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How Goldman gambled on starvation

Speculators set up a casino where the chips were the stomachs of millions. What does it say about our system that we can so casually inflict so much pain?

By Johann Hari | The Independent | 2 July 2010

By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You’re wrong. There’s more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here’s the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.

It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn’t afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it “a silent mass murder”, entirely due to “man-made actions.”

Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. “My children stopped growing,” a woman my age called Abiba Getaneh, told me. “I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died.”

Most of the explanations we were given at the time have turned out to be false. It didn’t happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn’t because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren’t enough on their own to explain such a violent shift.

To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world’s stomachs ache.

For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he’ll lose some cash, but if there’s a lousy summer or the global price collapses, he’ll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.

Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into “derivatives” that could be bought and sold among traders who had nothing to do with agriculture. A market in “food speculation” was born.

So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutsche Bank, who sell it on for £30,000 to Merrill Lynch – and on and on until it seems to bear almost no relationship to Farmer Giles’s crop at all.

If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains: “Finance, like other forms of human behaviour, underwent a change in the 20th century, a shift equivalent to the emergence of modernism in the arts – a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn’t be explained in workaday English.” Poetry found its break with realism when T S Eliot wrote “The Wasteland”. Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn’t fully understand.

So what has this got to do with the bread on Abiba’s plate? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was already deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in food contracts based on theoretical future crops – and the speculators drove the price through the roof.

Here’s how it happened. In 2006, financial speculators like Goldmans pulled out of the collapsing US real estate market. They reckoned food prices would stay steady or rise while the rest of the economy tanked, so they switched their funds there. Suddenly, the world’s frightened investors stampeded on to this ground.

So while the supply and demand of food stayed pretty much the same, the supply and demand for derivatives based on food massively rose – which meant the all-rolled-into-one price shot up, and the starvation began. The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.

When I asked Merrill Lynch’s spokesman to comment on the charge of causing mass hunger, he said: “Huh. I didn’t know about that.” He later emailed to say: “I am going to decline comment.” Deutsche Bank also refused to comment. Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that “serious analyses … have concluded index funds did not cause a bubble in commodity futures prices”, offering as evidence a statement by the OECD.

How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period – but only a fraction as much as the ones affected by speculation. Her research shows that speculation was “the main cause” of the rise.

So it has come to this. The world’s wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. Their Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict so much pain?

If we don’t re-regulate, it is only a matter of time before this all happens again. How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears that the Senate – drenched in speculator-donations – may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this “trade” takes place, advocacy groups are worried that David Cameron’s government will block reform entirely to please his own friends and donors in the City.

Only one force can stop another speculation-starvation-bubble. The decent people in developed countries need to shout louder than the lobbyists from Goldman Sachs. The World Development Movement is launching a week of pressure this summer as crucial decisions on this are taken: text WDM to 82055 to find out what you can do.

The last time I spoke to her, Abiba said: “We can’t go through that another time. Please – make sure they never, never do that to us again.”

j.hari@independent.co.uk

July 4, 2010 Posted by | Economics, Malthusian Ideology, Phony Scarcity | Leave a comment

Food prices to rise by up to 40% over next decade, UN report warns

Growing demand from emerging markets and for biofuel production will send prices soaring, according to the OECD and the UN Food and Agriculture Organisation

Katie Allen | guardian.co.uk | 15 June 2010

Food prices are set to rise as much as 40% over the coming decade amid growing demand from emerging markets and for biofuel production, according to a United Nations report today which warns of rising hunger and food insecurity.

Farm commodity prices have fallen from their record peaks of two years ago but are set to pick up again and are unlikely to drop back to their average levels of the past decade, according to the annual joint report from Paris-based thinktank the OECD and the UN Food and Agriculture Organisation (FAO).

The forecasts are for wheat and coarse grain prices over the next 10 years to be between 15% and 40% higher in real terms, once adjusted for inflation, than their average levels during the 1997-2006 period, the decade before the price spike of 2007-08. Real prices for vegetable oils are expected to be more than 40% higher and dairy prices are projected to be between 16-45% higher. But rises in livestock prices are expected to be less marked, although world demand for meat is climbing faster than for other farm commodities on the back of rising wealth for some sections of the population in emerging economies.

Although the report sees production increasing to meet demand, it warns that recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity. About 1 billion people are now estimated to be undernourished, it said.

