As governments and companies around the world are searching ways to insulate themselves from price shocks, Pakistan has the most vulnerable history of commodity price surge in the region. Energy crisis has given a deadly blow to the price stabilisation mechanism in a sense that first shot of price hikes is always fired by the government on a month by month basis. It might be surprising for anyone outside Pakistan that petrol and electricity prices were increased about 10-12 times in the last one year but in Pakistan it is a business as usual.
Explosion in commodity market
The new explosion in commodity prices is likely to be fuelled by a mix of unprecedented inflation, rising electricity costs, regularly surging petrol prices and growing housing and transportation cost. The rise in food prices always brings immense profits for agribusiness houses and speculators but untold suffering for millions of ordinary people. Prices of traded food staples such as wheat, corn, rice, sugar and tea continued to surge throughout the year. But the bad news is that the upward trend is determined to shoot higher due to the prevailing market forces. In 2008, riots broke out in at least a dozen countries as food prices hit record high. The Arab Spring that brought down the Tunisian, Egyptian and Libyan regimes were fundamentally triggered by economic and social unrest. The new surge in prices signals to unleash more widespread social unrest, as people around the world contend with the impact of the ongoing recession and governments’ austerity measures.
The latest research conducted by Oxfam indicates that the worldwide surge in commodity prices has clearly drawn a visible divide among developing and developed nations in levels of hunger. The primary concern of more than half of all Pakistanis when buying food is its cost while 44 per cent say they can no longer afford the same items they consumed two years ago because prices have gone beyond their reach. Most people believe that prices of oil, transportation, weather pattern or catastrophic events and government policies are major factors affecting food supply.
Effect on dietary patterns
It is also noted that the global rise in food prices has also changed dietary patterns of most people during the last two years. It points out that 18 per cent of Pakistanis strongly agree that they no longer eat some foods they did in the past. Around 39 per cent somewhat agree, nine per cent neither agree nor disagree, eight per cent somewhat disagree and 25 per cent strongly disagree. Research indicates that the cost of food is the major concern of 51 per cent of Pakistanis surveyed while 28 per cent are concerned about its availability, 19 per cent question how healthy or nutritious the food is and 22 per cent ask how safe food is to eat. Highlighting the most important factor affecting the food supply, the research finds out that 26 per cent Pakistanis blame government policies, 28 per cent consider weather patterns and catastrophic events while 23 per cent believe that oil prices and transportation charges are major factor. It points out that nine per cent Pakistanis claim that it is result of the actions of big corporations, three per cent blame consumer demand and nine per cent say it is an outcome of high input cost of food producers, including cost of credit, equipment, fertiliser and seeds.
Hunger around the globe
According to the FAO, 925 million people worldwide suffered from hunger in 2010, an increase of about 150 million since 1995-97. One third of children in the developing world are malnourished. The landscape is likely to be darkened even further as Institute of Fiscal Studies (IFS) forecasts 600,000 more children will be pushed into poverty by 2013, taking the total living in ‘absolute’ poverty to 3.1m. Although IFS report is focused on United Kingdom, yet it is an eye-opener to the economies around the world in general and weak economies like Pakistan in particular. The think tank has warned that the next two years will be ‘dominated by a large decline’ in incomes. It revealed median incomes are set to fall by 7 per cent after inflation has been taken into account – the sharpest drop in 35 years. The study said: ‘The unprecedented collapse in living standards is chiefly due to the high inflation and weak earnings growth over this period.’ Robert Joyce, of the IFS, described it as the ‘delayed effect’ of the recession. ‘Real earnings didn’t fall for a while after the economy started contracting, partly because inflation was very low’, he said. “But inflation has risen sharply and earnings have not done so in response”, he concluded.
Fall in living standards
Never before have household living standards fallen over such a long period according to Paul Johnson, the IFS director. “We are running out of superlatives to describe just how extraordinary some of these changes are,” he said. Most of the damage to living standards is being inflicted now. The typical family will be almost £2,500 a year worse off by 2013. it is clear beyond doubt that middle-income families are suffering an ‘unprecedented collapse’ in living standards as inflation and poor wages wipe thousands off incomes. In this global perspective, Pakistan needs to have a comprehensive, proactive and forward-looking mechanism to diffuse the poverty bomb being ticked by falling income and rising prices. If went off, it is feared to sweep away the whole system in place just like Tunis, Egypt and Libya. The message is loud and clear; if a society doesn’t help the many who are poor, it cannot save the few who are rich.