Food Prices and Riots in South Africa: One Year Later
I noticed this morning that gold is tanking. This is no surprise as the rally in gold over the 00’s was fueled by excessive commodity speculation following the loosening of finance regulations at the end of Clinton’s term. On the down side, this commodity bubble drove food prices up around the world but, more positively injected a decent amount of cash into Sub-Saharan African economies. Much of the economic growth that Africa has experienced over the past decade has been financed by this bubble.
I’m wondering if Glenn Beck and Ron Paul foresaw this event, encouraging the market in gold to help encourage a price rally, so that they, and other savvy individuals might jump out at the right moment. That smacks of conspiracy, however, and I’m not sure that either are smart enough to think that far ahead. It’s a fun thought to consider.
I was curious, however, if the collapse of the commodity bubble (though really less of a collapse and more of a “cooling down” of a slow burn market) might also be having impacts on social unrest. As I’ve shown here on this blog and other, more learned individuals have confirmed, food prices are associated with social unrest around the world.
I have written before on how the problem of Wall Street speculation is contributing to the problem of rising food prices around the world.
Fortunately, food prices are declining with the real or expected tightening of commodity speculation. Most notably, the Volcker Rule, as part of the Dodd-Frank set of reforms, aim to prevent banks from engaging in risky speculation in commodity derivatives. The Commodity Futures Trading Commission has also introduced several new rules regarding commodity speculation, most notably limiting the grabbing of large stakes of commodity futures with the aim of price manipulation. These rules, which place specific restrictions on agricultural futures and are though to only affect approximately seventy traders worldwide, have been fought vociferously by Wall Street.
Most relevant to developing countries, corn, price fluctuations of which have been shown to be tightly associated with speculative behavior, is returning to pre-2006 levels and could even get back to 1996 levels. This is bad for corn exporters (or maybe a return to normal), but great for corn buyers, particularly families living on pennies a day.
As before, I counted (or rather, the computer did) the number of newspaper articles which mentioned protests in South Africa, arguably the protest capital of the world, and combined them with the FAO’s food price index to see if a dip in prices was associated with a dip in protests. As the graph shows below, there is evidence to suggest that it is.
The Dodd-Frank reforms are welcome, but they aren’t enough. Starving kids and violence that result from excessively high food prices should be considered a major human rights priority. Fortunately, some groups like the World Development Movement are putting pressure on the UK government to enact and support badly needed reforms.
About Pete LarsonResearcher at the University of Michigan Institute for Social Research.
- We published a new paper on Covid-19 and ER visits for suicide attempts/self harm incidents in Epidemiology and Community Health today
- Short review of the literature on Snakebites in Kenya
- Bigfoot sightings in Michigan
- I was interviewed by WCBN on Covid-19
- How many workers are testing positive for Covid 19?