Are We Running Out of Food?
If we had free world markets, writes Kel Kelly, food would be exported from some countries, such as the United States and Europe, where food is plentiful, to countries where it is needed. This is because it would be profitable to ship goods to needy areas like Africa, where shortages were making prices rise.
The fact that this is not currently happening can be a result only of government price controls (which prevent prices from rising in needy countries), trade restrictions, or some other government barrier that prevents people from getting what they need. FULL ARTICLE
Comments (240)
Great article!
To quote Henry Hazlitt:
"One of the most stubborn fallacies about inflation is the assumption that it is caused, not by an increase in the quantity of money, but by a “shortage of goods.”
It is true that a rise in prices (which, as we have seen, should not be identified with inflation) can be caused either by an increase in the quantity of money or by a shortage of goods — or partly by both. Wheat, for example, may rise in price either because there is an increase in the supply of money or a failure of the wheat crop. But we seldom find, even in conditions of total war, a general rise of prices caused by a general shortage of goods. Yet so stubborn is the fallacy that inflation is caused by a “shortage of goods,” that even in the Germany of 1923, after prices had soared hundreds of billions of times, high officials and millions of Germans were blaming the whole thing on a general “shortage of goods” — at the very moment when foreigners were coming in and buying German goods with gold or their own currencies at prices lower than those of equivalent goods at home."
Published: May 6, 2008 8:51 AM
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You'll not get any closer to
the truth about what's afoot with
Bush's GLOBALIZATION and
and this LOOMING FOOD CRISIS
than my below thoughts and links
((copy and send to friends and colleagues;
and note that I REPEAT MY PREMISE
OVER AND OVER AGAIN, TO DRIVE
HOME THE POINT)):
The Third-Way push of
socialism/capitalism to
equalize the world's
economies has caused
this looming food
crisis, NOT CAPITALISM.
Socialist/communist leftists
have captured capitalism
and enslaved it to EQUAL/
"FAIR" outcomes.
Of course, you'll have to
think more deeply to find
the truth.
Read and learn the truth:
What we are facing in 2008
is a Third-Way (socialist/
communist/capitalist)
conspiracy to equalize the
world's economies, as preface
to installing one-world
government; a plan hatched
during the 1940s GATT
formulations, which were
socialist/communist, in
effect.
Keep in mind that there is
no PEAK OIL crisis, only a
decades-long, purposeful
cap on searching and drilling
and refining for oil, in order
to put the world in crisis-mode.
Using food to produce fuel
is part of the conspiracy to
generate food riots, in order
to destabilize governments;
and this so-called "war on
terror" is also part of the
secret plan, although its
primary beneficially is Israel
in the exchange of blood
and treasury for oil--as
payoff for protecting Israel
from an ever-threatening,
encircling Islamic Arabism.
The secret plan?: to create
one-world government under
GLOBAL ECONOMIC SOCIALISM.
This is a conspiracy-driven
dismantlement of the West's
financial underpinnings,
for a certain purpose: TO
EQUALIZE GLOBAL ECONOMIES,
for future installation of
one-world government.
I've provided all the details
in my essay, "Planned
Destruction of America"
(linked below), which is my
report on Lt. Col. Archibald
Roberts' 1968 booklet: "The
Anatomy of a Revolution".
http://planneddestructionofamerica.blogspot.com/
Study my essay, then write as
if we're all being led down
a path to hell on Earth by
secretive, elite movers and
shakers on the Left and Right
(path to hell aka "Third-Way
Global Economic Socialism").
Read and learn and teach:
The EU and the coming North
America Union are products of
the 1940s GATT formulations,
and very few analysts are
aware of it ((GATT, NAFTA,
and CAFTA are socialistic
attempts at equalizing global
economies, in order to in-
stall one-world government
under THIRD-WAY Global
Economic Socialism)).
The NAFTA Debacle (1995)
http://naftadebacle1.blogspot.com/
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Published: May 6, 2008 9:09 AM
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Read this excerpt from my essay,
"The NAFTA Debacle":
"Because many nations' agricultural
production will decline under NAFTA
and GATT, in becoming dependent on
the more productive nations' capacity
to export cheaper product to them,
they'll become gravely vulnerable to
any of the exporting nations' food-
production declines, possibly resulting
from bad weather conditions or bad
economies. "Free trade" in food sets up
a looming catastrophe (read my essay,
GATT: Ubiquitous Treason). Wouldn't such
worldwide economic interdependence
necessarily set the stage for a worldwide
economic collapse should any one nation
seriously falter? Such a worldwide collapse
would make America's Great Depression
appear like good times. Why aren't the
NAFTA and GATT crafters arguing for more
economic independence for nations - for
rugged individualism among nations, rather
than building this One World interdependency
that their brand of "free trade" necessarily
engenders?
The NAFTA Debacle (1995)
http://naftadebacle1.blogspot.com/
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Published: May 6, 2008 9:22 AM
Dear Mr. Kelly,
I enjoyed the article. In fact I receive the Mises Report daily and read it daily. Working in the UN on humanitarian relief, I agree with many of the insights you provide. I think that the best way to frame the issue is in the context of access to financial resources, or liquidity. What the problem is with Mr. Krugman's analysis is that he looks at the symptoms and not the root causes. Those who are most in need of food assistance at this point in time are either in the area of subsistence farming or are part of the so-called 'urban poor'. Due to the hike in oil prices, fertilizer costs have skyrocketed, and hence they have been unable to plant crops. Now normally I would be in favor of letting the market run its course, ok so prices are high, great, now more farmers will plant. However, the reality of 2 billion people is that they earn $1 a day or less. Once you take into account how structural, on a worldwide basis, the current situation is (as compared for example to your Ethiopia case), what is in store is worldwide civil unrest. A hungry person is a person ready and willing to wage war on his government. Here we are not talking about the Chinese demand for food, but demand originating in countries with very weak currencies and economies, such as Haiti, Honduras, Egypt, the Philippines and Cameroon. Not all of these are the poorest, but all have urban poor, who depend on incomes from informal urban economic activities, the return on which is rapidly declining compared to both the price of oil and food.
I suppose that my arguments do not run against the crux of your conclusion, "the real cause of continually rising food prices is the printing of money by world governments. And the real cause of actual food shortages is the prevention of profitable global trade in food by the ill-advised policies of the governments of the very people who are starving." To that last point, in fact, I would add the most key examples of export embargos by many countries trying to reduce food prices nationally (which ignores the fact that these are rising largely due to fertilizer prices, so that food supply will likely decrease in each nation with these controls, even in the medium-term).
However, while I do not argue with these points, I do think that there should be more made of the size of the food crisis in humanitarian terms, to the degree that the isolated examples of Ethiopia and Zimbabwe are much more nationally-caused, while the governments of Cameroon or the Philippines are not really inducing either infrastructure problems at home or contributing to the global money supply expansion that you note. Rather, I think it would be useful to point out that spending items such as the war in Iraq are creating a structural climate in terms of this money supply expansion that will, over time, victimize whole countries and populations that are far removed from the root problem.
Best regards,
Jeffrey Villaveces
Published: May 6, 2008 9:59 AM
I would like to point out a few very serious mistakes in the article Are We Running Out of Food. First, the author says "Krugman's proposed solution to these problems is for us to give more of our money to government, so that it can solve the problem the market is apparently incapable of solving."
I've looked over Krugman's article in some detail... and nowhere does he say that. In fact his implicit message is that we should remove subsidies for an ill-conceived ethanol program. So in fact he is suggesting that fewer taxes be paid toward energy production.
He does say "What should be done? The most immediate need is more aid to people in distress: the U.N.’s World Food Program put out a desperate appeal for more funds." Is this the same as the author's telling us "Krugman's proposed solution to these problems is for us to give more of our money to government"? I don't think so. There are many areas in the world where there is food but insufficient money with which to purchase it. Any proposed solution would seem to involve getting some money into the right hands.
There are also many areas where there is just no food. The author comes off sounding like an economist when he says "First, the underlying cause of any shortage is the lack of a free market, since genuine shortages cannot appear in a free market."
Out in the real world there are occasions where there is either no food or insufficient food to be had, regardless of the shape or size of the market. One can't just wave his economist's wand and posit an infinite supply of the stuff. Yes, there are actually occasions where there is a free market but no food. Or, often, so little food that it becomes unaffordable for most hungry people, and sits in the hands of speculators pending some rich buyer.
"...the higher the price, the more the supply would increase to meet demand, which would then of course reduce the price. If we had free world markets, food would be exported from some countries, such as the United States and Europe, where food is plentiful, to countries where it is needed."
What's missing here is any recognition that in the absence of money, masses of poor, hungry people do not constitute a "market". In economic terms, they are a nothing. They do not exist. It's only in the real world that these people exist.
I leave it to the author to explain to us how, in the absence of anything resembling economic aid, affordable food can magically appear in the marketplace and be purchased by poor people suffering from hunger.
I also leave it to the author to explain how everyone can be amply fed in the instance where there is just less food to go around than there are hungry mouths. Should we simply posit fewer people? Or, in the absence of rice, should we let them eat brie?
Finally, the author seems stumped at the fact that the Chinese are (1) making more money and (2) creating more demands upon a finite globe in terms of food production. Not only are they eating more, they are eating higher on the hog. I believe everyone is now aware of the fact that it takes ten kilos of grain to produce one kilo of meat. Therefore when one graduates from eating grain to eating meat, his demands upon the land increase by a factor of ten. And the earth is simply not large enough for that to happen. Not when we are also starting to burn our grain in our gas tanks.
In sum, I think the thesis needs more work. Food is not like money, in that it cannot be simply invented as the need arises. There are times when the need for food outpaces supply. And we are living in them.
