November 10, 2023: Global News Roundup
The value of nothing—$200 hamburgers and the real cost of food
The Global News Roundup collects news stories from entirely international (non-US) media sources on variety of pressing global issues and events.
In 2010, sandwiched between the 2007-8 and 2011-12 global food crises, political economist Raj Patel wrote a book called The Value of Nothing. Borrowing Oscar Wilde’s famous quip, Patel argued that modern economies and markets have created a system in which people know the “price of everything” and the “value of nothing”. To illustrate his point, Patel discusses the $200 dollar hamburger, which is what he calculates the true price of a hamburger would be were we to consider its “social cost”, rather than only its market price:
In modern economics, the term used for these social costs is “externalities”… To see externalities in action, let’s return to the Big Mac’s carbon footprint, to pick just one environmental impact among many. According to one estimate, the energy cost of the 550 million Big Macs sold in the United States every year is $297 million, producing a greenhouse gas footprint of 2.66 billion pounds of CO2 equivalent. In addition to the carbon in the footprint, we might want to add the broader environmental impact in terms of both water use and soil degradation, together with the hidden health costs of treating diet-related illness such as diabetes and heart disease.
While none of these costs are reflected in the drive-thru price of a Big Mac, they still have to be paid for by someone. It’s just that they are paid not by the McDonald’s Corporation but by society as a whole, when we pay the costs of environmental disasters, climate-change-related migration and higher health care costs. According to a report by the Centre for Science and the Environment in India, a burger grown from beef raised on clear-cut forest should really cost about two hundred dollars.
(Image: “Brazil’s beef industry has a bigger carbon footprint than the whole of Japan. Photograph: Jonathan Watts/The Guardian”, The Guardian, 11/6/2023, here).
The United Nations Food and Agriculture Organization (FAO) picked up on the same theme this week in its annual State of Food and Agriculture report, subtitled “Revealing the True Cost of Food to Transform Agrifood Systems”. The report “quantifies, to the extent possible, the hidden costs of national agrifood systems in a consistent and comparable way for 154 countries”, estimating hidden environmental and social costs globally at roughly US$12.7 trillion (in purchasing power parity terms, p. iv, 35).
While I disagree with many of the policy prescriptions the FAO makes in the report—the FAO tends to put more faith in larger-scale government interventions and corporate social and environmental responsibility efforts than I think is prudent—some of the data included in the report was really interesting. The chart below shows the distribution of hidden agrifood system costs estimated by the FAO across different categories (left) and subcategories (right).
(Image: “Quantified Hidden Costs of Agrifood Systems by Cost Category (left) and Subcategory (right), 2020”, from FAO’s The State of Food and Agriculture, 2023, p. 35).
Environmental costs included analysis of greenhouse gas emissions, water overuse and pollution, air pollution, pesticide exposure, habitat and biodiversity loss, land degradation, and antimicrobial resistance. The social costs analysis focused on rural poverty (including among farmers and agricultural workers), undernourishment and malnutrition, food loss and waste, and fertilizer leakage. Health costs were calculated with reference to dietary patterns in many advanced industrial economies—i.e., the so-called “Western diet”, which tends to be calorically-dense, micronutrient-poor, heavily processed, and loaded with sugar—which contribute to cardiovascular diseases, diabetes, and cancers (the hidden cost owes to health care expenditures, as well as lost productivity at work).
Reflecting the tendency of advanced industrial economies to employ large scale, industrial methods to mass-produce food and other agricultural goods—methods widely understood to generate many of the hidden costs noted above—the FAO finds that a much larger share of total hidden costs are generated in high-income and upper middle-income countries relative to lower-income countries (see chart below).
(Image: “Total Quantified Hidden Costs of Agrifood Systems by Income Group”, from FAO’s The State of Food and Agriculture, 2023, p. 37.)
However, the FAO is careful to explain that individuals in higher-income countries do not shoulder a greater burden from hidden costs relative to individuals in lower-income ones because, even though hidden costs per person are higher, so too is labor productivity and average income. Indeed, country-level data indicate that hidden agrifood system costs tend to represent a larger share of GDP in low-income countries than in high-income countries. For high-income countries—Canada, Chile, Germany, Israel, Italy, Japan, South Korea, Saudi Arabia, UAE, and USA—hidden costs represent, on average, 8% of GDP. By contrast, for low-income countries—Afghanistan, Burkina Faso, DRC, Ethiopia, Madagascar, Mozambique, Nepal, Niger, Sudan, Uganda—hidden costs represent, on average, 27% of GDP (p. 41).
The report further explains how the specific local/country context impacts the relative burden of hidden agrifood system costs:
Unsurprisingly, the countries with the highest net hidden costs are the world’s largest food producers and consumers, with the United States of America accounting for 13 percent of total quantified hidden costs, the European Union 14 percent, and Brazil, the Russian Federation, India and China (the BRIC countries) accounting for 39 percent. With the exception of Brazil, more than 75 percent of hidden costs are associated with dietary patterns. In the case of Brazil, almost half are associated with environmental sources, of which 31 percent are from GHGemissions and 67 percent from nitrogen emissions. However, when considering the share of quantified hidden costs to GDP, low-income countries face higher burdens. In the Democratic Republic of the Congo, for example, the ratio reaches an alarming 75 percent (p. 42).
