Rising Inflation, Food Riots and Onion Diplomacy

For nerds like me, who spend their time reading Ministry of External Affairs Press Briefings, it is a rare moment of humor when the Indian External Affairs Minister fumbles with a question about onions jutted between Iran gas pipeline and South African role in BRIC. In a country with highest per capita consumption of onions, lack of this essential ingredient for making curry (almost every Indian recipe under the sun) is a touchy issue. And when it is our old rival Pakistan that is remotely involved with its scarcity the situation quickly escalates to crisis levels. The media is already dubbing it the Indo-Pak Onion Wars. Unfortunately for the media, it is a minor issue that will be resolved soon, while the rising food prices are ready to spark a massive global crisis.

Top 10 Insanities of 2010 World Politics

Looking for an appropriate close to 2010, I played this mental game: what word comes to my mind when I think about global politics in this year? And the answer came back- insanity. Repeatedly our so-called global leaders kept on making unbelievably stupid mistakes that a slightly below-average eighth-grader would laugh over. Some were circumstantial, some can be blamed on alcohol and volcanoes (See #3. McChrystal’s Folly) but some were so deliberately stupid that we would only be able to explain them to our grandchildren with a shrug and we-were-high defense.

So here are your Top 10 Insanities of 2010 World Politics: Click here or scroll down.

#2 Irony is replaced by the phrase “European and American Fiscal Policies”

In the second half of 2010, amidst the Economic Recession, European economies started going bust one after another. Faced with a massive chain gang effect where the collapsing like economies like Greece and Ireland could take rest of the continent with them, all European governments reined in their spending, reduced the public welfare services like healthcare and education. Great Britain unveiled the biggest shake-up in its welfare services since World War II and others followed the suit. Merriam-Webster Dictionary got so impressed by the whole thing that it named “austerity,” the word used to describe this fiscal policy, Word of the Year 2010. The European public didn’t exactly like their governments taking away their free stuff and went on streets protesting. Some students in Italy even occupied the Leaning Tower of Pisa. 

Meanwhile, back in “these United States,” the public went crazy over the amount of spending government was doing. First the healthcare bill, which was supposed to massively expand public welfare services and increase government spending, was watered-down. Then an entire political movement was (of people who don’t even drink tea) was spun around less spending. And finally, American public destroyed Democrats in the 2010 Midterm elections and brought back the Republicans in the name of lesser spending. 

Hmm..now I am no Sherlock, but after complex probability calculations I have come to the conclusion that someone in this scenario must be wrong. Either you should spend more or less. Or maybe the simplest solution is to move American population to Europe and send Europeans to the US. Whatever the right answer may be, I hope they find it soon enough because I am scared of China ending up dominating the global economy. (for a quick summary of reasons see #9 Hell hath no fury as China scorned)

Finally, the most insane of all in world politics in 2010 was…

(Click here for the complete list)

Mathematics says Indian Food Security Policy is completely wrong

Well, it has been mathematically proven that the Indian Government is wrong. In his recent paper The Economics of Foodgrain Management In India, Kaushik Basu, India's Chief Economic Adviser, no less, has proven how the food security policy of the country is economically impossible!

Although this blog is not about food security, this is too sweet an opportunity to miss. Using economics and basic game theory, Basu has criticized the Indian food security policy in an extremely subtle but convincing manner and then got the Ministry of Finance to put the paper up on their own website. His most critical finding is that the current policy that the government follows is in fact leading to higher food prices in the country than if the government was not involved at all.

What Basu has proved is that to maintain low food prices as well as make food accessible to the poor at all times, following steps are necessary:

1. The government has to maintain food reserves. Privatizing the entire process will not help.

2. Instead of what is done today, the government policy should be to hoard when the weather is good and release when the weather is bad. Keeping food reserves at all time does not help anyone.

3. The government has to sell its food reserves at a lower price than what they had bought it at. As of now, when the government releases food, it is at the buying price plus transportation and storage charges. The food thus put in market is more expensive than what the market has to offer itself!

4. The food has to be released in small batches instead of a large bundle. The smaller the batches, the lower the price will be.

5. Instead of opening subsidized shops, introduce coupons for the poor to buy the food from any shop at the market price.

Image Credit: chmoss