Published: May 6, 2008 10:10 AM
You get to the point that I believe is the cause at the end. That is that governments in supplying countries, namely the US are A increasing credit supply and B paying more for this bio-fuel foolishness. These two policies mean food prices will go up un-naturally in the US. So what happens: Other food suppliers divert their products to the US who is paying an artificial premium on food. It doesn't take much to set all this in motion. In the near future you will see these other suppliers increase production, I am sure the Brazillians and Chileans are ramping up their production of food but this movement to stupidnol has been so sudden that even the best farmers in the world take time to react.
The saddest part is the poorest folks get double slammed as their own governments either tax or refuse to import food as the US sucks up food in a stupid bid to stop importing energy.
The most ironic part is that this whole stupidnol thing will end and when it does the US will have tons of crop land diverted to making it. The US will of course provide "subsidies" for the farmers to switchback to growing food for eating not fuel and thus cause a GIANT surplus of food driving prices way down causing a run as other governments subsidize their farmers.
Published: May 6, 2008 10:16 AM
"In sum, the real cause of continually rising food prices is the printing of money by world governments."
This " printing of money" is done also by various means other than using the printing press. Nonetheless it is the same as counterfeiting which in this case is legalized theft, those first at the trough
are the main beneficiaries those last go hungry.
Paul Krugman never addresses the problems caused by legalized counterfeiting, there seems to be some kind of mental block in his distorted logic that is unfathomable to those who think logical and long range.
Published: May 6, 2008 10:23 AM
Hmmm. Guvmints cause people to starve via ethanol because the land should be used to grow grain for people. Do us people likewise cause people to starve via eating meat as that grain should used be used for feeding people not cattle?
Published: May 6, 2008 10:29 AM
"First, the underlying cause of any shortage is the lack of a free market, since genuine shortages cannot appear in a free market."
While I agree that this is usually the case, nature can indeed induce shortages, at least over the short term, unless you count people who don't have enough resources to afford the higher prices starving to death as a good thing... in that case everything reaches equilibrium and the theory stands.
Published: May 6, 2008 10:35 AM
Jeffrey and Michael,
Thank you for your comments. Since my article raises as many questions as it answers, I will do a follow-up piece where I address your comments (but Michael, some of your concerns are already addressed in the article).
Thanks,
Kel
Published: May 6, 2008 10:42 AM
Krugman: “The most immediate need is more aid to people in distress: the U.N.’s World Food Program put out a desperate appeal for more funds.”
The failures of the UN in helping poor people are legendary. Thugs in government steal most of it and sell it to the highest bidder. Back in the 90’s a famine hit Mali, but the Mali government at the time refused to allow the UN to administer food aid coming from the West because of very poor experiences with corruption and theft during a previous famine. So the Mali government asked the Southern Baptist Missions organization in the country to handle the distribution. The Baptists didn’t have the personnel to do it by themselves, so they enlisted churches in every town to help. The church members knew very well who needed help and who was corrupt, so the distribution went very well and the Mali government was very pleased.
As for the causes, the author is right on the mark! Mainstream econ is totally and willingly blind to the disaster visited upon the poor of the world by monetary inflation. What should be done to help the poorest who live on less than $2/day? Send the money through private agencies such as World Vision, and church agencies.
Michael: “Out in the real world there are occasions where there is either no food or insufficient food to be had, regardless of the shape or size of the market.”
No, there are no places without access to food. Transporting food is quite easy and cheap. What people lack is the money to buy it and they do need help, but help from the UN is worse than no help at all.
Michael: “I also leave it to the author to explain how everyone can be amply fed in the instance where there is just less food to go around than there are hungry mouths.”
As the author writes, there is no shortage of food, just a shortage of money to pay the inflated prices caused by monetary inflation by governments. The US is a major exporter of food.
Michael: “Finally, the author seems stumped at the fact that the Chinese are (1) making more money and (2) creating more demands upon a finite globe in terms of food production.”
The Chinese are also growing more food than ever before. In the 1970’s and 80’s, Chinese were starving and the US and Europe kept them alive with massive exports of grain. Those shipments ended in almost the same year that Deng opened the Chinese economy to a small taste of free markets. Food production shot up dramatically. The world’s food supply is no where close to finite. It simply lacks better technology. Most farming in the world is done with a short-handled hoe. The productivity level isn’t even as high as that of the middle ages in Europe when farmers used oxen. In area like India and the Ukraine, where the quality of farm land is the envy of American farmers, socialism and tradition hold productivity back. The Ukraine enjoys such excellent farm land that they could probably feed the world by themselves if they weren’t so incredibly stupid. Hitler wanted to invade Russia for the sole purpose of getting to the Ukraine’s farmland.
Michael: “I believe everyone is now aware of the fact that it takes ten kilos of grain to produce one kilo of meat. Therefore when one graduates from eating grain to eating meat, his demands upon the land increase by a factor of ten. And the earth is simply not large enough for that to happen.”
I find those numbers suspect. Hogs eat mostly scraps for most of their lives and cattle eat mostly grass. Farmers feed them grain only during the last months before butchering in order to fatten them and improve the flavor of their meat. Hogs are the preferred meat for many of the world’s poor because they are so cheap to feed.
Published: May 6, 2008 11:21 AM
Jeffrey and Michael,
On second thought, I'm not sure I'll have the time soon for a whle new article. If you're interested (and if your concerns are not addressed by others on this blog) please send your remarks to my email address and I'll address each point. This is so that I do not take up blog space with more of my own writing. If anyone on the blog would like to see my email responses to Jeffrey and Michel, I'll be glad to forward them if they also write to me.
Thanks,
Kel
Published: May 6, 2008 11:33 AM
Michael, it is almost as if you only read the article half-way, or at points that you do not understand what is being spoken of. When more money is made reference to, it is money printed by the central banks, not extra wealth that comes by increasing productivity. Aid is surely fine (investment better yet), but only when it comes out of genuine wealth. Otherwise, inflation ensues, further diminishing the purchasing power of the individuals in question. The article addressed these points, and it is hardly a flaw that it "comes off" as an economist's writing (or did you miss the bit on 'real demand'.)
Published: May 6, 2008 12:00 PM
Micheal doesn't seem to accept that when you posit a "free market" you are talking about a market free of force (usually from government, but sometimes from government substitutes, such as criminals or rebel forces).
To ignore everything in the article that discussed the limiting forces to free trade, such as fighting in areas which makes transportation costs to that area rise, and rise greatly. Tarrifs and embargos and all the other regulations of government stop free trade.
In addition, one needs to address why various countries are poor - i.e. they are unable to produce something that other would want to trade for food, or tools to grow food etc. In almost all cases, extreme poverty is found only in places where there is lack of free trade. Just check out the Index of Economic Freedom and see which countries have the least poor and which have the least economic freedom.
Also, one needs to look at which countries engage in free trade agreements with other countries. These agreements are anything but - they are actually agreements as to how much interference each country is permitted.
A true free trade agreement would be one sentence: No government or forceful interference with any trade between two willing parties.
Published: May 6, 2008 1:20 PM
The simple fact is that the DAMAND from those people for food is not high enough to compel any producer to make it for them. Now, most of us can DEMAND food because we have high wages.
But not everyone does. Some people do not even have enough to demand (because goods must be demanded with money) enough to live on.
In a free market there will ALWAYS be those that sometimes through no fault of their own, cannot DEMAND the food (or any good in question). Beside the idealism of charity the free-market has no way to ensure these people who cannot demand goods are able to live.
Published: May 6, 2008 1:45 PM
There has never been and likely never will be a supply problem with food.
It is always one of demand. Where there is demand, there surely follows supply according to the process of the market.
Where there is no demand (in $$$$$) i.e. Africa, there is little or no supply.
The reasons Why African has low demand which are largely historical and political (i.e. colonialism, unequal trade, wars) aswell as cultural (as with many pacific Island nations Africa has cultural systems that don't always accept free-market ideas)
It would seem that there is almost an ethical obligation towards the (mainly European) countries that created alot of the mess, to fix it.
In the extreme short term food aid is needed because a free market cannot supply food to someone with no demand.
In the medium term it is about breaking down some of the political barriers that prevent these people from creating their own demand (i.e. production).
Published: May 6, 2008 1:54 PM
As the president of the united states, I here by authorize the FBI to confiscate all of OWEN's wealth and export it to Africa. I also authorize the Leviathan to provide OWEN with 3 Big Mac meals a day.
Published: May 6, 2008 2:11 PM
Very good article.
Published: May 6, 2008 2:14 PM
"(because goods must be demanded with money)"
I am not being picky, but it is more accurate to say that goods must be demanded with "value". Consequently, if whom ever is making the demand for food, has in that demand anything of enough value (as perceived by the food supplier), then that person is likely to receive the food in consideration for the provided value. It (the demand) does not have to be enforced with money. It can be enforced with goods, services, favors, promises or actions (also remembering that inaction is also an action).
Published: May 6, 2008 2:28 PM
i like this article because it is one of the first to aknowledge the role inflation has in food prices and distorsions across the supply a demand relations on any product.
however, i beg to disagree that "free trade", or lack of it, only relates to "micro" stuff like tariffs , subsidies, taxes. monetary disruptions have as much (in effect much bigger) consecuences in trade releations across countries and industries.
just an example: in the last six years the us dollar has fallen to the euro for more than 65%!!!! and that means that the "cost structure" between to of the most industralize blocks in the world will diverge for more than 65%. which is a lot more than the gross profit in any modern highly capitalize industry(including agriculture). in a few words, thre will be trouble in urope and america!!
yes, people would say: what about currency futures and options to hedge??. well futures and options can only covert you for a short term and for a cost beyond that you are "naked".
the problem is that the industry cycles for most modern industries can last for a lot more than five years or a future hedge so, then what can you do?
in this case ill tell you that there is no other resource than the dreaded "tariff" , currency manipulation or, in an ideal world, an international gold standard.
and what about the poor?? well, do you remember what mises said about the non neutrality of money???
i like to further discuss this so if you can write me to: olmedomiro@yahoo.com
Published: May 6, 2008 3:00 PM
President - as long as such confiscation is proportionate to all taxpayers. Therefore I hope you'll enjoy those big macs too!
