Adapting to Scarcity

Billionaire, Elon Musk’s bid to take over the popular social network – Twitter, dominated the international news cycle this week, providing some momentary respite from coverage of Russia’s invasion of Ukraine. However, a less noticed development was the decision by some British supermarkets, including Tesco, Morrisons and Waitrose, to ration cooking oil.

Ukraine and Russia account for roughly 60 percent of the world’s production of sunflower oil. Therefore, the disruption to exports caused by the war has resulted in a global supply shock. However, the war is not the only culprit.

In 2021, farmers in Canada, the largest exporter of rapeseed, were severely impacted by extreme temperatures of nearly 50C during the growing season. The price of soya bean oil is also high in light of forecasts of smaller harvests from growers in Brazil, Argentina, and Paraguay due to severe drought. Together, these three South American countries account for more than 50 percent of global supply of soya bean oil.

Meanwhile, Indonesia is set to ban the export of some palm oil products, which in all likelihood, will lead to added pressure on the global vegetable oil market. Palm oil accounts for approximately 60 percent of global vegetable oil shipments, while Indonesia makes up for nearly a third of all vegetable oil exports.

Apart from being an important staple in the kitchen, vegetable oils are also used in the production of hundreds of other food products, including basic ones such as crackers. Therefore, disruptions to the global supply of vegetable oils, whether through price increases or limited supply, will have ripple effects throughout the food supply chain.

However, vegetable oil is not the only concern. Labour shortages, especially of truck drivers in some major economies; the absence of shipping containers in some parts of the world; and other pressures on global supply chains brought on by the COVID-19 pandemic; have forced much of the world to navigate the problem of scarcity.

While 9.2 percent of the world, or 689 million people, live in extreme poverty on less than $1.90 a day, according to the World Bank, the dominant capitalist system relies on excess consumption to thrive. The United Nations (UN) for example, estimates that 17 percent of the food produced globally each year is wasted. That amounts to 931 million metric tons (1.03 billion tons) of food. This is but a small example of the extent to which we are programmed to buy more than we need or can realistically consume.

One way that consumers react to scarcity is by hoarding foodstuff and other basic necessities such as toilet paper. However, this causes others to suffer.

Countries, much like ordinary consumers, also hoard by stockpiling goods or restricting their export. This too creates big problems, especially for import dependent countries.

According to Harold James, Professor of History and International Affairs at Princeton University,price increases are the natural response to scarcity and many people—particularly poorer consumers—find them very threatening, since price increases for food and fuel and other daily necessities are far higher than a general rise in prices. The bad news is that we may have to live with scarcity of certain products, and related price increases for some time.

It is unclear exactly how long the current challenges in the global food system will persist, but many analysts fear that they could stretch into 2023, possibly beyond.

Essentially, scarcity on the world market triggers competitions and bidding wars among different countries and companies for scarce products. To establish a buffer against such developments, domestic manufacturers can build up stockpiles of their products. However, this would not go far enough for countries which are overly reliant on imports.

A longer-term solution to dealing with scarcity must be multi-prong. Domestically, countries with weak manufacturing capacity would need to scale up. At the broader level, global leaders, including business leaders, have to focus on dialling back the decoupling of countries from the global economy and instead focus on ways to boost inter-connectedness.

Joel K Richards is a Vincentian national living and working in Europe in the field of international trade and development.
Email: joelkmrichards@gmail.com