Food Riots and the Arab Spring
The Economics behind an uprising
In early 2011, the world witnessed an unprecedented wave of political uprisings in the Middle East known as the Arab Spring, protesters marched from Tunisia to Egypt to Yemen demanding the toppling of their regimes along with freedom, equality, and bread.
Some were successful in taking down their dictators to later on establish democratic states with free elections for the first time in decades. Others countries, or most of them plunged into an all-out civil war that still plagues the area to this day.
Obvious reasons that ignited the uprisings across the Middle East include high levels of corruption, police brutality, no real political freedoms, low levels of income along with high-income inequality, high levels of youth unemployment, and last and least authoritarian regimes.
“If you want to predict where political instability, revolution, coups d’état or interstate warfare will occur, the best factor to keep an eye on is not GDP, the human development index, or energy prices.
If I were to pick a single indicator — economic, political, social — that I think will tell us more than any other, it would be the price of grain,”
says Lester Brown, president of the Earth Policy Institute.
The first major warning of what came to be a food crisis appeared in the form of a briefing paper on the website of the UN’s Food and Agriculture Organisation in December 2010 with the headline “Recent bouts of extreme price volatility in global agricultural markets” it said,
“portend rising and more frequent threats to world food security. There is an emerging understanding that the global food system is becoming more vulnerable and susceptible to episodes of extreme price volatility. As markets are increasingly integrated in the world economy, shocks in the international arena can now transpire and propagate to domestic markets much quicker than before.”
The “shocks” occurred a long way from Cairo and Damascus.
They included fires in Russia in 2010 autumn which wiped out hundreds of thousands of acres of grain; heavy rains in Canada, destroying the wheat crop there; hot, dry weather in Argentina which destroyed the soybean crop; the Australian floods which ruined the wheat harvest, and even the Middle East’s wheat production was down due to yellow dust. However, the Middle East accounts for one-third of worldwide wheat imports.
The combined effect of these far-flung agricultural problems was to bump up the food price index by 32 percent in the second half of 2010. In simple words, the FAO likens “extreme price volatility” to great natural disasters — major earthquakes, tsunamis, catastrophic cyclones.
The good, the bad, and the ugly side of globalization
By checking the FOA’s (Food and Agriculture Organization of the United Nations) global food price Index or FPI (A measure of the monthly change in international prices of a basket of food commodities) we could observe a major surge in the food price index in 2008, then followed by the highest ever increase in the index in the last 40 years in 2011.
The FPI was at 127 in 2007 rising to 201 in 2008, in 2010 the FPI was at 188 rising to its highest level ever in 2011 at 230.
that included corn price increasing by Up to 63% and wheat, an essential component of everyday diet in the Middle East increasing by up to 84%.
Other reasons for the inflated price include a failed wheat harvest prompted Russia to ban grain exports through the end of the year. Later in August, the ban was extended through the end of 2011. A global decline in corn production in 2010–2011, due to Midwest floods and dry weather in both the United States and Europe.
Droughts occurred between 2007–2011 including countries like Russia, Ukraine, China, Argentina, along with torrential storms in Canada, Australia and Brazil, all major wheat and grain producers, considerably diminished global crops, driving prices up.
In developing countries changing diets and the increased demand for meat products created an upward pressure causing an increase in cereal prices. Developing countries’ growing populations and rising GDP which stood at 7.6% higher in 2010 than in 2009 boosted heir inhabitants’ demand for meat products, which in turn increased their demand for imported meat by 6.5%. Since additional livestock production requires more cereals for animal feed (particularly corn, wheat, barley, and soy), cereal prices came under upward pressure. An increase in ethanol production which created a downward pressure on corn availability, which in turn resulted in higher corn prices, the increase in limited surface area of land devoted to agricultural use, weather conditions, exchange rates in which a positive relationship has been established between the price of cereals, especially corn and wheat, and U.S. dollar exchange rates.
Cereals are bought and sold in U.S. dollars because of the size of global corn and wheat exports from the United States. As a result, an appreciation of the U.S. dollar leads to increases in the price of cereals in the world market. A Surge in oil prices that increased the cost of production and the cost of transportation for agriculture products, and trade speculation in 2008, in which studies have shown a positive correlation between stock market values and the price of food in the wake of the U.S. real estate market collapse. The study also showed a positive correlation between the 2008 financial crisis and the spike in food prices. According to this view, the relationship between stock transactions and the rise in food prices results from investors turning to other markets, and particularly the agricultural commodities futures market, following the U.S. real estate market crash. All these factors combined contributed to the rise of food prices in 2011.Don Coxe A farm commodity expert in BMO, said in 2010
“ When we have the first serious crop failure, which will happen, we will then have a full-blown food crisis” one far worse than 2008. When it comes”
The politics of hunger
After a food price shock in the late 1970s, prices dropped heavily during the early and mid-1980s. A combination of factors lead to a slowing global economic growth, which in return affected the spread of the “green revolution,” which then improved the efficiency of agriculture in developing countries; and contributed to the falling price of oil.