Good point John, but it doesn't change mine - those who are without food simply have no VALUE to exchange for it. Money is a means of exchange and store of value.
Published: May 6, 2008 3:05 PM
Thank you all for your enthusiastic responses.
Eric comments "Micheal doesn't seem to accept that when you posit a "free market" you are talking about a market free of force (usually from government, but sometimes from government substitutes, such as criminals or rebel forces). To ignore everything in the article that discussed the limiting forces to free trade, such as fighting in areas which makes transportation costs to that area rise, and rise greatly. Tarrifs and embargos and all the other regulations of government stop free trade."
Okay, let's posit Haiti.
1) No forcible dislocations in the market. No pressures from insurrection, from taxation, from regulation or from civil disorder.
2) No transportation problem. No tariffs. No embargos.
3) No jobs. No money.
4) No food.
Given the single available tool of making such a market more and more "free", solve the problem of creating more food. Then direct this newly appearing food toward hungry people's mouths. Remember, no cheating! Don't even think of involving the government, or employing any money in the service of a solution.
Then Inquisitor says "Michael, it is almost as if you only read the article half-way, or at points that you do not understand what is being spoken of. When more money is made reference to, it is money printed by the central banks, not extra wealth that comes by increasing productivity. Aid is surely fine (investment better yet), but only when it comes out of genuine wealth."
The problem is that in half the world you have people making less than two dollars a day. So they can only afford the cheapest of foods, like rice. Then the cost of rice doubles and then triples, worldwide. Do you have a solution that can correct for this in a reasonable amount of time, given that it only takes a couple of months to starve to death?
And to Fundamentalist, I would remind you that the animals you consume no longer subsist on table waste and barnyard scraps. That was back in the nineteenth century. If you're unfamiliar with modern meat management, and the amount of grain required to put beef and pork on our tables, the materials you seek are abundantly available on the web.
Published: May 6, 2008 4:00 PM
Deacon says "The Third-Way push of socialism/capitalism to equalize the world's
economies has caused this looming food crisis, NOT CAPITALISM."
But we don't have socialism anywhere, other than a tiny handful of very marginal economies. What we DO have is a worldwide food crisis. One that has arisen in the context of a capitalistic, globalized worldwide market. One with a minimal number of distortions like trade barriers or currency issues.
On this level playing field we see a very simple issue playing out. The world's food crop is being over-bid upon. With absolute shortages of food amid a great abundance of money, the prices are being bid up.
This is very simple, and impossible to deny. The culprits are the expanding use of grain and other food crops for biofuels, the transition of affluent consumers from a grain diet to a meat diet, and an absolute rise in the number of humans, while acres under plow worldwide and crop yields are remaining pretty much flat.
It's called supply and demand. More mouths chasing less food.
Published: May 6, 2008 4:15 PM
Hello,
one related topic from history is Ireland's Great Famine. I'm being told that during the time food was actually exported from Ireland. Because the people starving there to death were unable to pay for it, owners sent it abroad, where it was sold with profit.
How does this example play with the "free market solves it" principle? Or are these facts twisted?
Thanks for bringing some light to this.
Published: May 6, 2008 4:18 PM
Ireland's Great Famine:
You are exactly right. It was not a supply problem (there was plenty of food in the world at that time) it was a demand problem (Irish were subjugated in their own country and not able to earn a living wage as virtual slaves to the English).
Now we are being told that the situation in Africa is a supply one or that the 'free-market' can solve it. Pitty that a free-market rewards no-one without money or value to trade.
Published: May 6, 2008 4:31 PM
michael:
Are you a malthusian (overpopulation) theorist?
Published: May 6, 2008 4:33 PM
I'm sorry, have found this:
http://mises.org/freemarket_detail.aspx?control=88
"What Caused the Irish Potato Famine?" by Mark Thornton
/me ashamed joins Bart and the blackbord: "I will use Google before asking dumb questions." :-)
Owen:
thanks, that comment about slaves clarifies both Ireland history and today's Africa: free market would solve the hunger/poverty issue. But free market will only work if someone/something solves the freedom issue first.
Free market has some prerequisites to operate, if these are not met, it will not happen. No matter how loud we'll proclaim the mess to be "free market", it will not be.
Published: May 6, 2008 4:46 PM
Owen,
In a free market there will ALWAYS be those that sometimes through no fault of their own, cannot DEMAND the food (or any good in question).
This would be true if they do not have anything to offer in exchange, but this is highly unlikely - there is always something that can be exchanged for food.
Beside the idealism of charity the free-market has no way to ensure these people who cannot demand goods are able to live.
Only comatose or seriously handicapped people could not offer something in exchange. But those are extreme cases. You are talking about people with little income. However, even in that case, freedom to exchange can provide them with food.
Where there is no demand (in $$$$$) i.e. Africa, there is little or no supply.
You make an incorrect assumption - that only money can be exchanged for goods. But this is not the case - there are still barter economies in some parts of this world, like in the mountains of Peru, for instance.
The reasons why African has low demand [...] are largely historical and political (i.e. colonialism, unequal trade, wars) a[s] well as cultural (as with many [P]acific Island nations[,] Africa has cultural systems that don't always accept free-market ideas)
So, which one is it? Because you are basically admiting there is no free market in Africa due to cultural issues. So how can you say the free market cannot deliver goods, if there is no free market to begin with?
It would seem that there is almost an ethical obligation towards the (mainly European) countries that created a lot of the mess, to fix it.
To fix, what? And how?
In the extreme short term food aid is needed because a free market cannot supply food to someone with no demand.
You mean, the free market cannot supply food to someone with no money (Demand is not the same as having money)? Again, you make a false assumption - people can exchange other goods for money. Also, farmers are going to have surpluses and, unless they have access to international markets and sophisticated logistics, theirs will be a local market. As long as they are free to exchange their wares, there is no reason to think that people are not going to be able to get food.
Published: May 6, 2008 6:33 PM
Michael,
But we don't have socialism anywhere, other than a tiny handful of very marginal economies
Anywhere there is a vertical command of the economy in some degree, the system is socialistic, like almost all of Europe, many Latin American countries, or the USA.
What we DO have is a worldwide food crisis. One that has arisen in the context of a capitalistic, globalized worldwide market.
The food crisis, as explained clearly in the article, stems from interventionism and not capitalism.
One with a minimal number of distortions like trade barriers or currency issues.
Not true - other distortions exist like subsidies, lack of property rights, political barriers, regulations, et cetera.
On this level playing field we see a very simple issue playing out. The world's food crop is being over-bid upon. With absolute shortages of food amid a great abundance of money, the prices are being bid up.
Yes, but that is what the author says above. However, the point is that there is not a shortage of food (not absolute, for sure), but an excess of printed money. What's happening is clearly a food "bubble" due to cheap money.
This is very simple, and impossible to deny. The culprits are the expanding use of grain and other food crops for biofuels, the transition of affluent consumers from a grain diet to a meat diet, and an absolute rise in the number of humans, while acres under plow worldwide and crop yields are remaining pretty much flat.
Michael, it seems unlikely that the culprits are an excess of humans or the fact that they consume meat. The supply problems stem from interventions in the market - just look at how there are no shortages of shoes or hairpins. This is because the market for those things do not suffer the same interventions as the food markets - with tariffs, subsidies, "fair trade" scams, regulations, property rights violations playing against the consumer.
Published: May 6, 2008 6:54 PM
'The problem is that in half the world you have people making less than two dollars a day. So they can only afford the cheapest of foods, like rice. Then the cost of rice doubles and then triples, worldwide. Do you have a solution that can correct for this in a reasonable amount of time, given that it only takes a couple of months to starve to death?"
Increasing productivity by way of investment would be my suggested solution, not implementing some "solution" such as printing money which in fact is part (mostly) the cause of the very issue at hand. There are no "quick" solutions to years of economic irrationality which have ravaged the globe, least of all printing money.
Published: May 6, 2008 7:00 PM
Michael,
Okay, let's posit Haiti.
1) No forcible dislocations in the market. No pressures from insurrection, from taxation, from regulation or from civil disorder.
2) No transportation problem. No tariffs. No embargoes.
3) No jobs. No money.
4) No food.
Given the single available tool of making such a market more and more "free", solve the problem of creating more food.
There is a contradiction here, Michael - if there are no transportation problems, and yet you mention there are no jobs (whatever that means), then who would be running the trucks, or the boats, or the bikes at least? You posited an impossible scenario. Seems like you have no idea of what is a free market - can be from a simple barter/exchange system to the complicated network in a major country. Whenever people can exchange goods freely, you have a free market.
Then direct this newly appearing food toward hungry people's mouths
Remember the price system? With surplus food,
Remember, no cheating! Don't even think of involving the government, or employing any money in the service of a solution.
The last part is ridiculous - money can be anything that people choose to use as a medium of exchange, so the idea that there cannot be any money IS in itself a distortion of the market.
Published: May 6, 2008 7:08 PM
Francisco Torres:
You are right there is always something that can be exchanged for food when utterly necessary. One of these is sold reluctantly by young teens in the red light districts in South East Asia. You are sick and have no idea who or what you are talking about.
Published: May 6, 2008 7:27 PM
Cute, a genuine troll.
Published: May 6, 2008 7:35 PM
Michael: "I would remind you that the animals you consume no longer subsist on table waste and barnyard scraps."
I thought you were talking about the Chinese. Chinese farmers don't raise hogs the way we do in the US. Very few countries do. Besides we don't export hogs, but we do export corn and wheat.
Michael: "Okay, let's posit Haiti."
