List of Contents
Context: Food shortages are beginning to cast a shadow over the world. One long-term factor is the warming of our planet, which has slowly destroyed agricultural land.
But the proximate cause of the greatest concern is the war in Ukraine. Russian President Vladimir Putin’s Black Sea blockade is preventing Ukrainian grain and fertilizers from leaving the port of Odessa
A global agreement on food-stock buffers is needed to mitigate the sort of scarcity created by today’s Ukraine war disruption.
What are the underlying causes of the global price inc of wheat?
Russian blockade around Ukraine is one of the causes, but it is not a major one.
– Until 2021, Ukraine exported 8.5% of the world’s total wheat. But this should not lead to such a big increase in wheat prices, which can lead to global food shortages and famine that is being seen today. After all, most countries have some buffer stocks and should be able to absorb this shock.
The major cause is the behavioral response of national and local governments and even of individuals.
At the global level:
– When global policy coordination is poor, the natural reaction to news of some shortage is to hoard supplies. This is known from studies such as Amartya Sen’s classic work on the 1943 Bengal Famine.
– Ukraine has halted its wheat exports because it had no option. Other countries have chosen to stop or curtail shipments.
- For instance: India, for example, announced a virtual ban on wheat exports on 14 May. 26 countries have limited their wheat exports to ensure that they have sufficient supplies for their own citizens.
All this is causing global wheat prices to rise quickly. India’s announcement alone triggered a 6% price increase.
At household level:
A similar phenomenon occurs at the household level.
– Once the fear of shortages sets in, people stock up on more food than they immediately need in order to guard against a full-blown crisis. Yet, these small actions by millions of people, along with local and national government policies, can end up causing crisis.
The same thing has earlier happened with vaccines: Countries acquired far more doses than they needed, in order to guard against the possibility of a future shortage. Such hoarding explains some glaring global inequities in access to covid vaccines.
What needs to be done?
Behavioral responses, as discussed above, are inevitable. Thus, there’s nothing that can be done about it.
But through collective action, the world can overcome shortages that the market cannot fix.
– A system of global buffers or an international agreement, that countries with a surplus must help others during times of scarcity, would go a long way toward solving much of the problem.
Just like the deposit insurance put an end to bank runs, most people would stop hoarding once they had confidence that this system worked, and that in itself would help avert a crisis. For instance: a national PDS and the 2013 National Food Security Act. With a sophisticated system of minimal food guarantees in place for three decades, the psychology of hoarding at the household level has diminished, which in turn has diminished the need to hoard.
Despite recent hiccups, the march of globalization will not end. Hence, we must try to establish minimal global conventions and agreements to prevent it from harming the most vulnerable
Source: This post is based on the article “Global food shortages demand an international-level solution” published in Livemint on 1st June 22.