Famine Present, Brazilian Future?

A recent Economist article is shocking, if not blindly optimistic in its revelations about the world's prospective ability to feed itself.

The piece, published in the Aug. 28th edition, attempts to present Brazil's agricultural reforms of the past 40 years as a road map to insuring against future famines.  However misguided in its conclusions, the article is honest in its presentation of the problem of world hunger, acknowledging that "by 2050 world grain output will have to rise by half and meat production must double to meet demand."  One may wonder if these increases would only serve to maintain the current balance of global food supply and demand, which provides enough food at low enough prices to properly feed only 5 out of 6 people on the planet (WHO statistic), leaving more than 1.1 billion people in a constant state of mortally dangerous hunger and malnutrition.  The author also admits that these increases must come in spite of "flattening" growth in global grain-yields, a lack of "extra farmland" and "renewable water running short.".

The article opens with the suggestion that the current Malthusian pessimism, as far as agriculture is concerned, is trivial enough to be fit for making puns, and that the world has been subject to such doomsaying before, such as in the 1968 Best-seller The Population Bomb by Paul Erlich, which predicted that in the "1970's and 1980's hundreds of millions of people will starve to death."  Nevermind the fact that Erlich was essentially correct in his prediction, and nevermind that such a state of affairs continues to be true, with current WHO estimates attributing 36 million deaths per year to hunger and malnutrition.

Attempting to offer constructive and positive suggestions as to the problem's solution, the Economist lays out the basis for what it terms "Brazil's agricultural miracle."  Brazilian farms are "many times the size even of American farms," America being the home of large-scale industrial farming; that "Farmers... sell crops on a scale that makes sense only if there are world markets for them... they depend critically on new technology," and that "Brazil's progress has been underpinned by the state agricultural-research company and pushed forward by GM crops."  The article minimizes damage to the Amazon rainforest as a part of the "miracle" to the point of incredulity, saying that Brazil is an example of how to "save the world's imperilled ecosystems" by growing "so much food elsewhere that nobody would need to touch the natural wonders."  One is left to speculate on what type of statistics underpin this fantastic argument. 


Ambiguation and pun making aside, the article makes no account for certain troubling facts.  According to the WHO, 11 million Brazilians remain "undernourished," even as Brazil is a net food exporter, and while this number is on the decline, one cannot separate the economic, agricultural and land reforms of the past 40 years in Brazil from the military dictatorship which initiated them in the late 1960s and early 1970s.  It was an iron fist that swept aside property rights and civil liberties, and held down working-class wages in the name of agro-industrial progress and upper-class economic growth.  Former General/President Emilio Medici famously gave an honest assessment of his government's policies: "A economia vai bem, mas o povo vai mal"- "The economy does well, but the people do poorly." 

If the Economist is correct in its assertion that food production will need to increase dramatically in the next 40 years to meet demand, it remains unclear how other countries could manage to duplicate the 'milagre Brasileiro,' which would require them to conjure new farmlands and sources of fresh water, of which Brazil had untapped abundances of; to make multiple technological breakthroughs allowing more and more efficient use of those ever more scarce lands and resources and to abandon democracy, property rights and free markets in favor of central planning and speedy consolidation. To replicate this "miracle" outside Brazil seems less an option than a strange dystopic pipe-dream of plutocratic control and alchemy, perhaps just as nightmarish as any Malthusian prediction.


Read the Economist article at http://www.economist.com/node/16889019

Currency War?: Truth is the first casualty

In recent days, major news outlets across the world have been reporting on the growing rift, particularily between China and the US, and more generally between 'developped' and 'developping' nations, over currency markets and monetary policy ahead of the G20 meetings in Korea this November.  

The issue not only highlights the growing ability of emerging economies, such as China and Brazil, to stand up to the unbalanced global economic order imposed by European and American institutions, but the nature of the coverage has itself revealed a staggering bias and lack of insight by the Western media and points to an unsurprising but serious misunderstanding in the Western public as to how their economies function and relate to the global economy.

