Big Three Blank Check: Unsafe at Any Speed

Special interests please go down the hall to the right. Corporate bailout recipients take a number, and wait patiently. Our multinational-subsidizing government is at it again. This time its the bankers' ugly, sickly nephew who need a taxpayer windfall: the automakers. Yet again this month, we find ourselves at the crossroads of history, and our government must stand up and act with real conviction and bravery to set us on the right course. I'm beaming with confidence.

Not only must our automobile industry be saved, it must also change. Luckily, a better opportunity could not present itself. Though the government must intervene, the bailout should be relatively small in financial scale, despite the “Big” Three's CEO's ever-so-humbly approaching our leaders and asking them for money like they're running a PBS Telethon.

Instead of lining their pockets without asking questions, our leaders must be innovative, yet pragmatic when approaching this problem. Thus far, they appear to be on the right course by telling car makers to solve their own problems, which go beyond the credit crunch. Unfortunately, the Big Three might not competent enough to produce the comprehensive solution needed in the required timely fashion.

Democrats are wrong for all the right reasons and Republicans are right for all the wrong reasons. The jobs are crucial to our economy, but why give public money to greedy and wasteful corporations? Wages are high for certain American autoworkers, but wages in those companies are high across the board. Any cuts to workers wages should be matched by executive and managerial wage cuts. Why should unions be broken up because their bosses, for too long, relied on low interest rates to sell inferior products?

There is no doubt federal intervention can bare fruit to the public. In 1979 the government lent money to Chrysler, then on the verge of bankruptcy, and actually made money on the deal. Given Chrysler's good reputation with public money, and the fact that they aren't hemorrhaging cash like GM and Ford are, they should be extended credit. GM and Ford, however, should not consider themselves so lucky.

Ever since energy costs have entered the public consciousness with the forming of OPEC in 1972, Japanese car companies have steadily captured an increasing share of the American car market. The Big Three have steadily declined, though Chrysler appears to be recovering. Why is it then, that we would waste money subsidizing failing corporations, American though they may be? energy scarcity seriously?

The solution, therefore, would seem to be for the US government to arrange, encourage, or otherwise buy a majority of shares in GM and Ford, and sell them to foreign automakers. Using foreign companies would be pragmatic, cost efficient and could save countless American jobs. The Feds could ensure that the lion's share of these “imported” cars were actually built in the U.S., as companies like Honda, Toyota and Nissan already have many plants in the USA.

This suggestion should not be seen as a vote of confidence for free trade in the vein of NAFTA or the WTO, the latter of which could actually be used to sue the United States for heavy-handed market intervention. In fact, many successful emergency interventions could easily be punished under WTO regulations, which disproves the claim that capitalism and democracy go hand.

The government could also ensure that it has the chance, as per the agreement, to buy back the assets it sells to foreign automakers in decades' time so that it can be sold to American investors. This could offset fears of capital flight; fears that a year ago would have been unthinkable.

Better yet, our politicians could sell the car companies back to the workers themselves, who could collectively run the car plants. The important thing here is to not waste the American people's money propping up companies that not only make bad cars, but don't take energy scarcity seriously.

Some of the money, and certainly most of the legislation that arises from the Big Three's crisis should be spent on tackling larger problems involving energy. The rate of car ownership in America could certainly stand to drop and the percentage of people taking mass transit should be higher if we are to cut emissions. Why not take some of the proposed 25 billion dollars and invest in public transportation? Will there be conditions attached to the money to insure investment in the mass production of energy efficient cars? Do we really trust GM to do this considering what it has done in the past?

What will happen remains to be seen, though thankfully Congress doesn't appear to be in a rubber-stamping mood. Even without the credit crunch, the American auto-industry was due for a tune-up. Let's just hope that next time it passes inspection.

Digesting History

Barack Obama's victory this week is already being dissected by historians the world over. What does and doesn't it mean? Will his administration reshape the American economy on the model of Canadian or European social democracies? He could be vague when talking about his policy on the campaign trail. Will he wean the American economy off of the industrial-military complex? Will he try to renegotiate trade deals? Will the US join the International Criminal Court while convincing Russia, China and India to do the same?

It will be interesting to see how Obama balances his promise of change with his vow to work with the Republican opposition. Regardless of what his policies will be, his election has certainly marked a watershed in American history, illustrated by his supporters in cities across America, who were dancing in the streets until the wee hours of November 5^th. I was among the revelers on the revitalized U street in Washington, DC, and witnessed first hand the historical significance of his election.

What can be inferred from these celebrations is not that the balance of power has shifted from right to left; how much he governs to the left of center remains to be seen. More importantly, however, Americans have rejected a recent trend in anti-intellectualism by electing the first truly academic, with a genuine intellectual complexity not seen since Jimmy Carter.

On U Street last Tuesday night and on Wednesday morning, the young and educated, or what some might call “the Creative Class” was well represented amongst the party goers. And if you believe in the Creative Class, their contentedness with the election's result represents a silver lining on an otherwise gloomy economic outlook.

Another obvious historical milestone passed was one marking a major improvement in American race relations. As if Obama's skin color doesn't make it obvious enough, the black Washingtonians out celebrating on Tuesday night did.

