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Rising Resource Costs Escalate Odds of Global Unrest

The critical 40% income-to-food threshold
Tuesday, May 13, 2014, 10:34 PM

As we observe the growing unrest in Ukraine, there is the usual rush to ascribe a cause. Was it meddling by the West? Russia? Was it corruption by prior leaders? Simmering resentments that stretch back centuries that finally erupted?

The answers to these questions apply to Ukraine as well as to many other countries. Which is why having an accurate framework, a clear 'lens' for seeing what is actually transpiring, will prove far more useful to you than 99% of what you will hear on the nightly news.

In response to my recent report on the devolution of events in Ukraine, a veteran reader asked:

  • Which snowflake causes the avalanche?
  • Why are the people in Ukraine are angry enough to start a civil war, while the people in Greece are upset but ultimately willing to go along with years of Troika diktat in order to save the German and French banks? In other words: why was the avalanche in Ukraine so ready to happen?
  • Martin Armstrong attributes the high degree of Ukraine unrest to the populace crossing its tolerance level for corruption, after years of rising discontent. Is it that straightforward?
  • How about the Arab Spring: Do we blame the policewoman who slapped that fruit seller in Tunisia? Or Facebook and Twitter for facilitating communication among the populace in a manner outside of the control of the State?

Was it any of these reasons? All of them? Perhaps some others, too?

Why people in country A are ready to revolt, while those in country B are not, is worth exploring; especially for those considering moving to another country. If you plan to re-locate to a "better" society, you really need to make sure you fully understand the community and culture you'll be placing yourself into -- and whether its benefits are indeed extended to new-coming 'outsiders' such as yourself.

The 40% Rule

If you were going to try and understand why revolts happen, but wanted to limit yourself to a single variable, you’ll be hard-pressed to find something better than the price of food.

There's quite a bit of research to support the idea that people who spend above a certain percent of their income on food are more likely to protest, riot, or otherwise become restive. That number seems to have a minimum threshold of 40% of income to food costs, give or take:

Since the beginning of 2014, riots have occurred in countries including Thailand and Venezuela. Although they’re different cultures on different continents, these mass protests movements may all have one commonality; increasing food prices may have contributed to their occurrence. The cost of food has been steadily increasing in both Thailand and Venezuela; last month demonstrators in Caracas took to the streets marching with empty pots to protest food shortages. According to Dr. Yaneer Bar-Yam and fellow researchers at the New England Complex Systems Institute (NECSI), events such as these may be anticipated by a mathematical model that examines rising food costs.

The events of 2014 aren’t without precedent; the price of food has provoked (and placated) throughout history, beginning in Imperial Rome when Augustus introduced grain subsidies. In recent years, the Middle East has been particularly affected by the cost of grain. Centuries after Egypt developed bread as we recognize it, the nation experienced a bread intifada – the country rioted for two days in January 1977 following Anwar Sadat’s decision to drastically decrease food subsidies. More recently, under the rule of Hosni Mubarak, the price of grain rose 30 percent between 2010 and 2011. Then, on January 25, 2011 a new revolution began in Egypt.

(Source)

While the study used data through 2011, so much has happened since that I strongly expect the results are even stronger now. To wit, if we were to update the above chart we'd have to add Thailand, Argentina, Ukraine, Greece and Venezuela to the list.

It’s delightfully intuitive that food prices and people’s sense of contentment are tightly linked. Where the various meddlers in the Ukrainian situation were able to obtain quite large reactions from relatively simple efforts, it might be nearly impossible to incite a similar reaction in Switzerland, even with 50x more provocation and propaganda.

This conforms to my views on terrorism which I see as a very rare occurrence that results when a group feels they have literally zero other options left. Usually what governments call terrorism is not even that; rather, it's the type highly asymmetrical warfare that one gets when a vastly weaker party believes it has to react to a stronger foe.  That is, it's a tactic not a genetic defect or cultural ideology.

The main connection between these points on social unrest and terrorism is that people are generally very slow to react, and will only resort to unrest and violence if they already have their backs against a wall. A very effective wall is the lack of access to affordable food.

But there are others. From the same article as linked above:

Of course, man cannot riot off bread alone; factors such as unemployment, oppression, economic instability and corruption also contribute. Still, there is something so fundamental about food, and the implications of not having it, that makes people react. As Bar-Yam explains, “The analysis suggests the doubling of food prices we have seen since 2005 pushed many in the greatest poverty across the line from bare subsistence into desperation and starvation. When people are not able to feed their families, they have little to lose and become willing to take strong actions.”

