For the Filipino People to blame the government is expected whenever some malady strikes the nation. After all, most of us feel that our fates are very much intertwined with how the government goes about its affairs. That particular point has already been more than thoroughly discussed, and I feel that it might as well be high time to offer a comparatively, moderately, out-of-the-box, slightly hyperopic explanation of the status quo.
What is the fuss all about anyway? Insanely stellar rice prices.
I. So what initially caused the problem?
I have read a lot about agricultural subsidies and debated about them way back in my college days. In a nutshell, agricultural subsidies are a form of government aid given to members of the agricultural sector originally intended to control price fluctuation, which inadvertently, ultimately resulted to artificially low selling prices because of minimal operational expenses shouldered by the producing farmer. This is a policy that was implemented in many countries in the years surrounding the great depression of the United States.
The depression was caused by overproduction as a result of unhampered technological advancement that greatly accelerated increase in per capita labor productivity , so much so that consumer demand was not capable of keeping up. The situation was not limited to the agricultural sector. In fact, the phenomenon was widespread, especially upon the invention of the assembly line. Going back, In light of the basic supply-and-demand law, prices fell down since demand cannot keep up with production.
Prices went down. Tom, Dick and Harry got bankrupt. An economic chain reaction ensued and soon everybody was out of work. It was very crappy at that time.
Now, in the United States, a resolution to the probleme was formulated by Pres. Truman and his gang. They called it the “New Deal”. Part of the plan is to give aid to the agricultural sector so that they can minimise their yield, thus lowering supply, ultimately artificially raising prices.
The problem with this situation arises from three facts:
1. Public Servants in the US are democratically elected.
2. The voting bloc of the agricultural sector (including people who are sympathetic to their cause) is fascinatingly humongous.
3. The US is not in THE economic fix anymore, post 1950.
The subsidization policy was never repealled, with congress fearing a political backlash from the electorate, and that same exact protectionist policy persists up to now. The thing is, the initial premise of lowering yield has practically been scrapped, replaced by the inevitable consequence of artificially and insanely low prices.
Similar policies exist in various and numerous nations.
II. So What?
Because of artificially lowered production costs and hence artificially skewed prices, agricultural products from developing countries like the Philippines are having a hard time competing in the world market. Aside from this, a number of other hurdles plague 3rd world exports, like tariffs and duties, export taxes, and import/export quotas (like the one set by the European Union for Tuna from Davao) etc.
These myriad policies cripple the sector and thus serves as a disincentive for people in such place to venture in production of protected crops and/or livestock. Instead of these, people either go to some other sector, like the services industry (look at how many domestic helpers we have scattered worldwide) or grow non-staple/alternative crops, like biofuels (jatropha) and/or high-value crops(e.g. asparagus in lahar-infested Pampanga).
Discounting 3rd-world production, supply then goes down, and yet demand increases as a result of global population explosion, coupled with natural calamities that further causes mayhem on crops, we now face a global food crisis.
III. But hasn’t any of the 3rd-World national gov’ts or the international community at-large done anything prevent or mitigate it?
There has been attempts since time immemorial at resolving this issue, i.e. the seemingly unfair trade practices. The WHO was originally intended to address this situation. The Doha and Uruguay rounds of WHO talks in particular were aimed at addressing these with long-needed reforms, but to no avail. Democratic countries may be democratic in themselves, but when banded, turn into Oligarchic dynasties.
IV. So whats the Bottomline?
We are in a major fix. Even if the rice crisis is cosmetically averted, maybe through PGMA’s plea to King Bhumibol for extra rice exports, or the RP Gov’t’s untterly ludicrous suggestion of switching to wheat as the main foodstuff for a people who lived with rice even before the dinosaurs were conceived, the problem, the rice crisis, will just be a vicious cycle of crises and crises and crises.
And who knows, maybe other commodities will follow suit.
Time will come when even CEO’s can’t afford lunch.
