Learnings From the Thai Floods Regarding Food and Economic Security

The current flooding in Thailand clearly can be credited to a few factors.  One factor is that their was an unusually high amount of rain this year.  The rain also followed the pattern shown by climate change models here of higher precipitation in shorter periods (more rain on fewer days).  This type of quick and powerful rain generates more runoff and erosion than lighter rains over longer periods of time.  While we cannot claim any specific incident as being owed to human induced climate change, as this fits the recent meteorological shift and the model, we can say that this sort of rain is increasingly likely.


However the effects of this rain were also magnified due to development. The main development factors that affect runoff and flooding include: deforestation and forest degradation, agricultural practices that leave soils bare (such as monocrops with herbicide use), cultivation on slopes without adequate erosion control measures, urban and suburban expansion and increasing roads (these mean more land covered with structures and pavement that increases runoff and does not absorb water), roads also in how that act as dikes restricting and changing water flows, removal, reduction and tunnelization of creeks and canals (all of this restricts flow of water), changed building models to models that are not flood resistant in areas that historically flood regularly, dam systems (the dam systems helps to control and protect from flooding, but when dams are full as now they pose a hazard and water must be released, so dams protect but when they don’t work create a greater hazard.)


There are also some that attribute part of the cause being human error, specifically that the irrigation department should have been able to know that this year would be really wet and should have released more water early on.  This last point I find questionable, as I can imagine if the irrigation department released a lot of water early and then we had low precipitation, the country would be in tough times and many would complain about the lack of water.  So while the wrong decision was made in hindsight, it would have been difficult to make the opposite decision beforehand.


This can be seen as the set of factors that has led to this serious flooding situation now.  Once the floods came, there were also some initial errors in terms of managing the water. Great efforts were made to protect Bangkok and other key places developing temporary walls to keep the water out.   These walls have been acting as a dam, meaning more and more water (over 10 billion cubic meters according to the authorities) flowing down from the Thai central valley came to meet these walls.  This meant higher and high flood levels and more and more pressure.  The water could only go to the sides and not down and out to the sea as it naturally wants to go but there were also obstructions limiting the ability of the water to go East and West.  The pressure of the water was also too much for the temporary walls, leading to regular wall breaks and then a powerful and quick rush of water that could make an area flooded with over 1 meter of water in just a couple hours.  This led to more damage and loss of life then the normal gradual flooding that would occur in unrestricted conditions.  The lesson that now has been learned, is that if you restrict the flow one way, you need to create an open pathway for the water to go another way to reduce the pressure and move the water out to sea.  This is the current project underway.  There has also been an allowance of more water to pass through Bangkok to ease the pressure.


This flooding is unusual both in the flood levels in areas (many places with over 2 meters of water) and in the duration of the floods.  While part of this is due to the factors leading up to the flood, the key reason is due to the efforts to restrict the water flow and protect Bangkok.  This has meant very high flooding upstream of the barriers.  It has also meant that the water is stuck and cannot move out to sea quickly.


The flooding has been high for quite a period in the area North of Bangkok including the provinces of Ayutthaya, Pathum Thani, and Nonthaburi.  These 3 provinces 25 years ago were very rural and undeveloped, but now are full of industrial estates, universities, suburban communities and major businesses including distribution centers.  The flooding in these areas has made meant that none of these are operating normally and for the most part nothing can be done in these areas beside work on survival and protecting property.  This has stopped production and stopped distribution from these areas.


While the media has covered how this is effecting hard drive and automobile production, in Thailand we can see this in a lack of demanded products in shops, but most markedly in shops in large chains, such as 7-11, Tesco-Lotus, Carrefour.   This is partly due to increased demand, we might say panic or precautionary buying, of products like milk, bottled water, canned fish and so forth all that are easy to consume in a flooded situation.   However while the increased demand is draining supplies in shops, the shops have not been adequately resupplied due to problems in production and distribution.  One sees the interconnectedness of the production supply chain in this context and the risks this poses.  Much of the bottled water supplied to Bangkok is produced in Pathum Thani, a severely flooded province.   There are many other places with good quality water, but where are most of the bottles produced?  You guessed it in the same area.  With the automobile industry, Toyota has 2 of its largest factories near my home in Chacheongsao, neither is flooded.  However many key parts come from factories in Ayutthaya, which are now not operational.  While we can survive without new cars and hard drives, we are more depended upon milk, bottled water and other such key consumables.  So beyond the production side, the main distribution centers of Tesco-Lotus and 7-11 are in a flood affected areas.  Normally supplies are brought in wholesale there and then redistributed to their many shops.  This is now very difficult both coming in and going out.  This has meant that these shops have particular supply problems.  Also I know from our experience negotiating with Tesco-Lotus before and have heard from others, that these large chains drive the hardest bargains.  They are always promoting that they have the lowest prices. They demand the best prices from their suppliers.  They may compensate by purchasing great quantities, but margins are very low.


