FOOD banks are a rapidly growing phenomenon in the UK. A few years ago, they barely existed, but an estimated half a million people now make use of them every week. On the face of it, it seems that poverty has sadly become endemic since the financial crisis, with many families unable even to feed themselves. Real incomes have declined since 2007, putting pressure on household budgets. But the pace of increasing demand is surprising.
In fact, the food bank is a market. It is, however, complex – with particular features which mean that it is likely to grow rapidly, exactly as we have seen. The key point is that food is not the only commodity traded.
By the First World War, living standards had increased sufficiently so that everybody had enough to eat. During the really severe recessions of the early 1920s and 1930s, shortages did exist in the most depressed areas, but these were temporary. Certainly, by the early 1950s, after the end of rationing introduced in the Second World War, food was plentiful for everyone. Since then, average living standards have risen dramatically, even taking the recent recession into account. In real terms, average incomes have risen four-fold. While some people do struggle to make ends meet, the vast majority has been lifted from food poverty.
The story that, suddenly, large numbers of our fellow citizens cannot afford to eat does seem strange. The “cuts” said to have caused this situation are, in fact, really reductions to Gordon Brown’s ludicrous growth plans. Some have certainly been affected by cuts to welfare payments, and have unfortunately been forced to rely on charity. But overall public spending has risen sharply since 2010. Why then the rapid rise in food banks?
It is, of course, an article of faith among some that austerity is destroying the fabric of society. Responding to this narrative, many began to set up food banks. After all, they must be needed. Say’s Law states that supply creates its own demand. Most economists reject this idea, but food banks are a real example of this law in practice. Free food is offered, and the only cost is an getting authorisation for your voucher. Not surprisingly, this creates plentiful demand.
But there is another market in operation – less easy to spot. The supply is moral superiority. Some of those who set up food banks are undoubtedly sincere, and think their efforts are needed. But an opportunity exists for others to show conspicuously their concern for the poor, and at the same time demonstrate opposition to austerity. There is always ample demand in some circles for this type of commodity.
These two markets, for food and sanctimony, operate in symbiosis – an example of George Soros’s principle of reflexivity. Positive feedbacks between them reinforce their growth. A supply of free food is offered, which creates its own demand. A niche opens up for the supply of moral superiority, and the supply of food increases. This dynamic reinforcement between markets explains why the number of food banks has increased so quickly.
Paul Ormerod is an economist at Volterra Partners, a director of the think-tank Synthesis and author of Positive Linking: How Networks Can Revolutionise the World.