low prices: good for consumers, bad for people

You always have to wonder when people repeat something over and over again. They must be trying to make you accept something that does not make sense. And low prices don't make any sense. Low prices not only send the wrong message, they are downright harmful for your health and your environment.

At first it seems like a no-brainer. Why would you not buy something for less money? Why would you pay more? Why would you not buy the same thing cheaper? Would that not be a stupid thing to do?

There is a catch of course. But let me first say this. Let's take a look at those examples where people prefer to pay more money and buy items that are more expensive and let's see why they do it. There are items, such as soap and toiletries that people will gladly pay more money for. There are also services, some of which are free, like education, that people will pay a lot for. And in both cases, people will pay more because they think the more expensive product is better. While that may not always the case, in many instances you really do get what you pay for.

You get what you pay for in two ways. If you pay fair value, you receive a lot of value. And if you paid a lot of money, you will value what you got more. Not only will the seller be satisfied and able to make an honest living, which contributes to the good of society, you will be more satisfied too. You will truly feel that you acquired something of value and cherish it as such.

That is not all. If people are able to sell you items at rock-bottom prices, there has to be a catch somewhere. Nobody can sell items below cost. In essence the sellers are "stealing" from somewhere to support their business. And when they do, nasty consequences are likely to follow. Unfortunately, it is not always obvious where the damage happens.

If a food corporation can sell you calories below cost, it isn't just due to "efficiencies." It is due to heavily subsidized petroleum and wanton environmental destruction. To say nothing of worker exploitation. You could shrug and say our environment is alright, and the immigrant workers make a better living here than they would in Mexico or South America. Or you may not care about what goes on as long as you get food for less.

However, I can assure you that you will pay for those "savings" many times over. And the destruction that goes on is in many cases irreversible.

Already we have a situation where over half the population is overweight or obese. Soon up to 1/3 will suffer from metabolic disorders such as diabetes, hypertension and other chronic ills. These conditions will extract an immediate price in medical care, and a long term price in lower life-expectancy, amputations, kidney failure, and blindness. The money we saved on food is going to be spent many times over on medical care. And even if we are personally unaffected, we all have to pay for the ballooning medical costs.

Mass production of food is also wrecking the environment and contributing to global warming, ocean and air pollution, and other ills that make our survival on the planet more precarious by the day. Already a huge area in the Gulf of Mexico is so polluted that no fish can survive there.

We also pay direct costs. We support an enormous military and fight endless wars just to ensure access to cheap petroleum. The cheap petroleum is what keeps our economy humming but because it is so cheap, people do not value it either. They waste it in enormous amounts. In doing so they once again pollute the environment, contribute to inactivity and obesity, To say nothing of the many accidental deaths from traffic accidents.

There are simple ways to make a difference in this madness. You can get a smaller car and drive less. You can have your kids walk to school. You can bike to work. You can buy and eat only locally produced foods. You can stop wasting energy unnecessarily. You can do what is good for you and your community.

Borlaug

More than half the country is overweight or obese, yet one in seven Americans goes to bed hungry at night. According to the FAO, the number of malnourished people worldwide rose to over 1 billion this year. That is roughly 1/6th of the world population. Meanwhile that population is on track to grow to 9 billion by mid-century. The only problem it seems, is where will the food come from?

Now that Norman Borlaug, the Nobel laureate widely known as the father of the Green Revolution has died it may be time to ponder this question. Borlaug's introduction of high-yielding plant varieties, combined with very generous helpings from petro-calories, has been credited with making Mexico a net exporter of wheat in 1963, and doubling yields in Pakistan and India. There is little doubt that the Green Revolution caused the enormous population boom that occurred in the latter half of the 20th century. As a result of that boom, both India's and China's populations passed the 1 billion mark.

Many believe Borlaug saved over a billion people worldwide from starvation. For that reason, and for his contributions to world peace through increasing food supplies, Borlaug received the 1970 Nobel Peace Prize. One thing Borlaug certainly contributed to was to grow a lot of people.

