Eleven days of autumn, and world hunger

In September 1752, Britain and her dominions adopted the Gregorian calendar. Wednesday, 2nd of September was followed by Thursday, 14th of September. This is a piece of trivia nowadays known to most Unix geeks and not known to most humans.

A legend says that this resulted in riots: uneducated people thought that the King and his government had stolen away eleven days of their lives. They supposedly thought that even though their date of expiry is not known, it is predestined, in the calendar. They should be compensated for having their frightful day brought closer by more than a week!

Of course, the legend is not really true. Everyone knew the change was just about fixing the old Julian calendar which was getting badly out of sync with stardates. Catholic countries had switched already in 1582, but Anglicans had hated to do the same, because it would mean admitting that the cursed Papists could be right about something. The threat of counter-reformation gone, it was time to change.

Sweden had decided to do it gradually in the leap years after 1700, in a way that reminds us of the imaginary 1969 plan to move from left-hand  to right-hand traffic gradually first week only trucks change to right side and everyone else drives as before, then the following week buses switch, and private cars only a few weeks later, after professionals have deemed it is safe to do a complete switch-over. It didn't work out too well.

Russia never really got there, which is why the October Revolution was in November 1917 and nowadays, Finnish spas eagerly expect the Epiphany, which is when the Russian Christmas tourists arrive.

I'm reminded of all this by yesterday's paper which had yesterday's news: a fashionable world-traveler of reality TV fame Riku Rantala explains how world hunger is caused by market speculants. "American bankers" are "playing a casino game" where "speculators" are causing shortages and raising prices and "leeching off the poor". The piece would almost make a good parody, but I am sure it has been written quite earnestly.

It's very fashionable to blame Americans, the "bankers" and "libertarists" for all kinds of evil, but the article fails to explain one thing: what happens to the food that these speculators are hoarding and not selling to the poor people of the world? What do they do with the food whose price has gone up and and which they refuse to sell? How do they stop it from going to consumption? Are they storing it up somewhere, so that there is peta-sized rice vault in the style of Uncle Scrooge McDuck's money bin, big enough for ocean-going ships to swim in? One that holds all the food the poor of the world are not getting? Where is that immensely vast storage, and what do the bankers plan to do with it eventually?

There's no hoard. The food doesn't disappear any more than the eleven days of autumn 1752 disappeared in England. Of course, there are reserves of food all over the world, owned and maintained by governments, private companies and individuals. But there's no great hamster's nest full of food that could be used to feed the starving masses of Third World. The food is traded and spent by the markets, just like the days of one autumn 260 years ago were spent by people of Britain and the colonies the calender change may have changed some things, like lengths of contracts for rentals or indentured servitude, but that doesn't change the big picture.

With food, the global picture says there is enough food in the world. And the situation has been improving rather than worsening. Yes, there's insufficient delivery somewhere, and insufficient purchasing power for many, and there are really poor people. But this is not because someone is stocking up.

Some hunger is caused accidentally by disasters and conflicts. Some is intentionally caused by wars, boycotts and other actions of governments and government-like entities. But most of world hunger is just life as it has always been for most of mankind.

In the First World, our perception of poverty is skewed because we are told  and we willingly believe that there are lots of absolutely poor people in our own country, and  then on our holiday trips in the Third World we stumble at the reality of life there. Back-breaking, mind-numbing absolute poverty, entirely different from what we're used to seeing but the kind of life that has been the norm for almost all throughout the history of mankind. That poverty is not an anomaly; it's what used to be the rule.

Look at the men in this picture. They are old men. They're carrying gravel up the hill to a temple in Sichuan, to be used in construction. Perhaps 50 kilos in a wicker basket on their backs, probably more than their own weight. They carry that from a depot up to the temple, perhaps five tours a day,  three kilometers away and 300 meters up. All day. That's how they make their living. And they are content, I think: they get so much rice that they have lived much longer than their fathers, many of whom perished in the famines caused by the Great Leap Forward where speculants surely were given what's their due. And everyone else as well was given what was their due, most obviously the peasants who had to pay their taxes even if that left them with nothing but their children to eat, in true Jonathan Swift style. If you didn't grow enough to pay your taxes, you obviously were hoarding up, a speculant, and there you are.

Riku Rantala says that food price rises are not due to climate change, biofuels or population growth.