Symbolically, the U Street corridor, or Black Broadway, as it was once known, has sadly bared for too many years the scars of riots from the aftermath of Martin Luther King's assassination in 1968. Though the revitalization of such areas (read: gentrification) is not without its problems, one cannot deny that the quality of life along the U Street corridor has improved since sixty-eight, despite bumps in the road along the way. Obama's election, along with the throngs of happy people, both black and white, proves that the quality of life for blacks in the US has gradually increased over the past 40 years, thus improving race relations. Tuesday's celebration was America at its finest: never in most of our lifetimes has there ever been a public display of racial harmony that was so widespread, joyful and genuine. Blacks can make it to the top, after all.

And it wasn't only Americans who were celebrating. All around the world people celebrated. And at the corner of 12^th and U street, a group of Ethiopians signing and dancing (much better than us Americans, I might add), for me, was symbolic of America regaining its respectability around the world.

It was just one of many symbolic expressions of ecstasy, which temporarily silenced both America's most conservative and detestable elements, and its staunchest critics alike.

Democracy on Your Dinner Plate

Stopping government largesse. Strengthening the economy. Making healthcare affordable. Stopping special interest groups from infiltrating the government. Restoring respectability to American foreign policy. All of these important issues have been regular themes in the 2008 Presidential campaign. So why hasn't a national food policy been discussed?

Food inflation is at its worse in decades and global food crises could turn into global food catastrophes at the drop of a hat. But with the US election pushing starvation out of front pages, less than 10% of money pledged by donor countries has been delivered. One candidate could have caught the other camp off guard with the mention of a new comprehensive agricultural policy, but the issue, not surprisingly, was entirely ignored.

With more sexy issues, such as the war in Iraq, high energy prices and financial collapse crowding agricultural policy out of voters' minds, one could forgive the average American for not demanding more of the Presidential candidates. But ignoring high global food prices, and their remediable causes, only serves to hurt the United States in the long run.

A sound food policy is a cornerstone for good foreign policy. Americans vote with their wallets, whereas many around the world cannot afford such a luxury: they vote with their stomachs, which are growling.

A BBC World Service global study on the issue has found that the percentage of those dissatisfied by their leaders is in the mid to upper eighties in Egypt, the Philippines and Lebanon; countries not famous for their political stability. The same study found that rising food and energy prices have had a “great effect” on 60% of people across 26 countries. American politicians might find that staying the course with food policy could mean losing scarce legitimacy as a self-proclaimed “force of good” in global politics.

Two weeks ago, former President Bill Clinton addressed the issue. He was frank when speaking at a UN Meeting last Thursday. “We all blew it, including me,”he said. Clinton then blasted the agricultural policies of Western governments, for treating crops “like color TVs.”

No one was spared as Clinton railed against the US government, the World Bank and the IMF. Congress was chastised for spurning the idea (shockingly supported by President Bush, who got it right for once) of giving some food aid in the form of cash, instead of dumping American agricultural surpluses on fragile developing markets. The World Bank and the IMF were criticized for requiring African countries, at the behest of the US, to drop subsidies on fertilizer and other forms of financial support for farmers in return for World Bank/IMF aid.

Such policies only served to increase poor countries' dependence on the West and reduced their domestic food supply, thus leaving many people around the world where they are today: reeling from hunger. If we continue these policies, we only serve to alienate countries around the world that rightly view our intentions suspiciously. Our image cannot afford anymore of a beating, thus we must glean agribusiness' interests out of foreign policy decision making. We must therefore stop subsidizing exports and most non-cash food aid to poorer countries.

But it isn't just for reasons of foreign policy alone that our attitudes towards food must be reformed. Our economy, federal budget and health care systems could all use a boost; something that a national food policy could help accomplish.

Rising food costs are not only eating into household budgets, but they are squeezing businesses as well. Small businesses, such as restaurants and bakeries, are being hit hard. Who are benefitting from high food costs? The usual suspects: large multinationals with “upstream” market power. Cargill, Archer Daniels Midland and Monsanto all saw their profit nearly double. Wal-Mart claims that food sales are the driving force behind rising profits.

Subsidizing agriculture, though controversial, can be used to alleviate pressure on prices, though you wouldn't know it by living in the United States. Instead of paying farmers to not grow crops, thereby increasing food prices, the federal government should take a different approach. Guaranteeing farmers a minimum price for their crops is a better method. Farmers will then sell “downstream” at much lower prices, as they know the government will make up the difference, thus benefiting consumers.

Subsidizing farms, to some, is unnecessary: a way of distorting the market. To others, however, it is democracy on your dinner plate. Farm subsidies could, for example, be used to ensure that healthy, ethically grown food is sold at low-cost in the United States. Not only would this create jobs in the United States, but it would also reduce our dependence on oil (without subsidizing corn for ethanol development). As an increased supply (and decreased price) for domestically grown food, would decrease demand for imported food.

The need to fix our farm subsidy system also implies that agribusiness special interests must be locked out of formulating legislation. When two-thirds of total subsidy spending goes to the richest 10% of farmers, one cannot deny big business is calling the shots in a defunct agricultural program.