What you left out was corruption and crime. As someone has pointed out, free markets don't work unless the rule of law exists in fact, not just in name. Corruption is just as damaging as socialism, maybe more so.
Michael: "But we don't have socialism anywhere, other than a tiny handful of very marginal economies. What we DO have is a worldwide food crisis. One that has arisen in the context of a capitalistic, globalized worldwide market. One with a minimal number of distortions like trade barriers or currency issues."
That's simply not true. All European countries consider themselves socialist, as does China and most of Africa. All Latin American countries have elected socialist governments in the last decade except for Chile (and guess which south American country is the only one experiencing growth?) All Arab countries are firmly socialist. And there are degrees of socialism. The more socialism, the worse the economy does and the more people are in poverty.
We do not have a world food crisis; we have a world money crisis that has caused money to lose its value in exchange for food and that hurts poor people.
Check out the Heritage Foundation's freedom index if you think the world has unhampered, capitalistic markets. Nothing could be further from the truth. We don't even have that in the US!
Ireland's Great Famine: "How does this example play with the "free market solves it" principle? Or are these facts twisted?"
I don't think you can argue that England and Ireland had free markets at the time of the famine. Here's what Wikipedia wrote about it: "During this time, Great Britain forced the Irish to export corn (and other crops) which could have saved the lives of many Irish...They did lead to reform in the British agricultural and land-owning laws..." And this: "At the top of the "social pyramid" was the "ascendancy class," the English and Anglo-Irish families who owned most of the land, and who had more or less limitless power over their tenants."
Also: "Christine Kinealy, a University of Liverpool fellow and author of two texts on the famine, Irish Famine: This Great Calamity and A Death-Dealing Famine, writes that Irish exports of calves, livestock (except pigs), bacon and ham actually increased during the famine. The food was shipped under guard from the most famine-stricken parts of Ireland. However, the poor had no money to buy food and the government then did not ban exports."
Published: May 6, 2008 8:26 PM
Interestingly what's illibertarian about killing your enemy via neglect? Libertarians have harped about positive rights and how no one should be forced to redistribute even in a matter of life and death. If the English did not so much as cause the Famine but rather they didn't do much to alleviate it then they haven't done much technically wrong.
Published: May 6, 2008 9:32 PM
TLWP Sam:
I get your point and you are not wrong Sam, but the English were not neglecting the Irish so much as actively oppressing them.
Published: May 6, 2008 10:13 PM
You are right there is always something that can be exchanged for food when utterly necessary. One of these is sold reluctantly by young teens in the red light districts in South East Asia. You are sick and have no idea who or what you are talking about.
You made a conclusion based on your own comment and not on something I said (where do I say people can sell their bodies for food, even if such was a fact?) - that is called Intellectual Dishonesty.
Published: May 7, 2008 1:10 AM
Francisco Torres:
Just highlights your extreme naivety in saying that anything can be exchanged for money. You obviously live in some dream land where people are not forced into sexual slavery, selling their children, extremely dangerous jobs, selling their organs etc etc the list goes on.
My point was that some people do not have anything to exchange for basic necessities but when you retort that ther is ALWAYS something you are referring to exactly the kind of disgusting inhuman things that people are forced into.
I suppose whatever keeps the free-market ticking right?
Published: May 7, 2008 2:02 AM
Hello fundamentalist,
ok, so the answer is that Ireland and England at the time didn't have markets free enough to be able to prevent the famine, given other things that happened.
With all due regard to Wiki, I prefer comments from people on this blog to what Wiki says, especially with things there going "and the government then did not ban exports". Should it have banned them? On what grounds?
That's the question: People died, so what went wrong, and what should (and what shouldn't) be done next time similar scenario hits us.
Thanks :)
Published: May 7, 2008 2:47 AM
Oh, and I thought he was referring to labor (the hint was "only comatose or seriously handicapped people could not offer something in exchange"). You know, that good old labor thing, like working in the field, fishing, breeding cattle, sewing clothes, building homes and stuff like that. There are many decent ways to use unqualified labor that costs just a buck a day.
Published: May 7, 2008 3:22 AM
simik:
Poor old simik forgets that supply of anything is useless unless you can exhange it for something you need.
Great ideas you had. Pity they require access to LAND to do them. Oh, but I am sure you had already considered how people who are marginalised in their own country with no assets and just one among millions with no education or skills because they were born into a poor family...I am sure you had taken into account who was going to exchange with them.
Oh do tell...because it ain't happening much at the moment.
Published: May 7, 2008 4:02 AM
"People died, so what went wrong, and what should (and what shouldn't) be done next time similar scenario hits us."
1. Do ban exports on any grounds that the wise and venerable Krugman sees fit
2. Do ban imports on any grounds that Krugman sees fit
3. Do price crops to protect the proletariat (again Krugman has the numbers here)
3. Do not let the market operate
4. Get in line single-file for your potato
Published: May 7, 2008 4:37 AM
Ireland: “Should it have banned them? On what grounds? That's the question: People died, so what went wrong, and what should (and what shouldn't) be done next time similar scenario hits us.”
You might be interested in a bit of historical trivia. I’m a member of the Choctaw Nation (grandmother was Choctaw, grandfather Irish). Many Irish had married into the Choctaw nation before the Potato famine. One chief in the mid 1800’s had the last name of McKinney. So when the famine hit, the Choctaw took up a collection and send it to Ireland to help.
A similar scenario probably won’t hit us. It sounds like the English kept the feudal system alive in Ireland. Had the English allowed free markets, the Irish wouldn’t have been forced onto plots of land too small to support a family. Also, manufacturing would have moved to Ireland to take advantage of the lower wages and would have absorbed excess labor. Finally, free markets in land, and individual rights (which are necessary for free markets to function) would have allowed better farming techniques to improve agricultural productivity. The potato famine would never have happened had the English allowed capitalism (free markets plus the rule of law and individual rights) in Ireland. Once the famine took place, the Irish were at the mercy of the English, people who had used theft and war to steal Irish land and wealth. I wouldn’t expect compassion from them and free market reforms would have taken too long to help the dying.
Some people use free markets as a synonym for capitalism, but in reality free markets are just one aspect of capitalism. Free markets are nothing but the logical outcome of property rights. But for free markets to have beneficial effects, they must be coupled with the rule of law, equality before the law, individual rights and minimal corruption in the police, courts and state. That is the complete package that makes up capitalism. Russia after the collapse of the USSR is a good example of free markets without the rest of the components of capitalism. Those with political power stole whatever they wanted during “privatization.” The Russians called it capitalism, but they didn’t know what they were talking about.
Published: May 7, 2008 8:35 AM
Francisco, as a recommendation, ignore trolls. Saves time.
Published: May 7, 2008 9:05 AM
Owen asks "Are you a malthusian (overpopulation) theorist?"
Let's not get lost in the thickets of theory. I am not a theorist of any sort, if it can't accurately reflect the available facts. And we have lots of available fact in this present circumstance.
Currently there are three billion people on the planet with access to less than two dollars a day. Nearly all their funds are spent on sustenance.
Many of them can only buy rice, as it is the cheapest available food. Now let's triple the cost of rice. The consequence is that they can now buy only one-third the rice they could formerly buy. Yet they have the same number of hungry mouths. This, in my understanding, is the only reason the situation could be called a crisis. People once fed will now starve.
Why has the price tripled? I see no evidence of any artificial intervention in the markets. There are no trade wars, tariffs, barriers, etc. The problem is only that there is more demand for rice than there is supply. Therefore those with more money bid up the price and get the available commodity-- while those without do without.
The theoretical reaction would be for everyone to plant more rice. However in this instance the situation coincides with increasing shortfalls in every commodity due to a greater demand for everything. So the total area of land under plow has to expand.
Currently the remaining tropical forests of Africa, Brazil and Indonesia are all being felled at record rates in order to plant biofuel crops such as sugar cane, soy and oil palm. Rice is more problematic, while these money makers are easy to grow and far more profitable.
The market is already free. And the shortfalls we're seeing are the result of greatly increased demand, in the face of inelastic supply. It has been calculated that once everyone is as affluent as the American people, we will require the resources of four and one-half earths to satisfy all that demand.
Published: May 7, 2008 9:09 AM
Francisco, you maintain that "The food crisis, as explained clearly in the article, stems from interventionism and not capitalism." In support of this argument, I would invite you to describe the interventionism currently at work in Haiti and in Somalia, where the rice shortages are the most grave. I haven't heard of any.
Then you say "other distortions exist like subsidies, lack of property rights, political barriers, regulations, et cetera." But both places are all but stateless, with a near total absence of laws. Politics are conducted at gunpoint, and the only barriers are coercive rather than statutory. There are few guaranteed rights, but that has no effect on prices. Subsidies, whenever they have been enacted, have had the effect of lowering prices, thus making food more available to the poor. But there are none such in either place at present. In these markets, cash is the only king.
Does our author support his statements with facts? He says things like "the underlying cause of any shortage is the lack of a free market, since genuine shortages cannot appear in a free market."
This is ridiculous. Actual shortages of commodities are impossible? The mere presence of available funds makes any substance infinitely available? I don't know why we are even arguing this point.
He also says "If we had free world markets, food would be exported from some countries, such as the United States and Europe, where food is plentiful, to countries where it is needed. This is because it would be profitable to ship goods to needy areas like Africa, where shortages were making prices rise. The fact that this is not currently happening can be a result only of government price controls (which prevent prices from rising in needy countries), trade restrictions, or some other government barrier that prevents people from getting what they need."
The fact is that today rice is fleeing places like Somalia and Haiti because there's no money in those places. There's not enough rice to go around, so it's going to places where people can afford to pay more. Doctrinal squabbles like that between the alleged socialism we endure and the glorious capitalism to which we aspire are entirely beside the point.
