The food crisis and financial meltdown
by Steve Wallis
On the 25th of February, the World Food Programme (WFP), the United Nations agency responsible for distributing aid from donations by governments around the world, announced a $500 million budget shortfall due to soaring fuel and particularly food prices. The prices of the staple food items distributed by the WFP had risen by an average of 40% since June last year.
Since making that announcement, the WFP reported that food prices had risen by another 20% in three weeks. The WFP had changed to buying food locally to cut costs, so this massive further acceleration of food inflation is particularly severe in the “third world” and probably reflects panic buying and the hoarding of food by those worried about rising prices and/or shortages in the shops. The only thing preventing food prices rising even more rapidly than they are already is poor people around the world consuming less because they cannot afford the higher prices or because of shortages.
The WFP only distributes aid to around 70 million people and obviously a huge number of people now require aid who previously didn’t, to avoid starving to death. Meanwhile, the WFP is warning that if it does not receive more government funding by the 1st of May, it might cut “the rations for those who rely on the world to stand by them during times of abject need”.
Food prices have risen sharply in the West too, albeit to a lesser extent due to the huge profit margins in the supply chain (by 17% in the last year for “a basket of staple food items” according to an article by Emma Lunn in the Business & Money section of the 23rd of March Scotland on Sunday newspaper). A Tory report has estimated that butter has risen 37%, a dozen eggs 34% and bread 28% in the nine months since Gordon Brown became prime minister.
The demand for food is massively outstripping supply, mainly due to a lot of land being used for biofuels (to supposedly reduce global warming) and people in some countries (such as China) consuming more meat and dairy products, both of which require much more farmland (by a factor of eight for meat) than that required for vegan diets. Additionally, there is a problem with a fungus destroying wheat, and floods and droughts are affecting harvests.
There have already been demonstrations and riots in many countries as a result of the food crisis. The challenge for political activists such as myself is to channel the anger of ordinary people in a positive direction, and to provide practical solutions. Abandoning biofuels may help a lot, but many will have to switch to wholly or mainly vegetarian/vegan diets, either voluntarily (which would probably only happen in a socialist society) or through compulsion by a form of rationing.
I called for a worldwide general strike in the run-up to the 2005 G8 summit in Gleneagles, Scotland, when the Make Poverty History campaign and Live 8 concerts made “third world” poverty a big issue. There is massive scope for coordinated strike action in many countries of the world this year, because food and fuel price increases are hitting ordinary (particularly working class) people in the West too.
Additionally, income tax has doubled for some low-paid people in the UK (with the abolition of the 10% rate in Alistair Darling’s first Budget, hardly mentioned in the media), and mortgage interest rates (for homes declining in value) are rising.
The New Labour government is attempting to get public sector workers to accept three-year pay deals at no more than 2.5% per year, not just because inflation is already much higher than officially recognised but because inflation is massively rising in these turbulent economic times.
We cannot wait until the time of the next G8 summit (in Toyako, Japan, from the 7th to the 9th of July); the crisis is getting exponentially worse and is unsolvable without overthrowing capitalism. I have written two very important songs mentioning the food crisis; recordings of both will soon be recorded by my new band Red Day: “Feed The World” (which may become a charity single) and “Global Warming Bluff”. In the meantime, you can read the lyrics at www.red-day.net.
The food crisis impacts the other major crisis of capitalism – the credit crunch. The problem to date has largely been of “subprime” mortgages (particularly but not just those in the USA), with flexible interest rates that massively increase after starting low, sold to people with poor credit records. However, some commentators have recognised that the collapse of the big US bank Bear Stearns shows that there is a crisis with other mortgages (called “prime”) as well!
A BBC TV programme on the credit crunch pointed out that people got caught out with subprime mortgages largely because mortgages are usually a fixed rate for their entire term, unlike in the UK where all mortgages have flexible interest rates that can be changed by banks and building societies. With (real) inflation going through the roof, many more financial institutions are bound to go to the wall.
Rather than just a slowdown, recession or slump, we are heading towards a massive possibly terminal crisis of unethical capitalism like in 1914. On that occasion, stock markets around the world were closed for several months to avoid a complete meltdown.
There will need to be a complete reorganisation of the world economic system to resolve the situation. Maybe there could be a more ethical form of capitalism, in which I would argue that rich people must pay their fair share of tax and there must be a fair electoral system as well as there being ethical approaches to farming, the environment, animals and poor people via fair trade. Maybe banks and building societies would return to concentrating on savings and loans.
I would argue however that there should be genuine democratic socialist societies, in particular countries if not throughout the world. What happens will largely depend on what ordinary people striving to change society do, as well as the effects of politicians, stock market investors and big businesspeople. Economists can’t model the free will of individuals, so their relatively optimistic economic forecasts are largely speculative and will be proven false by events.