"Let them eat subsidies?"

Food prices have the potential to change regimes and the course of history. When Marie Antoinette allegedly said, "Let them eat cake" in 1789, she was wondering why higher bread prices were causing so much trouble in Paris.

Food security analysts, NGOs, think-tanks and the World Bank all say pushing the urban poor beyond their purchasing limits can and will cause unrest, and net food-importing countries are most at risk. Leaders may not be facing the guillotine in 2008, but some are already feeling the sharp edge of popular uprising. The most obvious tools to cushion the impact of the price rises - tax cuts and subsidies - not only go against free-market dictums but are frequently unaffordable for governments, analysts say.

"Governments don't generally worry overmuch for the fate of poor people most affected by dearth - until the protests mount," said John Walton, who teaches sociology at the University of California, and is co-author of Free Markets and Food Riots. "Regrettably, these pains are often justified in neo-liberal economic ideology as necessary reforms, despite a lack of evidence for their effectiveness."

The recent spate of food riots and demonstrations in West Africa may signal a new phase in the protest cycle, he said. Many analysts agree.

At least two dozen deaths have been reported in riots sparked by a sharp increase in food and fuel prices around the world, most recently in Egypt, Senegal, Cameroon and Cote d'Ivoire.

IMF riots

''Governments don't generally worry overmuch for the fate of poor people most affected by dearth - until the protests mount''

The last protest wave arose in the late 1970s in response to food and fuel price hikes after the International Monetary Fund (IMF) and lender countries forced poor countries to implement budget cuts. The impact was felt worldwide, beginning in Latin America and extending to Africa and Asia, to include perhaps 200 instances in over 40 countries, according to Walton.

The protests, known as the "IMF riots", were marked by strikes, demonstrations, rioting and looting and prompted by the contention that "the poor were being made to suffer" because of the "profligate lending by governments and banks", he said. "These protests had varied effects, destabilising governments in some places, winning reforms in others, and inviting repression in many.

"Sudan in 1982 was a case where the government fell largely as the result of austerity protests,” he explained. “In lots of other places [Peru] regime-changing elections have been moved along by unrest."

While the current protests have been sparked by the hike in petrol prices and the related impact on food costs, noted Walton, “the instances of popular demonstration and riots in Cote d'Ivoire, Guinea, and Burkina Faso replicate in many ways the protest repertoire and sense of injustice that characterised the IMF riots and earlier historical protest cycles. Time will tell how large the current protest wave will become.”

“Agflation” is the new buzzword to describe the food price hikes, on account of an increase in demand for cereals such as maize and soybean for human consumption and biofuels. The price of non-fuel-related grains such as rice and wheat has also rocketed.

The World Bank announced last week that at least 33 countries, which depend largely on imported food, could face potential social unrest. Kanayo Nwanze, vice-president of the UN International Fund for Agricultural Development (IFAD), warned: "The escalation of social unrest we have seen in Cameroon, Burkina Faso, Mauritania and Senegal may become commonplace in other African countries."

Protests have also been reported in many Asian countries, especially the Philippines, where rice prices are reported to have gone up by 70 percent within a year. According to the Wall Street Journal, President Gloria Macapagal-Arroyo is considering a moratorium on using agricultural land for housing developments or golf courses. Her government is urging fast-food restaurants to offer half-portions of rice to cut the country's rice bill.

“Resource scarcity is a long-term problem, and is likely to get worse with climate change - which will see reduced productivity, especially in countries where resources such as land, food, income, are ‘captured’ by an elite, and/or where inequalities are particularly bad,” according to social historian Diana Cammack, with the UK Overseas Development Institute.

The riots are about access to food, she points out, “where the poor have a reduced chance [compared to the rich] of getting to the food that is in the country … famines are often linked not simply to scarcity but to the cost of food and thus access to it”.

Urban poor

Historically, the politicised and educated urban population has been the brains behind most of the food riots, noted Marc Cohen, research fellow at the US-based International Food Policy Research Institute (IFPRI). “Governments have tended to provide them [urban residents] with subsidies to prevent them from becoming discontent.”

