News and Commentary for 11/17/07

The U.S. Congress has passed the U.S.-Peru Free Trade Agreement. Among the provisions: removal of duties on some 80% of U.S. exports to Peru, including subsidized cotton, corn and wheat (which will drive more Peruvian farmers off the land); expanded rights to drill in the Peruvian Amazon (which is why Occidental Petroleum, for example, has been lobbying hard for the FTA); and the greater opening of Peru's urban commercial sectors to foreign competition (hence the enthusiasm of Wal-Mart, Citibank, and others).

Brazil may purchase a nuclear submarine to "protect" the massive offshore oil reserves recently discovered at Tupi.

Speaking of nukes, the always-perceptive Azmi Bishara has written a good op-ed piece on Hiroshima and the Machiavellian logic of U.S. elites.

A massive cyclone hit Bangladesh on Thursday, killing a reported 1,100 people. Some 650,000 coastal villagers have fled to shelters, and 150 fishing trawlers are unaccounted for. The cyclone caused the power system in much of Bangladesh to collapse, leaving millions without power. This also led to a disruption in piped water supplies, as pumps could not be started.

The water problems in Bangladesh are a reminder of the complex supply chains and interdependencies that make urban life possible. The water crisis in Atlanta is another such reminder.

Climate Change and Water Wars

Tom Engelhardt's points out in this article that severe droughts are simultaneously afflicting the southern and midwestern U.S., North Africa, southeastern Europe, Mexico and Australia. Speculating about the possibility of mass migrations and resource conflicts over water in the U.S., he asks why the topic of water security--and what will happen if drought conditions take hold in major cities like Atlanta--is rarely broached in the U.S. media.

The IPCC impact assessments suggest that, even by conservative projections, there will be reductions in crop production in the most populous rural areas on the planet over the next few decades. But we have no reason to believe in convervative projections: U.S. carbon emissions are not only growing, their rate of growth is accelerating, and is predicted to continue to accelerate.

While there may actually be a boost in food production in parts of the U.S. due to climate change, in much of the farm belt food production will decrease. The IPCC 4th Assesment Report predicts:

"By mid-century, annual average river runoff and water availability are projected to increase by 10-40% at high latitudes and in some wet tropical areas, and decrease by 10-30% over some dry regions at mid-latitudes and in the dry tropics, some of which are presently water-stressed areas. [...] Crop productivity is projected to increase slightly at mid- to high latitudes for local mean temperature increases of up to 1-3°C depending on the crop, and then decrease beyond that in some regions. At lower latitudes, especially seasonally dry and tropical regions, crop productivity is projected to decrease for even small local temperature increases (1-2°C), which would increase the risk of hunger. Globally, the potential for food production is projected to increase with increases in local average temperature over a range of 1-3°C, but above this it is projected to decrease. [...] Increases in the frequency of droughts and floods are projected to
affect local crop production negatively, especially in subsistence sectors at low latitudes."

Two things need to be noted here: 1) these "subsistence sectors in low latitudes" include the most densely populated parts of coastal Asia, Africa and Latin America; and 2) increases of 1-2°C (under which "crop productivity is projected to decrease" in these regions) are at the low end of moderate IPCC predictions for temperature increases. So a fall in crop productivity in most of the world, most dangerously in the bread baskets of the southern hemisphere, is virtually assured. And this despite the fact that, at current growth rates, world population is expected to "crest" at 9 billion by 2050 . Unequivocally, then, anyone who advocates "business as usual" is advocating mass death.

Unfortunately, in a culture where possessive individualism is exalted by all-pervasive private and state propoganda as the highest collective aim, action on climate change might require its effects being "brought home" to the global north through drought and wildfires. As long there is a perceived geographical split between the greatest per capita carbon emitters and the greatest victims of climate change, it is likely that popular pressures will remain weak. Read more!

Bottlenecks, Supply-Demand Crises, and Rising Food and Oil Prices

As Nicholas Georgescu-Roegen pointed out in his 1971 classic The Entropy Law and the Economic Process, all forms of production and consumption are ultimately tributaries of solar energy flow captured through mining, forestry and agriculture. Despite the vast diversity of output in the global economy—from art to artillery—the main inputs are relatively simple: fossil fuels, minerals, timber and food (especially grains).

