How to respond to food and energy shortages – a short guide for policymakers

A government that cannot ensure the steady supply of food and energy at prices its citizens can afford to pay is likely to face political and social unrest

John KempJohn Kemp
Published : 5 August 2022, 10:25 PM
Updated : 5 August 2022, 10:25 PM

Ensuring an adequate supply of food at an affordable price has always been a fundamental responsibility of the state and in recent centuries that responsibility has extended to energy as well.

A government that cannot ensure the steady supply of food and energy at prices its citizens can afford to pay is likely to face political and social unrest and unlikely to remain in power for long.

Because they threaten the stability of the state, famines and fuel shortages have always been a special concern for the ruling class.

Corn supply was a regular subject on the agenda of the assembly in fifth-century classical Athens, alongside matters such as defence ("Athenian democracy", Jones, 1957).

Athens never exercised a complete state monopoly of corn supply, but it was never indifferent or left entirely to market forces and private merchants either.

In an emergency, the state would endow special funds to buy grain for distribution to poorer citizens to alleviate famine ("Charities and social aid in Greece and Rome", Hands, 1968).

In Rome, from the beginning of the republic the magistrates regarded it as a duty to organise emergency supplies if necessary.

"The price of grain is linked essentially with the concept of 'famine'," according to Geoffrey Rickman, the famous historian of the Roman food security system.

"As in the modern world, so in the ancient, famine is a concept with class and financial connotations," he observed ("The corn supply of ancient Rome", Rickman, 1980).

"The lowly and the poor in society had no reserves either of food or money and therefore suffered immediately as a result of a rise in the costs of basic essentials."

"The rich and the upper classes on the contrary rarely experienced actual hunger during a famine because of their financial resources or even private grain reserves."

"If the shortage of grain persisted, the rich might suffer economically by having to use more of their wealth, or their own grain, in order to cushion themselves against the crisis, but they did not starve."

"The poor did, not necessarily because there was a total lack of grain available, but rather because the current price of grain had risen beyond what they could normally afford to pay, because of crop failure, hoarding or speculation."

Through the republican and imperial periods, the Roman state organised grain shipments and storage, and distributed grain at controlled prices or free to eligible citizens.

At the other end of Eurasia, China's Song, Ming and Qing dynasties organised a hierarchy of village, county and provincial granaries for famine relief and regulating prices ("Nourish the people", Will and Wong, 1991).

While local granaries were intended simply to ensure the population would not starve when the crops failed, some of the larger provincial stores were ambitious efforts to regulate prices to ensure they remained "ever-normal".

ENERGY SECURITY

As modern mineral-based energy systems replaced traditional organic ones, the state's responsibility extended to encompass the availability and price of fuel ("History of the British coal industry", Hatcher, 1993).

In London, the city government took an increasing interest in energy prices as imported coal from northeast England replaced locally gathered wood as the primary fuel source for the rapidly growing metropolis.

When coal was in short supply and prices were rising, the city would respond by regulating prices, organising special distributions of coal to the poor, and making charitable payments to help with the cost of fuel.

The city authorities and parliament would usually respond to rising prices by launching a formal investigation into hoarding, stockpiling and allegations of cartel-like behaviour ("The rise of the British coal industry", Nef, 1932).

The City of London and Parliament regularly launched inquiries into the supply and price of coal from the early 1600s through the 1830s ("Monopolies, cartels and trusts in British industry", Levy, 1927).

At times, the city and parliamentary authorities contemplated creation of a publicly funded fuel reserve to ensure supplies for the capital, though the idea was never implemented.

But by the 1920s, imported oil was replacing domestically produced coal as the primary fuel for Britain's royal navy and commercial shipping and fuel supplies had become a national security issue.

UK defence planners began to insist on the idea of holding emergency oil stocks sufficient to cover at least three months of imports in case of blockade ("Oil: a study in wartime policy and administration", Payton-Smith, 1971).

Britain's interwar planning lives on in the US Strategic Petroleum Reserve and the International Energy Agency's requirement for countries to hold emergency oil stocks equivalent to at least 90 days of net imports ("Agreement on an International Energy Program", IEA, 1974).

Britain's interwar planning as well as the Qing Dynasty's ever-normal granaries also live on in China's rapidly growing but secretive state-owned petroleum reserve intended to protect the economy from large fluctuations in oil prices and enable the armed forces to continue fighting in the event of an embargo.

STATE RESPONSES

In 2022, responses to rising food, oil and utility prices in the United States, Europe and emerging markets are all rooted in the same millennia-old traditions.

In every case, shortages of food and energy have a price as well as a physical component. If food and energy are unaffordable for ordinary households and businesses, it doesn't matter if they are still physically available.

In the face of escalating prices, the first reaction of opinion formers and policymakers is to blame middle-men, dealers and speculators for withholding supplies, hoarding scarce stocks and driving up costs for consumers.

The response is normally to launch an investigation by a parliamentary committee or regulatory agency, which fails to find conclusive evidence price increases are driven by hoarding rather than genuine shortages, but demonstrates the government's concern for its citizens and may be used to frighten dealers.

On a more practical level, policymakers will order the emergency release of food and fuel from strategic reserves to alleviate shortages and in an effort to force prices down.

RATIONING AND SUBSIDY

Prices and market mechanisms will almost always ensure food and energy remain available for households and businesses with sufficient financial resources to pay.

But relying on the price mechanism imposes the most severe burden on the poorest households and most financially fragile firms.

For reasons of social equity as well as political stability, governments usually seek to modify the price-based distribution of food and fuel.

Policymakers typically intervene by implementing price controls and rationing; mandatory allocation to specified customers; and making supplies available to priority households and businesses at lower prices.

They may also grant direct financial subsidies and other payments to the poorest households and businesses to help them survive the crisis.

Interventions aim to protect the poorest members of society – but they also try to protect the most politically influential and dangerous citizens, who are usually the urban middle-class.

Toufique Imrose Khalidi
Editor-in-Chief and Publisher