What Price Growth?

Remember that cliché from the days of the first Reagan Presidential campaign about a rising tide lifting all boats? The underlying implication was that growth was all about benefit; and, if there was any cost to growth, that cost would always be outweighed by the benefits. Jimmy Carter had the courage to suggest that the appealing surface of such a worldview concealed flaws at a deeper level, and he was soundly trashed by the electorate for such convictions. Now the world (if not our President) wants to honor Al Gore for picking up Carter's baton and bringing "inconvenient truths" about economic growth to the public consciousness; and the most inconvenient of those truths will probably come when the bean counters finally open their books are start tallying up the cost figures.

In today's Financial Times Javier Blas and Chris Flood have written a story that reveals one of the things we are likely to find in those books. Consider their lead paragraphs that precede pulling out the actual financial numbers:

The global economy is facing a second wave of food inflation after the US agriculture department on Tuesday warned of significant falls in stocks of corn, wheat and soyabean and heavy demand.

Officials forecast US wheat stocks would shrink to their lowest level in 60 years, dropping from 312m bushels to 280m by the end of the 2007-08 crop year.

The US is the world’s biggest exporter of wheat and importing countries are bidding heavily for its crops as other exporters cut supplies.

Cold weather damaged crops in Argentina and drought affected Australia’s wheat production. Flooding also damaged European crops.

Michael Lewis, of Deutsche Bank in London, said the decline in stocks and rising shortages in large parts of Asia suggested 2008 “could deliver another year of . . . price shocks”.

Corn and soyabean stocks will also be lower than expected as demand from emerging countries rises in spite of record prices.

Greg Wagner of Horizon Ag Strategies in Chicago said supplies of soyabeans and wheat had now tightened to “very uncomfortable levels”.

This is not to imply that climate change is the only reason why the world is facing a food-shortage crisis; but, at a time when it appears that the United States is determined to prevent anything substantive coming out of the current conference in Bali, it is important to recognize the role that climate change is playing. Having considered their lead, consider, now, how Blas and Flood chose to conclude their story:

Agricultural commodities analysts have warned that rising prices for corn, wheat and soyabean will force up feedstock costs for farmers, leading to higher meat, poultry and milk prices for consumers.

Food prices are boosting inflationary pressures just as central banks are trying to cut rates to cushion their economies from the effect of the credit squeeze.

China said on Tuesday that inflation had reached an 11-year high at 6.9 per cent in November, boosted by a 18.2 per cent jump in food prices.

Eurozone inflation recently rose to a six-year high propelled by high oil and food prices.

As previous reports have begun to suggest, we are entering a period in which basic staple products are becoming luxury items; and, from my point of view, this is just another skirmish in the War Against the Poor. It is a return to the days of Germany before the Second World War, in which inflation had all but demolished the concept of "real money;" and the primary victims where those struggling to bring bread and milk to their family table. So it may be that the whimper with which our world will end will come not only from those being killed off by the negligence of our Social Security Administration but also from those starving to death on a far more global scale. When that happens, will those few who can still afford the food they eat still be obsessing about economic growth?