"Distorting the market" through subsidization can also help ensure that healthier food is cheaper. This would relieve pressure on the American health care system, assuming consumers were responsive to cheaper, healthier food. The result could potentially save Americans countless dollars, as problems such as obesity, diabetes, heart disease and a whole other host of health problems went into remission.

For two major candidates who claim to be intent on changing the American political landscape for years to come, Sens. Barack Obama and John McCain have incredulously barely even mentioned a new agricultural policy, at their own peril. Let us hope that whoever is elected president November 4th, will formulate a national food policy; one that could give the United States momentum needed for wholesale positive change for decades to come.

Change is needed and hopefully the calls for it are genuine. As George Orwell once wrote: “We may find in the long run that tinned food is a deadlier weapon than the machine gun.” Who would have thought our own government would have us looking down the barrel?

One Person....Seventy Votes?

A troublesome trend in recent American history is the absence of new ideas. Why have we been so weary of change? The Constitution is treated like the word of God, even though its authors intended for it to be regularly amendable. Labor Unions' greed, complacency and criminal activity after earning key concessions from big business in the 20^th century has hurt workers and continues to do so today. Reagan's “Revolution”, could not have been further from one; it was merely a throwback to the late nineteenth/early twentieth century ideas of classical liberalism, which were discredited by the Great Depression, a period of history that many fear could be repeating itself today given recent economic worries. What is it about America that is so inherently conservative? Without war, are we slated for stagnation?

A simple change to the legislative branch of the government could help remedy this lack of innovation in government. As far as I'm concerned, the sooner this antiquated part of the state is shut down, the better. I'm talking about the United States Senate, of course.

The reason that the Senate should be scrapped has to do with the way it mocks a fundamental principle of democracy. Consider the following:

California, Texas and New York are the three largest states in the Union, with a combined population of about 80 million people (about the size of Germany). Wyoming, Vermont and North Dakota are the three smallest states with a combined population of about 2 million people (about the size of Latvia). Both groups of states, large and small, each have 6 senators.

If you're still confused as to why the Senate should be banished, let us further analyze the existential consequences of the United States Senate. Assume that each Senator carefully considers the opinion of his/her constituents when voting, by holding a referendum that will determine how the Senator votes. Using a Senator's vote as metric of political power, a Californian's vote is equivalent to 1/36,000,000 of a unit of political power, whereas a citizen of Wyoming's vote is equivalent to 1/523,000 of a unit of political power. Thanks to the Senate, a voter in Wyoming has roughly seventy times the influence as a voter in California.

This problem must be remedied. This injustice is illustrated by data from 2005, which shows the return to the average taxpayer from each dollar spent on federal taxes. Of the states in the top 10 per capita returns to tax dollars spent (the whole table can be seen here), only three of them have populations that rank in the top 25 (Virginia, Alabama, Mississippi). This is not an argument against income transfers, but a point about fixing something thats broken. Why don't working class Californians, Texans and New Yorkers see a higher return to their tax dollars?

In addition to furthering the cause of justice, more proportional representation would also help eliminate the problem of reckless federal spending. What we have now is Senators trying to maximize their own state's return to federal tax money, thus increasing their chances of reelection, which does nothing to cure a public debt that has burgeoned to a staggering 40% of GDP.

Furthermore, eliminating the Senate could also do away with counterproductive Culture Wars between Red State and Blue State inhabitants by giving Blue State inhabitants (including Republicans who aren't socially conservative) their fair say in government. By some accounts, Blue State citizens outnumber their Red State counterparts by some 40 million. Yet the Senate's balance currently lies with the Democrats by a mere two votes, and only because the two independents in the Senate offer their support to them.

Not only are Armageddon-loving, freedom hating, science loathing fundamentalists generally detestable, but they are also over represented in Washington. They are free to peacefully be as willfully ignorant as they wish, but they should not unjustly force their beliefs on others, as per the current situation. This iniquity, and others, can practically be corrected by abolishing the Senate, thus making the United States Legislature a unicameral system.

How Far Will I Go to Defend Canada? Just watch me...

The entire world is holding its breath in anticipation of the American Presidential Election on November 4^th. But for those who see America's democracy as a model suitable for government world wide, take note. North of the 49^th parallel, America's supposedly humdrum neighbor, Canada, held an election today. And whatever the result will be (we will know in hours), the Canadian model should be considered more suitable and appropriate for the needs of 21^st century democracies, who should always respect majority rule and minority rights simultaneously.

On February 10, 2007, Senator Barack Obama announced he would be running for President of the United States. Three months shy of two years later, we will know the result of his historic campaign. But should his, or any Presidential campaign really last almost two years? What kind of constraints does this put on our government's ability to function? How effective can our legislators be if some of our more prominent ones are running around the country for two out of every four years?

Another consideration to make is the cost required to sustain such a marathon campaign. What kind of message do we send to our own citizens, and the entire world, when we deem access to an excessive amount of money to be a prerequisite for being the voice of the American people? What if someone has the right ideas but doesn't have the cash? In 2004, John Kerry and George W. Bush spent a combined 700 million dollars. How many schools could this money have built?

