Issue Date: 09-05-2020 Zone: UKPB Desk: Leaders Output on: 07-05-2020----09:24 Page: LD2 Revision: 0

8 Leaders The Economist May 9th 2020

Supply chains and the pandemic

The food miracle

I f you live in the rich world and want an example of trade and
global co-operation, look no further than your dinner plate. As
the lockdowns began in the West two months ago, many feared
zon’s grocery e-commerce capacity has risen by 60%; Walmart
has hired 150,000 people. Crucially, most governments have
learned the lesson of 2007-08 and avoided protectionism. In
that bread, butter and beans would run short, causing a wave of terms of calories, only 5% of food exports face restrictions, as
stocking-up. Today, thanks to fleets of delivery lorries filling su- against 19% back then. So far this year prices have dropped.
permarket shelves, you can binge-eat as you binge-watch. But the test is not over yet. As the industry has globalised, it
This capitalist miracle reflects not a monolithic plan, but an has grown more concentrated, creating bottlenecks. Covid-19
$8trn global supply chain adapting to a new reality, with mil- outbreaks at several American slaughterhouses have cut pork
lions of firms making spontaneous decisions, from switching supplies by a quarter—and boosted wild-turkey hunting licences
rice suppliers in Asia to refitting freezers. The system is far from in Indiana by 28%. America and Europe will need over 1m mi-
perfect: as incomes collapse, more people are going hungry. grant workers from Mexico, north Africa and eastern Europe to
There are risks, from labour shortages to bad harvests. And there bring in the harvest. And as the economy shrinks and incomes
is an irony in seeing the industry grapple with a crisis that prob- collapse, the number of people facing acute food shortages could
ably began with the sale of pangolin meat in a market in Wuhan. rise—from 1.7% of the world’s population to 3.4%, the un reck-
But the food network is so far passing a severe test. It is crucial ons, including in some rich countries. This reflects a shortage of
that, during and after the pandemic, governments do not lurch money, not food, but if people go hungry governments will, un-
into a misguided campaign for self-reliance. derstandably, take extraordinary measures. The ever-present
The supply chains behind an iPhone, or a car component that risk is that rising poverty or production glitches will lead pan-
criss-crosses the Rio Grande, are wonders of co-ordination. But icky politicians to stockpile food and limit exports. As in
the unsung star of 21st-century logistics is the global food system 2007-08, this could cause a tit-for-tat response that makes
(see Briefing). From field to fork, it accounts for 10% of world gdp things worse.
and employs perhaps 1.5bn people. The global supply of food has Governments need to hold their nerve and keep the world’s
nearly tripled since 1970, as the population has doubled to 7.7bn. food system open for business. That means letting produce cross
At the same time, the number of people who borders, offering visas and health checks to mi-
have too little to eat has fallen from 36% of the grant workers, and helping the poor by giving
population to 11%, and a bushel of maize or cut of them cash, not stockpiling. It also means guard-
beef costs less today than 50 years ago in real ing against further industry concentration
terms. Food exports have grown sixfold over the which could grow, if weaker food firms go bust
past 30 years; four-fifths of people live in part on or are bought by bigger ones. And it means mak-
calories produced in another country. ing the system more transparent, traceable and
This happens in spite of governments, not accountable—with, for example, certification
because of them. Although their role has de- and quality standards—so that diseases are less
clined, they still sometimes fix prices and control distribution. likely to jump undetected from animal to human.
The European Union’s farm tariffs are four times those on its To understand food as a national-security issue is wise; to
non-farm imports. A dozen or so big exporters, including Ameri- bend that understanding to self-sufficiency drives and blunt in-
ca, India, Russia and Vietnam, dominate staples such as wheat tervention is not. Already, before this year, food had become part
and rice. Half a dozen trading firms, such as Cargill from Minne- of a trade war. America has sought to manage its soyabean ex-
sota and cofco from Beijing, shift food around the world. ports and put tariffs on cheese. President Donald Trump has des-
Concentration and government intervention, along with the ignated abattoirs part of America’s critical infrastructure. Presi-
vagaries of the climate and commodity markets, mean that the dent Emmanuel Macron has called for Europe to build up its
system is finely tuned and can misfire, with devastating conse- “strategic autonomy” in agriculture. Yet food autarky is a delu-
quences. In 2007-08 bad harvests and higher energy costs sion. Interdependence and diversity make you more secure.
pushed up food prices. This led governments to panic about
shortages and ban exports, causing more anxiety and even lofti- Cooking up a new recipe
er prices. The result was a wave of riots and distress in the emerg- The work of the food-supply system is not yet done. In the next
ing world. It was the worst food crisis since the 1970s, when high 30 years supply needs to rise by about 50% to meet the needs of a
fertiliser prices and bad weather in America, Canada and Russia wealthier, growing population, even as the system’s carbon foot-
caused food production to drop. print needs at least to halve. A new productivity revolution is re-
Despite the severity of today’s shock, each layer of the system quired, involving everything from high-tech greenhouses near
has adapted. The supply of cereals has been maintained, helped cities to fruit-picking robots. That is going to require all the agil-
by recent harvests and very high stocks. Shipping firms and ports ity and ingenuity that markets can muster, and huge sums of
continue to move around food in bulk. The shift from eating out private capital. This evening, when you pick up your chopsticks
has had dramatic consequences for some companies. McDon- or your knife and fork, remember both those who are hungry and
ald’s sales have dropped by about 70% in Europe. The big retail- also the system feeding the world. It should be left free to work
ers have cut their ranges and rewired their distribution. Ama- its magic not just during the pandemic, but after it, too. 7