IMO, this is a problem brought about entirely by the way we choose to allocate goods. In our world, absolute need is of no relevance. What matters is only the quantity of numerical markers one happens to possess. And so long as those who lose under this system don't contest it, everything's fine.
But I may be missing something very basic. Please explain to me the principle by which too much money, chasing too little rice, would chase it into corners of the world like Haiti or Somalia.
Published: May 7, 2008 10:00 AM
Michael: “Why has the price tripled? I see no evidence of any artificial intervention in the markets.”
If you focus exclusively on the supply/demand in the real economy, you’ll never find the answer. That’s like the drunk who searched for his keys only under the street lamp. You have to look at how huge increases in the money supply jack up prices even when nothing has changed in supply/demand. Flooding the world with credit, which is government intervention in the market, has caused the current crisis.
Michael: “The market is already free.”
Simply not true, not even in the US. The biggest obstacle to agricultural development outside the US is price controls on ag products. Most countries in the world has such price controls because they want to pacify city dwellers. But such controls reduce incentives to grow food.
Free markets can’t stop a crisis after it has developed and people are starving. They take too long to implement. Only charity can help and private charity has proven to be far more effective and efficient than any state-run charity, especially the UN. Capitalism would prevent a minor problem, such as droubt, from turning into a major crisis, such as famine, by making sure the people had the money to purchase food and that food could be imported freely.
On the other hand, this discussion is operating with two different definitions of free markets. One uses the term as a synonym for capitalism, which includes the rule of law, property rights, individual rights, equality before the law, and relatively incorrupt police, courts, and state officials. You seem to be arguing from the strict definition of free markets, which would be pure chaos with survival of the most brutal. Hait and Somalia may have free markets in the strict definition, but I doubt it. I’m certain they don’t enjoy free markets as a synonym for capitalism.
Published: May 7, 2008 10:41 AM
No evidence of artificial intervention in the market? How about this one, quoted from the article: "World governments have been printing money at very high rates this decade." That is blatant intervention. Experience during the German hyperinflation in the 1920s tells us that people were starving and suffering from malnutrition at the time.
Published: May 7, 2008 10:47 AM
Fundamentalist, you point out that "Chinese farmers don't raise hogs the way we do in the US. Very few countries do. Besides we don't export hogs, but we do export corn and wheat."
Two observations. First, the Chinese middle class-- the jobholders participating in the money economy-- are today roughly equal in number to the public of the United States. There are about a quarter billion of them, as I understand. They simply can't depend on traditional farmers to supply their meat by raising a few hogs in the barnyard. I haven't yet looked it up, but assume by now they are already adopting Western feedlot practises, and raising their animals on grain rather than stubble and melon rinds.
Second, grain in a global economy is fungible. The cost and availability of grain in Iowa affects that in places like Peru or the Ukraine. Or China. We live in an increasingly borderless world. And the US surplus, traditionally dedicated toward the task of feeding the world, has now disappeared into the maw of domestic fuel needs. Without even beginning, I might add, to satisfy those needs.
Let me suggest next that we avoid getting into ideological thickets like this: "All European countries consider themselves socialist, as does China and most of Africa." The world now conducts its business through international agreements like FTAs and the rules of the World Trade Organization. It uses standard currencies like the USD and the Euro. To describe our international system as being socialist is to say nothing intelligible about it. IMO.
Lenin demonstrated the need for currency back in 1920, when he induced hyperinflation in order to do away with the ruble, and usher in an age of socialism. But it was found that that didn't work nearly so well as the pre-existing system. So they brought the ruble back. Since then, the world has departed markedly from either subsistence or socialism as a basic mode, and gotten on board with jobs, markets and money. At present, the web of international trade is very highly capitalist in its nature. And prone to periodic famines caused by inequities in the distribution of money.
To which we may now add absolute shortfalls in the amounts of grain required to service all needs.
In closing, I appreciate your reference to the Wikipedia article on the Irish Famine. Let me suggest that the destruction of Ireland's subsistence economy and its replacement by a forced export economy is capitalist at its heart, and the antithesis of anything socialist. The peasants were bled to provide crops to pay their rent, and had nothing in their tiny family gardens to subsist upon other than a few potatos. Then the potatos suffered blight. Similar land-rent schemes kept emancipated southern blacks poor for generations in the US.
The particulars in our current plight have pretty much nothing in common with either Ireland in 1840 or Alabama in 1920, however. Today's story has to do with novel, competing uses for crops formerly used only for human food or animal feed. We need more grain, worldwide.
Published: May 7, 2008 10:59 AM
If Paul Krugman believes that farm land being used for biofuel (rather than for growing food) is one reason why the price of food is high, why does he not support getting rid of government subsides for biofuel?
Afterall such an end to subsidies would not only mean that more land was used for growing food (thus increasing the supply) it would also mean that taxes could be reduced - so that people would have more money with which to pay for food.
The reason that Paul Krugman does not support getting rid of subsidies and reducing taxation is clear - such a course of action would conflict with his Obama style collectivist ideology.
Published: May 7, 2008 11:18 AM
>> michael: "Let me suggest next that we avoid getting into ideological thickets like this: "All European countries consider themselves socialist, as does China and most of Africa." The world now conducts its business through international agreements like FTAs and the rules of the World Trade Organization. It uses standard currencies like the USD and the Euro. To describe our international system as being socialist is to say nothing intelligible about it. IMO."
How old are you?
Have you ever read any history ever?
It's amazing to me that you are so oblivious to the massive market interventions that are imposed worldwide, many of which have been implemented in the last 75 years.
It's like you are a fish -- having always lived in water, the fish doesn't understand that he lives in water.
Having lived under a pile of market interventions your whole life, you don't pay any attention to them (e.g., central banking, crop production quotas, subsidies, loan programs available to a select few, import restrictions, export restrictions, tariffs, emigration and immigrations restrictions, etc.)
Published: May 7, 2008 11:19 AM
I was talking about this subject with a friend and we came upon the following tidbit of information. I'm no economist, but I wonder what cutting the rice subsidies in this country by 50-65% in the last few years (uncorrected for inflation even) did to the price of rice. I haven't really heard anything about this, so maybe its not a big effect.
From: http://farm.ewg.org/farm/progdetail.php?fips=00000&progcode=rice
Year Rice Subsidies
1995 $832,463,286
1996 $646,388,442
1997 $454,981,763
1998 $735,147,910
1999 $1,120,320,870
2000 $1,525,323,870
2001 $1,390,854,985
2002 $1,150,906,967
2003 $1,475,317,665
2004 $647,349,693
2005 $534,374,479
2006 $530,430,782
Total $11,043,795,298
Published: May 7, 2008 11:20 AM
michael says:
"Okay, let's posit Haiti.
1) No forcible dislocations in the market. No pressures from insurrection, from taxation, from regulation or from civil disorder."
this is so wrong. you have chosen to conveniently ignore how haiti got to its current, disastrous situation. look up papa doc duvalier (check out how much money he ripped off), aristide and the various coups against him. note also that property rights are shaky in the way of so many other latin american basket-cases - a few latifundistas owning virtually all the country's land.
solve the property aspect, and the rest will follow. have you ever been to the caribean or central america? the soil is so fertile, and the rainfall so good, that farming should be a cinch, but like cuba, poor property rights have delivered hunger instead of surplus. violence means that tourists go to other caribean locations.
Published: May 7, 2008 11:28 AM
Francisco, you have not addressed the very simple scenario whereby commodities travel away from areas with few cash customers, toward areas where there are abundant cash customers.
You say "There is a contradiction here, Michael - if there are no transportation problems, and yet you mention there are no jobs (whatever that means), then who would be running the trucks, or the boats, or the bikes at least? You posited an impossible scenario. Seems like you have no idea of what is a free market - can be from a simple barter/exchange system to the complicated network in a major country. Whenever people can exchange goods freely, you have a free market."
You are a very fortunate person, not to know what it means to live in a country where there are no jobs. This alone should exempt you from feeling you can comment meaningfully on what is going on in Somalia or Haiti.
If there were sufficient money in either place, there would be planes and trucks aplenty going there, to exchange wares for that money. And there would be no problem. I think the onus is on you to describe a scenario where the absolute lack of money is no impediment to the establishment of a "free market".
The Horn of Africa is mostly desert, greatly overpopulated and in the grip of a serious, multi-year drought that shows every sign of continuing. What few reserves of food exist in neighboring Kenya are being kept inside Kenya, to satisfy local demand. Elsewhere in the Horn, there's no food to spare either. But if there were cash, rice would come from Thailand, or India, or even Louisiana to take it away.
Show me how a well run market, without money, can magically bring food to Somalia. Flesh out for me, please, the following quote: "money can be anything that people choose to use as a medium of exchange, so the idea that there cannot be any money IS in itself a distortion of the market".
Published: May 7, 2008 12:10 PM
It's amazing to me how blind people can be to what constitutes force.
michael says:
"Okay, let's posit Haiti.
1) No forcible dislocations in the market. No pressures from insurrection, from taxation, from regulation or from civil disorder."
I have never been to Haiti, so I can't really comment with any expertise on what caused their famine. However, even a few seconds of googling on the subject shows many articles which speak of force.
Now, sometimes the force is external, as in articles about what the world bank did, and in other cases the articles complain about the lack of force (e.g. there's not enough protectionist tariffs - not that there are none, but that the tariffs aren't high enough). Since I can only gather facts indirectly - and I suspect this is how nearly all of us get facts - we are as usual faced with a battle of "whose got the right facts".
But just looking at what happens in America it is easy to see what force does in a market. Remember the gasoline lines? Was there really a "gas famine" or was it that the gas companies were prohibited from selling at a price they wished (hint, that's not free trade). Do you remember how they ended? It was the end of the price controls that ended the lines.
The principles of markets are easy to understand, once you can get real facts. But often people don't care about facts; they have an agenda.
