Tuesday, February 12, 2008

Things Are So Complicated

"Global demand lifts grain prices, gobbles supplies" is the cover story in the Money Section of USAToday for February 12. It is a good example of the way in which our global interdependence can lead to unintended or at least unanticipated consequences. Most would think that the economic development of third World countries is a good thing..and it clearly is. Most of us would think that turning to alternative fuels is also a good thing...and it is. Many think that using corn based ethanol is a good thing...and it might be. However, all these developments are leading to increased demand for food relative to supplies and thus higher prices for food commodities: corn, wheat, soybeans, etc. This is clearly a good thing for farmers both here in the U.S. and in developing countries. It means that especially in developing countries, more people can sustain themselves with agriculture and thus are less likely to migrate to urban areas with there concentrations of people and poverty.

At the same time, however, as prices for food increase, those who are poor and less able to afford food will get less food. Just to take one example cited in the article, the World Food Programme "will need $520 million more to provide the amount of good they had budgeted for this summer." This story is duplicated in other organizations providing food assistance like Oxfam.

As societies develop economically, they tend spend more on food although at a lower percentage of total income. There is an underlying dynamic, however, in that as people develop economically they tend to prefer increase animal protein over plant. Since it take eight times the grain to produce a calorie of animal protein as opposed to a grain protein, the demand for grain accelerates exponentially.

A gas station in Rochester has just started selling ethanol. It seems to be the case that every time a gallon of ethanol is consumed, the bread that I buy will cost more. That is merely an inconvenience for me but could threaten the health of those less well off than I.

It is hard to tell what to do. Switch grass seems a better source of ethanol than corn. The overall carbon foot print of ethanol--regardless of the source--may not be much better than petroleum. Reducing use of and thus demand for energy in the U.S. seems a more responsible way to be a good citizen in this global interconnected world. Increasing personal contributions to food assistance organizations is also a reasonable response for those of us who are so well off relative to our global sisters and brothers.

No comments: