A lecture at University of Texas, Austin by P. Sainath, sponsored by the University of Texas School of Journalism, the South Asia Institute, AID-Austin and the Society of Professional Journalists UT.
In 1999, Egypt came under the structural reforms regime of the World Bank and IMF, but for some reason, they didn't push it. Maybe because the ministers of that time were a little smarter.
2004 - Mubarak sacks most of his cabinet, brings in guys, trained - where else? - land of the free, home of the brave. Brings them in, and they ruthlessly implement the economic reforms and you've got chaos. You've got 80% of those below 30-35 unemployed.
Ya, so democracy is a very important issue. Unlike in say, India, they did not have the option of voting out governments. Please know this, just so that you understand this, how important the food issue is. Election after election in India, many elections in India, I can't even count for you how many, the price of bread has been the price of power.
In 2009 elections, all those governments that provided cheaper rice to their public won those elections. Whether the BJP in Chattisgarh and Madhya Pradesh, BJD in Orissa under Navin Patnaik, the DMK in Tamil Nadu... it made a huge difference, because the public were reeling under food prices.
Understand how important. In Egypt or Yemen, the public did not have the option of using the electoral route of protest.
So yes, the democracy thing was an important driver, but incredibly important was the food issue.
Here we are.
Let's take each one of these countries. So I've given you the Egyptian stats. In the 6 years between 2004 and 2010 the rate of accumulation and concentration of wealth in Egypt is even higher than in between 1999 and 2004. Inequality is a theme. Deepening inequality is a huge driver.
And we come to the United States. Egypt IS the world's biggest importer of wheat. Take Yemen.
According to the World Food Programme... Yeme is by the way one of the very poor countries of the world. 15.7% of Yemen's population lives on less than a dollar a day. 43% live on less than 2 dollars a day. And in three months this year, in three months of 2011 , 6% of Yemen's population went below the poverty line, driven by food prices and drought.
Are we beginning to get the idea that food matters? 6% of Yemen's entire population in the first three months of this year. January, February, March. That's the estimate of the World Food Programme, which has declared that they are broke, because the budget that they had made for Yemen was destroyed by the price rise.
They had a very large budget for Yemen and now estimate they are 28 million dollars short. Those 28 million dollars measure for you the rise in food prices. So they're saying, we are going to have to drop from our list more than 300 thousand hungry people if we are to continue in the same budget.
Let's get to Syria. You know, Assad. President Assad, drew a quick lesson from what was happening in Egypt, drew a quick lesson from what was happening in Tunisia and immediately declared that he would bring down the prices of the staples. But you know what, it didn't work. The crowds are getting bigger.
But it is interesting to me that he recognized it, as always too late. Mubarak also. Too late.
In Yemen, it did not start with Twitter or Facebook, it started in the south with a bunch of students bringing out a public declaration against high food prices. School students. High school students. They took out a protest against... and they were astonished by the number of people who joined them.
When they went out to... because their meals in the canteen, everything was cut by these extremely high prices. That's so much for Yemen.
Take You know, in Syria, immediately after the crisis started, Syria lowered taxes on olive oil by 53% , on taxes on sugar by 25%, lowered taxes across the board on foodstuffs, but the price increase is so high, that it's not having that much of an impact. In fact, the announcement that they would do it, led to rapid hoarding and speculation of food grain, and that has also bitten into the crisis very severely.
The Food and Agriculture Organization estimates that in the year 2008 64 million people went below the poverty line, driven by food prices. The FAO has a food insecurity atlas that you can look at. 2008 was 64 million people. When they bring out their 2011 issue, you will find that it was exceeded in 2010 because much much greater stress on pricess came up in 2010.
Here's an interesting thing. As always, after the horse has bolted the stable the IMF comes out with the study saying that there is a serious link between food prices and political unrest. Gee! We needed to know that. And only the IMF could tell us. They did a study between 1970 and 2007 which said that a 10% increase.... I haven't quite understood ... very written in the jargon of the economists. But what it basically says is that it adds a factor of 0.5 in a given year, in the next year of raising the prices in political unrest. In terms of the average political unrest, that is an increase of 100% - that's basically what they're trying to say is what I understand.
Often, this seems to unfold against not just food price increase, but double digit inflation overall. In India, food price inflation has been ranging between 13 and 18 percent for the last year, year and a half. And overall inflation has been close to double digit, but it's up and down, within a band of 2%.
Now let's take a look at my favorite magazine and website - Forbes.
