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September 7, 2010

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September 7, 2010

So do food price spikes cause riots or not?

September 7, 2010
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I’m a big fan of Chris Blattman’s blog (as the number of ‘hat tips’ – [h/t] – on this one demonstrates), but he lost it a bit in his recent post food riots mozon food riots. Here’s what he says:

‘Globalization and growth should reduce price spikes in future. More countries are producing crops. Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down. Falling transport costs also mean that more substitutes are available, further reducing price volatility. So things should be getting better over time, not worse, especially if trade allows countries to diversify their diet. Envision a future of diminishing instability.’

This reminds me of the apocryphal French diplomat arguing in a Brussels punch-up ‘I can see it works in practice, but does it work in theory?’ Here’s the practice – you can clearly see food prices pretty smooth up til 2007, then going haywire.

FAO Food Prices

Time to adjust the theory, rather than deny the reality, Chris?

Where I agree with him is that the triggers for food riots, as for most things, are often local rather than global – government policy, bad p_8wto_protests_in_seattlepolicing etc. And not just in developing countries – the incompetence of the Seattle police was in my mind largely responsible for the collapse of the WTO ministerial in 1999 – they had plenty of tear gas but no crash barriers (see pic). But it’s the interaction between local and global phenomena that we need to understand better – price rises in 2008 did coincide with a wave of food riots, no doubt all with their local contributory factors too. And to argue that this was mere coincidence isn’t very credible, in my view – A at least partly caused B. So yes, worry about local politics, but worry about the graph too.

[h/t Richard King, both for the graph, and for clicking the wrong button and posting this a day early!]


  1. “Climate shocks in Argentina are not that tied to climate shocks in Russia or China, and so price volatility from supply shocks should be going down.” – I don’t understand the logic of this. Even if it’s true that climate shocks in Argentina and Russia are not correlated, the increase in climate shocks per se would tend to increase price volatility due to supply shocks. Whether or not that is offset by an rise in the number of countries producing crops is another question, no? Chris, can you explain what you meant? cheers.

  2. Chris, the past couple of weeks proved that food price hikes do cause deadly riots. Mozambique is the point to note. Their government announced that the prices of some basic products will increase, the consequence is that the economy was brought to a standstill and at least 10 people died during riots following this announcement. I would expect that any food price instability will carry the same consequences, whether it is in Africa or elsewhere.

  3. Duncan
    I agree with the need for data, but I don’t think your graph disproves Chris’ theory.

    I’d like to see a longer timescale, (100+ years rather than 8). I predict that over the long-run, food price volatility is decreasing. I’m happy to be proved wrong.

    Duncan: fair point Neal, anyone got the numbers handy?

  4. 1. Isn’t the point that volatility in prices within each country will reduce through trade and globalisation rather than the global price?

    2. What is the counterfactual? Might there not have been even more volatility in global prices over this period without trade and globalisation?

  5. Much of the media coverage has been about wheat prices, which is bad for consumers in many parts of the world, but not as bad as you might think in rural parts of Africa and Asia (where a large proportion of the poorest still live), because they mainly eat maize/cassava and rice respectively. If the price of local foods has gone up as well, then this is also likely to be good for farmers of those local foods, who again may in many cases be quite poor. For those whom Oxfam may be most concerned about, it would be useful to see more local data on other staples.

    Duncan: good point Matthew, although I’m told bread as a staple is one of the legacies of the Portuguese in Mozambique – hence the riots. If people do want to dig more, check out the relatively user-friendly FAO database on http://www.fao.org/worldfoodsituation/FoodPricesIndex/en/

  6. With all due respect, Chris probably has it right on the falling volatility.

    I worked a bit on maize prices in Malawi in my thesis, and price volatility within any 12-month period is extreme – changes of 250% are rather the rule then the exception. Not even in the hay-day of speculation during the current global recession have we seen that changes within such a short time frame.

    It is obvious, too, that without any globalization, a drought in Russia would have had a much larger effect on prices in Russia than what is the situation today. Due to globalization, price volatility in Russia is greatly reduced, although some of that volatility is passed on to other countries.

    Globalization leads to expansion of market size, and, hence, risk-pooling.

  7. That kind of commodity price spike is nothing unusual. You need to look over a longer timeframe, as supply shocks take an average of 4 years to iron out. We actually have grain price data going back to the middle ages. It may be on my hard drive somewhere, but sadly it’s a hectic day, so I point you to Angus Deaton:




    Duncan: thanks Chris, food for thought…. (sorry)

  8. This seems useful:

    From a glance, it doesn’t look like there’s been a strong trend in food price volatility over time, either up or down – proving me at least partly wrong!

    However, it also shows that the metric used to measure food prices is very important. Should we use dollars? a weighted basket of currencies? or the purchasing power of an hour worked?

    The last of these is most socially relevant, but specific to the individual or country concerned. Still we have to remember that economic growth in most parts of the world has rendered food price volatility less of an issue, simply because we spend less of our income on food.

  9. I don’t agree with you Chris when you write “Falling transport costs also mean that more substitutes are available, further reducing price volatility”

    I think that we are going in the opposite direction: oil price (and tranport costs) has dramatically increased in the last ten years, and we now live in a world where a 70+ $/barrel price is normality, while up to 2004 it had never reached even 40$/barrell… and things can only get worse, I think.

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