Isabella Weber, an economist who has been criticized for her proposal to implement strategic price controls during the peak of inflation and identified corporate profits as a driver of high prices, has proposed a new measure that could prevent food shortages and price gouging in the wake of another disruption of global supply chains.
Weber’s new paper, published on Thursday, looks at how grain prices spiked in 2022 as Covid snagged supply chains and Russia invaded Ukraine.
The price hikes helped drive record profits for corporations while pushing inflation higher and increasing global hunger.
In the paper, Weber and colleagues call for the creation of buffer stocks of grain that could be released during shortages or emergencies to ease price pressures.
Such a system would quell the volatility that is a hallmark of the grain market and keep food prices down, said Weber, the paper’s lead author and an associate professor at the University of Massachusetts.
Weber’s previous work on inflation went viral after the Guardian published her opinion piece, but her views have since gained support from policymakers and other economists. A new entity proposed by Weber and her co-author, Merle Schulken, would work similarly to how the Biden administration has wielded the Strategic Petroleum Reserve to try to limit price spikes and collapses in the oil market.
When demand for oil is strong and prices climb, the government can use its oil reserves to help bring prices down. When demand is weak and prices fall so low that pumping more oil becomes unprofitable, the government buys and stores barrels in its reserve.
Weber focused on grains because they are easy to store and their prices affect other foods, like meat. More broadly, as ongoing inflation generates political discontent, such a measure could head off upheaval. High food prices have destabilized countries in the global south, leading to migration crises that have fueled the rise of the far right in Europe and the US.
The paper argues that price shocks for basic goods in large part have their roots in the financialization of commodity markets. In 2000, the US deregulated commodity markets under the Commodity Futures Modernization Act, a move that has led to unprecedented levels of speculation in the prices of necessities like grains, coffee, and metals. Speculation causes prices to swing wildly even though the prices are often detached from the physical reality of the commodity.
Weber envisions international cooperation with supplies positioned in strategic locations around the globe ready to be quickly deployed in the event of a supply chain disruption. The US and western nations have the resources to meet logistical challenges, and could even partner with private industry for storage. The idea is not all that radical, as the United States Department of Agriculture (USDA) already buys food for aid programs to “stabilize prices in agricultural commodity markets by balancing supply and demand”.