An naturally, the only answer to poverty that some people have is to use force! And they justify this by saying that there is no force going on at the moment. But anyone with eyes and a desire for the truth will find the force. It's always there.
Oh, and it's also force when some poor person has cash whose value is being forcefully stolen through inflation of the money supply.
Published: May 7, 2008 12:19 PM
Michael: "First, the Chinese middle class-- the jobholders participating in the money economy-- are today roughly equal in number to the public of the United States."
I agree with you that hogs sold to the middle class in cities are probably grain fed, at least just before slaughter. But I thought you wanted to talk about the poor. Poor people raise hogs, too, and they don't feed them grain. They don't need it and that would be a waste.
Michael: "The world now conducts its business through international agreements like FTAs and the rules of the World Trade Organization. It uses standard currencies like the USD and the Euro. To describe our international system as being socialist is to say nothing intelligible about it."
So you're arguing that what a nation does inside its borders has no impact on international trade? The fact that Europeans, Chinese and others consider themselves socialist is a very important fact. It means that they consider state intervention in the economy a good thing and practice it to the limit. It means there are no free markets in the world, just markets with more or less state intervention.
Michael: "Let me suggest that the destruction of Ireland's subsistence economy and its replacement by a forced export economy is capitalist at its heart, and the antithesis of anything socialist."
That's the Marxist definition of capitalism and it's a straw man designed by Marxists in order to win any argument by default. It has nothing to do with the traditional definition of capitalism. If socialists didn't have their own private dictionary with their weird definitions, discussion would be a lot clearer. Forced exports violate private property rights which are at the heart of capitalism. If something violates the principles of capitalism then it can't be part of capitalism.
Published: May 7, 2008 12:22 PM
Paul: "If Paul Krugman believes that farm land being used for biofuel (rather than for growing food) is one reason why the price of food is high, why does he not support getting rid of government subsides for biofuel?"
Good point! I suspect he doesn't because he's a socialist and supports only more state intervention, not less.
This weekend I listened to C-Span's broadcast of the congressional hearing on food prices. Two experts said that ethanol does not hurt food production because the type of corn grown for it isn't used for food. The US grows very little corn for food, most of it intended for animals in feed lots, other for corn syrup and ethanol. And their isn't a shortage of supply of food corn.
Published: May 7, 2008 12:29 PM
Dear all,
thanks for the answers, it clarified the historical details and provided intelectual ammo that will be used by this practising austrian in his debates with the not-yet-converted friends. It allows to continue the quest, best described as: "show me a market failure, and I'll pinpoint government intervention that caused it".
If there's one thing I don't subscribe to, it's the view that "similar scenario probably won’t hit us". I'd say it is in fact hitting us, the human race, in several places today.
But then again I agree, that should've there been the full capitalist bundle (safety of life and property, free markets, rule of law, ...) allowed to operate in those places in the past, there'd be no emergencies today.
It also makes perfect sense that such bundle would do little for those suffering now, and for these people the short-term relief may come from charity and relief efforts done by whoever willing to commit to it. In the long-term however, it should bring the "capitalist bundle" along, otherwise the efforts may get wasted, and suffering repeated.
Thanks again! :-)
Published: May 7, 2008 12:43 PM
It is interesting how certain subjects attracts large numbers of comments, i.e. enironmentalism and food. Very emotive subjects, it appears. Just an observation. :-)
To get back to this article, I have some more questions:
-What impact does it have on world food supplies now that we jumped from 3.5 billion people in 1980 to 6 billion + people in 2008.
-Is mother nature going to allow this?
-Can she tolerate this?
-Is nature in equililbrium with her ability to supply the demand of consuming organisms?
I've got a feeling she's gonna give us a kick up the backside some or other time. She always does.
Published: May 7, 2008 1:32 PM
Michael,
Francisco, you have not addressed the very simple scenario whereby commodities travel away from areas with few cash customers, toward areas where there are abundant cash customers.
The problem with the scenario is that it makes impossible assumptions: if there are no jobs, no food and no commodities, then where did the people come from (assuming that you do not want to change the population levels in Haiti for your scenario)? It is not an easy question: in order for a population level to exist, there must be a previous production or availability of resources. If we started with a population level of, let us say, a nomadic/hunter-gatherer society, then definitively there would be very little in the form of exchange with the outside, but only because many basic necessities are already addressed.
You are a very fortunate person, not to know what it means to live in a country where there are no jobs. This alone should exempt you from feeling you can comment meaningfully on what is going on in Somalia or Haiti.
You missed the point of my criticism entirely, Michael - you cannot set a scenario with impossible assumptions, entirely regardless of my past experience. IF you indicate there are no transportation problems, THEN you cannot indicate later that people do not have jobs: who would be in charge of transporting anything, then? The latter condition makes it obvious that there must be transportation problems.
If there were sufficient money in either place, there would be planes and trucks aplenty going there, to exchange wares for that money.
You do not understand markets, Michael - that which is traded is goods, on any market. Money is just a convenient exchange tool, but it is not the ONLY tool. In a scenario where, let us say, people are poor, food is scarce, money is low, there is still marketable goods or services that can be used for exchange, like cheap labor - investors can always (if no hindrance from governments and always respecting private property and contracts) invest in hotels, resorts, and factories. Labor receives money, and local farmers can then exchange their surpluses with labor.
And there would be no problem. I think the onus is on you to describe a scenario where the absolute lack of money is no impediment to the establishment of a "free market".
No, the onus is on you to explain why a free market cannot establish itself without money - free market only means the free trade of goods and services between people, without any outside and coercive hindrances. Money itself is not the sine qua non of markets - it just helps, a great deal.
Also, you misunderstand the concept of money. Just because there is no government to print fiat currency does not mean that there will not be any exchange. Money is whatever people agree to use - and it can be anything that people find attractive.
The Horn of Africa is mostly desert, greatly overpopulated and in the grip of a serious, multi-year drought that shows every sign of continuing. What few reserves of food exist in neighboring Kenya are being kept inside Kenya, to satisfy local demand. Elsewhere in the Horn, there's no food to spare either. But if there were cash, rice would come from Thailand, or India, or even Louisiana to take it away.
Again, you make a false assumption - that people are required to hold "cash" in order to exchange goods. The reason there is famine in the Horn has little to do with a lack of cash - again, people can agree on whatever they find attractive to become cash. The problem of lack of food has to do with poorly protected property rights, which stems from years of civil wars and tribal fights.
Show me how a well run market, without money, can magically bring food to Somalia.
Somalians already use money: they accept and trade with different currencies, so why would I have to show you anything?
Flesh out for me, please, the following quote: "money can be anything that people choose to use as a medium of exchange, so the idea that there cannot be any money IS in itself a distortion of the market".
My point was that your condition in your scenario (that there CANNOT be money) is in itself a distortion of the market - it indicates there is an outside force that forbids people to use whatever they want as money. If what you mean is that there is no government to issue currency, then by market forces (people's preferences) there will be a money market, on whatever they choose to use as currency.
Published: May 7, 2008 2:43 PM
Just highlights your extreme naivety in saying that anything can be exchanged for money. You obviously live in some dream land where people are not forced into sexual slavery, selling their children, extremely dangerous jobs, selling their organs etc etc the list goes on.
Owen, instead of making appeals to emotions, let us stay in the rational path: indeed, anything can be exchanged for money, but you are already adding your own lurid examples to poison the well. I am willing to look at them one at a time:
1) Forcing people into sexual slavery is NOT an exchange, it is coercion. If a person is coerced into slavery, then we are not talking about a free market.
2) Selling children - you will have to define this. People give their children for adoption, receiving in exchange payment for, at least, prenatal care. You simply use the general concept as innuendo.
3)What is an extremely dangerous job? This is a subjective concept: for me, a very dangerous job would be something like log cutting, and yet there are many loggers. Why would taking these jobs be a bad thing in itself?
4) Why is "selling one's organs" a bad thing in itself? My organs are my property, not one else's, and I can pretty damn much do what I please with them, if not coerced by an external force.
My point was that some people do not have anything to exchange for basic necessities but when you retort that ther[e] is ALWAYS something you are referring to exactly the kind of disgusting inhuman things that people are forced into.
That is a total and dishonest misrepresentation of my point - my comments above should show you that those supposedly "disgusting inhuman" things are not such, and that your use of those concepts stem from your own subjective prejudices. The "slave trade" issue is nothing more than a red herring, since it is NOT an example of free trade.
Published: May 7, 2008 3:02 PM
Francisco, you maintain that "The food crisis, as explained clearly in the article, stems from interventionism and not capitalism." In support of this argument, I would invite you to describe the interventionism currently at work in Haiti and in Somalia, where the rice shortages are the most grave. I haven't heard of any. Then you say "other distortions exist like subsidies, lack of property rights, political barriers, regulations, et cetera." But both places are all but stateless, with a near total absence of laws.
You surely jest - Somalia is being invaded by an US backed "ally", Ethiopia. That is in itself a serious distortion. Otherwise, it is a stateless entity but it does have laws - religious, common law or tribal law. And Haiti is rife with internal fighting and thuggery, with no protection for private property - this a result of previous government policies and corruption, not because of free markets.
Politics are conducted at gunpoint, and the only barriers are coercive rather than statutory. There are few guaranteed rights, but that has no effect on prices. [?]
It doesn't? Why do you say that?
Subsidies, whenever they have been enacted, have had the effect of lowering prices, thus making food more available to the poor.
This is false, historically and factually. Subsidies have the effect of lowering the producer's incentive to produce, which raises prices by way of a lower supply - right now, people in the US are paying more for food than what they would enjoy if agriculture was not heavily subsidized by the FedGov.
Does our author support his statements with facts? He says things like "the underlying cause of any shortage is the lack of a free market, since genuine shortages cannot appear in a free market."