Certainly one popular story in the West is that the people of Ukraine rose up against a corrupt president, Yanukovych, and that’s certainly true to an extent. Instead of viewing the corruption as the only factor at work, though, those willing to do a modicum of digging will soon realize it was merely one of several final straws.

Under- and unemployment contributed, as did oppression and a generally poor economy. Heavy fuel costs were mixed in there, too. And all of these threaten to get worse under the terms of the IMF ‘loan’ to Ukraine.

Rising Oil, Rising Food

Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.

- Henry Kissinger

There are numerous research studies showing that rising food prices are highly correlated with oil. Analysis reveals that the price of oil influences the price of food but that, in reverse, the price of food does not influence the price of oil. That is, there’s more than correlation, there’s causation -- with oil driving the price of food over the long haul. Specifically, the price of corn, soybeans and wheat, with rice not showing much of an effect possibly because so much of it is planted and harvested with muscle-power vs. oil.

Here’s a long run view showing this relationship:

(Source)

What’s interesting is that the obvious effect of rising oil prices is on the supply side. All of the inputs costs more: fertilizer, diesel for the tractors, chemicals and transport. The less obvious part of the story is on the demand side, as higher fuel costs end up diverting cropland to energy production in the form of corn-based ethanol and palm oil. This removes land for food production and creates competing demand for the same edibles in the case of corn.

In 2005, the price of oil began its volatile rise to the current worldwide price of over $100 per barrel. Correspondingly, the world price for food has also risen over the same period and is now above the levels that ignited the so-called Arab Spring, which really could be renamed the Hungry Uprising:

(Source)

Food prices are high by historical standards and this is one of the key flashpoints for so many of the recently afflicted countries. The reason energy prices and food prices are so tightly coupled is because there are anywhere from 10 to 20 energy calories embedded in each 1 food calorie.

It seems quite likely that food prices will only continue to rise from here for a number of reasons, high oil prices being just one. There’s also increasingly chaotic weather impinging on harvests, which seem to be a part of our new normal. Already driving the price of food is a fair degree of speculation on the possibility of the emergence of El Nino in the Pacific later this year (2014); previous similar weather patterns have proven to be especially damaging to global grain harvests.

Droughts, as well, have been particularly vexing to several regions of the world, including the US. One that began in 2008 is almost certainly a main contributor to the Syrian uprising:

Lebanon Prays for Rain to Avoid Syria’s Fate

May 9, 2014

Three years ago, on the cusp of the Arab Spring, a devastating drought sparked anti-government protests in Syria, which eventually devolved into a grinding civil war. Now a new drought has arrived—one that’s expected to be theregion’s worst in decades. Only this time, the parched country in peril is Lebanon.

Things are so bad in this nation of 4 million that snow was largely absent from the country’s famed ski resorts this year—a vital source of groundwater during the summer—and some villagers near the Israeli border have even reportedly turned to the ancient ritual ofshish balli, or praying for rain. And asthe dry monthsapproach, some worry thatLebanon, as well as Syria, is on the brink of a severe water crisis.

(Source)

Perhaps droughts have always been a staple in the global climate tool kit but when you combine drought with high population densities, ruined soils, and generally dim economic prospects they can be quite destabilizing as has proven true across the Middle East - North African belt.

In the case of Syria, there’s no good news yet on the horizon.

UN warns of Syria food shortage due to looming drought

Apr 8, 2014

The UN has warned that a drought in Syria could lead to a record low wheat harvest and put millions of people at risk.

The World Food Programme (WFP) said rainfall since September has been less than half the long-term average.

At the same time, WFP food aid has been cut by a fifth due to a lack of funds from international donors.

"WFP is concerned about the impact of a looming drought hitting the northwest of the country, mainly Aleppo, Idlib, and Hama," WFP spokeswoman Elisabeth Byrs told reporters in Geneva.

"A drought could put the lives of millions more people at risk," she said.

Up to 6.5 million Syrians could need emergency food aid as a result, up from the current figure of 4.2 million, Byrs said.

As a result of the drought, Syria could be forced to import more than the 5.1 million tonnes of wheat it needed last year, the WFP said in a report.

Syria was last hit by a drought in 2008, three years before the outbreak of the civil war.

On Monday, the WFP announced that it had to cut the size of its food parcels to Syrian families by 20 per cent.

(Source)

It’s pretty obvious that part of the tension that led to uprisings in Syria was related to both this drought and generally high food prices, even before poor harvests added to the misery.

Importing Water

An additional factor in my prediction for rising food prices stems from the gross over-withdrawal of water from aquifers that has been ongoing for decades.

