What you probably do not know about China’s food crisis
With the support of modern media and the Internet, we are well-informed about the state of the world. But perhaps not so well-informed as we believe. In The Myth of Grand Strategy I state
It is hubris to believe that any person or small group has sufficient information to develop a plan on a global scale. There are too many complex, unknowable factors. Social factors, such as ethic and religious dynamics. Plus economic, military, and political factors. We lack the understanding to process the data into accurate patterns – a plan. That requires a science of sociology developed to the degree of modern chemistry, so that we could reliably predict results of our actions. Unfortunately sociology is at the stage of chemistry in the Middle Ages, when it was called alchemy. In fact, the yearning for a grand strategy is the equivalent to the search for the Philosopher’s Stone.
Here is a small, brief test. The global food crisis is front-page news. How well-informed are you? Here are a few questions, based on the Bank Credit Analyst report “Is China Running into an agricultural dead end?” (16 April 2008).
1. As China emerges from poverty and famine, their consumption of of food is low compared to the global average. True or False?
… average Chinese household consumption of various agricultural products is already very high. Home to 19% of the world total population and with per capita income at 25% of the global average, China consumes 50% of global pork production, 30% of rice, 28% of fish and 26% of soybean oil. This means that per capita consumption of these food products is already much higher than the global average, or put another way, very advanced along the ‘income curve.’ Therefore, the expectation that Chinese demand for these agricultural products will ‘catch up’ with the rest of the world could largely be illusional.
2. OK, but their consumption of basic food stuffs has been increasing — one reason for the current food supply crisis. True or False?
However, it is safe to say that Chinese demand for major good staples such as grain, mean andedible oils has been very stable. Therefore, it is highly unlikely that the explosive price gains of these products are due to a sudden demand shock.
3. Enough looking backwards. China’s urban growth has resulted in a loss of farmland! True or False.
… there are concern that China’s rapid industrialization is eroding farmland, which will eventually hurt food supplies. These concerns are factually unfounded, as China’s totla farmland has gradually been growing, albeit slowly. The Chinese government has been very careful in preventing industrialization and urbanization from aggressively depriving farmland. The rules prohibiting the conversion of farmland for industrial use have been further strengthened since 2006.
4. Even so, they are dependent on food imports. A growing world population makes them more dependent on this limited resource.
Overall, China does not rely on international markets for agricultural products, and has traditionally been a net exporter of major staple foods. In fact, there has been an explosive growth of grain exports in recent years…
5. But what explains rising global food prices? And rising metals prices? And rising energy prices? It must prove the doomsters right — we are running out of resources!
Answer: it is probably inflation, just like in the 1970′s.
Under the Bretton Woods II system, emerging nations have artificially depressed their currencies. Inflation is the natural side-effect. Just as it is for the United States, as the dollar declines in value — making imports more expensive.
After all, it defies common sense that all commodities should sudden suffer supply shortages. Almost all commodities have rising prices, therefore there must be a systemic explanation. No matter what one reads at The Oil Drum. This is basic economics. Economic dynamics can be explained from many perspectives. Here is one, explained with usually clarity by Jeffrey Frankel — Professor at the Kennedy School fo Government of Harvard University: The Effect of Interest Rates on Commodity Prices. Note the links at the end to articles in the mainstream media, giving non-technical translations of his work.
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For more information about this subject
- Important news about the global food crisis! (1 April 2008)
- A view from Indonesia of the food crisis (3 April 2008)
- Stratfor warns about the global food crisis (18 April 2008)
- Higher food prices, riots, shortages – what is going on? (29 April 2008)
- A modest proposal for solving the global food crisis (30 April 2008)
- Weekend reading about the Food Crisis (17 May 2008)
This archive shows all posts about the food crisis, plus reports from from major international agencies.