Potential political unrest is a bigger reality in urban areas, where residents, who are mostly wage earners, feel the impact of food prices more acutely, added Cammack. “Can some politician use the situation to better his career? Then you have real problems!”

There is already a “tremendous amount of anger” in urban areas in most African countries around several issues such as high unemployment rates and social delivery, said David Zounmenou, a researcher with the Institute for Security Studies. “High food prices can only add fuel to this and can be exploited by the opposition or other interest groups to create instability.”

He added that “political discontent” was “already brewing” in Cameroon, Burkina Faso, Cote d’Ivoire and Senegal. After the violent price protests in Cameroon, which left at least 24 people dead, President Paul Biya went on state media on 27 February during the rioting to say that “certain politicians” were seeking to overthrow his government in a coup d’état.

Tempers have been quelled in Cote d’Ivoire, which witnessed two days of violent protests in which one person was killed. The government announced a 50 percent cut in VAT last week, said Auguste Kpognon, country director of CARE in Cote D’Ivoire. “But we are waiting for an explanation from the government about how it intends to pay for it.”

The government in Guinea last week announced it had ended subsidies on diesel, petrol and oil. El Hadj Gando Diallo, an adviser in the ministry of economy, finances and planning, said the government had to end the subsidies as one of the conditions imposed by the IMF for future funding.

“We could have a potentially explosive situation there,” said Zounmenou. Guineans staged violent protests against price hikes in 2007, in which at least 200 people were killed. The Guinean government has long used fuel subsidies to quell tensions over the rising cost of living. It last increased subsidies in June 2006 following union-led strikes over the cost of living.

Stop-gap subsidies

Subsidies are not a sustainable solution, according to Cohen. “A case in point is the urban population in Egypt, which has enjoyed subsidies for many decades. Should subsidies be removed, things can get very violent - but subsidies are increasingly unaffordable.” Egypt is reportedly the world's second-largest importer of wheat.

According to the Middle East Business Intelligence, the Egyptian government “seems to be losing control of spending on subsidies. It budgeted for $1.7 billion worth of food subsidies in the current tax year, but spending will be $2.2 billion or even higher because of the increase in global food prices at the end of 2007.”

Matein Khalid, an analyst, noted in his column for the Dubai-based newspaper, Khaleej Times, that bread has been subsidised by the rulers of Egypt since Pharaonic times. “… food price surges are more of a threat to regime stability than Dr Zawahiri’s Al Qaeda terrorists. Bread queues turn violent, a recurrent theme in Egyptian history …”

Agricultural investment

A long-term sustainable solution would be to invest in agriculture, believes Cohen. But political stability governs investment in agriculture. A scenario by the US Department of Agriculture’s Economic Research Service (ERS), which assumed a near-28 percent increase in grain prices for 2007 (prices have actually doubled in many countries since then), followed by increases of 1 percent a year through 2016, found that in sub-Saharan Africa, countries most susceptible to economic shocks are often those suffering from political instability, which stifles domestic production.


Photo: Brahima Ouedraogo/IRIN
Rioters took to the streets in Burkina Faso in February 2008 to protest rising food and fuel prices.

The ERS study found that Cote d’Ivoire would face the greatest shock, with the food gap jumping to an estimated 58 percent by 2016. “This country has been experiencing political problems during the last decade, with grain production virtually stagnant between 1990 and the early 2000s. To maintain grain supplies for a growing population, grain imports rose, and have been virtually equal to production for the past five years or so. The 28 percent price shock is projected to significantly weaken the country’s commercial import capacity, worsening food security.”

The World Bank last week announced it intended to double its lending from $450 million to $800 million for the fiscal year 2009 to Africa to help revive agriculture, in a bid to combat escalating food prices.

Most policy-makers agree that countries have to take a dual approach: social protection of the poor and productivity enhancement in agriculture.

In the meantime, price controls can keep people content for only the "short term", noted Zounmenou.

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