Take grain as the key link

Securing grain supplies and providing food security for the peasants was always one of the main duties of the Chinese state, partly because of their deep concern for the well-being of the peasants and partly because they wanted to prevent rebellions. I always teach my students that in a modern market economy secure supplies of staples like grain are less of a concern for the state, and in any case the prices of these things are low enough that most consumers pay little attention.

In China the old level of concern with basic commodity prices stuck around a lot longer. One of my friends spent a winter at a Beijing university in the 80’s, and when she arrived the director of the program assembled the incoming foreign students and said that they had no doubt heard about the poor harvests in the area and were worried about the food supply. She of course had not heard about the poor harvests, and as an American would not have cared, since she was not used to living in a society where her personal food supply was connected to local harvests. The director assured them that things would be fine, because while harvests of almost everything else had been awful, the cabbage harvest had been excellent, and they could be assured of a plentiful supply of cabbage all winter long.

Apparently something similar is happening in Taiwan. Michael Turton reports that wheat prices are going up across Asia, and that Taiwan in particular is feeling the crunch. His sources blame bad harvests, but I suspect that at least part of the problem is that American demand for ethanol is pushing American farmers away from wheat and into corn. I already knew that American SUV’s were destroying the rainforest, but I did not know that they were also depleting the world supply of baozi.

2 Comments

  1. I’m not convinced by the anti-ethanol narratives, at least not in isolation: for one thing, ethanol production just hasn’t risen that fast. Rising demands for food — especially higher-cost meats — in China and India have ramped up demand for all kinds of grain, but feed corn in particular.

  2. But the demand for meat has been rising gradually in China since the reform, while the price of corn sky rocked lately. So ethanol really does seem the culprit.

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