This is ridiculous. Actual shortages of commodities are impossible? The mere presence of available funds makes any substance infinitely available? I don't know why we are even arguing this point.
Michael, the point is that with an unhampered market, the PRICE system ALLOCATES the resources towards those that need them the most. If food production suffers because of an unforeseen event, like severe storms, the supply of food will DIMINISH, raising prices temporarily and making people ration their purchases to compensate. The rising prices also ENTICE producers to generate more output, which will eventually LOWER the price to the market clearing levels. It can also entice entrepreneurs to IMPORT food from other places If for some reason you have a government either imposing a barrier on imports or price controls, then you will HAVE supply problems AND shortages.
The fact is that today rice is fleeing places like Somalia and Haiti because there's no money in those places.
This is false. The rice is not being shipped because of restrictions to exports (hoarding) imposed by governments. These governments do not want the local prices to go up and so they stop exports.
There is money in Somalia - if there was none, there would be no cell phone companies investing there. And many Haitians receive money from relatives overseas.
There's not enough rice to go around, so it's going to places where people can afford to pay more.
That would include Somalia and Haiti. If I were a producer, that's where I would look for business. But with government subsidies and trade barriers, it makes more economic sense to sell my wares locally, rather than where it would be more profitable if an unhampered market.
But I may be missing something very basic. Please explain to me the principle by which too much money, chasing too little rice, would chase it into corners of the world like Haiti or Somalia.
Too much (fiat) money is creating a speculative bubble in the commodities market, making the product artificially expensive, the same way it did it for the housing market and before that, the stock market. That is one of the author's points.
Published: May 7, 2008 3:39 PM
Paul Marks writes
"If Paul Krugman believes that farm land being used for biofuel (rather than for growing food) is one reason why the price of food is high, why does he not support getting rid of government subsides for biofuel? Afterall such an end to subsidies would not only mean that more land was used for growing food (thus increasing the supply) it would also mean that taxes could be reduced - so that people would have more money with which to pay for food. The reason that Paul Krugman does not support getting rid of subsidies and reducing taxation is clear - such a course of action would conflict with his Obama style collectivist ideology."
Oh, but he does! In his April 7 article, Krugman writes
"Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels.
"The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a “scam.”
"This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly “good” biofuel policies, like Brazil’s use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation.
"And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states."
This position is certainly consistent with everything in Krugman's philosophy-- and with my own. Federal dollars thrown toward corn ethanol are wasted making the food problem worse, wear and tear on our land more extreme and fuel more expensive.
There goes that theory.
Published: May 7, 2008 3:53 PM
Newson writes "you have chosen to conveniently ignore how haiti got to its current, disastrous situation. look up papa doc duvalier (check out how much money he ripped off), aristide and the various coups against him. note also that property rights are shaky in the way of so many other latin american basket-cases - a few latifundistas owning virtually all the country's land. solve the property aspect, and the rest will follow. have you ever been to the caribean or central america? the soil is so fertile, and the rainfall so good, that farming should be a cinch, but like cuba, poor property rights have delivered hunger instead of surplus. violence means that tourists go to other caribean locations."
First I should correct you about the soil of Haiti. Nonexistent conservation practises have caused its original load of good topsoil to head straight toward the bottom of the Caribbean. Today the people live on used up mud, prone to slides in the torrential downpours they endure. You can't grow a decent crop there.
Second, let's bow our heads in acknowledgment of a century's worth of interventions and internal catastrophes-- crises that have given Haiti such a sad history of abysmal governance. However, in 2007 most Haitians could afford rice-- while in 2008 they can't. What is it that has changed?
I would suggest it is the price of rice that has changed-- while the amount of cash in Haitians' pockets has not.
Published: May 7, 2008 4:05 PM
Francisco, you say "The problem with the scenario is that it makes impossible assumptions: if there are no jobs, no food and no commodities, then where did the people come from (assuming that you do not want to change the population levels in Haiti for your scenario)? It is not an easy question: in order for a population level to exist, there must be a previous production or availability of resources. If we started with a population level of, let us say, a nomadic/hunter-gatherer society, then definitively there would be very little in the form of exchange with the outside, but only because many basic necessities are already addressed."
But all this is beside the point. The raw fact is that the world price of rice has tripled. Incomes in Haiti have stayed flat. Those are the two salient facts. Transportation costs have not changed from last month to this. Civil disorder has not changed. The regulatory environment has not changed. Only the price of rice has changed.
More than once you have alluded to payments in kind, where for example someone with no money repairs someone else's bicycle. I do not believe that is a sensible way to approach sales of Thai rice, or Brazilian rice, to Haiti. International sales are denominated in either dollars or in Euros. If you don't have the coin, you just can't buy the product.
Published: May 7, 2008 4:19 PM
Jake: "What impact does it have on world food supplies now that we jumped from 3.5 billion people in 1980 to 6 billion + people in 2008."
The good news first: it's not all up to nature, fortunately. Farming methods continue to improve the productivity of American farmers. Newer methods till the soil much less and reduce erosion.
The bad news is that very few farmers in the world are up to American standards. Most farming in the world is done with a short-handled hoe. Babylonian farmers had higher productivity when then began using oxen. So the productivity of farming outside the US has a long way to go. India and the Ukraine could drown the world in food if they would learn how to farm.
Published: May 7, 2008 5:04 PM
Here's a sad anecdote about farming from one of the UN development reports a few years ago. UN ag workers noticed that women did all of the farming in Uganda using a short-handled hoe. Those UN guys are very observant. So the UN guys decided to help increase farming productivity by giving oxen to the farming families. But the farmers didn't want the oxen. They said their neighbors would steal them in the night, butcher and eat them and they didn't want to have to worry about that. The insecurity of property strikes again and keeps people poor.
Published: May 7, 2008 5:08 PM
Michael, familiarize yourself with Austrian economics before making extensive commentary on the blog. It'll help you understand what's going on here better.
Published: May 7, 2008 5:49 PM
But all this is beside the point.The raw fact is that the world price of rice has tripled. Incomes in Haiti have stayed flat. Those are the two salient facts.
Yet these were not part of the Haiti scenario you posited:
"3) No jobs. No money."
Either people are sitting idle waiting for their demise, or there ARE jobs.
More than once you have alluded to payments in kind, where for example someone with no money repairs someone else's bicycle.
I have alluded to the fact that money is not required to have a free market. What you want to know is how to bring food without people paying for it, which is different.
I do not believe that [barter] is a sensible way to approach sales of Thai rice, or Brazilian rice, to Haiti. International sales are denominated in either dollars or in Euros. If you don't have the coin, you just can't buy the product.
That's absurd - whenever there is an opportunity, there will be an entrepreneur. Rice can be purchased on credit, and sold through retailers. If there is a clear demand for something, in an unhampered market there will be someone willing to take the chance of making a profit.
What happens is that you look at things too simplistic: You think there are only producers and buyers, totally forgetting the role of the entrepreneur. Let us say people in Haiti do not have money - yet. You are talking about a pool of cheap labor available there. Let us say they cannot get food from local suppliers - you have then a potential demand for food. Entrepreneurs can perfectly invest in manufacturing in Haiti and also in food distribution, using either capital or debt. Food can be purchased on credit, distributed by retailers. An entrepreneur can bring the cheaper foodstuffs (like grains) to be sold for the little money there is. Even using the local currency, entrepreneurs can pay with that currency the local labor or buy the local production, to be exported towards the USA or Latin America.
Published: May 7, 2008 6:19 PM
Barter never remains as "pure" barter for long. As Rothbard, Mises, etc. have written, people will always find some commodity, cigarettes, tobacco, iron, wampum, gold, etc. which becomes a money as soon as people show a preference for that items marketability.
If there are no jobs in Haiti, it means there are no entrepreneurs in the country finding out what people want and setting up businesses to supply that product.
If this is not the case, then perhaps the people there are not educated and don't know how to produce anything. But most likely, as in all cases I've heard of, there's some agent of force at work.
Even if these people are suffering, should others be robbed to send food to this country? And would it even do any good? What of the harm it causes those who are robbed?
Anyone who wants to send charity should do so. When Americans weren't paying 60% of their income in taxes, regulations, and other government "services" they were much better able to provide charity to others. But no matter how bad it is for some group of people on the other side of the world, there is still nothing good about robbing us to give to them. The thieves in power get all the money in the end anyway, so if people like Michael want to help out, they should do so, but not force others to help.
Frankly, I am much more concerned about all the people suffering in our prisons for "crimes against the state" who have never hurt anyone nor stolen anything. And if we are destroying lives here with our government, you can bet that in Haiti, their government is behind the starving.
Published: May 7, 2008 7:49 PM
Good points Eric. Some are wont to ignore the fact that these countries suffer from a lack of any institutions whatsoever to allow them to advance economically, such that all the aid in the world would only be a bandaid, for what is in fact a gushing wound.
Published: May 7, 2008 8:11 PM
michael says:
"First I should correct you about the soil of Haiti. Nonexistent conservation practises have caused its original load of good topsoil to head straight toward the bottom of the Caribbean."
poor agricultural practices resulting from insecure property rights, which i already addressed. most of the population is denied secure title to land, which remains in the hands of a few elites. no freehold owner willfully destroys his own land. the plots are too small and overworked.
michael again:
"Second, let's bow our heads in acknowledgment of a century's worth of interventions and internal catastrophes-- crises that have given Haiti such a sad history of abysmal governance."
here again you've got it the wrong way around. countries with adequate property rights are able to build enough wealth to survive both natural disasters and changing price of staples. witness the speedy recovery of thailand post-tsunami (compare to the slow recovery in aceh).
it's the very interventions that have created the poverty which renders the haitians so very vulnerable to hunger.
