On an unknown date at an unknown time, protestors took to the streets in droves. They were comprised of all types of people, including a large majority of college-aged students, and began to protest the inability of their government to understand the “will of the people.” They cited everything from social injustice to corruption, inequality to poverty, and eventually earned the attention of the world. Police crackdowns led to injuries and sporadic deaths, fueling the vitriol of the protest into an ongoing political crisis. Sound familiar?
In the last year alone, stories of protest that seem to follow a similar pattern have been reported from all corners of the globe. From the high-profile examples in Egypt, Ukraine, Turkey, Thailand, Brazil, and Venezuela, to the lower-profile issues facing Bulgaria, Indonesia, and Kosovo, world governments and diplomatic entities are scrambling to respond to these situations as struggles in Syria and the Middle East continue to rage. It’s an exciting time in international affairs, no doubt, as worldwide protests continue to challenge an international system already saturated with political unrest.
What is interesting about all of these protests is how they are all seemingly unrelated to one another, yet all seem to be following similar cues and issues. Unlike the Occupy movement, which saw global organization to a united cause, it seems as if these protests all are just coincidentally happening at the same time.[1] Could it be that frustrations are masked until a single protest serves as the tipping-point, igniting the world in protest? Or are they perhaps all merely the result of instability in a chaotic world? According to scientists at the New England Complex Systems Institute (NECSI) in Boston, these protests are really just predictable events foreshadowed by a single common denominator: rising global food prices.[2]
The FAO Food Price Index is a commodities index created by the United Nations that tries to map average food prices around the world. By focusing on the average costs of meat, dairy, cereals, vegetable oils, and sugar, the United Nations Food and Agricultural Organization hopes to give an accurate image of what foods staples cost.[3]The researchers at NECSI point out that whenever this index rises above 210, a number derived from average staple exports and market prices, world protest ensues. As they explain, the same thing happened in 2008 after global markets collapsed and again in 2011 after a Tunisian man set himself on fire in a busy public area.[4] Because global food prices rise and fall according to mathematical trends, they (along with the political unrest they bring) become predictable.
Yaneer Bar-Yam, NECSI’s founder, is the man responsible for explaining this correlation. He goes on to explain in his research that as world protests are related to rising food prices, rising food prices are directly related to rises in in biofuel usage and, mostly, speculation in commodities.[5]
Speculation in commodities is easy and rampant, almost required by the nature of the system itself. Unlike stocks, which are not so much physical things as they are pieces of an entity, commodities markets are based on the acquisition of physical goods. In commodities markets, you engage either with spot markets (immediate purchasing of a needed good) or futures markets (where you invest through contracts, agreements, etc. to a long-term purchasing of a certain commodity).[6] As a result, commodities brokers and those involved with investments are keen to speculate on the eventual value of a good before they purchase it. After all, no one wants to pay today’s market value on a commodity whose market looks like it will be dipping in the future. As speculators pay based off of perceived trends, their speculations become reality and ultimately end up driving the market in a certain direction.
At first, commodities speculation does not seem like something that really has anything to do with high food prices. After all, if speculators can drive prices up, it seems as if they would be just as likely to drive prices down. However, they reality is quite different from the theory.
As CBS MoneyWatch points out with their focus on the oil commodities market, a lot of commodities trading is influenced by governments and financial institutions alike who all have vested interests in high prices for high-demand commodities.[7] The result is a world-market that is usually inflated by over-confident speculation on the prices of food and a local market that is ultimately unable to compete. So, when an event such as a drought occurs in one region, the scarcity of the given commodity (perhaps something like corn or wheat) drives up prices in the international commodities market and funnels that commodity out of local hands. After all, why sell a product to local people whose price is much lower when you can sell to a foreign government that will pay you twice as much? This two-fold response drives up food prices around the globe to the point that international political unrest ensues.
Of course, rising food prices are reliant on so many external factors, as are government protests, that it is hard to say what (if any) course of action should be taken. Although the correlation between unrest and food prices is both common sense and quite apparent, the resulting information is a double-edged sword: although we may have better hopes at predicting when this type of unrest is likely to occur, it is hard to say what exactly could be done to prevent it. If anything, this correlation highlights why commodities market speculation ought to be better regulated, and is also useful in explaining why these events happen so that the response to them is more effective. Perhaps next time we need to rally students to a cause – all we need to do is charge them a little more for their Boloco burritos and the protest we need will be ready-made.
Kaitlin Beegle
Political Science and International Affairs ’18
[1] Adam, Karla. “Occupy Wall Street Protests Continue Worldwide.” Washington Post. The Washington Post, 17 Oct. 2011. Web. 19 Mar. 2014.
[2] Merchant, Brian. “Motherboard Motherboard.” Motherboard. Vice Media, 19 Feb. 2014. Web. 19 Mar. 2014.
[3] “FAO.org.” Food and Agriculture Organization of the United Nations: FAO Food Price Index. United Nations, 2014. Web. 19 Mar. 2014.
[4] Merchant, Brian. “Motherboard Motherboard.” Motherboard. Vice Media, 19 Feb. 2014. Web. 19 Mar. 2014.
[5] “How Math Predicts Revolutions Based on Food Prices.” Thought + Food. WordPress.com, 27 Feb. 2014. Web. 19 Mar. 2014.
[6] “Commodities Market 101.” Understanding the Commodities Market. N.p., 2007. Web. 19 Mar. 2014.
[7] Swedroe, Larry. “Do Speculators Drive Oil Prices?” CBSNews. CBS Interactive, 3 July 2012. Web. 19 Mar. 2014.
