Just as the financial world was breathing a sigh of relief amid signs that the worst of the credit crunch was over, another, potentially more serious, crisis has emerged. Food. Or, more accurately, the lack of it. What began last year as a dull murmur about food shortages and accelerating food price inflation in developing countries has turned into a roar as poor people across the world raise their voices in anger. Already, there is blood in the streets as dozensand possibly hundredsof people have been killed and many more injured during food riots, particularly in the hardest hit nations in Africa, Asia and Central America.
The transition from problem to crisis has been swift and startling. The reactions by the countries affected have been equally rapid, with many raising trade barriers to prevent the export of rice or grains. Their responses are understandable, but misguided: Trade barriers will not solve the problems and, on a global scale, will almost certainly exacerbate them.
It is no exaggeration to say the implications of widespread food shortages are far more serious than those of the recent financial turmoil. If this crisis deepensand there is every possibility that it willthe cost will be counted not in billions of dollars written off from banks balance sheets; it will be counted in corpses.
At the heart of this crisis is the simple equation of supply and demand. To most such equations, the free market provides a simple solution: Essentially, prices go up, demand goes down, problem solved. But this is not a problem that can be left to solve itself. The free market cannot resolve this issue. Indeed, there are many ardent free-marketeers who are only too pleased to see the crisis developingwitness the ugly sight of investors in well-fed Western nations licking their chops over the potential gains they might make from a global food crisis.
Ironically, it is in those investors greedy excitement that the germ of a possible solution lies. The giant corporations that stand to benefit most from the crisisthe manufacturers of fertilizers and agricultural machinery, the shipping companies, the seed suppliers and the energy companiesare in a better position perhaps than any national government to help ease the shortages, to bring food and agricultural assistance to the places that need it most. Those companies are in the enviable position of being able to prove unequivocally that, for them, corporate responsibility is a meaningful core value and not just a public relations exercise. If they can do that, they will not only help make the difference between the global economy hitting a speed bump and its careening into a full-on pile-up, they will ensure the people they help will become loyaland profitablefuture customers. Now that is good business.
Until next month,