The Biggest Crisis of All

If you have any doubt about the long-term implications of hunger, consider the following statistic. In North Korea, where food shortages and famine have been endemic for years, the average adolescent is 18 centimeters shorter than his counterpart in South Korea. Hunger has created a lost generation. Today, as food prices spiral out of control, the worry is that millions more of the world's poorest will also be lost to its ravages. Over the past few months, there have been food-related riots in 22 countries.

One government (Haiti) has fallen because of them. Others are under pressure.

It all underscores the incredibly political nature of food. Fuel prices have risen farther and faster than agricultural commodities over the past few years, and the $1 trillion subprime mess dwarfs the food crisis in terms of economic impact. But you don't eat oil or stocks. "Food is a radically different threat, because it affects so many of the world's poor so profoundly," says Erwann Michel-Kerjan, managing director of the Risk Management and Decision Processes Center at the Wharton School. Food is also, he notes, "an amplifier" of many other kinds of risk, particularly political risk, and its effects are traveling more rapidly because of the increasing interconnectedness of the world.

Those who would try to predict where the current situation is headed would do well to consider food crises of the past. The last major run-up in food prices (1974 to 1975) bears a number of similarities to today. Rising oil prices made farming more expensive. Natural disasters and bad government policy compounded the problem. There were riots and political unrest, but governments acted quickly. In the cold-war era, allies couldn't be lost; foreign ministers, rather than agricultural figures, took the lead in stabilizing markets. The price of a metric ton of rice (about $220, inflation adjusted) never reached today's levels of close to $300.

In fact, you have to go back as far as 1870 to find a crisis similar in both magnitude and cause. Then, as now, the run-up in food prices was due to a fundamental increase in demand because of economic growth. More than a hundred years ago, rapid population growth and industrialization led to increased demand for more and better food. The same is true today, as a newly wealthy emerging-market middle class takes its place on the world stage.

The crisis of the 19th century was eventually stemmed by a boom in agricultural investment and exports. That's a fact that world leaders would do well to remember. You need to trade more food to feed people, and nations today are sadly headed in the opposite direction. While slower global growth may presage an easing of commodity prices in the coming year, it's clear that the era of cheap food is over. As the following stories illustrate, agriculture, one of the world's most distorted industries, is in desperate need of an overhaul. Unless world leaders act in concert to give it one, another generation could be lost.