Fairtrade campaigners said the predictions of sharply rising prices provided a “stark warning” to international policymakers.

“Investment to encourage the 1 billion people whose livelihoods rely on smallholder agriculture is vital. Not only will this increase yields but will go a long way to increase prosperity in poverty stricken regions,” said Barbara Crowther, director of communications at the Fairtrade Foundation.

“At the same time, the promise of increased agriculture commodity prices could spark a new surge in land grabbing by sovereign wealth funds and other powerful investors which risks marginalising further rural communities who must be included in solutions to secure and maintain food supplies.”

The report says that agricultural production and productivity must be stepped up and it argues for a well-functioning trading system to ensure fair competition and that surplus food is getting to where it is needed.

It also painted a growing role for developing countries in both boosting demand and production. Brazil is by far the fastest growing agricultural producer, with output expected to rise by more than 40% in the next decade and production growth is also expected to be well above 20% in China, India, Russia and Ukraine.

“The role of developing countries in international markets is growing quickly, and as their impact grows, their policies also have an increasing bearing on conditions in global markets,” said FAO director-general Jacques Diouf.

“This makes their role and contribution to global policy issues critical. Policy discussions must be global in scope and we need to improve the framework for such exchange of views.”

Another factor driving up food prices is the controversial biofuels industry. The report predicts that continued expansion of biofuel output – often to meet government targets – will create additional demand for wheat, coarse grains, vegetable oils and sugar.

June 15, 2010 Posted by | Malthusian Ideology, Phony Scarcity | Leave a comment

Responsibly Destroying the World’s Peasantry

Turkish Weekly | 11 June 2010

The World Bank, the United Nations Food and Agricultural Organization (FAO), the International Fund for Agricultural Development (IFAD), and the UN Conference on Trade and Development (UNCTAD) Secretariat recently presented seven “Principles for Responsible Agricultural Investment.” The principles seek to ensure that large-scale land investments result in “win-win” situations, benefiting investors and directly affected communities alike. But, though well-intended, the principles are woefully inadequate.

It has been several years since private investors and states began buying and leasing millions of hectares of farmland worldwide in order to secure their domestic supply of food, raw commodities, and biofuels, or to get subsidies for carbon storage through plantations. Western investors, including Wall Street banks and hedge funds, now view direct investments in land as a safe haven in an otherwise turbulent financial climate.

The scope of the phenomenon is enormous. Since 2006, between 15 and 20 million hectares of farmland, the equivalent of the total arable surface of France, have been the subject of negotiations by foreign investors.

The risks are considerable. All too often, notions such as “reserve agricultural land,” or “idle land,” are manipulated out of existence, sometimes being used to designate land on which many livelihoods depend, and that is subject to long-standing customary rights. The requirement that evictions take place only for a valid “public purpose,” with fair compensation, and following consultation of those affected, is honored more in the breach than in the observance.

In Africa, rural land is generally considered to be state-owned, and is treated by governments as if it were their own. In Latin America, the gap between large landowners and small peasants is widening. In South Asia, many populations are currently being driven off their ancestral land to make room for large palm-oil plantations, special economic zones, or re-forestation projects.

The set of principles that have been proposed to discipline the phenomenon remain purely voluntary. But what is required is to insist that governments comply fully with their human rights obligations, including the right to food, the right of all peoples to freely dispose of their natural wealth and resources, and the right not to be deprived of the means of subsistence. Because the principles ignore human rights, they neglect the essential dimension of accountability.

There is also a clear tension between ceding land to investors for the creation of large plantations, and the objective of redistributing land and ensuring more equitable access to it. Governments have repeatedly committed themselves to these goals, most recently at the 2006 International Conference on Agrarian Reform and Rural Development.

The underlying problem runs deeper than how the principles have been formulated. The promotion of large-scale land investment is based on the belief that combating hunger requires boosting food production, and that supply has been lagging because of a lack of investment in agriculture. Hence, if investment can be attracted to agriculture, it should be welcomed, and whichever rules are imposed should encourage it, not deter it.

But both the diagnosis and the remedy are incorrect. Hunger and malnutrition are not primarily the result of insufficient food production; they are the result of poverty and inequality, particularly in rural areas, where 75% of the world’s poor still reside.