In Canada, The Elections Act of 2000 imposes tighter spending regulations on federal political than equivalent American federal regulations do. The result is that Federal Parliamentary elections, since 2000, have not gone over the lawful minimum required time needed to pass between the dissolution of parliament, and the next election: 36 days.

This shortens the election so that candidates don't have to raise hundreds of millions of dollars just to have a realistic shot at sustaining a winning campaign. The result, which might shock all the right-wing nuts who equate spending money to free speech, is the power held by parties outside the mainstream Liberals (center-left) and Conservatives (center-right). The New Democratic Party (left of center) might win enough seats to form a coalition with the Liberals. The Bloc Quebecois (Quebec sovereigntists) might lose the balance of power they held in the last government, supporting the Conservative minority. The Green Party (environmentalist) might win enough seats so that it is considered a major party in the next federal election ( it does not currently have any MPs, though was polled as winning 9% of the popular vote).

Even if a party's support plateaus and has no realistic shot at becoming the governing party, it might still have enough power to decide who governs and who doesn't (such as the Bloc Quebecois). Under a parliamentary system, Al Gore could have formed a coalition with Ralph Nader, and we never would've had to endure the cringe worthy presidency of George W. Bush. Thus minor parties are empowered.

One might think that a system that elects a head of government based on who controls the parliament to be a system that lacks safeguards on power. They would be mistaken. First of all, the Prime Minister is held directly accountable by Parliament. And unlike in the United States, where impeachment is considered a lesser form of regicide, Prime Ministers in Canada routinely face votes of no confidence in parliament. If the government fails to win a vote of confidence, the dissolution of parliament and an election (at least 36 days later) is the result.

Votes of no confidence also force Prime Ministers to be held accountable particularly in one aspect of government that is commonly overlooked here in the US: the financing of government. Regarding bills that deal with issues concerning the government's budget, should the government fail to pass any such bill, an election would be triggered as per the constitution. If a Prime Minister presents an unreasonable budget, he could reasonably find himself arguing before not Parliament, but the public as to why his budget should be accepted by taxpayers.

With regards to checks on federal power, when a Prime Minister enjoys a majority government, then it is true that they will have a relatively easy time passing laws. “Where are the checks and balances,” you bleat? Well consider the following: whats wrong with a government that has the power to pass laws and change a country? If a parliament's lower house reflects the will of the people, and the people hand a majority to a certain party, who is to say that this party shouldn't change the country?

Canada's Parliamentary system isn't perfect, but there is something to be said for it, especially when compared to America's circus democracy. Perhaps had we followed a political model similar to Canada's, the change that we as a country so desperately seek now would have occurred long before an impending financial collapse deemed it necessary.

Any Banks Death Diminishes Me...Does It?

All eyes have moved from Wall Street to Capitol Hill this week as America's legislative branch attempts to clean up the mess made by America's financial elites. But the recent crisis is only the sole fault of big financial institutions to the extent that their babysitter, lets call her Ms. Government, gave them bowl after bowl of chocolate ice cream and let them watch TV all night while she was outside chain smoking, drinking your fancy vodka and calling her boyfriend long distance on your phone right up to the moment you got home. And you're hiring her again this Friday?

The bailout plan is only the latest farce in the never ending tragicomedy that is America. We may have avoided this crisis if we reined in the low interest rates of decades past that helped manifest the “buy today, screw tomorrow” attitude of the private and public sectors. We certainly didn't help ourselves by rewarding every politician in the land who promised to cut taxes as much as possible (especially rich people's taxes). And, for the majority of the country, relatively low wages only seemed to guarantee that when the downturn finally came, it would be scary. Instead of offering Wall Street banks a lifeline, the government should help the helpless and punish the greedy, but it probably wont. Unless I'm mistaken, the government plans on buying up or refinancing subprime mortgages, and other risky investments, on a case by case basis, which basically means that the government is helping financial institutions clean house while the taxpayers are stuck with all the junk. This is pandering to special interests in the worst possibly way.

Why should the state get them off hook? Sure, they might create an oversight organization, in the same vein that regulatory organizations oversaw more recent mishaps and did nothing. But the government should take more of a hardline towards Wall Street aristocrats: if the taxpayers are going to bail you out, they're going to take you over. It should be either nationalization of failed firms or nothing, and the big banks shouldn't have any complaints. The public deserves no less.

Big banks weren't fans of the welfare state during better times, so it beggars belief that they think we're now just going to acquiesce to financing corporate welfare to those who do not need it, nor do they deserve it. Particularly when it is at odds the myopic so-called “laissez-faire” ideology that once made them winners (though on closer scrutiny, they have enjoyed state subsidies for years).

This is not to say that the government should do nothing about the current crisis. It is all well and good to snicker at how the mighty have fallen, but undeserving people will suffer as a direct result of others getting their comeuppance. Such is the fallacy of individualism. As John Donne once said, “no man is an island”. Despite the best efforts of the likes of Ronald Reagan and Margaret Thatcher, we in the West still live in societies and innocent people will suffer due to the financial carelessness of others.

First of all, if George W. Bush wanted to restore confidence and a sense of calm to financial markets, he should have declared a week-long bank holiday, just as FDR did when he took office. The idea being to stop people from making rash decisions.