According to Argentinian economist Eugenio Diaz-Bonilla.
“The Soviet Union, which was a net exporter of commodities, was hit hard economically, and by the end of the decade was near collapse. Growth diminished for a decade in Latin America, where most economies are based on agriculture. Dictatorships were overthrown in Ecuador, Argentina, Brazil, Uruguay, and Chile. African countries entered a period of economic stagnation and civil unrest. The emerging tigers of East Asia, meanwhile, such as China and South Korea, benefited from low prices on the food they import.”
Recently, two events re-captured the attention to the relationship between food prices and political risk.
The first was the 2007–08 food crisis, which triggered food riots in countries from Haiti to Bangladesh to Mozambique. A streak of farming crises in early 2008 led to a similar “extreme price volatility in global agricultural markets” which ignited food riots in more than thirty-nine countries, from Haiti to Mexico to Eritrea. All countries were categorized among eighty countries around the world that have both low incomes with food deficits. Most of these countries are major food importers, which brings risk and vulnerability to a wildly fluctuating world market price. In these low-income / under-developed countries, food purchases can make to 70% of an individual’s basic income. The result, when prices of grains increase by 30%+ is extreme distress, volatility, and vulnerability to uprisings and civil disorder. Abdolreza Abbassian, FAO’s chief economist said back in December of 2010.
“It’s getting a little bit uncomfortable. A lot of countries, especially the poorer ones, must rely so much on world markets. They have to import food at much higher prices. Whether or not this will lead to domestic problems, turmoil, demonstrations, riots, the kind of things we saw in 2008, it is not possible to predict.”
The second was the Arab Spring, the first signs of which were riots in response to high food prices in Algeria and Tunisia.
An authoritarian, an autocrat, and a food shortage walk into a developing country
With today’s heavily integrated and inter-wined global economies, any shock can start a butterfly effect that brings with it political risks and economic vulnerabilities across the globe, making no place immune to any wave of rebellion because globalization is a fact.
An upset in one place quickly translates into fury in another. Looking back twenty years ago when grain production collapsed in the Soviet Union during the 1980s which was one of the world’s greatest grain exporters became a net importer, it resulted in waves of anger and frustration that brought down the whole Communist system within a couple of years but just stopped there. Today damage control is limited, and thanks to digital communications, events happen at an exponential pace relative to other times.
Food, of course, is never the sole driver of instability or uprising. Corruption, a lack of democracy, ethnic tension are all known factors that may be critical, but food is often the difference between an unhappy but quiet population and one in revolt.
Venezuela is a live example, a decaying combination of un-wise polices of gas subsidies, currency controls, along with high levels of corruption led to a severe food shortage, a major catalyst inspiring the anti-government protests that have taken over the country since June 2010.
To understand more the politics of subsiding food prices, it’s important to understand the incentives behind it.
Authoritarian governments have a habit of maintaining food and fuel prices “artificially “low through subsidies and price controls. Without a safety net to lean on, this could leave governments highly vulnerable to political risk if the subsidies were removed.
As Cullen Hendrix frames it, a political scientist at the University of Denver’s Korbel School of International Relations and a leading figure on the relationship between food and conflict.
“Rational leaders have an incentive to cater to the preferences of urbanites. They are closer to the center of power, they face lower costs for collective action, they live in dense environments in which protests are particularly threatening to a leader. So what do these people want? They want cheap food. If you’re the dictator of a small, rich country, you can theoretically feed your population indefinitely.”
In 2011, while the Arab Spring was taking over the region, oil-rich Kuwait announced that it would commemorate the anniversary of the country’s liberation from Iraq by giving every citizen a grant of 1,000 dinars ($3,545) and free food for 13 months.
Saudi Arabia’s King Abdullah, on the other hand, tried to sedate his people into compliance by ordering $35bn to be spent on infrastructure, housing, social services, and education along with a development fund that helps Saudis buy homes, get married and start businesses. The message to citizens was clear and hard to disapprove with locally.