And a lot of these people are now very fat people who are increasingly unhealthy and unhappy. When it comes to peace, it has now been amply documented that all of Africa's incessant wars, genocides, revolts and carnages are due to resource limitations and climate effects that follow directly from overpopulation.

Sadly enough, world hunger has not declined. Instead the number of hungry people has only grown. Last year millions more were added to list of the starving and millions will be added every year in the foreseeable future.

One can only wonder where the contributions to world hunger and peace lie? To say nothing of the enormous damage done the environment. The rapid population growth has led to a resource depletion of unheard of scope. Nearly every food source on the planet is at, or over capacity. It has been estimated that the world's oceans will be depleted of edible fish species around 2030. Agricultural land is likewise near capacity and only widespread rain forest destruction is staving off the inevitable, Last year's cereal crop was the largest on record. It could barely sustain the present population, let alone an additional 50%.

However, fear not. our white knight Bill Gates is coming to the rescue. Recently he addressed the first United Nations food summit since 2002. Pretty soon all aid workers around the planet who aren't yet using Microsoft OS's will be outfitted with the latest version of Windows 7. Needless to say the fabulous features of Windows 7 will enable great strides in the war on hunger.

If you think that is a silly or overly cynical statement, think again. When is it finally going to dawn on people that modern technology has yet to solve one problem it did not create? And it has created plenty.

Before we go too far off the deep end here, let me remind you that I do not oppose technology. As a matter of fact I love technology. But I also see the limitations of technology. And one key limitation is that too many people believe technology is the solution to all our problems. No doubt, Borlaug believed technology would end world hunger, when all it has done is exacerbate the problem. He probably believed it would lead to peace, when all it has done is promote genocide in Rwanda, and Darfur.

So far, technology has done nothing but accelerate things.

Technology does speed up life, but more than anything, it seems to speed up our demise.

food shortage

The FAO thinks food production will have to increase by 70% over the next 40 years. It predicts that unless more land is used for food production, 370 million people will face famine by 2050. 370 million seems like a large number until you hear that the world population is expected to grow by 2.3 billion by then. Maybe we should hit the brakes somewhere? What if we only allowed a growth of 2 billion? That would go a long way to solve the problem it seems.

The FAO, like many other organizations and businesses does not think that way. To them the growth is a given if not a must. To businesses and politicians it always is. How can you grow a business if the population declines or stays the same? Ergo, come what may, we have to find a way to solve this problem.

The FAO thinks we need to increase agricultural investment in developing countries by 50% or $83 billion annually to avoid disaster. I am not sure if the FAO took into account the effects of declining fish stocks, scarcity of land and water, and the effects of increased levels of CO2 (with or without global warming) in the atmosphere. Research has shown that many crops, and especially those that Africans and Asians depend on for staples, dramatically reduce their yields when exposed to higher CO2 concentrations. So even if the world does not warm, rising CO2 concentrations alone will spell disaster.

However, rest assured that the climate is changing. And climate change is predicted to causes losses of up to 30% in Africa and slightly over 20% in Asia. These are also the areas of the most intense population growth. Not surprisingly these are also the areas with the most young adults. And young adults without jobs and without food tend to get very antsy if not outright belligerent.

Something's got to give here, and it isn't going to look pretty.

food prices

According to the FAO data, the current spike in food prices is quite modest. When adjusted for inflation and compared to other data over the last 50 years, the price hike is barely noticeable. In the 1970's for example, rice, wheat, and other cereals were anywhere from double to almost four times as much as they are today. Yet, corn has risen 31% over the past year, while wheat has gone up a whopping 130%, according to Bloomberg.

Several factors have been blamed for these price hikes. Oil prices play an important part as most food stuffs are transported over large distances. I read somewhere that the average food item travels over 1,500 miles before it reaches your table. Oil also powers farm equipment and irrigation devices, that are both needed and used extensively to grow food on an industrial scale. Petroleum is key for fertilizers and pesticides that are an equally integral part of the production process.

