A man-made threat

In my contributions over the last months I have made reference to a number of developments that are happening internationally. I have made reference to the price of oil reaching breathtaking heights. It has now gone over the $110 per barrel. I have also made reference to the turmoil in the financial markets, with a number of financial institutions being required to put their house in order, with the fall in the value of the dollar and with stock markets going through a rough ride. I have also made reference to the price of foodstuffs that is rising because of an increase in the price of grain.

Added to these developments is the fast pace at which the globalisation process of the international economy is taking place. An eminent Italian economist recently claimed that we have globalised the world economy in a short period of eight years. Then there is the strong economic growth in a number of countries such as China and India, with a consequential increase in aggregate demand in these countries, apart from a continual increase in the world population. We have also had a great deal of political uncertainty and in a number of areas around the world, but more notably in Africa, we have had continual strife. And to cap it all we are having to face up to a process of climate change with a direct impact on the production of food.

As if this were not enough, there is the expectation that by autumn there will be a general slowdown in economic growth. Maybe in Malta we are not yet feeling the pinch of all this because our economy is performing well, given the increase in employment and economic activity. Inflation is an issue that we are having to contend with, but our economic stability is untouched. Moreover, business confidence is judged to be high and so is consumer confidence. So it would seem that the troubles that are fairly evident beyond our shores may not have an impact on us. If this is going to be the case, then we should be thankful indeed. In several countries in Europe, economic analysts have started to talk again of the prospect more and more people falling below the poverty line. In these countries, reference continues to be made to an increasing number of persons not being able to stretch their incomes until the end of the month. What is even worse is that data are showing a drop in consumption, especially in the consumption of food.

This is happening because the exorbitantly-high price of oil and the significant increase in the price of grain have meant that the prices of most goods, but more so of foodstuffs, are rising to a level that makes it difficult for households to, at least, equalise income and expenditure. In addition the turmoil in the financial markets has meant that people have lost all their life savings and thus have nothing to fall back on once the rainy days arrive. Gone are the days when we would all be shocked by the presence of food mountains of various types. To get rid of these mountains we have cut back on the production of food, with the result that demand is now greater than supply.

In the poorer countries where resources are even more scarce, the situation is far more difficult. Internal strife or inappropriate economic policies have diverted precious resources from the production of food to other activities. For example in certain countries, where subsistence farming did at least provide a means of living to large sectors of the population, there has been an aggressive move towards industrialisation in an effort to exploit the opening up of markets, with the result that they have lost some of their capability to produce food.

Admittedly the difficulties being faced in Europe and the difficulties being faced by the poorer countries are very different, but they seem to have the same cause and seem to be having the same consequences.

Thus the threat of increased poverty and of famine is real. Previously the cause of famine used to be natural disasters. Today the threat is very much man-made, thanks to a series of decisions and developments, the impact of which was not predicted. I strongly believe that the problem we are facing is very much an economic one. It was brought about by inappropriate economic policies, even if it is having an impact on the social and political environment. It therefore requires a solution of an economic nature. The risk is that countries may fall to the temptation of seeking to go it alone, whereas this is a problem that needs to be addressed at an international level because it involves everyone.