Monday, May 19, 2008

The Silent Tsunami

The April 19 - 25, 2008 issue of The Economist had a cover story on the food crisis - "The Silent Tsunami" is how they titled it. It's based on "a wave of food-price inflation moving through the world." Here is the setup in some of the poorer countries in the world:

The middle classes in poor countries are giving up health care and cutting out meat so they can eat three meals a day. The middling poor, those on $2 a day, are pulling children from school and cutting back on vegetables so they can still afford rice. Those on $1 a day are cutting back on meat, vegetables and one or two meals, so they can afford one bowl. The desperate - those on 50 cents a day - face disaster.
That is pretty amazing that this is still going on in the world. But what is happening due to the food-price inflation is very disheartening:

Roughly a billion people live on $1 a day. If, on a conservative estimate, the cost of their food rises 20% (and in some places, it has risen a lot more), 100m people could be forced back to this level, the common measure of absolute poverty. In some countries, that would undo all the gains in poverty reduction they have made during the past decade of growth.
Where are these areas though, that are in risk of this major decline?

The starting-point should be that rising food prices bear more havily on some places than others. Food exporters, and countries where farmers are self-sufficient, or net sellers, benefit. Some countries - those in West Africa which import their staples, or Bangladesh, with its huge numbers of landless laboruers - risk ruin and civil strife.
But what is causing these rising food prices? The May 10 - 16th, 2008 issue of The Economist has one person's theory:

India's finance minister said that biofuels and speculators were responsible for soaring food prices and criticised the practice of converting land use from food to palm oil production...Earlier, George Bush upset some Indian politicians by suggesting that the country's increasing prosperity was a factor behind rising prices.

Maybe this should serve as a reminder that things are very bad outside of where we are. I heard about a website that has a setup that allows the individuals to make micro-loans to people in these developing countries. When I find that site, I will post it.

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