Secondly, a better form of intervention would be to create a new public bank with recently acquired assets, and use this via the Treasury and the Federal Reserve to refinance mortgages. This would help manage the housing bubble, and allow homeowners to keep their homes. Though it should be noted, only those who have borrowed responsibly and are victims of circumstances should benefit. The public should have no time (or money) for those who avariciously borrowed money they could not afford to pay back, just as it should not be asked to bail out greedy banks who lent carelessly in a predatory fashion.

A new public bank could provide low cost credit to those who need it, and the economy as a whole could flourish. Imagine the revitalization possibilities if Americans had access to microloans and other instruments of credit that weren't given with profit motives being the sole incentive for lending institutions. Small businesses and America's urban centers would be the beneficiaries.

If politicians are still keen on the idea that hard work can pay off, responsible market intervention seems, ironically, like the best policy. It is up to Americans to demand this from their leaders, instead of allowing gifts to corporations with no strings attached, leaving taxpayers to carry the weight of market failure. The long term sustainability of our well-being depends on it.

To Children Ardent for Some Desperate Glory

Today the Guardian reported that in May, former Israeli Prime Minister, Ehud Olmert, asked George W. Bush if the United States would support Israel's plan to attack Iranian nuclear facilities. This revelation was made by an unnamed senior European diplomat, the paper claimed. Bush, himself not immune to causing immense violent conflicts, thankfully declined to offer his backing, considering the US is already mired in two wars that are far from over.

One can't help but wonder that we might find ourselves immersed in World War III right now, but for Bush's dismal approval rating. This is something to consider come election day. John McCain has let the whole world know how he feels on the subject, when on stage during an early 2008 presidential campaign event, he broke out into an impromptu version of a popular Beach Boys song, replacing the lyrics “Barbara Ann” with “Bomb Iran.” Charming.

McCain went on to say that “Iran is dedicated to the destruction of Israel.” Firstly, Iran does not have nuclear weapons, and has refuted claims that their nuclear facilities are going to be used to build them (this itself could be the subject of another article). Secondly, and more importantly, the infamous “wipe Israel off the map” quote from Iranian President Mahmoud Ahmadinejad may have in fact been mistranslated by Iran's official propaganda arm itself. Ahmadinejad alleges that he was referring to the Israeli regime, at the time headed by alleged war criminal, Ariel Sharon, and not the people of Israel or Jews as a whole.

Don't get me wrong, Ahmadinejad is certainly a despicable figure. He isn't exactly the biggest fan of women's and minorities' rights, nor is he a staunch believer in democracy or free speech. But Jews haven't exactly been pouring out of Iran as a direct result of his presidency either. Perhaps right wing Americans and Israelis are too busy rattling their sabres and licking their lips at the prospect of yet another war. They should take notice that discrimination is not genocide, and, though deplorable, the case for war should be diminished.

So it is not surprising that no one in the US took notice of the Guardian's report. Even if this senior European diplomat turns out to be discredited, the rumors are still quite chilling. But it was ignored entirely by the New York Times, the Washington Post and CNN.

Its a shame that these media outlets did not pick up on this story too, especially on a day when Sarah Palin's interview with Katie Couric made news worldwide. “We shouldn't second guessed [sic] Israel's security efforts,” said the VP candidate, “because we cannot ever afford to send a message that we would allow a second Holocaust, for one. Israel has got to have the opportunity and the ability to protect itself. They are our closest ally in the Mid East [sic]. We need them, they need us and we shouldn't second guess their effort.” Unfortunately Katie Couric gave Mrs. Palin the opportunity to cover her tracks, when she asked her immediately after if the US should still support Israel, even if it is not in America's (or Israel's) best interests (e.g. Iranian forces would do more than just harass American forces in Iraq and Afghanistan, Israel itself would be under more of a threat).

We simply cannot allow this self-proclaimed pitbull to be an illness or accident away from the missile launch codes. Though she wont be the one dying, she is dying for more war, it would seem. Any excuse will do, and Israel will do just fine, thank you very much. Is this the type of person Americans really want to represent them on a global stage?

It is very frustrating that the media in the United States have not thus far made this connection; that certain factions within Israel have allegedly asked the United States for its' support for a war with Iran, and a certain presidential candidate in the United States is looking for what George W. Bush called a 'mandate' for his agenda, which could very well involve "preemptive" military action against Iran.

And on top of this, the only Middle Eastern regime with nuclear weapons is Israel. And its currently wiping Palestine clean off the map.

A Speculative Effort, A Deadly Game (out in 2008 in farms and supermarkets near you)

Speculation, the practice of purchasing something with a view to sell for a profit, has always been viewed askance. Speculation in foreign exchange markets can distort exchange rates, which could lead to short term instability. Property speculation can lead to gentrification, which can force people out of their homes through no fault of their own. In recent years, a very dangerous type of speculation has garnered some very appropriate negative attention in the media: speculation in food commodities.

Think of it as going to a school fair, buying up all the hot dogs, soda and cotton candy then setting up your own stand and charging more than what you paid for it. Except replace 'school fair' with 'the world' and 'hot dogs, soda and cotton candy' with basic foods such as wheat and corn and you have a problem of epic proportions.

