Rising food prices could “condemn a generation to extreme poverty and malnutrition”, according to the Daily Telegraph on 14th April:
“Robert Zoellick, World Bank president, said food prices are at “a tipping point”, having risen 36pc i n t he la st year to levels close to their 2008 peak. The rising cost of food has been much more dramatic in low-income countries, pushing 44million people into poverty since June last year.
“Mr Zoellick said he saw no short term reversal in the damaging effect of food inflation, which is felt much more in the developing world as packaging and distribution accounts for a far larger proportion of the cost in the advanced economies.
“Asked if he thought prices would remain high for a year, Mr Zoellick said: “The general trend lines are ones where we are in a danger zone… because prices have already gone up and stocks are relatively low.”
Food prices inflation is a complex problem and Mr Zoellick sees the causes in various factors such as:
- changing diet of the ballooning middle classes in the emerging markets
- weather problems in Russia, Ukraine, North America, China
- rising fuel prices, which go into fertilisers and energy
- food investment policies of some of the world’s wealthier nations in poorer countries
Although all these factors certainly play their role, there is another hidden factor that Mr Zoellick and most of experts seem not to notice, however we believe it is crucial. It’s hidden, because it requires that we look at the problem from deeper and from different perspective.
The inflation of food prices is a part of the inflation issue in general. Inflation is not a ‘fact of life’ – it is a result of allowing banks to create all money as debt. Firstly, there is a ‘cost-push’ effect on inflation: since all money is created as debt, then in order to have a money supply in the economy, individuals and companies must share the debt. In order to get out of debt or even just to pay the interest on ever-expanding debt, workers will always need to demand higher salaries, and companies will always try to increase prices by a little each year.
Secondly, there is the ‘demand-pull’ effect: as banks create as much money as they can in order to maximise their profits, this creates a debt-fuelled spending boom in the high street where businesses take advantage of the buoyant economy to raise their prices.
Finally, a significant amount of the money that banks create out of nothing will be used for speculation on ‘commodities’ (which include the food crops that make up the core diet of billions of poorer people around the world). This short-term profit-seeking speculation can drive up food prices significantly, driving people into poverty as the World Bank describes.