The next disruption to the OECD's cozy belief in the endless supply of cheap commodities came when those same vast hordes of the formerly poor began to change their diets. "We are now using energy and metals the way you did for decades, and now we're going to eat like you. We're no longer content to stay small and skinny by living on rice, bread and lentils. We want animal protein – in milk and meat."
As world supplies of grains were quietly turning from surplus to scarcity, the U.S. and EU were noisily falling all over themselves to "grow oil" through corn-based ethanol (U.S.) and soybean, palm oil and canola-based diesel fuels.
Results: Corn, canola and soybean prices have more than doubled in two years, as have wheat and rice. The entire world can no longer afford to have serious crop failures in any of the major grain-producing regions. According to the UN's World Food Program, hundreds of millions of the world's poor are already facing malnutrition or famine.
The world will soon face its greatest collective food crisis, as major Third World countries with growing food demands and growing wealth bid for available supplies of grains, milk and meat. Food inflation will soon be a greater constraint on global growth than $120-a-barrel oil. Even among the wealthy nations, consumers will be spending more and more of their earnings on food and fuels, and cutting back on expenditures on almost everything else.
If there are disappointing crops this year or next in any major grain-growing regions, the consequences will be scary. Engel's Law states that when food prices rise on a sustained basis, the impact is felt inversely to incomes – of individuals, families – and nations.
Future historians will write of this era as the time of history's greatest simultaneous efflorescence in personal economic liberty. In less than four decades, at least a billion people will move into middle-class dwellings and will switch to middle-class diets. That process took the West and Japan a century. The demands of these people for basic materials will be the overarching story of economic activity in the world until at least 2030.
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The next disruption to the OECD's cozy belief in the endless supply of cheap commodities came when those same vast hordes of the formerly poor began to change their diets. "We are now using energy and metals the way you did for decades, and now we're going to eat like you. We're no longer content to stay small and skinny by living on rice, bread and lentils. We want animal protein – in milk and meat."