Now that we've established food speculation as immoral (the equivalent of taking candy from a baby or many babies), just how much of it is a contributing factor is it to rising food prices? If you believe the academics, journalists and economists who bleat the same old nonsense about the virtues of unfettered trade and the End of History, then speculation on food futures is not only not raising food prices, but its lowering them, curing AIDS and spreading democracy around the world simultaneously. Of course they aren't saying the last three things, but their denial of speculation playing any role in rising food costs is baffling (did I say 'baffling'? Because I meant 'predictable').

Conservative economists, politicians and businessmen are more likely to attribute rising food costs to subsidies. Agricultural subsidies are by no means perfect, especially export subsidies on products to poorer countries, which should be scrapped immediately. Though if done right they can increase supply and decrease price. But I digress.

Nicholas Brookes of ETF Securities in London said the following on speculation: “There is no question that we have seen a sharp increase in this kind of futures trading. But the flows that are going into these products are minuscule compared to the underlying production of such agricultural goods globally.” His firm secured $1 billion in food futures in the last year alone.

By some accounts, speculating on food has increased to $47 billion in the past year alone. Though this certainly isn't a staggering sum in the context of the global economy, the fact that it has increased by a factor of five in one year makes Mr. Brookes' above statement seem, well, speculative at best. A coalition of Belgian political parties and NGOs estimate that about 20% of recent rises in food cost stem from speculation.

This figure is especially significant when you consider that from March 2007-March 2008, the prices of wheat, soy products and rice have risen by 130%, 87% and 74% respectively. If we are to accept what our Belgian friends have told us and make some simple assumptions, that means speculators have inflated the prices of wheat, soy and rice by 26%, 17.4% and 14.8%. These are not paltry sums when you realize that aristocrats are essentially using profit motives to eat into people's disposable incomes. People who make less in their lifetime than these investors do before lunchtime.

Thus it does not come as a surprise to hear this Belgian coalition call for the banning of speculation on raw food products (I don't think anyone is out to get wine speculators). It might not solve the problem as a whole, but its a step in the right direction. Why not use the freed up capital to invest in better farming technology around the world?

Not Quite Out of the Bretton Woods...

The masses being subjugated by the classes is, appropriately enough, as old as agriculture itself (the elites needed someone to feed them). In recent years though, The World Bank and IMF have played a role in causing food prices to rise through economic bullying: prying open closed markets through Structural Adjustment Policies. Though other there are other causes to the current crisis, there is reason to believe that these institutions are partly responsible for world grain supplies being as low now as they were in 1973, when there were approximately 2.6 billion fewer people in the world.

For those that do not know what a Structural Adjustment Policy (SAP) is, it is the conditions by which a country must abide when it obtains credit from the World Bank. SAPs are nearly as old as the Breton Woods institutions themselves, but gained prominence as a policy tool as many countries experienced economic crises in the late seventies. Though this seems reasonable (a creditor would want to make sure that his borrower doesn't spend care-free), in reality some of these demands are quite unreasonable for an institution that claims to be fighting poverty, in the World Bank's case.

In addition to accepting fiscal austerity, which itself can be harsh especially considering most Western governments run on deficits, many countries are also forced to privatize state-owned firms. But more integral to the food crisis, they are also made to open up their markets to richer countries, and encouraged (read: coerced) to discard traditional agriculture in favor of cash crops for export to the west.

Strucutral Adjustment is especially harsh when you consider that many poor countries only have asked the World Bank and IMF for loans after previous corrupt dictatorships bankrupted their countries. As a means of recouping losses incurred through irresponsible lending to these dictators (especially in the crisis of the late 70s early 80s), banks turned to the IMF, who then loaned these countries money so they could repay their creditors (such as Scotia Bank, Citibank) and thus global finance was given a get-out-of-jail-free card.

So how have these policies directly contributed to people going hungry today? The fallacy of economic orthodoxy with regards to free trade. It states that when tariffs are removed, countries that sacrifice the least production of one good to produce more of another (comparative advantage) will do so, and prices will consequently drop. This assumption, based on supply increasing more than demand due to competitive markets, is sheer fantasy, even in agricultural markets (see Cargill, Tyson, ADM). If markets are uncompetitive, taxes can fall with no negative effect on price whatsoever. Who will force firms to lower their prices (and their profits) if there are no competitors?

To illustrate this point consider the following. Country A and Country B sign a free-trade agreement, but B is significantly smaller and poorer than A. Consumers in both countries eat corn, but B produces much more. Previously there were tariffs on corn. If B's corn markets are open to A's richer consumers, the effect on price will be positive, thus diminishing real incomes in B. The beneficiaries will be corn farmers in B, whose land will invariably be bought by corporate interests, thus negating any real long term progress to those who yearn for it most.

This would appear to be the case in Central America, where corn and rice, key components in the diet of many, have increased in price due to richer consumers around the world pushing up the price (biofuels also dont help the cause of the campesino). Some even argue that Cargill is using its market power to rise the price of corn even higher than it should be if it were determined by market forces alone.