In the past, agricultural development has prioritized large-scale, capitalized forms of agriculture, neglecting smallholders who feed local communities. And governments have failed to protect agricultural workers from exploitation in an increasingly competitive environment. It should come as no wonder that smallholders and agricultural laborers represent a combined 70% of those who are unable to feed themselves today.

Accelerating the shift towards large-scale, highly mechanized forms of agriculture will not solve the problem. Indeed, it will make it worse. The largest and best-equipped farms are highly competitive, in the sense that they can produce for markets at a lower cost. But they also create a number of social costs that are not accounted for in the market price of their output.

Smallholders, by contrast, produce at a higher cost. They are often very productive by hectare, since they maximize the use of the soil, and achieve the best complementary use of plants and animals. But the form of agriculture that they practice, which relies less on external inputs and mechanization, is highly labor-intensive.

If smallholders compete in the same markets as the large farms, they lose. Yet they render invaluable services, in terms of preservation of agro- and biodiversity, local communities’ resilience to price shocks or weather-related events, and environmental conservation.

The arrival of large-scale investment in agriculture will alter the relationship between these worlds of farming. It will exacerbate highly unequal competition. And it could cause massive social disruptions in the world’s rural areas.

Certainly, agricultural investment should develop responsibly. But, while many have seen the scares provoked by spiking food prices in recent years as an opportunity for investment, opportunities should not be mistaken for solutions.

To re-launch agriculture in the developing world would require an estimated $30 billion per year, representing 0.05% of global GDP. But how much is invested in agriculture matters less than the type of agriculture that we support. By supporting further consolidation of large-scale monocultures in the hands of the most powerful economic actors, we risk widening further the gap with small-scale, family farming, while pushing a model of industrial farming that is already responsible for one-third of man-made greenhouse-gas emissions today.

It is regrettable that, instead of rising to the challenge of developing agriculture in a way that is more socially and environmentally sustainable, we act as if accelerating the destruction of the global peasantry could be accomplished responsibly.

June 12, 2010 Posted by | Economics, Environmentalism, Malthusian Ideology, Phony Scarcity, Timeless or most popular | 1 Comment

Global proven oil reserves increase by 33% over two decades

Venezuela ‘has world’s second biggest oil reserves’

Tamsin Carlisle | VHeadline | June 11, 2010

Venezuela is now the world’s second biggest holder of proved oil reserves, overtaking the Gulf producers Iran, Iraq and Kuwait.

In the 2010 edition of its benchmark Statistical Review of World Energy, which was published last week, BP has made substantial upwards revisions to its estimates of Venezuela’s oil reserves for both last year and 2008.

It appears to have included in its latest tally about 73 billion barrels of heavy crude reserves for which the South American country has long sought recognition from Opec. That has boosted the company’s estimate of Venezuelan oil reserves by more than 73%, following a smaller revision last year.

According to BP, the Middle East’s share of global oil reserves has shrunk by almost 10 percentage points in the past two decades, as producers in South America, Eurasia and Africa have established more commercially viable deposits of the world’s leading fuel. Those countries now officially include Venezuela. BP has set at 56.6% its estimate of the proportion of the world’s proved oil reserves that are located in the Middle East. That is down from 65.7% in 1989.

  • Despite the region’s diminished standing as a source of future crude supply, Middle Eastern oil reserves have increased by 14% in the past 20 years to 754 billion barrels, according to BP.

Over the same period, however, the world’s total proved oil reserves have expanded more than twice as fast, swelling by nearly a third to 1.33 trillion barrels by the end of last year from 1 trillion barrels two decades earlier. The world’s top six holders of oil reserves, according to the latest BP league table, are now, in descending order, Saudi Arabia, Venezuela, Iran, Iraq, Kuwait and the UAE, all of which are OPEC members.

Russia was last year’s top oil producer, pumping more than 10 million barrels per day, followed by Saudi Arabia and the US. Russia and Saudi Arabia were also the world’s leading oil exporters. Unlike those countries, the US is a net importer of oil. The review ranked the UAE as the eighth most prolific oil producer last year. The nation’s output, averaging 2.6 million barrels per day (bpd), narrowly exceeded those of Iraq and Kuwait, which each pumped 2.48 million bpd of crude.

Venezuela’s oil output averaged 2.44 million bpd, putting the South American state within range of overtaking every Gulf oil producer except Saudi Arabia and Iran.