Egypt however, the most populous country in the Arab world doesn’t have a significant amount of foreign reserves or oil reserves; its rulers do not have options like that of their rich neighbors. Egypt has had its fair share of history food-based instability, In 1977, under global pressure for economic reform from the IMF and the World Bank, Anwar Sadat cut 227m Egyptian pounds worth of subsidies. These cuts resulted in the first major uprising after the end of the Monarchy rule. Back then, the riots which were better known as the “bread intifada,” saw strikes, riots, and chaos take over the country; lasting for three days and killing around 800 people. EL-Sadat eventually turned around on his policies and re-instated some of the subsidies back on.
By 2011, food and fuel subsidies accounted for a staggering 8 percent of Egypt’s GDP, standing at 44% of total government expenses. By then Mubarak’s regime wasn’t able to sustain taming his population into submission. Even with subsidies, grain prices jumped 30 percent in Egypt between 2010 and 2011, bread price rose up to 37% while Egypt’s annual food price inflation continued and had hit 18.9%, the uprising then began in January 2011.
The literature behind predicting riots
In a paper published by New England Complex Systems Institute in Cambridge’s Marco Lagi, Yavni Bar-Yam, Karla Z. Bertrand, Yaneer Bar-Yamin 2012 called “The Food Crises and Political Instability in North Africa and the Middle East”.
They claimed to have found a single factor that seems to trigger riots around the world. And that factor is as you might have imagined, yes, it’s food prices!
The authors argue that when food prices rise above a certain threshold, social dis-order and unrest sweeps. Their evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause. The result is the graph above. It shows that when the food price index rises above a certain threshold they identified, the result is a breaking rippling effect around the world. The notion is very simple, Individual’s become desperate when food is unobtainable. When people cannot feed themselves or their families, anarchy spreads.
What’s catchy about their analysis is that they demonstrate that high food prices don’t necessarily trigger riots themselves, it simply creates the fertile ground that allows social unrest to flourish, given and controlling for all and other factors of course.
“These observations suggest that protests may reflect not only long-standing political failings of governments but also the sudden desperate straits of vulnerable populations. These observations are consistent with a hypothesis that high global food prices are a precipitating condition for social unrest,”
What’s even more intriguing that On 13 December 2010, the group wrote to the US government to warn out that global food prices were about to cross the threshold they had identified. Four days later, Mohamed Bouazizi set himself on fire in Tunisia in protest at government policies, an event that triggered a wave of social unrest that continues to spread throughout the middle east today.
That leads to an obvious thought, if high food prices affect social unrest, then reducing the prices should stabilize the planet. However in a different paper (Listed on Tweetmap of “Top Scientific Discoveries of 2011) also by the same authors, they found two main factors have driven the increase in the food price index.
The first is traders speculating on the price of food, a problem that has been exacerbated in recent years by the deregulation of the commodities markets and the removal of trading limits for buyers and sellers. The second is the conversion of corn into ethanol, a practice directly encouraged by subsidies.
In another paper published by Aicha Coulibaly from the Canadian Library of Parliament in 2013 to understand the causes and impacts of food prices in 2010–2011. Aicha concluded by stating that the food prices increase was caused by changing diets in developing countries, ethanol production, reduction in the surface area available for agriculture, which of course lowers the supply and increases the price. Other factors included were weather conditions, fluctuating exchange rates, oil prices, and trading speculation.
“ When commodity prices hit local markets, they reduce consumer purchasing power and can compromise the food security of people with unstable incomes. Higher prices also contribute to social unrest such as the events of the Arab Spring in 2011 and disrupt countries political instability and geopolitical relations in affected regions.”
So where does that leave us now and what does a world of permanently expensive food mean for global politics?
Most probably as globalization keeps on dominating the global economy, it will lead to more global instability in countries that are already among the world’s conflict hotspots.
A World Food Program report in 2011, co-authored by Hendrix, stated that
“Sixty-five percent of the world’s food-insecure people live in seven countries: India, China, the Democratic Republic of Congo (DRC), Bangladesh, Indonesia, Pakistan, and Ethiopia, of which all but China have experienced civil conflict in the past decade, with DRC, Ethiopia, India, and Pakistan currently embroiled in civil conflicts.”
If there’s a winner in a world of scarce and expensive food, it’s likely to be the United States. America is the world’s undisputed food superpower, the Mecca of grain.
Lester Brown notes that Iowa alone grows more grain than all of Canada, while the United States grows more soybeans than China. And due to generous federal subsidies for ethanol, the United States isn’t even growing nearly the amount of food it could or should.
On the other side of the globe, the Arab Spring may very well become a textbook example on the relationship between food price volatility and political risk/social instability. A relationship that paints the geopolitics of food prices, in which uncertainties, risk driven markets, and economic globalization could lead to social unrest.