One of the results of the Industrial Revolution was to tie food production to fossil fuel inputs. The supply-demand dynamics of food and oil (and the distortions of cartels and subsidies) are as inseparable in industrial capitalism as air is from water in the atmosphere. And now the atmospheric effects of fossil fuel inputs since 1750 could reduce yields of rice, wheat and corn by as much as a third in Asia, Africa and Latin America(where the overwhelming majority of subsistence farmers now live).

These news stories from the last few days capture the interrelated dynamics of food production, oil consumption and climate change:

Global Food Crisis Looms as Climate and Fuel Shortages Bite
Rising Food Prices To Hit Consumption
Frenzy in the Markets as Oil Heads for $100 a Barrel
IEA Sounds Alarm Over Huge Energy Demands
High-Prices Oil Adds Volatility to Power Scramble

To see how these interrelationships work, look no further than the U.S. corn industry. As Michael Pollan shows in The Omnivore's Dilemma, the seeming diversity of products in U.S. supermarkets is largely corn-based. Corn-based sweeteners have replaced cane sugar in most U.S. soft drinks; U.S. bacon, eggs, milk and hamburgers (through corn-based pig, chicken and cattle-feed) ultimately come from corn. Corn is used in 2,500 out of 10,000 products sold in the average U.S. supermarket. This dietary monopoly is made possible through obscenely large subsidies ($51.3 billion from 1995 to 2005), about 63% of which go to the top 10% of enterprises, the main suppliers of corporate processors like Cargill and Archer Daniel's Midland. In fact, 3 or 4 corporations control 81% of corn exports in the U.S., 60% of the grain handling facilities, 61% of flour milling, and 49% of ethanol production.

The result (a real irony considering the anti-immigrant sentiment in the U.S. corn belt) is an export subsidy to the agribusiness giants of over $100 million annually to dump U.S. corn on the Mexican market under the neoliberal NAFTA rules. According to the Mexican government itself, U.S. corn dumping has driven around 2 million Mexican farmers off the land. CAFTA is now bringing this dynamic to Guatemala, Honduras and other signatories with small corn farmers.


Besides fuelling poverty in Latin America and obesity in the U.S., this subsidized corn production is fragile, because it's overwhelmingly oil-based. On average, 10 calories of fossil fuel energy are burned for every 1 calorie of food energy produced in the U.S. The fertilizers, the tractors, the processing equipment, the refrigerated trucks, the plastic packaging and grocery bags: all require oil.

The intimate connection of oil and food inputs at the base of the global economy means that changes in supply and demand affect both. We see this in rising food and oil prices worldwide, reported side by side by the Financial Times today:
To be continued...






Read more!

Guarding supply lines

Interfax reports that the U.S. signed a new "military cooperation plan" with Azerbaijan on Friday. In 2003, the Caspian Guard initiative was launched, under which the U.S. would carry out joint military exercises with Kazakhstan and Azerbaijan. The U.S. has been trying to establish mobile army bases in the country, which is stragically important for two overlapping reasons: the soon-to-be-opened Baku-Tbilisi-Ceyhan pipeline and the adjacence of Azerbaijan to Iran. Regarding the pipeline, it will enable Caspian oil to be transported through the Caucasus to Ceyhan, Turkey, and is controlled by an Anglo-American consortium led by BP. Regarding Iran, in April it deployed troops to the Azerbaijani border, and there are rumors that Iran has drawn up a list of locations in Azerbaijan that would be bombed in the event of a U.S. attack. Earlier this year, U.S. undersecretary of State Matthew Byrza told a press conference in next-door Georgia that the U.S. was hoping to use Azerbaijani air fields for military purposes, leading some to speculate about a possible "northern front" against Iran. This prompted the Azerbaijani Defense Ministry to issue a statement assuring the world that "Azerbaijan's territory will not be at the disposal of any country for hostile acts against neighbours."

