The Price of Everything

A blog post written in April 2011

Do you know how much of your income you spend on food? It varies from person to person, from place to place, but in richer countries the average is about 10 percent; around seven percent in the US, and some 12 percent in Central Europe. Sound about right?

In poorer countries this figure is much higher. When I surveyed people in rural Zimbabwe last year, they were spending nearly all their money on food, with only small amounts going on healthcare, education, transport.

These differences are important, particularly when we consider that the cost of food is rising. In fact, world prices are at their highest point since record-keeping began, and are predicted to rise further throughout 2011. This is going to have a huge impact on the poor.

If I spend ten percent of my income on food, a small rise in price means that I forgo something else in order to eat the same amount of food. Or I buy cheaper alternatives. But if you are spending 80 percent of your income on food, and your diet is already poor, then any price rise is going to have much more dangerous effects. To eat the same amount, you have to spend more, which means eating into the other 20 percent - healthcare costs, water, transportation, which aren’t exactly luxuries.

Alternatively, you can consume less, but for people already surviving on two meals a day that’s not a great option. Or you can buy cheaper food – which means less fruit, vegetables or meat and more staple, less nourishing foods like maize or rice.  

Of course, there are other choices. You can take your children out of school so that you don’t have to pay the fees, buy uniforms or books. You can eat less yourself so that they can continue to eat. You can borrow money, or sell something; tools, seeds, land. All such choices can have grave long-term consequences. But what choice do you have?

This why the “Food Price Crisis” is really a “crisis for the poorest.” It’s not just rising prices that are the problem. If prices are increasing gradually it’s generally a sign of dynamism that encourages people to invest and be productive. In such a situation, people’s incomes can rise gradually too. But over the last number of years, food prices have become more volatile, which means greater, increasingly unpredictable swings between highs and lows. There are many causes: extreme weather; the price of oil; population growth; an increase in the use of bio-fuels, which divert crops from food to fuel; deregulation of commodity markets; as well as local factors like elections, conflict, and domestic policies. Different countries will be affected in different ways, but the poor will always suffer most.

This really is a global problem, and since the first real surge in prices in 2008, the world has taken notice. Much has been done to try to protect the poorest from the volatility of the food markets. In the short term, food or cash assistance by the UN or NGOs has helped to off-set some of the shocks. Governments in poorer countries are now looking at new ways to provide “social protection” schemes to their most vulnerable citizens. The G8 and G20 have also put agriculture back on the agenda. A lot has been achieved, but much more needs to be done as this problem gets worse. 

Many of the world’s poor and hungry are small-holder farmers, and investment in agriculture—not just in increased production but all along the ‘value chain’—can ensure that farmers are able to grow enough food for their families and are protected against volatile market prices.

Some of the more controversial issues, like bio-fuels or the regulation of commodity markets need to be addressed with the impact on the world’s poorest in mind. Greater integration and cooperation between countries can also sustain confidence and prevent market panic. Harmonizing and pooling data on food production, consumption and stocks will make markets more transparent and help guide policy choices. It’s an increasingly complex problem that requires a whole suite of solutions from global to local levels.

Oscar Wilde famously described a cynic as someone who knew “the price of everything and the value of nothing.” When the cost of food is a matter of life and death, it’s not enough just to know the price. We have to understand its value.