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Bolivian President Evo Morales on Capitalism and Saving the Planet

November 8, 2008 in Capitalism, Democracy, Environmental Justice, Food, Latin America, New World, Video | 1 comment

Open Letter to the President-Elect: Farmer in Chief

November 6, 2008 in Barack Obama, Climate Crisis, Environmental Justice, Food, New World, Oil | Leave a comment

This is a long article, but it’s full of insight on how the federal government could contribute to a sustainable food economy in the US. The problem, of course, is that all of the brilliant policy recommendations are directly opposed by the profit-making food industry. Worth reading, but how about an article explaining what the American public can do for its own food security? [alex]

Open Letter to the President-Elect by Michael Pollan: Farmer in Chief

Farmer in Chief By Michael Pollan
New York Times, October 10, 2008
Dear Mr. President-Elect,

It may surprise you to learn that among the issues that will occupy much of your time in the coming years is one you barely mentioned during the campaign: food. Food policy is not something American presidents have had to give much thought to, at least since the Nixon administration – the last time high food prices presented a serious political peril. Since then, federal policies to promote maximum production of the commodity crops (corn, soybeans, wheat and rice) from which most of our supermarket foods are derived have succeeded impressively in keeping prices low and food more or less off the national political agenda. But with a suddenness that has taken us all by surprise, the era of cheap and abundant food appears to be drawing to a close. What this means is that you, like so many other leaders through history, will find yourself confronting the fact – so easy to overlook these past few years – that the health of a nation’s food system is a critical issue of national security. Food is about to demand your attention.

Complicating matters is the fact that the price and abundance of food are not the only problems we face; if they were, you could simply follow Nixon’s example, appoint a latter-day Earl Butz as your secretary of agriculture and instruct him or her to do whatever it takes to boost production. But there are reasons to think that the old approach won’t work this time around; for one thing, it depends on cheap energy that we can no longer count on. For another, expanding production of industrial agriculture today would require you to sacrifice important values on which you did campaign. Which brings me to the deeper reason you will need not simply to address food prices but to make the reform of the entire food system one of the highest priorities of your administration: unless you do, you will not be able to make significant progress on the health care crisis, energy independence or climate change. Unlike food, these are issues you did campaign on – but as you try to address them you will quickly discover that the way we currently grow, process and eat food in America goes to the heart of all three problems and will have to change if we hope to solve them. Let me explain.

After cars, the food system uses more fossil fuel than any other sector of the economy – 19 percent. And while the experts disagree about the exact amount, the way we feed ourselves contributes more greenhouse gases to the atmosphere than anything else we do – as much as 37 percent, according to one study. Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis – a process based on making food energy from sunshine. There is hope and possibility in that simple fact. Read the rest of this entry »

Petrodollars – How Dollar Hegemony depends on Oil

November 2, 2008 in Dollar, Economic Crisis, Empire, Iraq, Oil, War | Leave a comment

[There are many articles (including one I wrote in college), and even whole books written about Petrodollars – the way that US dollars dominate the world economy by their crucial involvement in all global oil trades. This just happens to be a very clearly written and accessible essay, so I’m reprinting it despite slightly out-of-date numbers. The extent to which the fragility of petrodollar hegemony affects US foreign policy is probably the biggest question mark, but it seems plausible that the much-threatened aggression against Iran has a lot to do with that country’s moves to abandon the dollar for their oil trades. – alex]

Oil prices and the dollar

C. P. Chandrasekhar
Jayati Ghosh

Originally published by Business Line, February 26, 2008.

The depreciation of the US dollar has been closely bound up with the movement of oil prices, as world oil trade is typically denominated in dollars. Yet this relationship may now be under threat as the dollar continues to depreciate and the US economy tips into recession. In this edition of Macroscan, C. P. Chandrasekhar and Jayati Ghosh examine how oil prices have changed with different numeraires, and consider the implications for the future of the oil-dol lar nexus.

The relationship between oil and the US dollar has been at the heart of the way international economic relations have been organised for more than half a century.

International capitalism has relied on the US dollar as the basic reserve currency, and has therefore granted it an essential degree of stability for several decades despite the large external deficits run by the US and the periodic swings in its valuation in currency markets.

More than half of aggregate world exports are denominated in dollars; more than 80 per cent of all international currency transactions similarly involve dollars.

