after. You hope to buy cheap and bet on selling dear. This has always been done by big traders, but in the last decade we have seen money piling into commodity funds as the economic situation has looked more uncertain. Hedge funds and investors are now looking to food because they hope it is “crisis proof”. Governments can then push prices higher when fears of shortages lead them to panic buy, to stockpile or to introduce restrictions on trade.
Nor is it just about buying up crops. Land grabs are occurring across the world both by companies and by states like China which want to ensure their own future supplies. Even in Britain land is big business. A few years ago bankers were using their bonuses to make lifestyle purchases of rural land in areas like East Anglia. Now they are using them to buy land as an investment – it’s “like gold with a cash flow”, said one land agent.
These price swings make it hard for farmers to know how much to plant for the next year. They also make it hard to know what to plant because some crops are interchangeable. The likelihood is therefore for instability to grow rather than diminish in the future.
Hunger and plenty
Despite a rash of pessimistic reports about the food crisis, the problem we really face is that we have allowed a system to develop where there is “hunger amidst plenty”. World population growth is slowing and it is predicted to stop by mid-century. What we need is to take control of the food system. This will enable us to deal with the wasteful system in the rich countries but also to increase production in the poor ones.
The focus on increased output in the Global South has to be here because this is where the potential to increase output is the greatest. But most of all we need to rescue the two billion people who depend on some 500 million small farms for all or parts of the livelihoods from the perversities of global capitalism.
In the long run socialists look forward to a world of plenty built on the greatest economy of human labour. But we are a long way from that. For now, pouring more into big farms in rich countries or the huge estates and ranches in poor ones makes little sense. Where small-scale agriculture is important more modest attempts to assist in building irrigation, introducing better techniques, seed strains, fertilisers and so on, and encouraging forms of agricultural cooperation, offer real prospects for change. But piecemeal action along these lines can never be enough. To be effective agribusiness needs to be dethroned. The real change will only come when the power of those running the system for the purpose of profit is challenged.
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