Another illustration of free trade's failure is the case of oil. Has religious pursuit of free trade made oil cheaper? Not by a country mile. Though unique in its naturally limited supply, it is comparable to grain markets. Only so much land is arable, and small landholders, though by some accounts more productively efficient, are easily bought out by corporate farmers. As stated before, farming is actually not as competitive as high school economics text book writers would have you believe. Free trade agreements might lead to lower prices in the short run, but as smaller farmers struggle to cope with lower revenue and are run out of business, prices will increase. And why would a profit maximizing agricultural firm choose to lower its price in the absence of additional competition, particularly when consumers are typically unresponsive to price changes in basic food commodities?

Furthermore, Western countries make a mockery of free trade when you account for the export subsidies that agribusinesses receive. We make trade liberalization a necessary condition for normalized relations with poorer countries, yet we dump our agricultural surplus on their markets, only to the benefit of overproducing Western corporate farms.

As if the encouragement of unfair trade wasn't enough, the World Bank and IMF also encourage the growth of cash crops for export through market-distorting incentives. Not only do these mainly benefit elite and corporate farmers, who have the capital handy in order to make the switch and learn how to grow the cash crops, but they also succeed in reducing the supply of crops grown for domestic consumption and staples that may be exported.

By 1999, 50% of World Bank loans were tied to structural adjustment. There is reason to believe that because the World Bank/IMF placed more emphasis on SAPs (and they were accepted by debtor governments), food supply in poorer countries has decreased as a result, thus contributing to the rise in price. Tanzania, for example, saw land designated for cash crops increase by 17% after accepting the terms of Structural Adjustment in the late 80's. Most of these crops had a detrimental impact on the soil, as they were highly erosive. Thus structural adjustment directly led to unfavorable conditions for Tanzania's farmers and consumers.

Structural Adjustment Programs come under criticism for many reasons. They mainly come under criticism for their violation of national sovereignty and unjust provisions. The World Bank and IMF should admit their mistakes and work to neutralize some negative effects of SAPs on the global masses, though SAPs are not the sole cause for the food crisis. Previously, economists must've felt that the price of wheat, corn and rice could do with an increase, but a rapidly changing world is voting with its stomach and its appetite for a solution is growing.

How to attack the food crisis? Rat-a-tat-tat

Its hard to know where to begin when trying to tackle an issue as big and complex as the rise in global food prices. So instead of delving into the causes of higher global food costs (rising fuel costs, biofuels, lower supply, speculation, market consolidation, a richer Asia increasing demand, World Bank structural adjustment) your reporter decided to start with some articles published yesterday, to illustrate some effects.

According to the Reuters, the price of rat meat has increased nearly fivefold in Cambodia. Last year a kilo went for 1,200 riel, this year it is 5,000 riel (1 USD = 4,120 KHR approx) out pacing the official central bank's rate of inflation, which stands at 37%.

With a kilo of beef costing 20,000 riel, it is no surprise that Cambodia's poor have flocked to a cheaper substitute. Though poor people in parts of the world have been eating rat for years. This seems to suggest that rising food prices are forcing middle class Cambodians into the lower class.

Then again maybe it doesn't. Maybe rodent-eating is all the rave. According to the Guardian, grey squirrels are flying off of the shelves in butcher shops all across Britain. They are numerous and local, which gives them green credentials, and they are also, apparently, quite tasty. One butcher, David Ridley, from Northumberland, described the bushy tailed animals as tasting somewhere between lamb and duck: “'It's moist and sweet because, basically, its diet has been berries and nuts.”

But this is Britain we're talking about, not Cambodia. Britain has not been ravaged by civil war in over 350 years. Its hardly been three decades since Pol Pot and his Khmer Rouge thugs decided that about a quarter of the population was surplus to requirements. Given that the price of rice has risen by about 50 percent over the past six months, it would be very unconvincing to argue that Cambodians are eating rats for the same reason that Britons are eating squirrels, especially considering that 60% of Cambodians' nutrition comes from rice.

Therefore one can only conclude that rising food costs are forcing more and more into poverty, and as disposable income declines, demand for inferior goods such as rats will increase. Yesterday the World Bank released data which showed that more of the world's inhabitants are in dire poverty than previously thought. That number, which was calculated using more recent data (from 2005) has been revised up to 1.4 billion from 1 billion. The good news is that there has still been significant poverty reduction since the 1980s. The bad news is that the data does not account for recent rising food and fuel costs. Wheres the pied piper when you need him?

(Sources: http://www.washingtonpost.com/wp-dyn/content/article/2008/08/26/AR2008082602786.html?sub=AR

http://www.guardian.co.uk/environment/2008/jul/20/food.cambodia

http://news.yahoo.com/s/nm/20080827/od_uk_nm/oukoe_uk_cambodia_rats )

Glenn Beck - Thick as S***

Glenn Beck's latest column on CNN defies logic. The conservative pundit rails against cities like Detroit, Buffalo, Newark and other poverty stricken cities for electing Democrats for mayors, implying that had they elected Republicans occasionally (many cities have elected Dem. mayors for half a century) they would not be so poverty stricken.

Cue the head shaking.

