US Foreign Policy
Commentary

Were High International Food Prices An “Early Warning” Of The Arab Spring? Probably Not.

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The spike in high international food prices, in late 2010, which coincided with the demonstrations and regime changes in North Africa has become a popular explanation for the initiation of the Arab Spring. However, not everyone is convinced of that connection, least of all, international food policy analysts. The disagreement swirls around Tunisia, the initial site of regime change and the “enabler” of other anti-regime movements that soon followed. Why the doubters? The evidence, in the form of FAO, World Bank, and African Development Bank reports, indicating that Tunisia’s local prices remained stable before, during and a few months after the fall of Zine El Abidine Ben Ali’s, despite the spike in international prices, is considerable. However, there is also a body of counter-evidence, suggesting that local food prices were not as stable in Tunisia as these reports indicate (see reply by Yaneer Bar-Yam at: http://www.newsecuritybeat.org/2014/04/high-food-prices-arab-spring/).

The controversy began with an astute forecast. In late 2010, as international prices rose, a team of complex-system modelers-Marco Lagi, Karla Bertrand and Yaneer Bar-Yam-warned of a wave of social conflict that would likely occur when FAO’s Food Price Index (FFPI) topped 210 (the FFPI reflects international prices for “a basket” of traded food items on the international market) (Lagi et al. 2011). They were, in fact, correct (see Fig. 1).

Settled? Actually, the debate starts here. While it is generally acknowledged that low-income food-import-dependent states are vulnerable to food-price-related social conflict (Arezki and Bruckner, 2011), the authors went a step further. In a July 2011 paper, they drew a direct connection between the FFPI’s spike, surpassing a nominal value of 210, and ongoing uprisings in North Africa. What’s so controversial? Over the past five decades, North African states (and other middle-income states) have established elaborate systems of food price controls and subsidies for the express purpose of reducing the risk of social conflict.

Did those systems fail? While some food-price control systems in Arab countries have performed better than others, the system at the center of this debate, Tunisia’s, worked as designed. On January 31, 2011, GIEWS-FAO’s early warning system released a bulletin reporting “relatively stable domestic prices despite high international food prices” in Tunisia’s consumer food markets during the winter months of 2010 to 2011 (GIEWS, 2011; reported in Laipson et al., 2011). The bulletin also stated that “the hike in international food prices has not translated into high domestic prices. [And Tunisia’s] consumer price index of food (CFPI) declined slightly from 131 to 129.9 between November and December 2010.” [this bulletin is available at: http://www.newsecuritybeat.org/wp-content/uploads/2014/03/FAO-GIEWS-Tunisia.pdf]

An April 2012 review of Tunisia’s pre- and post-revolution inflation trends by the African Development Bank’s Chief Economist Complex (Abderrahim and Castel, 2012) makes it similarly clear that the Tunisian government’s food-price management, which includes tightly regulated prices on some staples (on about 30 percent of common food items), and a compensation fund for subsidizing poor consumers and farmers, buffered Tunisia’s food prices through 2010 and into July 2011. The authors note that the local index rose sharply (although below 4 percent per year) only after the transition government relaxed some controls in mid-2011 in order to relieve fiscal pressure on the compensation fund and slow the accumulation of debt.

There is additional evidence that Tunisia’s “Dignity Revolution” cannot be written off as “a food fight.” A World Bank report (Ianchovichina et al., 2012) compared consumer food prices among the countries of the region. Because food price controls insert a time lag between international food prices and the response in local consumer markets, food policy analysts use a lag indicator called the pass-through coefficient (PTC). The PTC estimates the proportion of the change in the FFPI that is transmitted to the consumer food-price index over a specified time (usually six months or a year). The lower the coefficient, the more protected local food markets are from international price spikes.

According to this report, Tunisia and Algeria maintained the lowest food price PTC during the 2010 to 2011 period. Six months after a one-unit rise in the FFPI, Tunisian and Algerian consumers could expect to experience an average food price increase of only about one-twentieth of a unit. In contrast, Egyptian consumers were much less sheltered-that country’s PTC for the same six-month period was higher, allowing a rise of 0.33 units for every unit of FFPI. And in local markets in the some of the Gulf States, the coefficients were even larger.