The issue has been politicized in the US for some time now, where people are being made to feel somehow that in a general way China is threatening the welfare of the American economy by holding its currency 'artificially low', causing the hemorraging US trade deficit and the continual loss of American factory jobs.  The intended message to the public is clear when the US Treasury Department's not-yet-released study of whether China manipulates its currency to gain an 'unfair' trade advantage is referred to again and again, while credible statements to the contrary go unnoticed, such as the World Bank and IMF who foresee currency 'tensions', not 'war', and who admit that allowing China's currency to rise will do little to help the balance of trade in the US.  Quite often, the fact that the yuan has already risen against the dollar by 20% since Chinese currency reforms five years ago is completely glossed over, or is noted as insignificant.

Nearly without exception, all Western news outlets decry China's 'intervention' or 'state manipulation' of the value of its own currency, along with other vaguely 'commie' sounding terminologies which are sure to raise the hairs on the back of every red-blooded American. 

A nation's currency is the lifeblood of its economy, and a government's right to manage and manipulate the value of its own currency is not only necessary for the maintenance of economic stability, but also sovereignty.  Free trading nations such as the US and EU resort to 'open market operations', manipulating interest rates, and lately 'quantitative easing'- the modern-day high-tech equivalent of printing more money.  While China 'pegs' its currency's value against a basket of currencies to maintain its stability in global markets, something that the US and EU do not do, it is the height of hypocrisy for the US and EU to enact major inflationary measures such as quantitative easing to drive down the value of its currency for selfish political and economic reasons, and then call China beligerent and interventionist when it merely allows the value of the yuan to float along with the Euro and greenback.

Western efforts to cheapen the value of US and Euro dollar denominated debts and to make foreign-produced goods more expensive in their domestic markets, to beat back looming deflation, to bailout its financial institutions and to inflate economic data, all by devaluing their currencies, is neo-mercantilism, and an extreme provocation to developping nations dependent on exports, such as China, Brazil, India, Korea, and Thailand to name a few.  Furthermore, Western governments, by lowering lending rates and increasing the supply of money in their domestic markets, have provided impetus to large financial institutions to go overseas to look for opportunities, thereby increasing competition, prices and the value of the domestic currency in those developping nations, as Western capital virtually invades and destabilizes their markets.  To then attempt to dictate how these nations should or should not react to such provocations is the height of arrogance.

The truth is that the US and European economies remain extremely vulnerable to further collapse, and politicians and bureaucrats in these economies remain willing to enact extreme measures to prevent this, or to at least give the appearance to their constituents that they are doing so.  The past few years have seen massive uncertainty and volatility in currency markets because of the banking crisis of 2008 and the Keynesian reaction to it and the recession it caused.  That such uncertainty and volatility would spill over into the relations between the West and its global trading partners is perhaps predictable.  However, painting China's monetary policy as the sponsor of Western economic woes is ridiculous, and does more to damage the accusors's credibility than it does to improve their economic situation.


Read articles on this topic, good and bad, at:

ABC News "China trying to avoid currency war"
http://abcnews.go.com/Business/wireStory?id=11865837

Xinhua News:  "Sword of Damocles dangling over China-US economic ties"
http://news.xinhuanet.com/english2010/indepth/2010-10/16/c_13560709.htm

The Council on Foreign Relations:  "Concerns over currency wars grow"
http://www.cfr.org/about/newsletters/editorial_detail.html?id=2222

The Globe and Mail:  "Averting currency war tops G20 agenda"
http://www.theglobeandmail.com/report-on-business/economy/averting-currency-war-tops-g20-agenda/article1758134/

Arirang News:  "Currency disputes heat up ahead of G20 Seoul summit"
http://www.arirang.co.kr/News/News_View.asp?nseq=108013&code=Ne2&category=2

The News Center:  "Fx tensions mount ahead of Fed's Bernanke"
http://www.moneycontrol.com/news/world-news/fx-tensions-mount-aheadfed%60s-bernanke_491477.html