As OPEC’s biggest western hemisphere oil producer and a founding member of the group, Venezuela has been pushing for a higher OPEC production quota based on recognition of its large reserves of “unconventional” heavy crude. Venezuela can still develop those deposits while honouring its commitment to OPEC because the group’s production quotas exclude unconventional oil. Formal recognition of the reserves and a higher quota, however, would give Venezuela the country more flexibility to raise its output of lighter crude, which is usually more profitable to produce.

Another landmark emerging from BP’s latest data is that Brazil’s oil production has for the first time exceeded 2 million bpd. Brazil pumped almost as much crude as Nigeria last year and surpassed the output of five other OPEC producers. Brazilian production rose by 7.1% to 2.03 million bpd, cementing the country’s position as South America’s second biggest oil producer.

US oil output, which had fallen in 2008, rebounded last year by 7% to 7.12 million bpd. The 462,000 bpd increase was “by far” the world’s biggest and came mainly from the Gulf of Mexico, said Tony Hayward, the chief executive of BP.

The Middle East remained the world’s top oil producing region last year, accounting for more than 34% of the global total. It was followed by Europe/Eurasia and North America.

In terms of gas, the biggest change from last year, according to BP’s data, was a 13.9% increase in Venezuela’s reserves.

Last September, the Spanish oil and gas group Repsol announced it had struck a giant gasfield off the coast of Venezuela. Hailing the discovery, the Venezuelan president Hugo Chavez said his country would soon become “one of the five giants in the world of gas.”

On the basis of their proved reserves, the reigning monarchs of the gas world are Russia, Iran and Qatar, which between them hold nearly 3.5 quadrillion cubic feet of reserves representing 53% of the global total. Venezuela’s gas reserves, at 200 trillion cubic feet, are now the eighth largest in the world. The UAE has 227 trillion cubic feet of reserves, putting it in seventh place.

Gas reserves in Russia and Saudi Arabia also increased last year. Russian reserves grew by 2.5% to 1.57 quadrillion cubic feet. Those of Saudi Arabia swelled by 4.6% to 280 trillion cubic feet.

Global gas reserves have increased 53% in the past 20 years, outpacing oil. The Middle East’s share has expanded to 40.6 from 30.9%, largely due to development of the world’s biggest gasfield, which is shared by Qatar and Iran.

June 11, 2010 Posted by | Malthusian Ideology, Phony Scarcity | 4 Comments

Nails in the Global Warming Coffin

By Professor Philip Stott | April 27, 2010

My silence since mid-February has not meant that I have taken my eye off the climate-change scene. Far from it, although I have to confess that I have become increasingly wearied and bored by the fatuous lack of reality exhibited on this topic by many UK politicians. It is so glaringly obvious that, since the debacle in Copenhagen, ‘global warming’ is dying as a major political trope that I find it less and less exercising as an issue. Indeed, I do not want to waste too much energy in flogging a fundamentally dead corpse.

This last week, however, the nails in the global warming coffin have been driven in so thick and so fast that I thought it might be worth bringing attention once again to what is happening around the world – “You will therefore permit me to repeat, emphatically, that Global Warming is as dead as a door-nail,” although I suspect that the Global Warming Ghost will hang around moaning and wailing for quite a while yet.

Germany Gets Cold Feet

First, in that paragon of so-called Green virtues, Germany, Spiegel Online reports that the German Chancellor, Angela  Merkel, ‘Abandons Aim of Binding Climate Agreement’:

“Frustrated by the climate change conference in December, German Chancellor Angela Merkel is quietly moving away from her goal of a binding agreement on limiting climate change to 2 degrees Celsius. She has also sent out signals at the EU level that she no longer supports the idea of Europe going it alone.”

Spiegel goes on to comment:

“… now it’s time for realpolitik. Merkel and Röttgen [have] had to admit that countries like China and India will not submit to a mandatory target that others have contrived.

Precisely so.

The Emissions Billycan Waltzes Off  Indefinitely

Meanwhile, ‘Down Under’, The Sydney Morning Herald reports: ‘Emissions put on back burner’:

“A Senate vote on the trading scheme legislation, which was due next month, has now been dropped by the government for the May and June sittings of Parliament.

A government source said yesterday the fate of the Senate vote on the legislation beyond June was unclear.