If you compare the map below with a list of trouble spots in the world you will note a high degree of overlap:

(Source)

Some of those countries are not yet in revolt, but are on a very dangerous path that may well take them there. India is badly over-pumping its main aquifers and is hugely dependent on the food that comes from those efforts.

Saudi Arabia’s main aquifer is slated to run out as early as 2016. Because it has abundant energy resources Saudi Arabia will be able to turn to desalination plants, but for how long and at what costs to their ability to export oil as that same oil is being used to power those plants?

It takes up to 1,000 tons of water to grow one ton of wheat. Therefore, when China imports grains, like corn, soybeans and wheat, it is actually importing water, something it increasingly needs to do because of aquifer depletion and surface water pollution.  

Given the trends in world food production, energy prices, droughts, El Ninos, depleting aquifers, and the like -- we actually have to work very hard to come up with any scenarios wherein food prices might fall instead of rise.

The only one that really makes sense is an economic accident of such grand proportions that it causes a deflationary impulse so strong that it drags pretty much everything down with it, including food prices. But then, we’d expect literally everything to be cheaper in price; from real estate to stocks to bonds to politicians to used cars.

It remains our view that such an outcome, while possible, will be fought tooth and nail by the world's central banks. They'll print and distribute additional rounds of ‘deflation fighting’ money to keep the system afloat.

And, just as none of the central bankers have given one thought to the savers they have tossed under the bus wheels to ‘save the system’, they will give about as much thought to the immense pain that exporting food inflation will meant to dozens of countries and billions of people.

Conclusion (Part 1)

In Part 2: What To Avoid When Relocating we apply the framework above to understand why Ukraine was actually a very likely candidate for the unrest that's broken out there, and why the math strongly indicates the situation is likely to get considerably worse. 

Dwindling resources produce the least admirable human behaviors, something science has tested and understands quite well. Ukraine is a bellwether; we will see other conflicts like it elsewhere in the world, and likely, in time, within our own nation. Which is why understanding the nature of social unrest is so important, particularly to those considering relocation (within or outside of their home country). You certainly don't want to leap from the frying pan into the fire as resource scarcity and conflicts are now part of the global equation.

Click here to access Part 2 of this report (free executive summary, enrollment required for full access).

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14 Comments

pgp's picture
pgp
Status: Silver Member (Offline)
Joined: Mar 2 2014
Posts: 199
Perfect Storm

Nice analysis, puts into numbers what those with some foresight have logically concluded to be true, too many people and not enough food and water.   

Things look bad form all angles it seems; if the economy and energy collapse doesn't get us the food/water supply shortage will knock the world on its ass.  And all of it appears to be a sure thing in many countries within the next 25 years.  Some very hard times to look forward to in retirement as we contemplate cancers, murder, starvation, exposure and tribal and international war.

Is it just me or does it look like everything wrong in the world is coming together in a perfect storm.  Disease, atmospheric corruption, economic corruption, community decay, lack of food/water, energy depletion all seem correlated with everything failing at the same time and with mostly equal ferocity.

Wildlife Tracker's picture
Wildlife Tracker
Status: Gold Member (Offline)
Joined: Jan 14 2012
Posts: 403
"Some very hard times to look forward to in retirement"

Running through the bucket list at 25 isn't exciting either :(

Also, I love your perfect storm description. I think it just proves that we have really pushed the limits of planet earth and it's finiteness. 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5666
The Perfect Storm
pgp wrote:

Is it just me or does it look like everything wrong in the world is coming together in a perfect storm? 

It's not just you. 

What's coming is a convergence of multiple exponential functions into a very narrow window of time.  When you get right down to it, a couple of decades is really nothing at all from either historical or evolutionary perspectives.

In these next couple of decades we will be facing exponentially larger demands for 'stuff' from the natural world and exponentially depleting or declining stocks of the same.

To see the difficulty, all you need to understand are the concepts of time, scale and cost.

Sure we could transition to some other energy source, yeah we could do that.

But are we?

Nope.

Just look at this chart and think about how exactly we are going to transition off of fossil fuels given the issues of the time it takes, the scale of the task, and the costs that we'd have to prioritize over to that project instead of frittering our money away on war and perpetuation of the prior living arrangements.

Each and every decade we are using more fossil fuels both in aggregate and percentage terms.  If we need to be using less, we are headed the wrong way on this particular highway.

Without a plan for how we will manage depletion of water from aquifers, increased poisons in the environment, more humans on the planet, crumbling ecosystems, increasingly chaotic weather that is less supportive of farming and the 800 pound gorilla of declining net energy, then we will simply crash into that reality later on.  

