From the Chartroom: Food Inflation Predates the Supply-Chain Disruptions of COVID-19
Government officials around the world are learning from history’s hard lessons.
Government officials around the world are learning from history’s hard lessons.
E urope was awash in protests on a scale seen neither before nor, arguably, since. The year was 1848. “A specter is haunting Europe,” Marx wrote. “The specter of communism.” Others saw it as the “springtime of the nations,” a surge of liberal nationalist rebellion. Many of his contemporaries, however, perceived something else at work. Contemporary economists now see it too. Beginning in 1845, a series of supply disruptions had sent retail food prices across Europe surging. Food inflation, for neither its first nor the last time, was at least a co-conspirator in a bout of political upheaval.
As no country is immune to COVID-19’s disruptions in the food-supply chain, food inflation is now again on the prowl. In the United States, grocery prices last month rose 2.6 percent (month-on-month), their fastest pace since 1974. Yet that rate may be mild compared with what’s in store — or out of stock — for consumers in countries that, like Lebanon, entered the 2020 pandemic in weak economic positions. “Many Lebanese have already stopped buying meats, fruits and vegetables, and may soon find it difficult to afford even bread,” Lebanon’s prime minister, Hassan Diab, warned last week.
Food prices were a cause for concern even before 2020’s COVID-19 supply-chain disruptions. By December 2019, world food prices had already climbed to a five-year high. This appears to be due to a combination of long-term trends, such as growth in demand for certain agricultural products, and acute afflictions, including a 2019 swine flu that wiped out much would-be pork.
Food prices seem not to have lost their potential to cause political trouble in the 21st century. As the chart above shows, in the new millennium’s two previous episodes of surging food prices, one amid the 2007–08 financial crisis and another around early 2011, accelerating food prices triggered or contributed to unrest. “Pasta protests” appeared in Italy in September 2007, and discontent in Egypt shuttered Cairo’s once-bustling streets by April 2008. The second surge coincided with the onset of the Arab Spring, with consequences that still burn today.
While monthly “unrest events” between January 2007 and December 2011 range from a low of 41 in December 2007 to a high of 433 in April 2008, the peak of the monthly price index, in February 2011, was 78 percent over its trough in January 2007.
The data on global food prices and global food-related unrest are taken from Marc Bellemare’s “Rising Food Prices, Food Price Volatility, and Social Unrest,” which appears in the January 2015 issue of the American Journal of Agricultural Economics. Bellemare’s measure of food-related social unrest is derived from original analysis of a database of media coverage, and price data come from the United Nations Food and Agricultural Organization.
Governments officials who, like Lebanon’s Prime Minister Diab, voice worries about rising food prices are learning from history’s hard lessons. Some may appear, if not fully prepared, to be at least trying to plan ahead. Authorities in China, for instance, are now releasing supplies from their strategic reserves of pork. Whether new tools will enable today’s governments to insulate themselves from the old malady remains an open question. Given today’s food prices, however, it is a question we may soon be able to answer.