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