There is, however, counter-evidence-suggestions, primarily in the form of press reports and academic papers, that local food prices, despite state controls, were a source of aggravation among those involved in demonstrations. Whereas I find most of these lack substance, there is an exception: a report, published in January 2011, from European Commission economists on food and energy prices, and subsidies in the non-European (mostly Arab) coastal Mediterranean states (Albers and Peters, 2011). This detailed study does, indeed, conclude that the popular unrest that was underway in both Tunisia and Algeria were related to food prices. How the authors make their way to that conclusion, however, is truly mystifying. They report (p. 10) that:

While agricultural commodity prices were the key driving force for food price developments in the [southern Mediterranean] region, there are visible divergences in price developments across countries. Over the period examined, food prices in Algeria, Egypt, Israel, Jordan, Lebanon and the [occupied Palestinian Territories] have shown stronger increases than in countries such as Tunisia or Morocco where the agricultural sectors are larger. Government subsidies on food products have mitigated the price rises, so that actual agricultural commodity prices had soared even more in case these subsidies would not have been provided.

Then, without blinking an eye, the authors conclude that Tunisia’s revolution was somehow related to failures to buffer international food prices-no explanation necessary, and no attempt to resolve the inconsistencies between this conclusion and the text and graphics, which show Algeria and Tunisia the least sensitive to a food price shock and (along with Morocco) the quickest to recover (p. 14).

The Point

Social and political conflict, revolts and revolutions, while the focus of much of political science’s research, remains poorly understood and difficult to forecast. To their credit, Lagi and his colleagues’ food price threshold model may be the most successfully predictive attempt so far. However, in this short note, I’ve argued that they may have applied a model, which succeeds in low-income food-importer-dependent states, to states to which it is unlikely to consistently apply. In so doing, they have aggregated very different types of conflict-a problem that permeates the literature on conflict. In addition, they downplay the role of Tunisia’s social and economic development as a force in the drive to political liberalization, laying the blame on an institutional failure for which there is little evidence.

As of this writing, the nominal FFPI (uncorrected for inflation) has remained above 200 for more than three years (FAO, 2014), the likely product of rising demand, speculation, and ethanol production. In March 2014, the FFPI averaged 214-above Lagi and his colleagues’ threshold of FFPI-210, and an excellent time to put their model to a test again. Will it perform as before? Only time will tell.

Until further tests are conducted, I contend that analysts should remain conservative in their expectations of the FFPI’s relationship to social conflict. For food importers with enough foreign currency reserves and institutional capacity to maintain a low pass-through coefficient, the current trend is costly, draining capital reserves and inhibiting the import of capital goods. But international food prices, when buffered by efficient controls, remain an unlikely trigger for demonstrations, revolts and revolutions. For now, their concerns would be best focused on low-income food-import-dependent states, where food-price pass-through coefficients are typically high. In these risk-prone states, high international prices should be expected to breed food insecurity and political risk. Alarmingly, these conditions appear persistent and seem unlikely to recede anytime soon without some type of action from international institutions.

 

 

Literature Cited

Abderrahim, K. and V. Castel. 2012. “Inflation in Tunisia: Perception and Reality in a Context of Transition.” Tunis: African Development Bank.

Albers, R., and M. Peeters. 2011. “Food and Energy Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries.” Munich: European Commissionm General Directorate Economic and Financial Affairs.

Arezki, R, and M. Brückner. 2011. “Food Prices and Political Instability,” IMF Working Paper, WP/11/62. Washington, DC: IMF.

FAO. 2014. “World Food Situation”, Rome: Food and Agriculture Organization (FAO). Available at: http://www.fao.org/worldfoodsituation/foodpricesindex/en/

[GIEWS] Global Information and Early Warning System on Food and Agriculture. 2011. “GIEWS Country Briefs: Tunisia.” Global Food Price Monitor. Rome, Food and Agriculture Organization (FAO). Available at: http://www.newsecuritybeat.org/wp-content/uploads/2014/03/FAO-GIEWS-Tunisia.pdf

Hendrix, C.S. and I. Salehyan. 2012. “Social Conflict in Africa Database (SCAD), 1990-2012.” Available at: https://www.strausscenter.org/scad.html. Accessed: Feb. 20, 2014.

Ianchovichina, E., J. Loening and C. Wood. 2012. “How Vulnerable Are Arab Countries to Food Price Shocks?” Policy Research Working Paper, 6018. Washington, DC: World Bank.

Lagi, M., K. Z. Bertrand, and Y. Bar-Yam. 2011. “The Food Crises and Political Instability in North Africa and the Middle East.” Physics and Society arXiv: 1108.2455.

Laipson, E. (ed.) 2011. Seismic Shift: Understanding Change in the Middle East. Washington, DC: Stimson Center.

 

Photo credit: Todd Mecklem via flickr

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