Becker’s focus is the impact of food price inflation on the poor, and I have no disagreement with his analysis. I want to discuss commodity price inflation in general, and its political consequences, but I want to begin my discussion with Becker’s point about the effect on food policy of the greater political clout of urban than of rural populations. That greater political clout has been a factor in government policies since Rome provided its citizens with free bread. The concentration of population in a city, especially in a nation’s capital, makes urban residents a potential threat to political stability. It does this by facilitating large-scale demonstrations, riots, and other mob action (not only because there are many people to fill the streets, but also because information spreads very rapidly in a city, facilitating the coordination of a large group of people), with consequences—which can include bringing down the government—that we are seeing in the Middle East and North Africa today. Hence it makes political sense for a government to provide more generous food subsidies to urban than to rural residents even though the latter are needier.
It appears that rapidly rising food prices have been a major factor in the recent and continuing unrest in the Arab countries. As Becker emphasizes, food prices are a big part of the budget of families in poor countries, even of urban residents, with their higher incomes. In fact the demonstrators who brought down the Tunisian and Egyptian governments were complaining vociferously about surging food prices, though they had other serious complaints as well. During the Egyptian crisis Mubarak promised higher subsidies in an (unsuccessful) effort to quell unrest. Other governments in what used to be the Third World will doubtless take the hint, and increase food subsidies particularly for city people, who are far more likely to bring down a regime than rural people; and so the inefficiencies and hardships that Becker points to as consequences of economically unsound food policies are likely to become even greater.
The broader point is that commodity price inflation has inescapable political consequences. A characteristic of commodity prices is that they can and often do change very rapidly and steeply, and if the commodities are consumer commodities these changes are quickly observed and cause alarm. A notable example is gasoline. Prices of gasoline change rapidly, and like other consumer commodities purchases are frequent, so that the consumer is kept continuously aware of price instability. Prices for food and fuel are excluded from the usual measures of inflation because of their instability, but they contribute to measured inflation (if they continue rising) indirectly because they are inputs into other goods and services, as are many other commodities whose prices have also been rising. The rise in these prices reflects worldwide increases in demand, especially in rapidly growing economies such as those of China, India, and Brazil, and concerns with inflation, against which investment in commodities is a hedge.
If food prices keep rising, we can expect more unrest in the Third World and slower economic growth. The increased unrest, however, need not diminish long-run economic growth or long-run political stability, if it is the catalyst for the replacement of authoritarian regimes with more-democratic ones—though that can only be a hope, and not a prediction. Rising food prices thus may—or may not—have a silver lining.