The FAO also provides some interesting examples of how what they call “true cost accounting” (TCA) can inform policy interventions. One example compares how Ethiopia and Somalia each pursued different policy pathways for managing a locust infestation that was decimating crops and causing hardship for farmers and rural communities, as well as food shortages. Ethiopia employed “large-scale spraying of chemical insecticides (broad-spectrum organophosphate and pyrethroid insecticides)” which mitigated the locust surge, but unintentionally killed so many honeybees that Ethiopian honey production fell 78% between 2019-2021. Somalia pursued a different strategy that created fewer negative externalities, using “the fungus Metarhizium acridum and insect growth regulators – a more innocuous and targeted chemical remedy with much lighter environmental impact than traditional pesticides – to effectively control the locusts”. In this way, grazing lands were “safeguarded”, which allowed “pastoralists to maintain their livelihoods” (p. 52).
In related news, the Business Daily reported this week that fewer Kenyans are eating goat meat due to soaring prices: “Once a culinary staple celebrated for its distinctive flavor and cultural significance, fewer and fewer families can now afford the meat… prolonged drought has led to livestock losses and the few goat farmers who have stock are reluctant to sell locally because the export market fetches better prices.” A new study conducted in Glacier National Park found that mountain goats seek out snow in order to avoid biting insects. And, US Marines in California tested a “robotic goat” that can carry and fire weapons in battle.
Things I’m keeping an eye on:
1. War: I’m sure you’ve been keeping an eye on this yourselves, so I won’t offer too much detail (see also my last post from late October). Ukrainian forces and politicians are growing desperate as the US and its allies turn toward the Middle East; the Russian military said it rehearsed “delivering a massive retaliatory nuclear strike; the US conducted strikes on Iranian military facilities in Syria and deployed a nuclear-capable submarine to the Middle East, while its House of Representatives authorized the use of military force to prevent Iran from developing its nuclear capabilities; Israel continued its military incursion into Gaza (a response to Hamas’s October 7 attack), where more than 10,000 civilian casualties are estimated so far as a consequence of Israeli strikes, including many children; Yemeni Houthis “effectively declared war” on Israel and used rockets to shoot down US drones; Iranian-backed forces in Iraq attacked a US military facility; and, Hezbollah appears to be preparing for a broader conflict.
2. Ceasefires, humanitarian pauses, and other diplomatic efforts: The US and Israel have still not agreed to a ceasefire, though news broke yesterday that Israel did agree to a 4-hour humanitarian pause per day in northern Gaza to allow “civilians to flee”. Bolivia severed diplomatic ties with Israel in protest of perceived violations of international law, while Chile and Colombia recalled their ambassadors. Brazilian President Lula da Silva, who is currently taking his turn as the rotating president of the UN Security Council, continued to try to secure a ceasefire: “I am tired of making phone calls,” he said, “but I will continue because it is necessary."
Meanwhile, US and European leaders are starting to push Ukraine’s Zelensky to make peace with Russia, while China continues to push for peace in the Middle East. US President Biden and Chinese President Xi are slated to meet next week for talks on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco. And Russian state media quoted Deputy Foreign Minister Sergey Ryabkov about possibly cutting diplomatic ties with the US: “[I] if we look at Washington’s current behavior model from this perspective, I don’t rule out anything at all. The level [of diplomatic ties] may be lowered; and the severance of diplomatic relations is also possible.”
3. Geopolitical risk: As conflict in the Middle East expands and intensifies, the risks for markets and economies are starting to pile up. FT reported this week that central bankers have mixed opinions about how they should respond to rising energy prices if the war escalates further. Officials in Canada and the UK, along with US Federal Reserve Board Governor Michelle Bowman, indicated they would pursue higher rates in the face of energy-driven inflation, but European Central Bank president Christine Lagarde disagreed: “The eurozone was, Lagarde said, “a completely different economy today”, compared with when energy prices surged last year as EU countries weaned themselves off Russian imports. Higher rates and weaker demand this time round would constrain any price pressures emanating from the Middle East.”
Last week, Iran made another call for OPEC to embargo oil exports to Israel and its supporters. The rising cost of shipping insurance and the slow rate of unloading at ports is driving food shortages and inflation in Israel, which relies on imports especially for protein (85% of beef is imported, 90% of chicken feed). As Reuters reported last week, “Ships sailing for Israel face a 10-fold jump in war risk premiums as the conflict in Gaza intensifies, prompting industry calls for the government to help ensure vital imports keep coming.” Insurance premiums were also sharply up this week for merchant vessels coming into Ukrainian ports on the Black Sea: “[O]n Wednesday a Russian missile hit the Liberian-flagged KMAX Ruler when it was loading iron ore. Four crew were injured and the Ukrainian pilot was killed, making it the first fatal strike involving a commercial ship in many months.”