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A harried housewife trying to make ends meet in Karachi could be excused for being ignorant of the global forces that are inexorably squeezing the family budget. She would probably be equally unmindful of environmental and demographic changes that are fuelling inflation, officially running at 14 per cent.
The budget announced by the finance minister offers our fictional housewife no relief, just as his predecessors failed to do. But to be fair, there is little he can do to offset the impact of spiralling food prices that are hitting consumers around the world.
However, Americans and most Europeans spend around 10pc of their disposable income on food, while nearly 40pct of family budgets in South Asia are allocated for nourishment. Thus, people fortunate enough to be living in developed countries are less affected by inflationary trends.
A recent study for Oxfam has warned that the prices of wheat, rice and meat are expected to rise by around 30pc in 2020, and 70pc by 2050 in real terms. By the middle of the century, the world's population will be some nine billion, a rise of two billion over the present number. Meanwhile, water availability per capita is expected to fall drastically, as glaciers melt due to global warming, and rainfall becomes more erratic.
At the same time, demand for grain and fodder are rising inexorably as more and more people in developing countries change their dietary habits, and switch to eating more meat. Simultaneously, rising oil prices make the production of bio-fuels more economically viable. As farmers switch to these more profitable crops, the output of edible produce is reduced, thereby pushing up prices.
Suddenly, countries like China that were largely self-sufficient in food are having to import food. Another disturbing trend is the acquisition of large tracts of lands in other countries to assure food security. According to the Guardian, China signed an agreement with Patagonia in Argentina to lease nearly 800,000 acres, along with irrigation rights and a concession at the local port. A Chinese corporation has also announced that it is set to acquire around 600,000 acres in the Philippines.
American and European corporate giants have entered into similar agreements with developing countries around the world to corner the global market in soya and other major crops and oilseeds. In Ukraine, huge fields owned by multinationals are farmed using enormous unmanned tractors guided in straight lines by signals from satellites.
Four giant conglomerates control a large chunk of several major crops, with annual sales running into the hundreds of billions of dollars. International food prices are set in the Chicago futures and exchange where dealers buy and sell options without ever seeing a sheaf of wheat, or a bag of sugar.
Established in 1848, the exchange became a world centre for food trading after it was deregulated in 2000. Investment in the commodity index rose from $13 billion in 2003 to $317 billion in 2008. Currently, a speculative bubble is building up that might push up prices just as one did in 2008.
So when our housewife in Karachi wonders why items produced in Pakistan should cost more every day, she forgets that in this globalised, connected world, prices are no longer isolated. Even though the government often imposes restrictions on the movement of certain food items to prevent speculation or smuggling, the fact is that it cannot force traders to sell if they can make a bigger profit by hoarding their stocks.
Thus, if international prices of sugar are rising in Chicago, not even a Supreme Court suo motu notice will keep them down in retail outlets across Pakistan. Indeed, artificially low prices enforced by the dwindling power of the state will only succeed in driving stocks underground, and encourage the creation of a black market.
So where does this leave a consumer in a developing country? Between a rock and a hard place. With fuel and transport prices continuing their steady rise, the poor become even more vulnerable.
The number of malnourished people, according to the Food and Agriculture Organisation (FAO), has risen from around 850 million in 2005 to slightly over a billion now. Significantly, nearly 1.3 billion people survive on less than $1.25 per day.
One of the major reasons for this rise in the number of the hungry is the increase in food prices; the other is the global recession that has increased unemployment. And as more and more land is used for growing more profitable crops, and more and more water is diverted towards corporate farming, the poor get even more marginalised.
At a time when we should be seeking to make farming more productive through innovation, we find that Pakistan spends 30pc less on agricultural research than Bangladesh. Despite our heavy reliance on agriculture, Pakistan lags far behind in inventing and developing new seeds, and in training our farmers to utilise land, water and fertiliser better.
Tim Lang, a professor at London's City University, writes in the Guardian:
“… there is agreement we are entering a new era in which basic agricultural commodity prices are rising after decades of falling… To the west, the great success of the food story in the second half of the 20th century was lower prices. This allowed spending to diversify and fuelled the consumer boom. Proportionately less outlay on food meant more for clothes, homes, holidays and fun. This rebalancing came at a cost to the developing countries dependent on food exports. Their purchasing power declined while ours went up. It also came with dire environmental costs…”
Thomas Malthus, the 18th century political economist, propounded a grim theory in which whenever population outstripped food production, starvation would cull the numbers until the equation was restored.
Over the last two centuries, his prediction has been proved wrong by improved yields and the development of marginal lands. But does our explosive population growth and changing dietary habits mean that Malthus was right all along?
According to Oxfam, we still produce enough food for everybody, and if it could be equitably distributed, all of mankind would get the 2,700 calories necessary for a healthy life. But as our housewife in Karachi will attest, you need the money to buy those calories.
