Surge of Food Prices Presage Armed Conflicts!

``Anyone who thinks this decade’s problems start and end with credit, in other words, may yet receive a rude shock; sadly, we live in a world where soybeans may yet pack as painful a punch as subprime.”-Gillian Tett, The Next Crisis will be over Food

Rising commodity prices, especially food prices have in the past contributed to rising tensions and belligerence which may lead to more incidences of wars or civil wars.

Figure 4: Marc Faber GBD: War Time Distortion 1830-1950

As we have mentioned, the urbanization and growing wealth in emerging market economies have led to dietary changes on the demand side while climate changes, water shortages, desertification, industrialization, long underinvestments in agriculture, and the unintended effects of biofuel subsidies and other regulations have all contributed to the supply side shortages.

However surging food prices will mean lesser food for those living on the margins, this means increased political pressure or heightened risks for armed conflicts. Surging wholesale prices as shown in Figure 4, courtesy of our favorite Dr. Marc Faber’s Gloom Boom and Doom, has coincided with martial activities.

This from Dr. Faber (highlight mine), ``In his book Cycles (New York: 1971), Edward Dewey devotes a chapter to “The Patterns of Wars”. His research was inspired by an Index of International War Battles and Civil War Battles, which had been created by Raymond Wheeler in the 1930s. (Wheeler had been a professor of psychology at the University of Kansas and president of the Kansas Academy of Sciences, and became well known for his studies into climate cycles.) According to Dewey,

“… the War Index was used by Professor Wheeler to show a relationship between shifting temperatures in the earth’s climate and man’s proclivity for war. Warm periods, he noted, were the time of dictators and international wars, while cold periods produced civil unrest and democracy. His compilations were made without any preconceived notions of cycles, but he did note that there were recurrences of drought and civil war at approximately 170 years intervals and that every third of these drought–civil war periods was more pronounced, thus creating a longer cycle of 510 years. He also observed shorter rhythms, especially one of approximately 23 years.”

So yes, while surging agriculture prices may underpin an investment boom in the Philippines the unseen risks is that this can lead to armed conflicts here or abroad.