The source said the decision to park the legislation indefinitely reflected the political reality that the opposition, under leader Tony Abbott, and the Greens had vowed to reject the scheme in the Senate.

Unless the Coalition or the Greens change their positions the government will now have to wait until July 1 next year for the Senate to change over after this year’s federal election to negotiate with a potentially less hostile Parliament – unless a double-dissolution election is called.

The government will now concentrate on passing other matters in the Senate including its national health reform package and the national broadband network. ‘Obviously there are a lot of pressures in the Senate, so the government has to prioritise the reforms that are most likely to be passed,’ the source said.”

Indeed. Most wise. “Good On Yer, Mate!”

Different Priorities In US Too

Then, in the US, as The New York Times reports: “The Senate climate bill sits on the brink of collapse today after the lead Republican ally threatened to abandon negotiations because of a White House push to simultaneously overhaul the nation’s immigration policies.”

Moreover, President Obama has far more pressing worries and priorities as ‘US Republicans block debate of finance rules reform’ – Mr Obama has made reining in Wall Street a cornerstone of his Presidency.

Quite so.

Finally, Elusive Pay-Offs And Not Such A Green-Blue

Further, somewhat unsurprisingly given all of the above, the monies so happily and so readily promised to help developing nations to fight ‘global warming’ are proving remarkably elusive. Only the most politically- and economically-naive of souls could have expected otherwise.

Lastly, even in our ever-Utopian UK, ‘global warming’ has, thank goodness, hardly featured in the election to date, being confined to brief comments hidden in the deepest inner recesses of a few newspapers, although it is worth stating that the energy policies of the newly-resurgent Liberal Democrats would probably do for Britain as a serious economic power.

By contrast, as The Times points out this morning about the Conservatives:

“Despite Mr Cameron’s slogan of ‘vote blue go green’, a recent survey found that only 22 per cent of Conservative candidates in winnable seats strongly supported Britain’s target of generating 15 per cent of Britain’s energy from renewable sources by 2020.

David Davis, the former Shadow Home Secretary, recently warned that the policy of tough targets to cut carbon emissions, supported by Mr Cameron, was ‘destined to collapse’.”

Just so.

Indeed, the complete collapse of the Great Global Warming Grand Narrative continues apace.

It will surely be fascinating to observe precisely the moment when UK politicians begin to stop mouthing pious platitudes about the political significance of ‘global warming’.

That moment cannot come too soon.

April 27, 2010 Posted by | Aletho News, Deception, Malthusian Ideology, Phony Scarcity | 1 Comment

Ethanol supporters in Congress try to prevent a repeat of biodiesel mothballing

Dan Looker – Successful Farming – 4/20/2010

Four months after a $1-per-gallon biodiesel tax credit expired, putting some 29,000 out of work in that industry, backers of the ethanol industry are trying to prevent that from happening on an even larger scale.

Ethanol’s 45 cent-a-gallon credit, known as the Volumetric Ethanol Excise Tax Credit (VEETC), expires at the end of this year.

Tuesday, Senators Chuck Grassley (R-IA) and Kent Conrad (D-ND) introduced a bill to extend VEETC through 2015. It would also extend a tariff on imported ethanol.

Grassley told reporters that some 112,000 jobs in the ethanol industry are at risk if the tax credit and tariff are allowed to expire.

“I don’t think we can risk a repeat performance with ethanol like we had with biodiesel,” he said.

There doesn’t seem to be much organized opposition to renewing the biodiesel tax credit, but under new pay-as-you-go rules intended to keep the federal deficit from growing even more, Congress has to find offsetting budget savings or higher taxes to pay for the biodiesel credit.

Grassley said Tuesday that the House Ways and Means Committee is looking for ways to offset the biodiesel credit.

The new 5-year tax credit extension for ethanol might also need offsets. Grassley said Tuesday that he doesn’t know where they would come from.

Unlike biodiesel, the ethanol industry does face opposition to extending VEETC and the tariff.

In March, Representatives Earl Pomeroy (D-ND) and John Shimkus (R-IL) introduced a similar bill in the House of Representatives to extend the ethanol tax credit for five more years. That bill has already drawn opposition from the American Meat Institute, Grocery Manufacturers of America, Natural Resources Defense Council, Taxpayers for Common Sense and others. […]

The bill Grassley and Conrad introduced today, the Grow Renewable Energy from Ethanol Naturally Jobs Act of 2010, or the GREEN Jobs Act of 2010, is cosponsored by Senators John Thune (R-SD), Ben Nelson (D-NE), Mike Johanns (R-NE) and Tim Johnson (D-SD).