This already should tell us that we're dealing with statements of religion, not outcome of research. For it is clear that hunger, like content, is the result of many things. And so is the price of food. There is no single reason to any famine, and no single factor determines price of food. In global perspective, demand for corn and palm seed oil for biofuel production certainly has raised the prices of these food materials, and when you have more people a growing population that is coming out of poverty and is eating better than ever then it is obvious that demand for food increases and the price increases.

Remember the 1985 Live Aid, which collected money to send food to those starving in Ethiopia? Thousands of tons of food was sent and it stayed rotting in ports of Ethiopia, because much of the whole thing was pointless. The famine was not really caused by lack of food in the country. It was primarily caused by the Ethiopian government forcibly relocating people. Even a Guardian reader should know that: the food aid may actually have helped enforce these relocations. Allowing delivery of the aid food to those who were starving would have undermined the political goals of the forced relocations, so much of the Live Aid was not delivered. Some of it was used by the very government that caused the famine in the first place.

The rise in prices is not primarily due to speculants, and they are not making any extraordinary profits by depriving people of their food. What are they doing then, why do they get such huge profits and how?

They are making extraordinary profits by giving world information it needs to know, and it is paid by those who want to know.

Proportion of world population
extreme poverty 1981–2008
Why is the monetary price of food increasing? Biggest reason is that world poverty is decreasing so rapidly. Many more people than ever are earning more than a dollar a day. They are moving from nomadic or peasant style subsistence farming to more modern agriculture. They are moving from farms to cities to work in factories.

The figure on the right is from the World Bank: proportion of people in world living in extreme poverty. And remember: this is despite of considerable population growth. As an example, the population of Ethiopia, our postcard example of famines, has had its population grow from 38 million (1980) to 84 million (2012).

So, like no one lost eleven days of their lives because of the calendar change in 1752, no food disappears from the world because of futures trading. Rather to the contrary: trading in futures gives information to the producers which allows them to adjust their production. How?

What if global food speculators see that the percentage of farmland of a large producer country  allocated to corn will be increased from 7 % to 10 % next year, and wheat will decline almost correspondingly, because corn to be used as biofuel source will be giving a better price than wheat which is to be eaten? The speculator of course sees that it's good to buy futures for wheat.

What is the impact? With increasing demand, the price of wheat futures goes up, and this is a signal for producers that it may be profitable to increase wheat production, because next year someone will be paying a better price. For increasing production, many different ways are possible: allocate more land from something else, purchase or claim more farmland, or invest in more efficient farming methods and tools, develop crops etc. Producers adopt all of these.

So, the price increase in food does not really go to the pockets of speculators. Where do the huge profits of speculators come from then? Not primarily from the farmers, or the buyers, even if Riku Rantala would have you believe so. They come from other speculators. Some of them win, some of them lose. In this way Rantala is right, it is a bit like a casino game where people and institutions place bets about food price. But it is a casino game that produces useful information to the world, and thereby reduces famines, instead of increasing them. Of course, the speculation also has a cost: it is a cost of producing information. But the cost of speculation has no significant impact on food prices: the volumes of food trade are so huge. And what actually causes bubbles is regulation of speculation. That you distort the rules to reach a short-term political goal, usually by piling up more snow in  front of you to shovel.

Of course, some of the increase in purchasing power of people has negative impacts on availability of food. For instance, if more people are able to buy tobacco, chocolate or other luxury items, then this may allocate resources to farming these, and not food items.

Anyway, in the short term, speculation can indeed rise prices. This is a good thing because it helps to react to changes in the world so that in the long term, prices are more stable.And for world population, long-term sustainability of food production is what matters, not the short term. Instead of a sharp price increase in a year or two, we have price increase - some volatility - right now, which encourages producers to react and prevent food shortage and high volatility in the future.

We don't have to like the speculators, but just like the newspaper deliveryman, they give us something we should know. Sometimes it is rubbish, of course. Speculators can go wrong. But they do so with the very best effort they can make.

And the speculators are better paid than deliverymen are but earning a lot requires luck and skill. Anybody can try. For me, it's too hard work. So I just stand back to marvel at that "cal 9 1752" whenever I have trouble with the calendar being too full: it's wonderful that I don't need to look at the SAP reports every 20 days.

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