• Friday, Oct 30, 2020
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OP-ED: Hungry times

  • Published at 06:42 pm June 29th, 2020
poor coronavirus

Bangladesh is more vulnerable to disruptions in the global food market

For most people, macroeconomic indicators are gobbledegook -- what does the difference between 5% and 8% GDP growth mean? For most people, economic indicators that matter are the ones that animate dinner table conversations -- jobs and incomes, and the cost of living.

In the advanced economies with higher quality data, it is job numbers that resonate most -- one might not understand what GDP stands for, but it is very clear what a rise in the unemployment rate means if one’s neighbour has been laid off.

In developing economies with large informal sectors, however, quality employment numbers are hard to come by in real time. Data on the prices of essentials -- proverbial chaal, daal, tel, noon -- are much more readily available, as are wage rates of different types of workers.

Mix those essentials and voila, there is a plate of khichuri. Using the data on prices and wages, we can calculate the number of plates of khichuri an average worker could afford a day.

For example, a few years ago, I calculated the Khichuri Index for a skilled factory worker for the period 2000-2014. The chart below shows a few clear trends that accord well with what is generally known about those years.

In the early 2000s, the index steadily rose -- wages grew faster than prices; these were good times for Dhaka’s working class. But the middle of the 2000s were not -- even as wages continued to rise, prices rose even faster.

Then, from late 2008, prices fell for a while and the index rebounded, before wobbling around in the first half of the 2010s, when there had been price hikes, but then wages tended to catch up.

Of course, one can’t survive by just eating khichuri, one has to live somewhere too. I don’t have a series on rents in Dhaka slums, but I’d hazard a guess that it moved up quite a bit over time. 

Also, our factory worker needs to send her children to school, and possibly send money to the villages and so on. Further, factory workers aren’t the only people who live in Dhaka -- we would want to know what happened to the income of the middle classes who work in various services.

That is, we should not treat this stylized index as a substitute for quality statistics.

But this stylized index has the virtue of being simple and intuitive to people without formal economics training (that is, most normal people). And at times of sudden economic disruptions, as has been the case for the past few months of the Covid-19 pandemic and related lockdown, this index can provide a first pass assessment of living standards.

Extending on the basic concept, the good folks of Brac have been calculating khichuri indices for farm labourers, rickshaw pullers, and construction workers on a weekly basis, covering: Dhaka and Chittagong (urban centres); the northern districts of Bogra, Kurigram, and Dinajpur; haor areas of Sunamganj and Brahmanbaria; char districts of Gaibandha and Jamalpur; the hill tracts of Bandarban and Khagrachari; and the storm lands of Bhola, Patuakhali, and Satkhira.

The Brac analysis suggests that as the pandemic hit, prices started to rise from mid-March, peaking in mid-May, and then declining slightly. Of course, Ramadan may have affected prices. 

Much starker has been the trend in wages -- a sharp decline in late March and April for non-farm workers, followed by a modest rebound in May. As the chart below -- from the Brac analysis -- shows, the urban poor have been hit harder, with rickshaw pullers (usually relatively less skilled) suffering the most.

If this continues, Fakir Alamgir’s Sokhina may well see her besotted return home hungry after all these years.

Will the slight uptick in the index -- resulting from wages recovering as well as prices declining -- continue?

Let’s start with prices. As the chart below -- from the Food and Agricultural Organization -- shows, there is no sign of a food price hike in the global markets. In fact, global food prices fell by 6.5% in the year to May, with prices of five food types -- meat, dairy, cereal, oil, sugar -- declining since March.

Contrast this with the rapid run up in food prices in 2007-08. Back then, the global food supply was beset with adverse shocks -- poor harvests in Australia, Europe, and North America, and sky high oil prices. Subsidized bio-diesel in the United States also distorted food supply.

Meanwhile, food demand was rising on the backs of millions escaping poverty in Asia and elsewhere. To make matters worse, major food producing countries responded to rising prices by slapping on export controls, which reduced the supply further in the global market, and exacerbated the problem. Rice prices, for example, more than doubled because of export control.

The world entered the pandemic with the global food market in a much better shape. There was no supply shock before the pandemic. And the bulk shipping and oil prices were already low.

In addition, 22 major food producers who account for over three-fifths of the world’s agricultural exports, have pledged to keep trade open.

As a net food importer, Bangladesh is more vulnerable than our neighbours to disruptions in the global food market (see chart -- data from Nomura Research).

According to Alvaro Espitia, Nadia Rocha, and Michele Ruta of the World Bank, the pandemic itself might raise global food prices by around 1.8-6.3%, but if there is exports control and retaliation, the impact might be three times as large, with Bangladesh being one of the worst affected countries (see the map below from Espitia et al, 2020).

While the risk of a food price hike remains, potentially much more pernicious is the impact of the global economic slowdown on the incomes of the working poor.

According to Arif Husain of the UN World Food Program, the number of acutely hungry people around the world could double to more than a quarter of a billion in 2020, with the loss of income being the major cause.

That loss of income is the difference between an economy that is growing at around 8% (as Bangladesh has been experiencing in recent years) and one close to 5% (the latest government estimate for the 2019-20 financial year).

With luck, Bangladesh will not experience a famine. But if the economic slowdown continues, incomes will stagnate, living standards will cease to rise, and for the urban poor, creeping hunger will once again be a reality.

In the state of creeping hunger, Sukanta said many years ago, prose replaces poetry as the full moon looks like a burnt ruti. One hopes that in monsoons to come, khichuri-induced stupor can once again fuel poetic fantasies.

Jyoti Rahman is a political blogger. This article was first published on jrahman.wordpress.com.

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