April 21, 2010 Posted by | Economics, Malthusian Ideology, Phony Scarcity | 2 Comments

Global Food Reserve Needed to Stabilize Prices, Researchers Say

By Rudy Ruitenberg | Bloomberg | March 29, 2010

A global crop reserve system is needed to reduce price volatility, curb speculation and prevent a food crisis, said researchers from Germany and France.

Centralized global stocks could bring “peace and quiet” to world food markets, said Joachim von Braun, director of Germany’s Center for Development Research, at a conference on agriculture research in Montpellier, France, yesterday.

World food prices started rising in 2007 and climbed to a record in June 2008. Surging prices of wheat, rice and corn sparked riots from Haiti to Ivory Coast. Von Braun said IFPRI research has shown fund investment in agricultural commodity futures added to price volatility.

“The world is no more food secure today than three years ago, when the world food-price crisis hit,” said von Braun, a University of Bonn professor and former head of the Washington- based International Food Policy Research Institute. We need “an efficient, global, coordinated reserve policy which brings peace and quiet to the world food market,” von Braun said.

A global reserve would make it “difficult to manipulate the market,” said Marion Guillou, the head of France’s Institut National de la Recherche Agronomique, at the conference.

Von Braun said a food-stabilization system should consist of three parts, including a physical stock managed by the World Food Programme that would allow the agency to respond to a humanitarian crisis more speedily, as well as a reserve based on countries setting aside some of their stocks.

“In a price spike situation, this group could decide, like the International Energy Agency, to release from stock,” von Braun said. “Not a general stabilization fund, but a price- spike stabilization mechanism.”

The third instrument would be a virtual financial fund that could counter speculators by taking positions in the agricultural futures market, he said.

“We have good analysis that speculation played in role in 2007 and 2008,” von Braun said. “Speculation did matter and it did amplify, that debate can be put to rest. These spikes are not a nuisance, they kill. They’ve killed thousands of people.”

–Editor: Will Kennedy, Doug Lytle.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace in London at swallace6@bloomberg.net.

April 5, 2010 Posted by | Economics, Malthusian Ideology, Phony Scarcity | Leave a comment

The homeless pay the price

Sasha Abramsky | guardian.co.uk | 20 March 2010

Recently, I wrote about public education in crisis. But two other vital public services are also being hit hard by budget cuts: mental health care and assistance to the homeless.

Education is at least partly buttressed by the fact that almost everybody supports the idea of public schools. Cuts generally provoke an outcry, and politicians often pledge to do their best to restore funding as soon as the economy improves. Mental health and homelessness services, by contrast, are in some ways more vulnerable over the long-run: the constituencies they serve tend to be perceived by much of the public as nuisances at best, as societal menaces at worst; services to these groups tend to be costly; and the success rates (illnesses controlled, homeless folks moved into permanent housing) are, while a whole lot better than nothing, sometimes mediocre.

And so, as local and state government budget crunches worsen, it’s no surprise many of these services are on the chopping block.

The Centre on Budget and Policy Priorities (CBPP) reports that Connecticut’s governor has proposed suspending all state-funded homeless services for the rest of the fiscal year; California has eliminated funding for domestic violence shelters; Massachusetts has reduced spending on geriatric mental health services; Ohio has, according to the CBPP report “eliminated virtually all state funding for mental health treatment for individuals who are not eligible for the state’s Medicaid programme”; while Virginia has reduced the amount it pays hospitals to treat people with mental health or substance abuse issues and slashed its grants to local mental health service providers.

In fact, search online for mental health cuts by state, and it rapidly becomes clear that across America the already-fragile community mental health service infrastructure is being battered.

The impacts are by no means abstract. Community mental health clinics provide not just medicines and counselling services, but an array of other support: they help the mentally ill find housing and jobs; and they work with them to navigate complex government bureaucracies and access benefits. They provide friendship to people who are frequently lonely, depressed and marginalised from the broader community. Cuts to the mental health infrastructure in Kansas have resulted in a documented increase in calls to suicide hotlines and rising numbers of people being admitted to psychiatric hospitals in a psychotic state. Communities like Santa Barbara, California, have seen homelessness spike at least in part because broke local mental health services are having to turn sick men and women away.

