Energy crisis, food crisis, and the free market: The story of soybeans, cooking oil, and the poor in Indonesia

Soaring food prices were the New Year’s undesirable gift for Indonesians. Among others, the price of soybeans and cooking oil has increased almost twice in the last six months. Although both commodities have contrasting backgrounds, interestingly, free market forces work to the extent that they finally converge to a single result, increased prices.

Apart from declining global supply (partly due to global warming), the food crisis is linked directly to the energy crisis as fuel cannot be decoupled from production. But the link is also indirect. The ambition of transnational corporations and developed countries to stop dependency on oil has caused a race in agro-fuel projects (the term bio-fuel is misleading because it is not necessarily environmentally-sustainably produced). Competition between food for humans and fuel cars results in nothing but a food crisis.

The story of soybeans and cooking oil
Internally, Indonesia has already been a country that imports soybeans from the US and China. Only 15% of total soybean consumption is domestically supplied since the incentive to produce is simply abolished by cheap imported soybean which is – unfortunately – not always the case. When the demand of soybean rises - partly because of its diversion to agro-fuel – the importer countries like Indonesia become very vulnerable.

Vulnerability also happens in cooking oil but from another angle. In the cooking oil case, the country is not vulnerable of its dependency on imports but on its desire to export. Following increasing demand of agro-fuel, cooking oil has suddenly deserted the domestic market forcing consumers, in the country where it is produced, to pay skyrocketing prices. Conditions in Indonesia looks like the root causes of famine in Bengal in 1943 as explained by Nobel Laureate Amartya Sen.

And where is the government? Well, its power to stabilize the food price (except for rice) has been largely removed ever since the signing of the IMF’s Letter of Intent (LOI) in 1999. So, there is not much can it do against rising soybean prices. In the meantime, trade deregulation under the IMF LOI has allowed companies to import and export as they wish. And therefore, government is simply helpless in enforcing a domestic market obligation mechanism when companies sniff huge profits overseas.

Free market and the poor in Cogreg

It was Milton Friedman, the prominent defender of free market, who said that free market responds to individual preference and needs. But will it respond to the preference and needs of the poor? Realistically speaking, no! Nobody is ignorant enough not to realize that free market only responds to money: to the preference and needs of those with money.

My late grandma used to say, “No matter how expensive the diamond is, if you have money, you can buy that. But no matter how cheap the food is, if you don’t have money then you buy it”. Then, it is money that enables you to have soybeans and cooking oil regardless of their different backgrounds.

So, what can our poor beneficiaries in Cogreg do about these commodities? Not much except exclude them from their daily menu. Grin and bear it? Yes, because their voice is too soft to hear while the government has been lacking of the cotton buds (in addition to their power).

But, hold on! The poor might be abandoned by the market and by the government. But not by you! You can help them because you hear their voice. You can help them because you know that they suffer much more than everybody else in any crises. So, you can actually empower them through MicroAid. Give them hook and not the fish. That way will – somehow - help them cope with the world’s energy and food crises.

And because the poor endure most of the effects of these crises, you can support them in their projects to be friendlier with the earth: to reduce, reuse, and recycle as much as possible. Alternatively, your contribution can facilitate improving their income, because the free market - that responds to nothing but money - is no longer an option for Indonesia and other developing countries.

Posted:

http://www.microaidprojects.org.uk/page-article2.htm

Seven ladies, one coping strategy

Seven ladies were already gathering when I arrived at Cogreg village tucked away in the Bogor hills, West Java, Indonesia, that afternoon. The ladies were all 2007 Microaid Projects beneficiaries. They gained a lot of different family enterprise know-how through their Microaid Projects, funded by donors as far away as USA courtesy of the Internet. How to cook melinjo crisps, banana crisps, sewing simple children's clothes, using their home garden for decorative plants sales, making handicrafts for sale such as straw flowers, and beads accessories. These skills proved to be very useful until an economic whirlwind hit them.

Sri, one of the ladies, aged 38 with 3 children, used to get good profits from selling melinjo crisps with nice packaging while Herlina, a neighbor aged 54 with 5 children, was busy selling banana crisps. But that was a year ago when prices were still friendly. Early this year, they both had to close her business because skyrocketing food prices meant that the raw materials were too expensive and customers, now short on cash anyway, could not pay the increased price Sri and Herlina had to charge to make even a modest return on the crisps. Even small enterprise processing plants producing crisps at a much better economic scale had to dissolve. Small producers like Sri and Herlina are so vulnerable to external factors of inflation: the enemy of the poor. At this point, where their little money they had saved was of no value against soaring input prices, Sri and Herlina decided to quit the crisp business.

Not long after the MicroAid Projects course in handicrafts, Erlin (45 years, 3 children), Nomi (40 years, 3 children) and Ari (45 years, 3 children) had really become experts in producing various accessories. Erlin stitch embroidery, Nomi makes artificial flower from straw while Ari made various bangles, mats and wall hangings from beads. You cannot help but notice their goods are of the highest quality. The combination of colours is just perfect that no one would believe they came from the poor village of Cogreg. But what can Nomi and Ari do with their expertise now? Customers have abandoned them since food prices soared.

The same fate happens to Yayuk aged 30 with 2 children and Ngatimah aged 40 with a child who followed the course of for home plot nurseries. They had a feeling that something must have gone wrong with the economy when their plants have been laying idle for months, waiting for customers. After some time, the massive increase in food prices really came.

With the economy slowing down, how can the Cogreg ladies deal with both expensive food and dissolvence of their business? What should be their coping strategy? Well, they were lucky enough to have learnt the skills of sewing from Microaid Projects. They make embroidery (mostly) on a ready-made Muslim headscarves from a local clothing factory. This is how their cheap labour helps them cope with economic whirlwinds. The motif has been copied on the fabric which needs embroidering for each particular headscarf by the factory. The work orders come to them with the headscarf and all materials needed. The work remaining is embroidery the motifs which cannot be done by machine.

A paradox but here in Cogreg village human labour is valued much lower than a machine! People are paid Rp. 6,000 (30p) for one big headscarf with complicated embroidery. This is work for no less than 6 days and not less than 5 hours a day. In other words their labour is worth Rp. 200 (1p) per hour: almost zero compensation for eye weariness and backache. Yet, out of this frustration and hard graft, a little money still means a fortune for those who have nothing.

Seven ladies with one coping strategy are confirmed to be the winners, not the losers. They stand strong against lives that appear to be anything but easy. Through my visit, seven ladies of Cogreg take the opportunity to say thank you to Microaid projects, living proof that even a little help is better than nothing.

Posted:

http://www.microaidprojects.org.uk/page-sevenladies.htm