By J. Yanqui Zaza
The Perspective
Atlanta, Georgia
July 3, 2008
In the US, Union leaders and some economists were accusing financial speculators for soaring food prices. Also, some US lawmakers said that profiteers were inflating food prices because of greed, and high prices were causing pain and suffering for US families. (NY Times, 6/12/08). Further, contrary to the views on Wall Street and those views of a senior advisor of President Sirleaf (The Analyst) that demand in food consumption was responsible for the increase in price, Joel E. Cohen, professor of populations at Rockefeller University and the author of “How Many People Can the Earth Support?” stated that there is enough grain grown to feed 10 billion people.
But if manipulation of food prices causes civil wars or riots in Egypt, Haiti, etc., a pending food crisis will be even more overwhelming, said Diana B. Hemriques. (NY Times, 6/5/08). She explained that if speculators, in addition to prices, control food production, distribution, etc., food will become a Gold commodity (i.e., “Resource Curse”). In her article called “Food Is Gold, And Investors Pour Billion Into Farming,” she said traditional players in agriculture are concerned that investors “…will focus on profits above all else, and would not share the industry commitment to farming through good times and bad.”
She said that speculators, trying to free themselves of regulations aimed at curbing speculating, are purchasing farmland, fertilizers, etc around the world. With such an investment, investors would transfer food into a Gold commodity by creating artificial shortage or transferring food from less profitable market to a more profitable one.
Obviously, Africa is a target since its land is cheap and fertile. Regrettably, though, Africa does not need an additional Gold commodity, similar to iron ore, diamonds, timber, etc. This is true since it is trying to mitigate the effects of failed policies, including the policy to import food and produce cash crops.
However, what is a “Resource Curse?” The phrase was coined after many developing countries endowed with natural resources are poorer primarily because profiteers became the de facto owners. In order to gain excessive profits, investors do not only handpick dictators, but they also propagate and institute onerous policies such as keeping the electorate uneducated and unskilled.
While speculators fine-tune policies to produce another “Resource Curse,” Africa policy makers have a dilemma. Can they ignore the danger (civil wars, riots, etc.) of uncontrollable greed of investors and countless unfulfilled promises made by the World Bank? Is it not true that local as well as external regulators usually disregard their duty for prudential supervision and enforcement of policies once a moneymaking commodity is involved?
Onerous policies, including exporting cash crops (coffee, latex, etc) and importing food largely contributed to the demise of Africa, in general, and Liberia in particular. The arrangement has been bleeding Liberia long before the soaring of food prices. Besides weakening Liberia’s diplomatic position, the country gets less money from exporting latex and pays exorbitant prices for goods made from raw materials exported. Further, Liberia suffers from trade deficits and lower cash reserves in addition to its weak diplomatic position and shifting of profits to investors.
More so, with enormous influence through the production of Liberia’s staple food, speculators could convince future leaders to enact unwarranted laws. Such a fear, not just an imagination, happens daily. Even in great countries such as the United States, investors wield influence. For example, at the height of the Depression, President Franklin Roosevelt and Congress enacted a law that allowed companies to collude to drive up prices. (NY Times, 6/17/08). Or recently, the George Bush Administration, under the influence of big beef industry, denied the request of a beef producer to test his own cows against mad cow disease (brain-wasting disease), since such a test would be a precedent for the beef industry, an additional cost the beef industry opposes.
Shifting ownership of food production to speculators would not only cause riots, but might also threaten the survival of food (i.e., rice) as Dan Koeppel explained in the banana case in his article called “Yes We Will Have No Banana.” (NY Times 6/18/08). Using Koeppel’s logic; speculators’ desire to maximize profit would use the concept of economics of scale (land usage, uniform in equality, universally available, etc) as used for fast-food hamburger. Unlike hamburgers, rice, a living organism, can become sick and can be wiped off in years to come once contagious bacteria enter the rice system.
For ordinary Liberians who are spending about 60 percent of their household income to buy food, rice extinction or the consequences of speculators monopolizing rice production, distribution, etc is the least of their worries. That’s the responsibility of a government to plan short-term and long-term projects. While President Sirleaf‘s Draft Budget proposal of $3 million and, or the bipartisan meeting to address the food crisis is a good effort, but her government should provide a genuine plan to produce food.
Hopefully, our national leaders will not only plan a policy that feeds our nation and export food as well as cash crops, but their plan will also provide jobs for our unskilled youths. Additionally, the plan might help in reducing overcrowdings in urban cities, thereby reducing the incentives of drug kingpins and money laundering cartels. Yes, investors are welcome; however, there is a good reason why government, and not speculators, should produce food; to prevent the creation of a “Resource Curse.”
© 2008 by The Perspective
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