And, once homeless, the mentally ill – as well as the non-mentally ill homeless – face a similar scramble for scarce resources. Tens of millions of dollars have been removed from city shelters in Washington DC, the nation’s capital. As winter set in last November in Minnesota, one of the coldest states in America, thousands of low-income families lost emergency financial assistance to help pay rent to avoid being evicted. The National Coalition for the Homeless estimates more than 700 homeless Americans die of hypothermia each year – and with homeless services being slashed, that number will likely increase in the years to come.

Meanwhile, New York City is considering closing the largest homeless drop-in centre in Manhattan. Activists worry that homeless residents with drug addictions, HIV, tuberculosis, or mental illnesses will find it harder to access treatment if they aren’t in stable housing situations. And that, ultimately, could trigger a broader public health problem.

In cities, counties, and states across America, homeless and mental health services are being eviscerated. As a result, programmes that have been carefully built up over decades are going to close. With them will go the expertise of trained staff; the accumulated experience of caseworkers who have gotten to know the needs and behaviours of individual clients, and who might have spent years getting those individuals to trust them enough to let them provide help; and the fragile bonds, the sense of belonging, that in some instances are the only things keeping a person on the edge from spiralling into more serious illness and more intractable long-term homelessness.

There are no easy answers here: too many branches of government have simply run out of cash and of quick-fix solutions. Without more support for these programmes from the federal government, or local ballot measures that earmark funds for particular social services, it’s inevitable that many of them will be cut in the next few years.

But, at the very least, this merits a frank conversation, an acknowledgment that the risks associated with dismantling this infrastructure are huge: tear down services to these groups during the down times and there is just no guarantee that a political consensus will emerge at the back end of the fiscal crisis to restore such services. After all, homeless people or the seriously mentally ill don’t tend to have much of a political voice. Their needs are, too often, seen as irrelevant.

The undermining of these vital social services will have an impact that long outlives the current economic crisis. Nothing would more forcefully illustrate the phrase “private affluence and public squalor“, coined by progressive economist John Kenneth Galbraith, than a booming America, its landscape littered by ever more homeless encampments, ever greater numbers of untreated mentally ill people and, in consequence, a growing sense that, for the affluent majority, public spaces are unsafe and unseemly. That happened in Victorian England; it occurred again in both America and the UK in the 1980s. It would be a great tragedy to let the 2010s and 2020s witness a repeat performance.

March 20, 2010 Posted by | Malthusian Ideology, Phony Scarcity | 1 Comment

More Maize Ethanol May Boost Greenhouse Gas Emissions

American Institute of Biological Sciences | March 2010

In the March 2010 issue of BioScience, researchers present a sophisticated new analysis of the effects of boosting use of maize-derived ethanol on greenhouse gas emissions. The study, conducted by Thomas W. Hertel of Purdue University and five co-authors, focuses on how mandated increases in production of the biofuel in the United States will trigger land-use changes domestically and elsewhere. In response to the increased demand for maize, farmers convert additional land to crops, and this conversion can boost carbon dioxide emissions.

The analysis combines ecological data with a global economic commodity and trade model to project the effects of US maize ethanol production on carbon dioxide emissions resulting from land-use changes in 18 regions across the globe. The researchers’ main conclusion is stark: These indirect, market-mediated effects on greenhouse gas emissions “are enough to cancel out the benefits the corn ethanol has on global warming.”

The indirect effects of increasing production of maize ethanol were first addressed in 2008 by Timothy Searchinger and his coauthors, who presented a simpler calculation in Science. Searchinger concluded that burning maize ethanol led to greenhouse gas emissions twice as large as if gasoline had been burned instead. The question assumed global importance because the 2007 Energy Independence and Security Act mandates a steep increase in US production of biofuels over the next dozen years, and certifications about life-cycle greenhouse gas emissions are needed for some of this increase. In addition, the California Air Resources Board’s Low Carbon Fuel Standard requires including estimates of the effects of indirect land-use change on greenhouse gas emissions. The board’s approach is based on the work reported in BioScience.