It seems likely that oil prices will continue to move upward over the long term. On top of that we will no doubt see several spikes -as the one we are currently in- and drops -that will surely follow-. But the underlying trend will be up and up. Hopefully, that trend will remain "visible"enough so people have some incentive to change their life-styles before the whole rigamarole comes tumbling down in one big collapse.

Apart from oil, there are other factors. One is the biofuel craze, or growing crops for fuel production. More fuel production means less farm land is available for food. This trend is unlikely to persist for long but in the meantime it is giving rise to a fair bit of speculation. Wild promises also make it less likely people will think conservation.

Another factor is the shift in eating habits. That shift is especially pronounced in developing nations such as India and China, that are now changing to Western eating habits. Never mind that such habits come with definite health concerns. The key shift is towards more meat. In China meat consumption per capita has gone from 20 kg in the 1980's to over 50 kg today. Given how inefficient meat production is, and how wasteful it is with resources, that is not good. This trend however is likely to continue for as long as beef is available and people have money to pay for it.

Considering all these factors it may surprise you that FAO predicts food prices will stabilize in the next decade. Not just stabilize mind you, but remain low compared to historical trends. If that is so, there will be no stopping the predicted population boom. Estimates are there will be 9.2 billion people on the planet by 2050.  But then again, people thought US real estate prices would rise forever too.

I am willing to bet we are in for a big surprise. By mid-century the world will be a different place. And it won't be the rosy predictions people have grown accustomed to from watching Star Trek and similar shows.

speculation?

Is the food shortage for real or is it speculation? The same can be asked in the commodities and energy markets. Are we running out of goods and oil or is the shortage artificial? NYTimes editorial writer Paul Krugman answered this question recently by offering three alternatives. The first, that it was all due to speculation and investors driving prices sky high, mainly because other markets were performing so poorly. This apparently has happened before, but more about that later. The second was a combination of both speculation and some real shortages, while the third was outright and real shortage.

I think there is an answer that avoids a choice between these alternatives. Because in some sense they all play a role. Certainly food and commodities prices are high because of a fair amount of speculation. And we aren't really out of food (yet). The wave of obesity, which some call the epidemic is still in full swing. Clearly, many have too much to eat. So much so that they would prefer to use some of that corn to put into their SUVs and offset high oil prices.

Much of the speculation is also driven by future planning and by estimates of future yields. In the planning section we have the ambitious and voter-pleasing US plan to use more corn for ethanol to "reduce dependence on foreign oil." I have pointed out several times before that we are dependent on foreign oil because we choose to be wasteful, not because we need foreign oil. And no, we don't need to drill the Alaska wildlife refuge to handle this self-made problem. Secondly, we also choose to do so to prevent others from taking too much oil. I.e. we have a vested stake in making sure we use enough oil.

As for yields, there are the dire predictions of future shortages in almost anything of "real value." Food, oil, basic materials, etc. That is certainly true and worrisome, and if we keep on wasting stuff the way we do, we are bound to run out sooner rather than later. What is not mentioned here is that the pollution buildup from all that mining, oil-burning, and food producing activity will probably get us long before we run out of supplies.

Add to the planning and yield projections, the ability to make a quick buck, and the never ending greed of "investors." As has happened before in times of plenty, people are once again becoming unashamed of their unbridled greed. Some are so unashamed, they proudly display greed as a token of success. But as the good pope would remind them, greed is a deadly sin. What that really means apart from religion, is that the human experience over the centuries has shown that openly visible greed almost always leads to disaster. The disaster is then framed as god's punishment for human sins.

The truth is that we are awfully close to disaster. That too has happened before many times I might add, but NEVER on a planetary scale. That is what makes this looming disaster so much more worrisome than any previous one we have faced. And when we get closer to disaster, real and artificial shortages, and combinations of both will become more frequent. Initially, all will eventually dissipate and give the naysayers plenty of ammunition to scold those who worry, but in the end, shortages will become so frequent, with so little normal time in between that everyone will get the picture. Unfortunately, by then it will be too late to take effective measures and avoid a widespread and deep catastrophe.

food and survival

As any mother knows, food is essential to well-being and survival. Produce more food and more people will appear. Furthermore, more will survive into adulthood and more will reproduce and have healthy offspring. Food is the single most important contributor to longer and healthier lives. Well-fed people get sick less and often, and when they do, they survive better than those who are not. The main reason we have so many people on the planet today is because the Green Revolution of the 1950s produced so much excess food. That food was produced thanks to a wealth of cheap fossil fuels.

