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On Globalization, Economics, And The History of Food Crises
Michael Perelman & Max Haiven, Counter Currents
Michael Perelman is a prolific and compelling scholar of contemporary economics and politics who teaches at California State University in Chico. He has published 19 books on a wide variety of topics. Graduating with a degree in agricultural economics, questions of the global inequalities of food production and distribution, both past and present, led Perelman’s to write several early books including Farming for Profit in a Hungry World (1977), Classical Political Economy, Primitive Accumulation and the Social Division of Labor (1983), and Karl Marx’s Crises Theories: Labor, Scarcity and Fictitious Capital (1987). All three touched on the “environmental, social, and economic costs of the current agricultural system” and the way those costs are disguised by reigning economic paradigms which facilitate the privatization of social wealth.
Perelman’s abiding concern with, on the one-hand, burning social issues and, on the other, the brutal deficiencies and complicities of mainstream economics has animated his career ever since
… In this interview Perelman offers his insights into the contemporary food and economic crises, some of their historical antecedents, and themes ranging from speculation to dependency to class.
Max Haiven (MH) for Politics and Culture : Before the recent financial crisis, discussions of an endemic and deepening food crisis was making its way into the mainstream press thanks largely to spectacular demonstrations in the global South and some anomalous prices for things like cereals at Northern supermarkets. Since the financial crisis was fully realized last fall, that food crisis seems to have been largely forgotten (along with the related problems of “peak oil” and general resource scarcity). Is this coincidence of the food and financial crises an accident?
Michael Perelman (MP): The relationship between the financial crisis and the food shortage is not coincidental at all, although I do not believe that the ongoing crisis is merely a financial crisis. Instead, crises like these are endemic to a capitalist economy. A decades-long distortion of the entire economy, reflected, for example, in an epidemic of inequality and deregulation, has made this particular crisis even worse. I tried to describe the entire pathology in historical context in my recent book The Confiscation of American Prosperity. Inequality and lack of investment in productive capital, among other things, led to a speculative fever that eventually produced a financial crisis.
Once the bubble was set in motion, speculation in all sorts of raw materials, including food and energy, became part of the contagion. Once crops became seen as a cheaper form of energy production, a mania for producing biofuels created food shortages.
Now that speculation in raw materials is running in reverse, people in the less developed countries, whose economies depended upon the export of raw materials, will face markets with sufficient food, but without the wherewithal to afford it—a different kind of food shortage, but one that is just as lethal.
(17 April 2009)
All Better Now?
Sharon Astyk, Casaubon’s Book
… James Howard Kunstler has written about the ways that the “psychology of previous investment” ties us into projects that are fundamentally doomed – and I think there’s no better place to see that operating than the stock market. Look around you – despite the fact that the stock market is (even with the rally) down 6000 points, give or take for today’s adjustment, over its peak, most people are holding their money in the markets. Even though many of them might get a greater rate of return, even with penalties, by taking the money out and paying off their mortgage, or using the money to invest in infrastructure that would lower their costs they don’t.
And they don’t because psychologically they can’t. We’ve been told that the market always, always goes up. And this is true – but up over what? It took nearly 30 years for markets to return to adjusted 1929 highs, and more than 20 to pass them absolutely. How many baby boomers can wait that long? How many people saving for college have 20 full years before their kids are freshmen? And yet, as I’ve pointed out before, there is no rational backup plan for the long term future of ordinary people but the stock market – our entire society’s long term sustenence is based on the stock market will always go up, and that everyone will always believe this, and thus ensure near-universal participation.
And it is the expansion of participation, more than anything else, that fueled the last few tenuous years of growth – fundamentally, the real estate bubble was, as we all know, created by our now deplored cheap and predatory lending. But what most people fail to think about is that the real estate bubble, and the larger growth that fueled it, *could only have happened* by pulling more and more people into the market, by convincing them they could have a house, and that real estate values would rise forever. That is, the very things we deplore about the market were necessary to keep the economy booming.
And this is true across the board – the other things that fueled growth, on a world scale, was the industrialization of agrarian people in the Global South – the moving of people off their land and into slum housing and factories in cities – the much vaunted process of “development” that people like Larry Summers and Thomas Friedman claimed would “lift all boats.”
