When a Spark Ignites Fire: How Food Price Hikes Can Topple Governments and Undermine the Economy

An unemployed man in Tunisia burns himself to death. Political unrest fuels riots in Egypt, Algeria, Jordan, and other countries. A mother in Bangladesh goes to bed hungry because of a fifty percent rise in the price of wheat. What do all these events have in common? They are linked to rising global food and oil prices. According to the United Nations Food and Agriculture Organization (FAO), world food prices reached a new historic peak in January 2011.

The impact of rising commodity prices -- already being felt across the globe -- will soon be felt at home in the form of higher grocery and gas bills for Americans.

The political upheaval in North Africa and the Middle East -- sparked in part by rising food prices -- should serve as a wake-up call for the urgent need to address global hunger and inequality. If we want to stop skyrocketing global food prices, we have to tackle some of the underlying challenges in the global food system. The road to food security can be paved with the following steps that address the underlying causes of the current crisis:

  • Maintain current levels of foreign assistance for nations in poverty, especially to fight hunger: Congressional leaders are currently considering cuts to U.S. investments to fight global hunger at a time when funding is most needed. Proposals by the new House leadership could slash U.S. support for programs that help poor farmers in Africa by more than half. Doing this would break a pledge made by President Obama at the G8 summit in L'Aquila in 2009 to provide3.5 billion in US support for farmers in developing countries to feed themselves. With a global food price crisis unfolding, cutting aid for food and agriculture is not the answer.
  • Implement the Dodd/Frank Wall Street Transparency and Accountability Act: Food and oil have become increasingly linked. Oil is in every part of our agricultural system from transport fuel to fertilizer, so as oil prices rise, so do food prices. Yesterday, oil hit100 a barrel. Announcements like these start speculators spinning, hedging short and long to profit off volatility. This law puts sensible limits on speculation but it has not yet been implemented. Until this law is implemented, food and oil prices will continue to ping-pong.
  • Look at alternatives to renewable energy other than biofuels: During the State of the Union address, the President hailed biofuels as an answer to energy dependence. Shifting crops from food to fuel is wreaking havoc on food prices. Already the U.S. has diverted 40% of the corn crop from food and feed to fuel (ethanol). The growing demand for corn ethanol combined with rising demand for corn has shrunk stocks to the lowest level in decades. Low stocks and high demand push prices up. We can save money by cutting the ethanol subsidy and freezing biofuels targets at this year's level.
  • Help farmers adapt to climate change: Part of the problem with rising prices is related to supply, and climate change plays a role on this. Severe droughts, floods, and heat waves, linked to climate change, are straining food production. Climate-related declines in food production are only expected to get worse: the Nobel-prize winning Intergovernmental Panel on Climate Change projects that in less than 10 years, yields from rain-fed agriculture in some countries in Africa could be decreased by half. We don't need to increase deficits to fund climate adaptation -- taxing the financial sector, using IMF Special Drawing Rights, and taxing maritime bunker fuels to finance climate adaptation are all viable options that can generate significant funding.

The recent political unrest in Egypt, Tunisia and Yemen illustrate that food price spikes are more than a blip on the Chicago board of trade, and we need to take it seriously. No one wants 2011 to be a repeat of the 2008 global food crisis when riots in 33 countries pushed more than 100 million people into deeper poverty. But one thing is certain: without action to address the underlying causes of the global food crisis, history is destined to repeat itself.