Published: May 7, 2008 11:06 PM
further on haiti, the united nations has been unable to combat the out-of-control crime rate, with gangs terrorizing the local population. theft, kidnap, and extortion are rampant - would you care to invest in such a place? of course not, so there is a dearth of capital investment. result: falling standard of living in the face of steady population growth. hello malthus and the horses of the apocalypse.
Published: May 7, 2008 11:39 PM
It is the case that there are food riots in some thrid world countries and I for one am happy about it. The world prices of food are out of their control but what is in theri control is the structural imbalances within those economies. The inequalities in land ownership and the corruption of the governments will only last so long once people are finding it had to put food in their mouths.
I agree with Eric that no government should provide aid to another government but that it should be done through private charities.
But if one stopped and thought for a moment one would realise that the largest portions of government aid (apart from humanitarian relief) have strings attached to them. In this case it is not really 'aid' at all but investment in achaiving some 'ends'.
Published: May 8, 2008 4:16 AM
michael writes:
However, in 2007 most Haitians could afford rice-- while in 2008 they can't.
Let me offer a similar example: in the summer one can afford sleeping under the stars, while in winter such attempt would mean he freezes to death. There are obvious differences, as seasons are governed by the laws of nature, while the food turmoil is rooted in governments messing things up, but for those who are affected the result is the same: when the winter or food crisis hits, they're caught unprepared and suffer. For why they're uprepared, read below.
What is it that has changed? I would suggest it is the price of rice that has changed-- while the amount of cash in Haitians' pockets has not.
Why, yes, it is the rice price that changed. Cheap times are over, in the real world rice will be more expensive now. The higher price is needed to sustain the producers, i.e. those who deliver the rice are today only able to do it at these new prices. If anyone thinks it is possible to grow it cheaper, well, he should prove it by going ahead and using his own money and effort to do it, to bring that cheaper rice to market.
The culprit on Haiti is broken societal system. While it allowed these people their bowl of rice in 2007, it is past the threshold now, and is no longer able to do that. Small change in input can mean drastic change on the output, yeah, that's the world we live in.
Re cash in their pockets, where does cash come from? Cash, or any other good used as means of exchange, comes from providing goods and services to other people. That's division of labor, which enables our society to deliver the plenty we have.
Where the society is broken as much as it prevents "the capitalistic bundle" (capital savings, investment, property rights, rule of law, ...) from working its wonders in the effective allocation of the scarce resources available, there it is no wonder to discover that hard times are true to their name in such places.
Published: May 8, 2008 7:54 AM
Francisco, I think you're being a bit evasive on the issue of what constitutes money. Most people are in agreement as to their preferred medium of exchange. Yet I've asked "I think the onus is on you to describe a scenario where the absolute lack of money is no impediment to the establishment of a "free market"."
To which you've resonded "No, the onus is on you to explain why a free market cannot establish itself without money - free market only means the free trade of goods and services between people, without any outside and coercive hindrances. Money itself is not the sine qua non of markets - it just helps, a great deal.
"Also, you misunderstand the concept of money. Just because there is no government to print fiat currency does not mean that there will not be any exchange. Money is whatever people agree to use - and it can be anything that people find attractive."
In terms of the Haitian market for rice, they have been accustomed to buying Florida rice. The reason is that US rice subsidies have for years made that rice cheap enough to undercut the local product, and so destroyed the rice industry in Haiti. And at present there is plenty of rice-- for a price-- sitting on the dock in Florida.
Yet the Haitians can't afford it. In fact they can't afford to buy the Florida rice sitting right there in the market in Port au Prince.
Are you telling us that penniless hungry people can feed themselves merely by shining the shoes of the rice sellers? Surely you must admit this is not the solution. Without actual dollars-- the world's most common tender-- who's going to ship more rice from Florida?
Published: May 8, 2008 9:41 AM
Micheal: "In terms of the Haitian market for rice, they have been accustomed to buying Florida rice. The reason is that US rice subsidies have for years made that rice cheap enough to undercut the local product, and so destroyed the rice industry in Haiti."
I'll take your word on this since I have no data myself.
But don't you see the force involved here? How can US government subsidies occur in a free market? If you want to complain that free markets don't deliver the goods, then complain about something that is a result of that freedom, not something that you yourself are claiming isn't free. You're just making a case for free markets.
And how come we aren't hearing about the poor exploited workers in Haiti, who have to work 14 hours a day just to earn enough money to eat.
Why aren't the greedy capitalists taking advantage of the Haitian people by offering them low paying jobs. Surely starving people are prime for this sort of exploitation. What could possibly be the answer? Could it be that there's some sort of forceful interference? With all these human resources, how come nobody is getting rich exploiting cheap labor?
Published: May 8, 2008 12:12 PM
Francisco, I think you're being a bit evasive on the issue of what constitutes money.
I do not think so, Michael - what's happening here is that you are really asking how can the market bring food to people without paying for it. It would be better if you just got out and say it.
Yet the Haitians can't afford [the Florida rice]. In fact they can't afford to buy the Florida rice sitting right there in the market in Port au Prince.
I would have to take your word for it, assuming you polled the sellers at Port au Prince. If I were a seller, I would find a way to clear the market before my rice went bad, by offering the product at a lower price, but hey, that is just the capitalist pig in me.... Maybe the sellers over there are less interested in business and more in warehousing rice for kicks.
Published: May 8, 2008 1:39 PM
Hi Eric-- I think I agree with all your points.
"But don't you see the force involved here? How can US government subsidies occur in a free market? If you want to complain that free markets don't deliver the goods, then complain about something that is a result of that freedom, not something that you yourself are claiming isn't free. You're just making a case for free markets."
I agree totally. In fact, so does that arch-bugaboo Paul Krugman. US agricultural subsidies have tilted the playing field for every country entering into a "free trade" agreement with the US. Mexican agriculture was destroyed by these subsidies-- a quandary that directly resulted in the eight to twelve million displaced Mexicans moving to the US since the enactment of NAFTA. Previously, Mexico employed these people in growing corn, wheat, poultry and rice-- all crops that the local small farmers could no longer compete against us in.
Given a couple of years, Haiti will respond by once again growing local rice. In the meanwhile, they call this the "Clorox hunger"-- meaning your stomach is so empty it feels like you've been drinking bleach.
As the US government has co-opted the term "free trade" to mean deals like this, many of us now refer the term "fair trade" to describe a truly level playing field.
"And how come we aren't hearing about the poor exploited workers in Haiti, who have to work 14 hours a day just to earn enough money to eat."
Ask the media why the world's poor rarely make the news.
"Why aren't the greedy capitalists taking advantage of the Haitian people by offering them low paying jobs. Surely starving people are prime for this sort of exploitation. What could possibly be the answer? Could it be that there's some sort of forceful interference? With all these human resources, how come nobody is getting rich exploiting cheap labor?"
As a matter of fact, I think that was very likely in the back of our minds back in 1915, when we first intervened in Haiti's politics. Since then Haitians have made all our baseballs, and many other handmade items. Their politics have been managed in such a way as to make this poor country a perpetual basket case. The prognosis is for this satisfactory state of affairs to continue.
Published: May 8, 2008 1:53 PM
Fransciso Torres:
They are obviously still selling the rice, but only to those that can afford it. Michael was obviously referring to those that can't. Suppliers will start importing only the amount required to sell to those that can afford the rice and the rest will starve.
You chose to misinterpret what he said.
Michael still has a point about the money. His point was that the market cannot feed ALL the poor, especially in Haiti because there are various reasons why some people are unable to earn the amount required to even feed them. The market has no remedy for this - it is usually solved only by donations of some sort whether voluntary or state enforced.
I think you have a chicken and egg problem - how is someone going to go out and earn money without some food in his belly and clothes on his back?
Published: May 8, 2008 2:01 PM
Francisco-- I hope I can clear up what appears to be a persistent communication problem. You say "My point was that your condition in your scenario (that there CANNOT be money) is in itself a distortion of the market - it indicates there is an outside force that forbids people to use whatever they want as money. If what you mean is that there is no government to issue currency, then by market forces (people's preferences) there will be a money market, on whatever they choose to use as currency."
I was not describing some imagined scenario, but rather talking about current events. Nor did I say there cannot be money. Of course there is money. It's just that about three billion people on earth are being severely impacted by the rise in food prices as they have virtually none. These are all the people earning less than two dollars a day.
BTW let's define "money". In the global marketplace it's not people trading carwashes for paint jobs. And it's not people trading weak, debased, nonconvertible currencies for goods. This market is denominated almost exclusively in US dollars-- and to an increasing extent in Euros. If you have some of those markers (or their equivalent), you can play. If you don't, you can't.
It is perfectly legal to own USD in Somalia-- I made no point that it wasn't. However, it's a shame more people don't have any. Because the only thing rice growers accept as currency on the international market is dollars or Euros-- and virtually all the local markets of yore have by now been destroyed by globalization.
Published: May 8, 2008 2:11 PM
They are obviously still selling the rice, but only to those that can afford it. Michael was obviously referring to those that can't.
That is not what he is saying. He is asking how can a "free market" supply food in a country that does not show restrictions (Haiti). The fact is that Michael is misrepresenting the situation in Haiti, and what he is really asking is how can a market supply food to people without paying for it - that is a totally different question, yet he is not being upfront about it.
Suppliers will start importing only the amount required to sell to those that can afford the rice and the rest will starve.
That is absurd, Owen - you think that suppliers agree on market share? If I wanted to make a killing, I would bring even MORE rice in order to undercut my competition; automatically, that makes the rice even more affordable.
What you DON'T understand is that suppliers cannot know how much people can afford their product - that is impossible. What they CAN know is that they can sell X tons of product at price Y, and X+10 or X+20 tons of product at price Y-5 or Y-10 or Y-20. Entrepreneurs are revenue seekers, as Murray Rothbard explained, which means if they can get more revenue with a lower profit margin, they will bring in MORE rice, to o