But of course globalization’s root mechanism was cheap fossil fuels – and the process of industrialization of poorer nations inevitably results in a lot of new competitors for fossil fuel supplies. This drives up prices, creates exciting new bubbles for people who see something going up just as things begin to destabilize, creates a host of new “eaters” as food turns into fuel to meet growing demand, and, at least according to James Hamilton, crashes the global economy, not to mention pushing us very near to a climate tipping point. The very thing we most need to constrain, for a host of reasons – ie, rising use of fossil fuels – is precisely the thing needed to get us out of the hole.
(20 April 2009)
Beware of getting snookered into making short-term predictions!
All of Sharon’s points are valid in the long-term, but for the next few years – who knows? No one. Not peak oilers, not stock market gurus, not even the sage of Omaha, Warren Buffett. The better the investor, the more she will admit her uncertainty.
The economy is a complex system and there’s nothing certain about it. I could see a rapid recovery, a slow mild recovery and plateau, a continuing recession, or a drastic Depression.
Capitalism has proved incredibly resilient, especially when it backs off from the extreme policies of the last two decades and begins adopting social democratic and Keynsian ideas, as it is doing now. It will absorb ecological ideas when it is forced to (or when it can make a profit from them).
I think the main problems right now are specific:
- Wars and military spending. The elephant in the living room. We actually do have a “war economy” now, considering the large % of our GNP that goes to the military and arms manufacturers. Can’t really afford to re-do our infrastructure, as long as we have military bases all over the world.
- Subsidizing the banks and corporations. “Socialism for the rich” – subsidizing costs and privatizing profits. After we bail out the banks, there is not much left over for the infrastructure.
- Bad investments in energy and infrastructure. The tendency is for us to spend money foolishly, on projects that make us feel good but are hopeless or counter-productive in the long run. For example, efforts to keep the car/highway system going. Or the many efforts for alternative forms of energy, most of which have little chance of success (corn ethanol, carbon sequestration, hydrogen, etc.)
So at this point, I don’t think the problem is that capitalism and the growth economy are in their death throes. The problems are short-sightedness and manipulation by lobbies. -BA
Retirement Dreams Disappear With 401(k)s
60 Minutes, CBS News
The effects of the current economic crisis have touched everyone. Even if you still have a good job and a paid up mortgage, chances are your monthly 401(k) statement will remind you that you’ve lost a good chunk of your savings.
Trillions of dollars have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there’s time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people.
It was a gray, chilly morning in midtown Manhattan and a line of unemployed, mostly white-collar workers, stretched for blocks around the Radisson Hotel. More than 1,000 middle managers, stockbrokers, consultants, secretaries and receptionists had come hoping to find a job.
It was called a career fair, but there was no merriment – only a whiff of desperation.
Many of the people at the career fair have been out of work for months and burned through their liquid assets; their future, even bleaker than the present.
(19 April 2009)
Real GDP and the Oil Shock of 2007-08
Dave Cohen, ASPO-USA
If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands
—Douglas Adams
Dr. James Hamilton (JDH) recently released his study Causes and Consequences of the Oil Shock of 2007-08. The paper concludes that if the oil price shock that started in 2007 and ended after 2008:Q2 had not occurred, the U.S. economy would have been described as growing slowly in 2007:Q4-2008:Q3. Here is JDH’s conclusion and the main result…
…Hamilton is making a subtle point by examining a counterfactual proposition. Imagine there had been no oil shock in 2007Q:3-08:H1. In this case Hamilton believes that the U.S. economy would have been “growing slowly” during the period in question. This point is confusing because our economy was growing slowly as measured by real GDP (+0.7 or 0.8 percent as shown in Hamilton’s Table 3, and discussed on page 34). JDH’s point is that without the oil shock, our economy would have been seen as growing at a slightly faster rate than the data shows—declining light truck sales provide empirical support for this view (see the last section below). Hamilton says his conclusion is one “that I don’t fully believe myself.”
(16 April 2009)