Had he bothered to give any meaningful insight, he would have mentioned found that cities really only have control over property tax revenue. So what would his solution be? To cut those taxes? Housing demand is relatively price inelastic (sure it varies from city to city) but a tax cut given inelastic demand would equate to lower tax revenue. This would mean less cash to spend on education and public transport, which can help alleviate poverty.

Beck neglects to mention that since 1968, America has elected a Republican president for all but 12 years (Carter, Clinton) and that Clinton himself was fairly right wing. But surely those who actually control important macroeconomic policy (fed. income tax, minimum wage & labor laws and trade issues) should not be held responsible for the poverty that has stricken once productive industrial cities. Instead Beck blames the victims - that somehow these cities are more poverty stricken than others because the inhabitants of these cities dont take personal responsibility (just like all those CEOs who receive massive bonuses after leaving companies they've run into the ground)

Furthermore, Beck suggests that Ben Franklin was opposed to minimum wage laws and a welfare state (those ideas barely existed in a pre-industrial society, though they did to be fair, i.e. Elizabethan Poor Laws) without actually citing Franklin on the subject.

Basically my point is Beck's stupidity is absolutely astonishing. He can blame the Democratic mayors all he wants, but at the end of the day the major economic policy makers are either in Washington or state governments.

Then again maybe he's right about the Democrats. Maybe those cities should've elected socialist mayors.

You can read the article for yourself here, but I highly recommend that you don't.
http://www.cnn.com/2008/POLITICS/08/20/beck.cities/index.html


Stay tuned for some comprehensive posts on the global food economy.

How Dumb Do They Think We Are?

Dont answer that.

I know I was planning on to keep this blog focused on specific issues, but I just can't help myself.

John McCain has just released another negative ad. Surprise, surprise. Though it is already known that economics is not his strong point, the stupidity of the latest ad (which I had hoped to post or put a link to but could not find) is nothing short of astonishing.

The woman narrator (courting Hillary's votes, are we?) states: "The real Obama promises higher taxes, more government spending -- so, fewer jobs." Can anyone who has studied macroeconomics for a week point out whats wrong with this statement? No, well consider the following:

GDP = Consumer Spending + Investment + Government Spending + Net Exports - (Savings + Taxes)

McCain might be right about the taxation meaning fewer jobs, though if this tax revenue is spent in an effective manner it will *shock* create jobs. So why did his campaign state that government spending has a negative effect on employment? Is he really that foolish or does he think we are?

He must be a fool and take us for one if he thinks he can make Obama's popularity seem like a negative thing. God those ads are annoying. And I'm not even an Obamamaniac.

The End of the American Dream?

Recessions have occurred in the past with little batting of eyelashes by those who study the economy. But especially with the housing market in tatters, this time there are reasons to believe that the recession of 2008 could signal the end of the American Dream.

What makes this recession different, I'm sure you've heard all before. High oil prices are crippling American drivers and homeowners. Should these trends continue, the American suburban way of life based on long daily commutes could, thankfully, be under threat. Record trade deficits have thrown into question the sustainability of a service economy given rising costs of imports, which implies structural changes in America's pipeline. This is particularly funny considering it wasn't all that long ago that we had to make the transition to a service economy from a manufacturing one.

The trade deficits and, to a lesser extent, high oil prices can be blamed on capital-seeking corporations and the all-powerful profit maximizing financial institutions, the latter being the means of many people to home ownership. But the financial sector is buckling under the burden of irresponsible lending and borrowing, thus raising questions about the ability to continue . By some measures, household debt has doubled over the past seven years. This debt combined with government debt is greater than 100 percent of US GDP. Oh dear. ('The Economic State of the Union' – Manufacturing & Technology News 2008) I'm not sure if this even accounts for inflation and the burgeoning foreign debts.

Had a massive recession occurred without prior significant strain on creditors and debtors, recovery would be made easier by expanding credit. But with credit already overstretched, one has to wonder who would be dumb enough to lend money to Americans at a time like this (it will come from overseas, if anywhere – China and the Middle East). The last time America suffered economic hardships on a large scale, it took a massive war to end it (and by some accounts, America's war machine have kept the economy afloat ever since...will be covered in a future post).

But I digress...

The point is this: with the economy overstretched as it is, particularly the housing market, the American Dream (big suburban house complete with garage two lawns and 2.5 kids) will be scrutinized. What does this mean? Well, its not the end of America, thats for sure. But politicians fawning over the benefits of home ownership and financial analysts who claim that real estate always bounces back might be endangered species. But people's reactions to the recession depends on how severe it actually will be.

Perhaps the most positive aspect of the changing economy are the end of Disneyland suburbs complete with McMansions and strip mall after strip mall. After years of excess and demanding perfection and massive spectacles, Americans may finally grow up. But then again, maybe another massive economy-fixing war is being planned by the deviants who lurk the halls of the Pentagon. It would give America a fresh start, boost the economy and Disney could make a movie about it in twenty years time.

all power to the blogosoviets

This being my first post, I'm not sure entirely what to say, only that this 'blog' (I really hate that word) will hopefully focus on armed conflicts, housing and land and food issues.

Hopefully it will be updated a few days a week, but we'll see.