Even the most average child can tell you that nothing can grow forever.  Sooner or later you'd think that reasonable adults would begin to have that same conversation, even if it was only to conclude (rightly or wrongly) that we are actually on a path that brings us to a stable and durable future.

Instead there's literally zero conversation in any of the halls of power about anything other than needing to get us back to rapid growth.  

Again, you and I don't have any particular requirement for economic expansion, but our money system does.  We are being driven to the brink to chaos by an unexamined slavery to a concept, and that concept is debt-based money.

Why are we slaves to money?  Why is it not the other way around?  I really don't understand...

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Slighty abnormal weather is good enough.
"The tree rings show the kind of rapid climate change that we and policymakers fear," says Manning. "This record shows that climate change doesn't have to be as catastrophic as an Ice Age to wreak havoc. We're in exactly the same situation as the Akkadians: If something suddenly undid the standard food production model in large areas of the U.S. it would be a disaster."

Read more at: http://phys.org/news/2014-05-climate-empire-fall-tree-reveal.html#jCp

And

El Nino improves the global yield of soybeans by 2.1 to 5.4 percent, but changes the yields of maize, rice and wheat by -4.3 percent to +0.8 percent, they said. When El Nino goes into reverse, a process called La Nina, the change in global average yields of all four crops range from zero to -4.5 percent, according to a study in the journal Nature Communications. Read more at: http://phys.org/news/2014-05-winners-losers-cereal-production-el.html#jCp

But we can adjust.

Nordic Food Lab conducts research into new food alternatives on the basis of local availability. Insects play an important part in their research. The researchers focus on specific preparation methods to turn the insects into tasty dishes. The insects being used include crickets, grasshoppers, moths and bee larvae. Various cooking techniques are explored for each insect, from frying to fermenting and from boiling to frothing. The aim is to expand the range of flavours and develop new ideas and methods that will satisfy even the greatest connoisseurs. Read more at: http://phys.org/news/2014-05-nordic-food-lab-insect-snacks.html#jCp

climber99's picture
climber99
Status: Silver Member (Offline)
Joined: Mar 12 2013
Posts: 177
How to consume guilt free

Mankind is destined to expand to the limits of the planet, use up all it's fossil fuels and then collapse to the carrying capacity of the Earth. Most people, including myself, are selfish creatures. We don't care about a future collapse as long as it doesn't happen in our lifetime and it happens somewhere else first.  How do people deal with this horrible trait in their personality? Very simply, by not talking about it or even acknowledge it. I find making comments on blogs such as yours very therapeutic.  It means I can continue to consume my 200 kWh or so of energy per day guilt free. 

nigel's picture
nigel
Status: Silver Member (Offline)
Joined: Apr 15 2009
Posts: 143
Don't focus on the perfect storm

Every farmer will tell you that rain from a lightning storm will make your crops grow an extra inch.

Other times and other cultures had this issue, if memory serves Jarod Diamond wrote about a time when the Japanese empire was facing depletion of wood, which at the time was their primary energy source. I believe England at one point or another faced the same issue, as did several other European cultures. I'm sure that some neolithic cultures faced a similar crisis when faced with mammoth depletion, which was their primary energy source.

Look at this time as the time before the storm to get everything in order, and look at the time after to learn about resource management.

It's not the end of the world if I don't have fuel for my car, it just means I get to ride my horse.

You could even make some fun out of it, make a new website, peakmammoth.com :-)

climber99's picture
climber99
Status: Silver Member (Offline)
Joined: Mar 12 2013
Posts: 177
Going equine

We are at the peak of the fossil fuel age, give or take a decade. World population is currently at 7 billion and an increase to 9 billion is already baked in the oven (sorry about the pun). The carrying capacity of the Earth without fossil fuels is vastly below this level even if we go 'Equine'.  The question is how we are going to continue our personal 200 kWh energy dependence while we drive every one else's down to 0. The US spends more money(energy) on the military than all other Nations put together. I think there's a clear winner there (if this race is, in fact,' winnable'.) 

pyranablade's picture
pyranablade
Status: Silver Member (Offline)
Joined: Nov 8 2010
Posts: 205
climber

People like us that "know the score" should take on leadership roles - not by talking specifically about these problems that others "don't get." Instead we should be talking to our neighbors about how rewarding it is to work in our gardens, talking to our co-workers about how fun it was to ride our bicycles to work, talking about how much money we are saving by consuming less energy, etc.

