Bank of England Governor Andrew Bailey warns of “apocalyptic” food price rises. Sri Lanka is caught up in mob violence in the face of food shortages. Up to 20 million people face starvation in the Horn of Africa as the worst drought in 40 years is combined with the losses of access to imports of wheat and other staples from Russia and Ukraine.
Overall food prices in the UK are up 6.7 per cent in the past year. Rapeseed oil, coconut oil and sunflower oil are up around 40 per cent. Semi-skimmed milk up almost 20 per cent. Butter, 35 per cent. Chicken fillets up nearly 40 per cent for some brands. Eggs up 8 per cent. Pasta 16 per cent.
We have so far regarded these issues mainly in terms of their impacts on overall inflation, now headed towards 10 per cent. And of course global food price inflation is frequently closely associated with broader inflation, as monetary growth often bleeds into rapid commodity price growth as a key mechanism by which it spreads out into broader price inflation. Food prices, on the UN’s Food and Agriculture Organization (FAO) food price index, were up 71 per cent over the two years to April 2022, the highest two-year change since 2008.
What we have discussed much less so far is how rapid food price rises can spill over into civil disorder and even revolutions. A well-known example of this, which I wrote about in these pages in 2011, occurred in the late 2000s and early 2010s, the last time global food-price inflation was higher than today. Quantitative easing after the Global Financial Crisis was closely correlated with food price movements in this period. And countries across North Africa and the Middle East where food price rises were most rapid relative to their previous trend, saw civil unrest and revolutions in the so-called “Arab Spring”.
Similar patterns pepper history. For all the many other issues late Tsarist Russia faced, it was food price inflation that triggered its end. As the research of economic historians Helge Berger and Mark Spoerer showed, “it was mainly economic misery and the fear thereof that triggered the European revolutions of 1847/48“. And everyone remembers the role hunger played in the French Revolution of 1789, even if they know history has misrepresented comments about “Let them eat cake”.
Governments that cannot guarantee a supply of food for their citizens risk being replaced – violently or otherwise. Revolutions may be less likely in the West than elsewhere, but even then the political backlash at the ballot box could be severe. If establishment parties have no answers, voters may turn to populists or others offering putative solutions. For all that they come to be expressed in terms of racism, antipathy to immigrants, the rich, big business and internationalist intellectuals, populist movements often find their origin in economic movements. Even Jean-Marie Le Penlong-time leader of the French National Front, was first elected as a representative of the “Poujadist” movement of small shopkeepers complaining about taxes.
The other, closely-related, significant political concern about inflation is that volatility in price rises from year to year – which tends to increase as inflation rises – leads to firms and workers making mistakes in anticipating future inflation rates. If they underestimate what future inflation might be that can leave workers unable to pay their bills and to repay their debts, resulting in the miseries of default. If they overestimate what future inflation might be that leaves workers on too-high wages, which can lead to high unemployment.
The EU was very concerned about populist movements through the Eurozone crisis period – from Greece to Spain to Germany to France. It may have hoped that period was behind it. A new lease of life for populist political movements, driven by concerns over inflation, would be most unwelcome.
Governments cannot hope to pretend that rising prices are someone else’s problem. If they do not take responsibility for inflation, the risk is that populists (in stable democracies) and revolutionaries (elsewhere) will be listened to instead.