What happens in a crisis situation, such as ours where production and supply routes are effected?  Well, costs of production and transport go up, and overall supply is lower than demand for some items.  This means that in order to supply and get a product to market and not lose money one needs to charge more money.  Increased demand means that buyers are willing to pay more than normal.  In such a case a large distributor that promotes itself as selling at the lowest prices and drives suppliers to sell to it at lower prices, is left handicapped.  No one wants to sell to them at a loss.  They cannot increase their prices to reflect actual conditions.  Thus you find what we have now, stores largely empty of the products most in demand.  However fortunately Thailand does not only have such large enterprises, but also has many fresh markets where each stall is run by an entrepreneur.  It also still has a number of non-affiliated small shops that are owner operated.  So now you find that actually products in high demand and short supply are available, just you have to go to one of these owner-operated places.   While some complain of price jacking, my perception is most business people are just adding the real additional costs to their prices.  So now a bottle of water has moved from 7 to 10 Baht per 600 ml bottle.  Other key supplies have increased in cost 10-50%.  These smaller operations can move small amounts of supplies more easily.  So there are people buying supplies in places like Phanom Sarakham, Chachoengsao, the biggest town near my family home, and running these into Bangkok to sell.  This commerce is filling a real need at this time that is not being met well by larger operations.


This whole dynamic shows that the economic model of the last few decades of increasing specialization, centralization, larger scale production, etc that has been promoted as more efficient, also clearly poses more of a risk of failure in crisis situations.  In the business school language I recall they spoke of producing widgets.  Thus the model is to use your competitive advantages to produce the most widgets of the best quality at the lowest price and sell them to the world.  This idea being if you do this well and everyone else does this well with their different types of widgets, one will have the most buying power for the best quality products as each is specialized in producing one product well and efficiently.   On the marketing size the direction has also been the same to fewer and larger chains of stores.  So now we have Carrefour, Tesco-Lotus, Walmart, Price Club and Amazon.com.   (Amazon is a bit different in some ways, but is also a huge store with huge centralization.)


When we translate widgets to things we really need like milk, vegetables, eggs, fuel, water, soap; then you realize that if a disaster strikes where most of the milk is produced, and milk is suddenly really short on the market, you have a problem.  So while Wisconsin and Holland may be very efficient at producing milk, centralizing milk production to a couple places poses a high risk in times of disaster.  In our globally linked world, while the whole world can help others in need, our systems are also more and more dependent upon inputs from other parts of the world.  During my visit to Belgium recently, I learned that most milk producers in Belgium and Holland are really just input transformers.   What this means is that they buy feed and other inputs, they feed their cattle, and then they sell milk.  Thus except for a very few organic and alternative farmers, the whole milk supply is dependent upon feed that is mostly imported.  The normal feed is a corn-soy blend.  Most of the soy is coming from Brazil.  So now we see that if a crisis were to take place in Brazil that would stop production or transport of soy, this would then lead to a great reduction in the production of milk in Europe.


Centralization also poses increased risk as we can see here in the area of transport.  If most of Europe’s milk comes form Holland and Belgium, then most of Europe’s milk needs to be transported far to other countries and markets.  My old joke about how do you identify an antique shows this transport issue.  Answer – Doesn’t say “Made in China.”  As we see with Brazilian soy, the transport is not only of final products but of all sorts of raw materials.  Transport can be affected for all sorts of reasons.  We have had volcanic ash, extreme weather events, flooding of major routes, and political crises.  But the crux for now and to come is the cost of transport, which reflects the cost of energy.  As soon as energy prices go up, transport prices go up, and this means increased costs for shipping of raw materials and final products.  Current energy prices are already high enough that it is weighing in counter to the efficiency of centralization.  Countries that are highly dependent upon imports, particularly of critical products like food, are more and more at risk of facing shortages or price swings of critical products due to transportation problems and cost increases.


