The political price of bread

By Published On: March 8, 2008Categories: Economy0 Comments on The political price of bread

Casa de democracia

I looked at the bag. There were only two rolls not three. Ever since I
have been in Bolivia I have got three rolls for one boliviano (about 8
pence). It was very concrete evidence that prices are going up.

It has been in the papers for a while, but it is really in the last
month that every other conversation you hear is about rising prices. A
group called “Amas de casa” were out marching in Cochabamba earlier
this week. Whilst they are often dismissed as a front group for
opposition prefect, Manfred, the same can’t be said for the union
workers in El Alto who have expressed their “frustration” at food
prices and marched on Friday calling for the resignation of the Finance

And the rise in prices is probably the biggest threat to MAS’s
programme of changes. For discussions about ethnic identity and
start to become irrelevant if people are paying more
for the basic necessities of life. In fact those who are most affected
are those who are the core of Evo Morales’s support: those on low
incomes who saw no benefits under years of neoliberalism and have hope
for real changes under Morales. With more than a third of the population
earning less than one dollar a day, a 30% increase in staples such as
bread is not something that can be easily absorbed.

Given that the MAS government has very much lost middle-class support,
those on low income are a sector that MAS can not afford to lose.
Particularly when the Government is turning to the population for a
constitutional referendum – to guarantee the progress of its reforms –
in just a few months time. The reality of finding it harder to get by,
and the general unease caused by shifting prices beyond each person’s
control is at the very least likely to undermine the motivation of
people to vote in favour of the Government.

The question is who is to blame. And of course the Right with its strong hold on the media is very keen to attribute all the blame to the Government. I am no expert in inflation, but as far as I understand it inflation largely arises when too much money is chasing too few goods. In this context it is clear that a policy of increased public spending (rather than public investment) which has been most obviously seen in the launch of the Bono Juancito Pinto (Child benefit) and Renta Dignidad (universal pension) has fuelled inflation – although politically they were crucial responses to show concrete effects of the government’s ‘nationalisation.’

It is also clear as I heard in a meeting of small producers last month, that the Government’s programme to increase national production is still highly flawed and not working. However lack of investment in this area has a much longer history than this particular government, including two decades of neoliberal policies that prioritised cheap exports of primary products rather than generating food and essential items for the national market. In fact it is ironic to hear the Right talking about the government’s responsibility for inflation when they adopted the free trade policies that undermined national and local production and continue to argue for a Free Trade Agreement with the US.

But it is also to a great degree out of the hands of the government – and in fact even in the North we bear some of the responsibility. According to a Guardian report, rapid growth in India and China is forcing up food prices both in terms of increased demand (richer populations tend to consume more meat which needs more grains) and in terms of knock-ons from industrial growth (demands for oil and petrol push up prices that affects crops dependent on petrochemical pesticides).

But another big factor is that the US and Europe are increasingly pushing for conversion of crops into agrofuels. In fact Britain recently passed a law that sets targets for agrofuels use in transportation starting this year. The aim is supposedly to reduce dependence on fossil fuels and to prevent global warming, although recent scientific reports suggest it is doing exactly the opposite: increasing deforestation, increasing carbon emissions and putting food prices out of the reach of the poor. In other words, whilst we start to fill cars with agrofuels, Bolivians are paying more for their bread. And it is likely to get worse: Jean Ziegler, special rapporteur for the Right to Food from the UN warned several months ago that biofuels is increasingly depriving the poor of food and should be considered a “crime against humanity.”

In Bolivia the other key factor has been a series of devastating floods in some of the key agricultural areas which has destroyed crops and killed many cattle, also forcing prices up. Yet even here there is a responsibility in the North, as Evo Morales has pointed out, for global warming caused by northern industrialised nations is already making its effect on countries like the South. Whilst it is still unproved that the weather patterns (known as Niña) that have caused the floods two years in a row are worsened by global warming, the evidence is ever more pointing in that direction.

Meanwhile in Bolivia, it feels like it has unleashed economic forces that MAS will find very difficult to control. It is here that you realise how much economics is about psychology and economic power rather than science. Because prices now seem to be set more by fears of increasing prices in the future rather than the reality of price increases. Yet this fear then ends up creating inflation.

This is further fuelled by private businessmen who see an advantage to both undermine the government and to make profits at the same time. Their dark warnings last year when inflation wasn’t a problem to a certain extent became self-fulfilling. As it is mainly the economic elites who control distribution, they are also in a better place to hoard and speculate causing prices to rise – or to use the talk of inflation to push for above-inflation price increases. A clear example is my bread purchase: even the Right doesn’t argue that inflation is running at 30% yet the main city bakers applied an increase well beyond the small rise in flour and vegetable fat prices.

It returns us again to the conundrum that MAS have political power, but through the Right’s control of business and the forces of globalisation, does not have economic power. The proposed constitution plans to address that in some way, with its focus on land redistribution, control on monopolies, focus on food sovereignty and national production, ecological production (ie less dependent on petro-chemical inputs) and controls against free trade. But even so, it will be a major challenge for the government to take on the entrenched economic forces and to do that in a way that doesn’t cause capital flight or economic sabotage. It’s a catch-22 that the Government needs major structural reforms to prevent its dependence on outside prices and internal economic elites, but it might not be able to make those changes if it gets blamed for the current crisis over which it has little control.

Whatever it is a warning that in pursuing necessary cultural transformations such as recognition of indigenous autonomy, the Government can’t afford to neglect the economy, national production and improving or at least defending basic standards. It also has to do this in a strategic, intelligent and pragmatic way. We have seen with “nationalisation” or the transfer of privatised water utilities into public hands that public ownership doesn’t automatically translate into effective workable alternatives. The price of bread has often been the cause of revolutions, but it could also be the undoing of the changes in Bolivia. Narrowing in on the economy may seem like going against the deeper issues the government is tackling, but it in fact it has even more relevance to a government that needs popular support if it is going to deepen a process of structural change. 


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