Society as a whole might never accept the insights we discuss on websites like this, but we can still have a positive influence on the rest of the world.

Instead of saying "well we cannot solve all the world's problems, so let us just wash our hands of them," we should be putting forth a reasonable amount of effort towards setting the tone of our culture. That tone will be pivotal when the S hits the F.

pkprsnnj's picture
pkprsnnj
Status: Member (Offline)
Joined: May 17 2014
Posts: 1
Kissinger quote

Wikiquote says there's no source for Kissinger quote about food, controlling money/world.

<http://en.wikiquote.org/wiki/Talk:Henry_Kissinger>

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5666
Kissinge quote
pkprsnnj wrote:

Wikiquote says there's no source for Kissinger quote about food, controlling money/world.

<http://en.wikiquote.org/wiki/Talk:Henry_Kissinger>

Maybe not according to wiki, but this quote is very widely attributed to HK.

As here: http://americanhistoryquotes.com/kissinger_henry.htm

If it was not him, then I should like to claim it as my own, as it's quite right, pithy and brilliant.  If it is not claimed by someone within a set period of time, how long do I have to wait to claim it as abandoned property for my own?

:)

Just kidding, of course.

I'll keep searching to see if I can find the original source for the quote, it's just so much harder with material said/developed before the internet came along to helpfully archive everything for us...

derelict's picture
derelict
Status: Member (Offline)
Joined: Aug 13 2008
Posts: 16
suspect ratios

I remember how 100% was the tipping point for debt to GDP. And how $80 oil would crash the economy. 

Now I suspect the world is all much more complex than that, with different ratios holding in different countries, at different times. 

dickd's picture
dickd
Status: Member (Offline)
Joined: Nov 2 2011
Posts: 14
Global Unrest and Blogs

This discussion by CM perfectly describes thoughts I've had recently.  I've printed the "report" along with the thoughtful blogs and will use them in our next "Community" meeting for discussion.

At 67 and retired for 2 years I find myself becoming less hopeful and optimistic for the near term; and so are the retirees in our local Community.  Could this be normal for senior citizens or is it caused by a lifetime of learning about humanity and history?  Yet, a few younger bloggers seem to understand and are attempting to ignite change.  That's encouraging and this website is truly "therapeutic" in knowing that there are some intelligent people who understand.  (P.S. I define "intelligence" as "the ability to predict".)  Having just spent the last 2 weeks with seemingly intelligent folks who scoff at "Crash Course" concepts and not having access to a computer, I NEEDED to read Peak Prosperity reports and blogs again!  Our generation lived during a sweet spot of human history and unequaled prosperity which may not return for a long time once the oil and resources are depleted.

Thank you Chris Martenson and bloggers! :)

kaimu's picture
kaimu
Status: Silver Member (Offline)
Joined: Sep 20 2013
Posts: 160
PEAKING AT OZ

Aloha! There is no real OZ here and the Wizard has always been running the show buck naked! The fuel that runs everything in this world even the S&P500 record highs as well as energy consumption is one word and one concept. The concept is "buy now pay later" and the word is D-E-B-T! It's not magic and the reason we are feeling this supposed "sweet spot" is that the issuance of "easy credit" whether it is in the form of a mortgage, a car loan, credit cards, business loans, IMF loans or just plain old M-A-R-G-I-N is because we have record high global DEBT!!!! The entire world's future is crammed into one $345TRIL interest rate derivative bet! Every government on Earth has demanded that their supposed "non-political" central bank keep interest rates at historical record lows for years on end. Why wouldn't a central bank keep rates low since their objective since 1913 has been to own every Nation on Earth via the issuance of debt? Record high debt demands record low rates! It's not rocket science.

People consume more simply because the issuance of bank credit allows it. If you hand 99.8% of the Nation a blank check they will make it out for the highest dollar amount possible. That is human nature and that defines the mentality of the US Congress. Congress is addicted to debt and the more credit they get the more they spend because they know that the more their constituents consume the happier they will be and that means the incumbent two party monopoly stay in power longer. So far their plan has worked to perfection! Any dead beat drug dealer knows that you keep your addicts happy by giving them more dope not less.

That energy consumption chart looks an awful lot like this chart ...

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5666
Indeed it does look like that!
kaimu wrote:

That energy consumption chart looks an awful lot like this chart ...

Yes it does, and the plot twist coming to the world soon enough is that while the debt chart has to keep climbing (or else the banking system wipes out) the energy cannot keep climbing like that.

The irresistible force meets the mirage.

It's not going to be much of a contest.

 

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