But food alone is not enough and food prices do matter. If people cannot make a profit, food ends up being wasted. Farmers have thrown away food time and again when they felt their margins were insufficient. As for feeding the world, there has always been enough food to feed everyone alive, but the number of hungry has stayed more or less the same throughout. These people are hungry, not because there is a lack of food, but because they cannot afford to buy it. They starve while we in the West battle with obesity.

Given how world economies work, producing more food will not solve the hunger problem, ever. If we make good food available for cheap prices, then people will quickly reproduce more and more of their offspring will survive. That will lead to higher demand and at some point production improvements, which are rather linear, won't be able to keep up with population growth, which is more exponential in nature.

Chances are things will get worse, a lot worse, before they get better. We already have a severe food crisis and instability is rising around the globe. Prices are rising because of increasing fuel costs, the lure of biofuels, and the increasing demand for higher quality, lower yield items such as beef. All these have some relationship to global warming or remedies for global warming, and all will continue to cause deterioration in the food supply for decades to come. The days of cheap fuel are over and so are the days of cheap food.

Many important food sources are also overextended. Fish stock are at capacity or past capacity and some have predicted the oceans will be empty within 50 years. Given how many people depend on fish as a source of protein, massive starvation is likely to ensue. But global warming -whether man made or not- is also going to rear its ugly face. Some of the best food producers of today are likely to suffer the most. Countries like India will be affected in major ways and that will have repercussions around Asia. With over a billion people, most of them young, and many educated with access to technology, this could give rise to a rather interesting fight.

Already the anger of the world is directly almost exclusively at the US. Many high level foreign officials have used bad words to describe our venture into biofuels. Lots of people around the world look at America as a nation of overweight individuals driving around in oversized cars who show no sign of concern for their starving neighbors. Oh no, rather than help, the Americans are now growing and burning food in their oversized engines to sustain their bad driving habits. And with Congress looking to please constituents in an election year, don't expect anything but more money going into biofuels.

Many Americans are aware of the deteriorating status the country enjoys abroad. But too few are paying attention to this next wave of anti-American sentiment that is building. How would you feel if you saw people hoarding corn for their SUV while your family is starving to death?

invisible crisis

Just before the housing bubble burst, things looked really good. Excitement was in the air. Credit was easy to come by and housing tracts appeared out of nowhere as so many mushrooms before dawn. There were new houses everywhere you looked, and more were being built all the time. Furthermore the houses changed hands in the blink of an eye. Everyone was getting richer and richer all the time.

Very few people had an inkling that anything was wrong or could go wrong. The prevailing mantra was housing will always go up. It has always gone up and it will always go up. Never mind that the population is aging, never mind that many people already owned two and three houses. Housing always goes up. There is no such thing as a national housing market, all housing is local, and local looked good. And then the bombshell hit.

Currently, there is a food crisis. It is hardly visible from where we are and as one San Diego reader to another blog remarked: supermarket shelves are full and people are obese. What food crisis? But the food crisis is as real as the housing crisis. It just hasn't hit the US yet. Being one of the richest countries in the world has its advantages you could say. But it will hit and it will hit hard. First the farmers will benefit some more, and then everyone will be in dire straits. Everyone except the well to do. Unless of course things really go out of hand. You never know.

One thing about bubbles and catastrophes of this kind is that things always look the best right before the implosion. Witness all the overweight people. Witness all the wasted food everywhere. Nevertheless, we are about to experience a major food implosion. Many countries have already seen riots and more riots are sure to come. Better get ready for the storm. Food prices are rising at astronomical rates, and they are rising to levels that will hurt middle class consumers. But it won't stop there. There will be shortages too. It won't be pretty. And there won't be any quick solutions. So much for biofuels you might say.