Mark Thoma points us to Famine
I really need read this book. Mark Thoma: "Could it Happen Again"
I've been reading a book called Famine, and they were far more common in the past than I realized. It notes that, historically, societies have been able to deal with one year of bad harvest. It's not costless, and sometimes markets or governments do not deliver the food where it is needed, but there is generally enough food in reserve to augment the poor harvest sufficiently to avoid widespread hunger (this was no accident historically, governments kept food in reserve to smooth variations is supply). But when there are poor harvests two years in a row, whether it be from natural disasters such as weather problems or human caused problems such as war, then the problems become severe. No matter how well markets or governments work, there aren't generally enough supplies in reserve to withstand two consecutive years of substantially reduced harvests.
This book, together with the financial crisis, make me wonder just how insulated modern societies are from these kinds of problems. Could the world withstand two consecutive years of food shortage? I suppose we believe, as we believed with the economy, that modern institutions and technology insulate us from such problems, it can't happen in our advanced societies. But what would happen if an unexpected volcano's emissions blocked sunlight for two harvests, or if some fungus or bacteria suddenly appears wiping out grain supplies worldwide for several years? How bad would conditions be, and how bad would fights between nations get if there truly was a worldwide food shortage?
Based on the stylized facts I know, I believe large-scale famine could very easily happen again. All we need is a little more demand growth from rapidly advancing countries like China and India, a little bad luck with the weather, and continued stagnation and bad governance in the some of the poorest countries. Put it all together and, well, it seems both scary and plausible.My guess is that we are closer to the edge than we like to believe.
It's been fluctuating between one and two months worth of global supply in grain stores and warehouses, for a few years now.
ReplyDeleteIt costs 2-3%/yr of wheat cost to store it in grain elevators. But if you engineer a long-term storage vessel maybe cheaper. If you engineer GMO wheat that is during storage: less oily, anti-fungal or water resistant; maybe cheaper. By the time of OLEDs or some other innovation greenhouse produce might be cheap. Storing in a mine might be super cheap given right blueprint.
How many days of domestic and global supply should there be? Two years is 4% storage cost (needs to be dried and cooled) on an industry worth a couple $trillion$ = $120B year. Domestic is a different question but would be sure to trigger a crippling trade war. Cheaper to add a few months to stores and try some different R+D. Maybe teaching gardening in churches and schools would be better than limited duration stores.
Yeah, while I think the concern is real it's much harder to think of a viable solution.
ReplyDeleteIf governments store commodities is mostly just displaces storage from private speculators.
I'm not sure about a solution. These days I'm leaning toward the idea of taxing meat. And if inventories get really low and prices start getting really high, tax meat a whole lot more.
This too would discourage private accumulation of inventories. So... it's complicated.
Some say just use foreign aid if the crisis happens. That doesn't always work given the governments and institutions (or lack thereof) one would have to deal with.
Some feed is from land that is marginal: pastureland and alfalfa.
ReplyDeleteIt would be best just to tax the % of feed that is grown off of duel purpose farms. Even then weather kills grain quality enough to turn it into feed. Something like a meat quota taking into account these "involuntary" feed sources and then a tax might work. It is cruel to tax meat in protein poor developing countries.