March 18, 2009
Yesterday saw me at the Forum for the Future of Agriculture in the lovely Biblioteque Solvay in Brussels. The main event was Nobel Prize winning economist Paul Krugman.
Krugman spoke at some length about the current financial crisis and how he believes it is masking a growing food shortage around the world. He feels that the price spikes in 2006/7 reflected real shortages and that the current downturn has dampened prices simply because nothing is selling in any sector. It seems hard to disagree.
He argues that current prices in many foodstuffs, whilst depressed now, are still above the prices at which they started this decade. This, he states, is a long-term upwards trend and not and a ‘spike’ as many suggest.
He also spoke about the impact of rising food prices caused by shortages. Though it is an obvious statement, it is one that is not often expressed – especially by us in the ‘rich world’ – that the people that suffer the most from higher food prices are the poor. More specifically, they are the poor in poor countries. For most of these people, there is very little that they, their governments or aid agencies can do to help. As food crisis start, they will likely be unable to pay the higher prices required to import for their basic requirements and the nation as a whole will likely suffer. Such a scenario needs much greater coordination in prevention and aid.
He also had some interesting points about the global economic crisis. Firstly, and most notably, he believes that we will ’emerge’ from this – but who knows when? When it comes to timing, he suggests that it could easily be three or four years. This is in contrast to the politicians and news media that tend to suggest that by 2010 everything will be fine. One view sounds more realistic than the others…financialguy