Loans made by the IMF and other multilateral institutions are denominated in dollars. More than 60 per cent of the foreign exchange reserves held by central banks of all countries are in dollar assets.

This has obviously meant huge advantages for the US. It has allowed the US economy to benefit from access to imports that can effectively be paid for simply by printing dollars, and has therefore allowed the US to run enormous current account deficits for prolonged periods. It has encouraged the rest of the world to finance these deficits by providing its savings to be held in US or dollar-denominated financial assets, to the point that all the developing regions of the world are also building dollar reserves that directly or indirectly find their way to the US economy.

Dollarisation of oil markets

A key feature of this entire process has been the dollarisation of world oil markets. Oil is the central commodity of industrial capitalism, absolutely essential for the production of essential and widely used goods. All industrial economies, and most developing ones, would grind to a halt with even a moderate disruption of oil supplies.

Most of the world oil trade has operated and continues to operate in dollars, even when the US is not the trade partner. Oil prices are defined in dollars for most oil exporters. As a result, oil importing countries also pay in dollars. The oil-exporting countries accumulate dollar reserves, which have been preferentially invested back in the US because of the zero currency risk involved in this.

Indeed, this recycling of petrodollars has been very significant as a source of finance for US trade deficits in several periods, including in recent times. Other countries also hold dollars for future oil purchase.

The dramatic increase in the price of oil in the past few years could be argued to have accentuated this tendency. As Chart 1 indicates, oil prices have increased dramatically in dollar terms especially from 2003, going up by nearly 2.5 times between 2003 and 2007.

This has obviously contributed very significantly to the wealth of oil exporters, and allowed them to generate balance of payments surpluses and build foreign exchange reserves, which have then been invested dominantly in dollar assets in US markets.

However, this is also the period that the US dollar has been depreciating, especially with respect to some of the other major currencies such as the euro and the Japanese yen. As a result, the change in oil prices has been less striking in terms of these currencies than in terms of the dollar.

The currency factor
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Breakdown or Breakthrough?

November 1, 2008 in Capitalism, Collapse, Democracy, Economic Crisis, Fascism, New World, Oil | Leave a comment

Originally published by Common Ground Magazine.
By Daniel Pinchbeck

Witnessing the unraveling of the global financial system, I find myself gripped by contrasting emotions. While part of me feels like heading for the hills and hoarding cans of sardines, another part of me is giddy, almost celebratory. The tyrannical rule of Wall Street is ending, along with the self-serving free market ideology of Neoconservatives. The massive amounts of fictitious capital created by our corrupt financial system must be destroyed, so we can address our immediate situation on this planet.

I feel sorry for the millions of people who may suffer during a transition that will be extremely difficult. On the other hand, our rapacious economic system is destroying the integrity of the biosphere, threatening our future as a species. Taking a wider perspective, we can see a new social structure that creates sustainable patterns of behavior is necessary, if we want our descendents to continue on the earth.

In my last book, I looked at many predictions of systemic financial dissolution at this time. I discussed the possibility that a financial H-bomb could melt down the economic system while leaving the “tangible assets” — people, infrastructure, land — still standing. I suggested this could be the best thing to happen to our world. Such a systemic collapse is a tremendous opportunity to change the direction of our society. Those who believe civilization can be run according to different principles — humane, equitable, and collaborative ones — need to step forward now with concrete proposals and put ideals into practice.

Several factors made the collapse of the global financial system inevitable. One problem with capitalism is that it is not self-sufficient, but depends on the constant availability of new markets, forcing expansion by creating ever-increasing amounts of debt. We now have a globalized world market, so exploitation of new territories can no longer take place. As Naomi Klein analyzed in The Shock Doctrine, this led to a policy of “disaster capitalism,” where cataclysms like hurricanes and terrorist acts were seized as opportunities to redevelop internal markets. Such a practice is inherently unsustainable.

Another crucial element that is rarely discussed in the media is the connection between the current financial meltdown and peak oil. Just as our debt-based economic system needed new markets to penetrate, it also required an ever-increasing supply of cheap energy to fuel its expansion. The decreasing supply of fossil fuels relative to global demand has brought the second law of thermodynamics into play, breaking the delusionary spell cast by the financier-sorcerers, who decoupled financial value from real value back in the early 1970s. When we consider the permanent reduction in the supply of cheap energy combined with the lack of new markets, it is obvious the amassed debts will never be repaid. Read the rest of this entry »