Regimes can rise and fall in the grocery store.
‘As no country is immune to COVID-19’s disruptions in the food-supply chain,” I wrote in Capital Matters on June 2, 2020, “food inflation is now again on the prowl.” Now, a year later, its prowl has turned into a pounce. According to data released by the United Nations on June 3, 2021, global food inflation has jumped to a height unseen in roughly a decade. Last year, food inflation was a worry for many government officials. Now, it’s materialized into a real foe that many are grappling with. And this foe, these latest numbers indicate, has grown to the point that it poses a real threat to the stability of governments.
Over the last year, many new developments have joined COVID-19 in putting upward pressure on food prices. The Russia-based cyberattack that disabled a key U.S. meat-production facility is only the latest addition. Others include Brazil’s worst drought in over 90 years and the Biden administration’s own economic policies. Even an effective end to the pandemic, then, now appears unlikely to effectively end the ongoing rise in food prices.
Now, with last year’s food price fears coming to fruition, governments, wary of discontent at the grocery store, are taking action. For instance, as eclectic a set of governments as Argentina, Russia, Ukraine, and the European Union have imposed restrictions on exports of grain, a commodity each produces in abundance. But these export restrictions, however effective they may be at controlling domestic prices, cannot mitigate inflation at a global level. For instance, Russia, which Egypt imports many of its raw vegetable seeds from, imposed new export taxes on vegetable seeds in April 2021. In May 2021, Egypt started offering consumers smaller bottles of subsidized vegetable oil — after an increase in the price of imported raw oil-seeds compelled officials to raise the price of the original size bottle.
As the chart above shows, with this latest data, global food inflation has now reached rates consistent with discontent boiling over into real trouble for governments. The last time year-over-year food inflation hovered near the 40 percent broached in the latest release of data was around March 2011, when large-scale protests first erupted in Syria. Those were part of the “Arab Spring” movement catalyzed only a few months before that, in December of 2010, by a Tunisian street vendor’s self-immolation amid frustrating living conditions. While the Arab Spring had many causes, the run-up in food prices certainly seems to have been one factor behind this complex phenomenon. Research has documented a robust link between food price increases and food-related unrest, and the prices of cereals — a type of food popular in the Middle East — had risen by a particularly large amount in the run-up to it.
The similarities in the trajectory of food inflation between the start of the decade of the 2010s and the 2020s is hard to miss. In each, amid weak economic conditions, food inflation starts off modest, if not negative. Soon, however, a combination of factors leads year-over-year food price increases to climb steadily higher and higher, broaching even 40 percent.
Will this episode of food inflation end with its own Arab Spring somewhere in the world, a period of political unrest that reshapes global politics for at least the next decade? It’s too soon to tell. But it’s not too soon to say this: Based on the latest numbers, you certainly shouldn’t rule it out.