Meanwhile, the U.S. is trying to establish an AFRICOM base in the oil-rich Gulf of Guinea region, a move that the Nigerian government is trying to block. It is well worth remembering that AFRICOM is taking over what was formerly the responsibility of CENTCOM, which was formed in the 1970s to enforce the Carter doctrine of ensuring U.S. access to Middle East Oil.
The U.S. is also carrying out joint military operations with states in the Sahel, the Horn of Africa and West Africa (which will supply a fifth of U.S. oil by 2020) under the rubric of AFRICOM. One such operation in Mali, known as "Flintlock 2007," led Tuareg rebels to fire on a U.S. military plane on Wednesday. Read more!

Economic News 9/12

While many people were thinking about non-state terror yesterday, the wheels of state terror were being liberally greased with a new round of arms sales. According to the Financial Times, one of the world's biggest arms fairs opened in the Docklands section of London on September 9th, and is scheduled to run through today. 1,300 companies from 30 countries will be present. There will be military delegations from some 36 countries, including Libya, Indonesia, Saudi Arabia and China, taking their pick from a plethora of grenade and rocket launchers, depleted uranium shells, warships, and the like. Who is the organizer? The second-largest arms dealer in the world, the British government. From the FT article:

"The show is a brainchild of the Defence Export Sales Organisation, a part of Britain's defence ministry devoted to promoting arms exports. British defence companies say Deso has played an important role in making sure the UK defence industry has not shrunk along with the rest of the country's manufacturing capacity."

According to a UK government website, Deso was "set up in 1966 to promote UK arms exports overseas." Deso has been dumping more weapons than usual onto the global market in recent years. Between 2001 and 2006, Britain exported £26.5 billion (or $53.8 billion) worth of weapons under the auspices of Deso, "helping to secure tens of thousands of British jobs," the FT says. British arms sales to Africa almost quadrupled between 1999 and 2004, for example, surpassing the £1 billion mark in 2005. But this is not enough. Prime Minister Gordon Brown is reportedly going to shut Deso down, not because he is worried about state violence, but because he wants to increase "institutional alignment across government." He is, the FT says, "moving [Deso's] responsibilities to where the rest of British export promotion lies - within the newly named Department for Business, Enterprise and Regulatory Reform." This is the body that handles promotions for all UK exports--from subsidized beet sugar to, now, depleted uranium tank shells.

In indirectly related news, oil prices reached a record high yesterday at $78.23 a barrel, and OPEC pledged to increase production by 500 barrels a day. According to the New York Times, this will not have much of an effect on oil prices, as "[t]he market consensus was that there would be a big drop in oil supplies in the inventory data to be reported Wednesday by the United States Department of Energy."

The Chinese trade surplus with the United States continues to widen, totalling $103.3 billion for the first eight months of 2007. But the U.S. is not China's biggest trading partner:
"China’s August exports totaled $111.3 billion, while imports were $86.4 billion, according to the customs agency. European nations were the biggest trading partners, with exports to Europe rising 31.3 percent, to $23 billion, and imports from there up 21.8 percent, at $10.2 billion."

It has to be remembered that a huge chunk of these exports are not manufactured by independent Chinese firms, but by Chinese subsidiaries of European, North American, Japanese and Korean multinational corporations using cheap Chinese labor. According to one estimate, no fewer than half of all Chinese exports are "intra-firm" trade, e.g. trade between the branches of a single, usually foreign corporation.

On the other side of the Pacific, low interest rates have stimulated deficit consumer spending on foreign-manufactured goods and real estate in the U.S., leading to a bizarrely lopsided economic situation. The combination of automation and outsourcing continues to reduce U.S. manufacturing employment (which is likely to become as marginal as agricultural employment in the near future), while employment in sectors like construction (fuelled by the housing boom), retail (fuelled by consumer spending) and health care continues to grow. As Thomas Paily puts it at Asia Times, "The overall picture is one of a distorted expansion in which manufacturing continued shriveling while imports and services expanded. This pattern was carried by an unsustainable house-price bubble and rising consumer debt burdens, and that contradiction has surfaced with the implosion of the subprime-mortgage market and deflation of the house-price bubble." Read more!