Food Inflation Foments Political Unrest
3/17/11 Wall Street Journal
100%: The increase in anti-government protests associated with a 10% rise in global food prices.
Despotic leaders, entrenched inequality and new forms of communication have all played their roles in the political turmoil now shaking the Middle East. But new research by economists at the International Monetary Fund points to another potential contributor: global food prices.
Looking at food prices and instances of political unrest from 1970 through 2007, the economists — Rabah Arezki and Markus Brueckner — find a significant relationship between the two in low-income countries, a group that includes Tunisia, Egypt, Sudan and Yemen. To be exact, a 10% increase in international food prices corresponds to an added 0.5 antigovernment protests over the following year in the low-income world — a twofold increase from the annual average.
Given the recent trend in food prices, leaders of low-income countries — a group that also includes China — might have reason for concern. In February, global food prices were up 61% from their most recent low point in December 2008, according to the IMF. What’s more, the research suggests the effect of food prices has increased in recent years.
Wealthy nations such as the U.S. appear to have less to fear. The economists found no correlation between food prices and political unrest in high-income countries.
That said, not everybody in wealthy countries enjoys a high income. The 24 million American households in the bottom quintile by income, for example, spend an average of 35% of their after-tax income on food, according to the Labor Department. Over the past three months, the price of food in the U.S. has risen at an annualized rate of about 5%. That’s not as bad as the rise in global food prices, but still enough to make a lot of people angry.
blogs.wsj.com
my commnet: food production, processing, refrigeration, and transportation, all takes energy. High energy costs are a major contributor, to high food prices. For instance, because of high transportation costs, in areas of rural Alaska, milk is now $9/gallon. |
