Peter Dawe: Globally Distributed Misery

The Globalised Hunger of 2022

28AUG22 0v1 A Guest Post from Peter Dawe

Peter is someone who has always put his money where his mouth is. He made his bone as an internet pioneer with Unipalm Pipex back in the day, and has then done his best to read the crystal ball of the future that the internet he enabled - and spell out the consequences and dangers. He accurately predicted the food crisis (from long before the Ukraine invasion)

"Globalisation means that resources can move easily across the world. While supply exceeded demand, the “rising tide” lifted all boats. Poverty was in retreat, in spite of the increasing population. This free movement, also allowed the “Just-in Time” method of minimising short term costs. However from around 2019, the balance of supply and demand shifted due to: climate change, unsustainable exploitation of resources, population growth and their appetite for a better life. This caused a global chronic slow-burn crisis. The “Ebbing Tide” is rapidly stranding many “boats”. Layered on to this chronic crisis, we then had two further crises (“tsunamis” if you will ), Covid and the Ukraine war.

Historically, a local food crisis, was local, and neighbours, and the world beyond, would eventually respond with aid, offer refuge and seek to mitigate the crisis. The Globalised Hunger of 2022, is very different! Globalisation is distributing the crisis across the world. The poor in every country across the world are suffering.

How will governments respond to this new situation?

Across the media in every country, there is the demand that “The government should do something”. However, as a global crisis, they are powerless. A government cannot magic non-existent resources into being. All government can do are :-

• “Beggar their neighbours“ in seeking to get their countries share of resources at the expense of others
• Allocate these resources within their jurisdiction.
• Ignore the deprivations of other countries

Beggar their neighbours

The typical first response is to restrict the export of any food and energy resources. We have seen this over the last few years, with bans on the export of palm oil, wheat, and many other staples across the world.

Another response is, if you have the currency, to buy up whatever resources are available on the international market. E.g. Germany is buying all the LNG it can lay its hands on.

A third, again if you have the currency, is to build strategic stocks, which of course increases the scarcity of that resource for everyone else!

Fourth, is to use political and military power to divert resources to your country. Arguably the reason for a number of recent wars.

Resource allocation

So far, the “Market Democracies” have allowed the market to continue operating, with only limited government intervention. In the UK, the Energy Regulator has simply caused many small energy companies to go to the wall, and then subsidised the larger companies who are “too big to fail”. The exchequer has been pumping money into the economy, apparently in the hope it will some how magic more resources.

With rapidly rising inflation, the economy also becomes a market where the strongest enjoy maintaining their share, with the consequence that the weakest suffer more. It was no surprise that the early strikers were in the essential logistics sector. - Trains, Post, Ports, Refuse.

During the similar global crises of the two World Wars, the UK government rapidly implemented central control of resource allocation and used rationing to ensure everyone “suffered” the deprivations equally. (Or at least as far as they could)

Perverse policies

The “Market” is a good mechanism for incrementally finding a local maximum for productivity. However, it is useless at resource allocation when the parameters change dramatically.

• With energy prices going up faster than food prices, the use of food-for-fuel, converting cereals to alcohol, veg oil to diesel and other crops to methane in anaerobic digesters, becomes MORE attractive.
• One of the biggest uses for Natural Gas is the manufacture of Nitrogenous fertiliser. Governments in Europe are failing to prioritise fertiliser over other uses, (particularly consumer energy use). While this will improve the situation in the winter of 2022, the consequence on global food productivity in the 2022/2023 will be catastrophic. The UN’s World Food Programme, is already warning that the 2022/2023 yields will be significantly down.
• Food production has time delays. Arable crops are typically annual, as are dairy, lamb and pigs. Chickens are 12 weeks but beef takes 30 months. While one can rapidly reduce production through slaughter, rebuilding breeding stocks can take years. In the UK, and many other countries, the meat, dairy and egg sectors have massively contracted in 2022. Mainly due to the uncertainty of selling prices, when their input costs have in most cases doubled or trebled. And the vegetable sector is not immune either, heated greenhouses that supplied year-round salads etc. have all been mothballed, as the heating costs make their use uneconomic. As we found after the Covid lock-downs, rebooting mothballed sectors is neither easy or fast!

The inevitable policy

The consumption of the population needs to match the resources available. With a massive lowering of global productivity, this means everyone's living standard has to drop. Eventually, governments will have to centralize resource allocation, and implement rationing. This will be the only way to ensure everyone gets enough.

If the situation is allowed to get out of hand, extremist “Social Entrepreneurs” will rise, through scapegoating of some unfortunate group.

Note: I’ve tried to make this paper apply to any country, however I am aware that I only have experience of the UK, and have used UK and EU examples. Not all countries fit this model, the US, Russia and China in particular.