Was all this an issue of demand and supply? Was all this chaos over riots and food was it entirely an issue of demand and supply? Yes, those were factors. The collapse of the Russian harvest, the drought in Australia had an impact, but nothing like the impact that speculation on commodities is having on world food prices.
Do you remember in 2008 the price of petrol went from 40 dollars a barrel to 170 dollars a barrel and then came down to 120? production didn't change so fast, did it? Food prices if you remember shot up in 2008 and toward the end of 2008 fell dramatically.
Why does that happen?
It's called futures trading. It's called speculation in food grain. The difference about speculating in food grain and.... see now some of the wealthiest investors... I've got to read you a quote from Wall Street Journal on this. What are they...? They are not even acquiring a physical commodity. They are not acquiring so many tons of rice. They are just betting on the price of rice.
They are just betting and they have a very simple bet. Food price goes ... up.
So its driving the prices of food way beyond what the public of many, many nations can afford. That's what's happening. Okay?
So it's really going dramatically up, and Fortune advises its investors ... it says "this is a bet worth dipping into." It's going up.
So I... today I looked at Fortune's list of fastest growing industries of 2009. What was number 1? Food Production. Fastest growing in revenues, food production. Number 2 is Energy, number 3 is petroleum refining, but Number 1 is food production.
In the top 20 there are two other food related... food processing is number 15, and another food related item is in the top 20, but food production is the number 1 in revenues, and in terms of growth of profit, the fourth most profitable industry in the world.
According to Fortune 500, whom I trust implicitly, because they tell me correctly how many billionaires we have each year.
And it's very... Fortune's 2009 results are very important. In a way they tell us what happened and what follows in 2010. When we look at those numbers today, we get a much better understanding of the food crisis.
Here are some of the biggest beneficiaries of that boom. Number 1 company in the world. Profiting from the largest expansion. Number 1 industry in the world and the fourth highest profit making industry in the world is Archer Daniels Midland - ADM.
If you look at it in terms of percentage change in profits, the food industry 2008-09
48% increase 42.8% increase. The next highest is some 14% behind and that is energy.
Here is how Archer Daniels Midland - an American company did. I'm quoting from Wall Street Journal "It not only reported record third quarter profits and windfall as all other food companies including Monsanto did, in the seeds sector, but Archer Daniel's profits included a seven-fold increase - a net increase in its unit that stores transports and trades in grain. Not produces grain.
The highest profits were in the units in those companies storing grain. You can the enhance speculation. You're not producing one morsel of grain. You are trading in it, you are hoarding in it, you're speculating in it, you're storing it and that unit has the highest profits of the fastest growing industry in the world.
Tells you how important food is.
Welcome to the ultimate profit zone. I'm surprised Warren hasn't found it yet or maybe he has investments we don't know about. It's called food and water. You know, if the world has to do without petroleum, it will. Humanity lived without it for millenia, but you can't live without food and water.
The countries that control food grain in the next twenty years will run the world.
The countries that control food grain or the food grain trade, they have the world by its belly. It's literally having the world by its belly. Now if that was Archer Daniel's profits, you know, I won't go into the whole list. the profits became so much, that the United States Senate set up a commission.... what was it called... the commodity futures trading commission. It held a session in Washington with Congressmen participating, I think, because of the kind of damage it was doing.
Today, the point of it is that hedge funds and index funds control between an estimated 50-60 percent of wheat traded on the world's largest commodity markets. So hedge funds and index funds are driving food prices. In India, the volume of futures trade - it's not possible to calculate how many percent it has increased in 18 to 24 months. The percentage and level it has increased in a very, very brief time.
So that's what's happening.
By the way the food production industry increase - I said 42.8% - I'm wrong, it is 48.8%.
Now the fast growing investment is coming. It is moving to another area. Farmland. How many of the Indians sitting in this - or the people of Indian origin sitting in this audience are aware that India is buying vast tracts of farmland in Kenya and Ethiopia. Are you aware of this? [inaudible audience response] Two people. Not bad. That's about the National average.
We're locked in a race with China and we're damned irritated because they've bought more land than us. And what are we buying this land for? To grow food in India. Having destroyed India's food production capabilities over 20 years of neo-liberal economics.
And we're buying... we're going to be buying hundreds and thousands of acres - we've invested 4.3 billion dollars in Ethiopia as a country. We're going to be buying tens of thousands of farmland in Ethiopia - for God's sake, don't you think they have enough problems without us landing up there?
[contd in Part 4]