Archive | May 15, 2012

Rising Commodity Prices Starve Kenyan Children

Mbita Market

Yesterday, I was walking through the local market here in Mbita, Kenya and was struck with a (very overdue) revelation. Prices for basic goods here in Kenya are really not much more or less than prices for the same goods in the United States.

Kenya is certainly not cheap for foreigners and one may be under the impression that we pay some extra surcharge on just about everything. In some countries, this is very true. In Kenya, everyone pays the same price for everything.

Take a liter of milk. In the US, a liter of milk (at the time of this writing) is going for approximately $1.13. In Kenya, despite local production, a gallon of milk costs $.87. Turning that milk into cheese will set back an American $9.30 a pound, a Kenyan, a whopping $10.38.

It is worth mentioning that the newspaper here has reported that the price of milk in Kenya has shot up by 40% since the beginning of the year to nearly $1.05.

Shopping in a local hardware revealed that prices for steel nails and roofing is almost the same as the U.S. A kilogram of penny nails here costs about $5.00, just about the same as what I would pay in the states. 2×4′s will run approximately $.30 per foot, again, entirely comparable to what I pay in the States. A gallon of gas here is about $5, still cheaper than Malawi’s $10 but more expensive than the States.

Jimmy sells sugar in the market with his mother to support his 6 children. Each of these sugar cane blocks goes for about $7. The price that Jimmy pays the wholesaler is pegged to worldwide sugar prices.

To put this in perspective, an average American family pulls more than $44,000 yearly, where a typical Kenya is unemployed and may eek by through farming and informal market activities on a mere $800 a year (assuming GNI as a proxy).

Thus, to a Kenyan, food and housing are both incredible expenses. A Kenyan family likely spends nearly 80% of every penny they earn on food. The remaining 20% goes to school fees, cell phone minutes and transportation.

The trouble, and what may don’t realize, is that all of these things, food, steel and gasoline are commodities that are readily traded on the world market. Thus, prices are pegged to worldwide prices set by larger economies such as the United States and Europe. A Kenyan has to pay the same amount of money for the same products as an American, a Brit or a citizen of Japan.

All manner of beans are available at the Mbita Market.

One may argue that this situation may be an unavoidable consequence of a truly global economy, an unfortunate side effect of the free market. Competition on world markets, however, is only part of the equation. The situation is made worse, for example, by US policy which rewards speculation in commodities on Wall Street, a practice that was illegal before 2000. The global market, far from being free, is actually controlled by large global financial players betting on rising prices, prices which they themselves are setting.

Rising food prices barely make a dent in US home budgets, and even if they do, most families can cut things like eating out to adjust. A Kenyan, on the other hand, has nothing to cut when milk goes up an extra dime. People will simply just eat less.

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