So from this experience in Thailand and how it applies to the current world context, we have some clear lessons to take away.  The first is that over-centralization (particularly of products and inputs of critical need) poses a high risk.  Thus in a risk adverse world, we need to move to increasing decentralization.   The fuel cost juggernaut also points to the same direction of increasingly local production of key products.  That the economic game has changed already can be seen in the increasing cost competitiveness of local production and marketing.  While some costs will be higher, such as most probably labor, cutting out most of the transport and intermediaries can mean competitive prices with imports and often key other advantages, such as face to face service and flexibility.  There are also local economic benefits, and an easier chance to see the supply chain.  In Thailand this is really clear for very basic products like vegetables.  Now the price of vegetables in the market is high.  These vegetables normally would go from one place to a central place in Bangkok and then be redistributed.   The wholesale price to the farmer is generally quite low per unit, yet the steps and transport lead to a high price.  However there are some farmers in our area who produce vegetables that they sell directly to the local market.  They can sell at the same or better than the market price, getting a good return.  The quality is normally superior both because the product is fresher and the production is more traditional (closer to organic if not organic).  Talking with organic farmers in Belgium, they said the same thing.  While they cannot sell to large enterprises, when they can sell direct to local consumers, their prices are very competitive and their products clearly of superior quality.  I have felt that the current US situation provides a climate for a re-emergence of local production with the lower value of the US dollar and more and more un and underemployed.


At Wanakaset, we say that we should aim for 25% self-sufficiency and that this is enough to make a real reduction in our costs and debt and together with others in the community to create strong food and economic security.   We are not trade adverse, but we see self-sufficiency on a community level of our basic needs: food, medicine, organic fertilizers, daily household goods;  as key.   Seeing this crisis, it is refreshing to realize how secure we are.   We have ample rice, fruit, vegetables, and fish.  We have and produce many herbal medicines to serve normal ailments.  We produce shampoo, soap, tooth powder, face cream.  We have surpluses of these and we share the knowledge on their production.  So we aside from being much more economically and food secure, we also are contributing towards the food and supply security of the area.


While I don’t expect everyone to move to 25% self-sufficiency yet, I think a small step in this direction can be very powerful and help a lot in terms of reducing the risks posed by crisis situation, as well as help make the transition to lower energy use.  The first logical step which I am happy to say has been taken by almost all of my family and friends, is to grow something you eat or use.  This could be some vegetables, and cooking or medicinal herbs.  Further logical steps include: making your own organic inputs (compost) for your production, learning about wild harvesting in your neighborhood or nearby wild areas,  developing skills to repair things you use and doing this, learning to process products such as make jams or natural soap.  The list can go on and on and I think this is familiar territory.  A very nice thing is that this sort of work that reduces costs and can generate income does not require an employer.  I read that Spain now has over 20% unemployment.  This 20% might be able to practice increased self-sufficiency reducing costs and potentially earning income through sales.  So self-sufficiency can also be a powerful tool for economic security.


Combined with taking our own small step towards self-sufficiency, we can also play a key role by taking a small step as consumers of local products.  So while you may not grow all your own food, if you buy some from local farmers, and support other local producers of processed products, you are helping to develop self-sufficiency and food security at a community level.


While some may wish to go completely local, buying hard drives and cheese only made locally from local raw materials and done in a sustainable manner, we do not declare an end to trade, but see a need for trade and consumption to be smarter.   So if one cannot find a good local sustainable coffee or hard drive producer and thinks that coffee and hard drives are important, then one can use his or her buying power to choose to support production that is sustainable, such as fair trade and organic coffee and rice producers, or the equivalent for hard drive producers.  This can also help contribute to greater food and economic security in the long run on a global level.


So while the Thai floods are far from over, and continuing to cause damage and challenges, they have already provided some clear and valuable lessons that can be shared and applied throughout the world that may be used to help reduce crisis risks and impacts in the future.


Michael Commons,  Earth Net Foundation, Thailand, 1 November 2011