Hertel and colleagues’ analysis incorporates some effects that could lessen the impact of land-use conversion, but their bottom line, though only one-quarter as large as the earlier estimate of Searchinger and his coauthors, still indicates that the maize ethanol now being produced in the United States will not significantly reduce total greenhouse gas emissions, compared with burning gasoline. The authors acknowledge that some game-changing technical or economic development could render their estimates moot, but sensitivity analyses undertaken in their study suggest that the findings are quite robust.

Read the full article (PDF)

March 15, 2010 Posted by | Malthusian Ideology, Phony Scarcity, Science and Pseudo-Science | Leave a comment

The Irony of Iowa’s Ethanol Exemption

Even Iowans Don’t Want to Put It in Their Tanks

By Robert Bryce | March 5, 2010

Oh the irony. This morning, the Des Moines Register is reporting on the death of a piece of legislation known as SF 2359. The bill would have required that all gasoline sold in Iowa contain at least 10% ethanol. But Iowa legislators couldn’t garner enough political support for the bill.

You read it right. Iowa, the biggest ethanol-producing state in the US, doesn’t have a requirement that forces consumers to buy ethanol-blended gasoline. The result: only about 73% of the gasoline sold in the state contains ethanol. And according to a story written by Dan Piller, a reporter at the Des Moines Register, the Iowa legislature couldn’t pass SF 2359 because it was “opposed by a coalition that included fuel retailers and marketers and truckers.”

Iowa has about 3.3 billion gallons of ethanol production capacity, that’s more than twice the capacity of the next-biggest producer, Nebraska. Iowa’s ethanol industry and farm lobby plays an outsized role in US politics. Every four years, presidential candidates must make the haj to Iowa and bow down before the ethanol industry while  proclaiming their loving support for corn ethanol. The 2008 election provided hard proof of the importance of the Iowa ethanol industry. Both Hillary Clinton and John McCain – avid critics of ethanol before they began their campaigns for the White House – became ethanol evangelists when they started visiting Iowa.

For decades, US taxpayers and consumers have been paying for the subsidies and mandates that are designed solely for the benefit of the corn ethanol scammers, but Iowans have not shared equally in the pain. About 28 states and the District of Columbia have mandates on ethanol-blended gasoline. And earlier this year, top Iowa legislators believed they would be able to add Iowa’s name to that list. Jack Kibbie, a Democrat from Emmetsburg, who serves as the president of the Iowa Senate had a wonderful quote in Wallaces Farmer:

We hear from critics here in Iowa that a mandatory blend of E10 won’t work, that it will mess up engines on motorboats and lawnmowers…Baloney. With all the lakes and boats they have in Minnesota, many more than in Iowa, they’re doing just fine with their E10 mandate. Remember, this bill we want to pass, Senate File 2359, calls for a 10% blend of ethanol in gasoline for highway use for motor vehicles. It has provisions to provide non-ethanol gasoline for antique vehicles, motorboats, lawnmowers and other small engines.

But earlier this week, Kibbie was forced to admit that his bill was dead. And his explanation was revealing: “People don’t like mandates,” he said, “and of course the petroleum marketers didn’t like it.” So Kibbie and his fellow Democrats decided not to subject the bill to a full debate before the Iowa legislature.

At the very same time that the ethanol lobby is pushing the Obama administration to break the “blend wall,” which prohibits gasoline retailers from selling fuel containing more than 10% ethanol, the Iowa legislature can’t even pass a measure that would require Iowans to buy gasoline containing 10% ethanol. Indeed, the ethanol industry wants federal regulators to allow fuel retailers to sell gasoline that has been adulterated with up to 15% ethanol. And they need that regulatory relief because fat federal subsidies led to too much investment in ethanol production capacity. According to Ethanol Producer Magazine, 19 ethanol plants with a capacity of 884 million gallons per year are now sitting idle. And another 7 plants with 484 million gallons of production capacity are under construction. Meanwhile about 192 plants are operating with total capacity of 12.7 billion gallons per year.

The punchline here is obvious: Iowa, a state that has about 25% of all the ethanol production capacity in the US, doesn’t require its citizens to buy ethanol-blended gasoline. And the Iowa legislature can’t pass a bill to change that because, as Kibbie said, “people don’t like mandates.”

Oh the irony.

Robert Bryce’s fourth book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future, will be published in April.

March 5, 2010 Posted by | Corruption, Malthusian Ideology, Phony Scarcity | 1 Comment

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