By Evan Fraser and Andrew Rimas
Council on Foreign Relations
January 30, 2011
When Do Price Spikes Lead to Unrest?
The year 2010 was a tough one for the global food system. Wildfires, fueled by record temperatures and a summer drought, burned away much of Russia's wheat harvest, spurring the Kremlin to halt exports. Throughout the fall, commodities prices skyrocketed. The United Nations panicked and called an emergency summit in September. World food prices rose to a record high in December 2010. So far, 2011 has not been much better: in January, food prices were identified as one trigger for Tunisia's unrest as well as for riots across much of northern Africa, including Egypt, a country that depends heavily on Russian grain. It seems that a food crisis along the lines of the one in 2008, when rioters in dozens of countries furiously protested the price of grain, might again be in the works.
Assuming a connection among rising prices, hunger, and violent civic unrest seems logical. Many commentators have emphasized it, including Dominique Strauss-Kahn, the managing director of the International Monetary Fund, who warned of mass starvation and other "dire consequences" if food prices were allowed to rise too high: "As we know . . . those kinds of questions sometimes end in war." For its part, the UN emergency summit last fall concluded with a reminder of the pledge taken during the 2009 World Food Summit: Countries must "refrain from taking measures that are inconsistent with the [World Trade Organization] rules." In other words, the UN reaffirmed that free trade and increased agricultural production are the best means to achieve food security.
But for all the noisy media coverage and declarations by senior policymakers, few people have remarked on the actual motives of those who, in 2008, destroyed property in Argentina, Egypt, India, Indonesia, and Peru and brought down Haiti's government and are currently causing havoc in Tunisia and across the Middle East. After all, food riots have occurred throughout history but have not usually correlated with hunger or food prices. For the most part, the planet's 700 million-900 million hungry people have suffered in silence. And price volatility does not necessarily lead to screaming crowds, either. There are many more examples of people accepting volatile prices than rioting over them. So there is more to the protests than the logic of the pocketbook. A key psychological element -- a sense of injustice that arises between seeing food prices rise and pouring a Molotov cocktail -- is missing.
It is not yet clear how big a role food riots played in the toppling of the Tunisian government. But if history is any guide, Tunisians' feelings of being cheated were more important than actual food prices. Take Cameroon's experience in 2008, for example. That year, this West African nation suffered one of the most serious and protracted food riots in the world, and scores were left dead after the crowds eventually dispersed. Remembering the crisis, Alexander Legwegoh, a Cameroonian academic and an expert on urban poverty and food security, and Bernard Motuba, an accountant who left Cameroon for Canada, said that it was not just bills that caused the violence: expensive fuel drove taxi drivers to strike and then, anger over merchants' profiteering on staple products broadened the protest. "The government knew a group of merchants was taking advantage of everyone and that this would grow to a political crisis." Yet, according to Legwegoh and Motuba, as the protesters' numbers swelled, the size of loaves of bread for sale in the markets shrank while their price tags remained the same.
The real culprits, then, were retailers who stockpiled grain in hopes that prices would continue to go up. This speculation spun Cameroon's food system further out of control and bred hatred. Motuba describes the food merchants as "cutthroat business guys who don't give a damn about people." When the government sent inspectors to grocery stores and warehouses to auction off any illicit surpluses, the public cheered. Prices had not returned to their earlier levels, but a seeming restoration of justice helped calm the rioters' tempers, whose fury, according to Motuba and Legwegoh, had been rooted more in a feeling of exploitation than a fear of starvation.
Moral outrage is a common theme in the history of food riots. In fact, the story of the food riots in Cameroon aligns neatly with that of the 1917 food riots in New York City, which managed to bring commerce and retail to a standstill in February and March. That year, Marie Ganz, a New York housewife organized food protests, storming the Waldorf-Astoria and launching a citywide boycott of grocery stores. In her memoirs, Ganz painted a vivid scene: "Cart after cart [of produce] was overturned and the pavements were covered with trampled goods. . . . Onions, potatoes, cabbages flew through the air, and in each instance the target was a ducking, wailing peddler, whose stock had been ruined beyond hope of recovery." The reason for the excitement was a sudden jump in grocery prices -- 30 percent in a matter of weeks. But what kept Ganz and her contemporaries on the streets was the perception of wrongdoing. "The day of the profiteer had come," Ganz wrote. "Surely a thousand women, perhaps twice that many were in that mad struggle, long-enduring wives and mothers who had resolved to bear the oppression of the profiteer no longer."
Ganz's anger, too, echoes events from the early eighteenth century, when hundreds of food riots caused tremendous commercial and social damage across England and France. Until then, an ancient law called the Assize of Bread had set the price of wheat, determined the quality of flour, fixed bakers' fees, and obliged farmers to sell grain in easily accessible markets rather than at their farms, where merchants would have had a buyers' advantage over the urban poor who could not travel.
As a food system, however, the Assize of Bread was expensive, and although it kept grain prices stable, it also squashed the energies of enterprising middlemen and entrepreneurial bakers. As such, it ran counter to the logic of Adam Smith and his fellow economic rationalists, one of whom argued, "Let corn flow like water, and it will find its own level." Smith, in particular, believed that instead of helping the poor, such interference with the market damaged food security. If during a bad harvest year, for example, the government kept prices artificially low by preventing merchants from stockpiling food, then there would be no incentive to store grain or reduce consumption. This would only lead to greater hardship later in the year when food grew even scarcer. In a free market, prices would rise and merchants with surpluses would retain their stores. Hoarding would be considered a virtue when the merchants eventually released their surplus into the shopping bags of a needy public (for the right price).
Theoretically, this made sense. But rioting mobs are not economically rational. England's and France's slow shift from the protection offered by the Assize of Bread to the market-driven efficiency of laissez faire economics in the late 1600s and early 1700s coincided with the tail end of the Little Ice Age, which was spoiling harvests worldwide. The combination of volatile production and the replacement of welfare policy with free-market principles convinced many that unscrupulous merchants were profiting from hunger. In his description of the large-scale food riots that erupted across England and France at this time, the historian E. P. Thompson cited contemporary correspondence to show that the object of the crowds' anger was not high food prices so much as the ethical wrong of profiteering.
In 1768, an anonymous country gentleman wrote a letter to the British Parliament commenting on this moral factor. While denouncing the rioters for causing havoc, he argued that food, coming from God through the sun, rain, and soil, is ontologically different from money. Merchants, he asserted, must be wary of profiting too greedily from the trade of food abroad while the English were suffering. His message and that of Ganz's housewives, the Cameroonian mobs, and likely that of the Tunisian and Egyptian protesters is that food riots are ultimately caused more by the perception of profiteering and less by the actual prices on the shelves.
Policymakers today must be mindful of the psychological causes of food riots when they discuss the correct mix of trade and protectionism that will safeguard our food security. If they simply embrace the efficiency of the market, public feelings of injustice may cause more trouble than the volatile price of food itself.
