Monday, April 14, 2008

The Consequences of Insanity

Two articles, How Hunger Could Topple Regimes in Time and Food Inflation, Riots Spark Worries for World Leaders in the Wall Street Journal, detail the growing unrest in developing countries related to food price increases.

Recall in my post Warm Weather Causes Terrorism?, I discussed various modern intellectuals, viz., Sir Crispin Tickell (love writing that name), Professor of 'Peace Studies' Paul Rogers, and even Osama Bid Laden who were claiming that global warming would lead to terrorism since desertification and rising sea levels (not making that up) would lead to food shortages and chaos in third world countries which then would lead them to terrorism etc. Yet, ironically, the above article quotes policy makers at the IMF and World Bank who have now "singled out U.S. policies pushing corn-based ethanol and other biofuels as deepening the woes" since it is believed that the biofuels are diverting production from corn (uh, food). Didn't the U.S. government push biofuels to reduce our dependence on the dreaded fossil fuels to prevent global warming (excuse me, "climate change" as evidence shows the earth is not warming) and the alleged apocalypse forecasted by Nobel Prize winner Al Gore? Yet, those policies are helping to drive the cost of food higher and leading to chaos. Hmmm.

Of course, we know the diversion of crop usage is only part of the problem. The core problem rests in the government's control of the money supply through the Federal Reserve system as I discussed in my last post. The government's inflation of the money supply is leading to increasing prices everywhere.

So, what is the solution? Is it elimination of world central banks and a return to private banking and a gold standard to end global inflation? Is it removing statist policies that encourage the production of biofuels? Is it encouraging and supporting third world countries to adopt free market policies like protecting individual property rights and contracts to attract foreign investment and trade with wealthier nations so that they become first world countries? Is it removing price controls and export restrictions to encourage supplies to go where they are most needed? In short, isn't the solution laissez-faire capitalism? Afterall, were there food riots in Las Vegas this week since it is located in a desert? For some reason, there is plenty of food in semi-capitalist desert cities, but there is no food in corrupt, despotic desert countries. Might there be a connection?

So what do the brilliant policy makers at the IMF and World Bank think is the solution?

"The World Bank plans to nearly double its agricutlutral lending to Africa next year to 800 million, and is urging members to ramp up relief for hard-pressed nations. "

And where will the World Bank get this money? Of course, the governments that contribute are those who tax people's earnings then give it to the World Bank who then gives it away to people who haven't earned it and who can't pay it back (not to mention the fact that most of these loans are stolen by corrupt government officials). And when there is not enough tax dollars, how does the U.S. fund its budget deficit? It funds it through government securities which are purchased by the Federal Reserve Bank with money that it creates out of thin air which leads to inflation and higher prices for everything thus necessitating more loans to developing countries who can't afford anything ad infinitum. Does a system where bizarre government policies that affect production and debase the currency through statist monetary intervention all to fund more government intrusion into the lives of everyone sound like laissez-faire to you? Well, if you work for Time magazine it certainly does. Quoting Tony Karon from the above link:

The social theories of Karl Marx were long ago discarded as of little value, even to revolutionaries. But he did warn that capitalism had a tendency to generate its own crises. Indeed, the spread of capitalism, and its accelerated industrialization and wealth-creation, may have fomented the food-inflation crisis - by dramatically accelerating competition for scarce resources. The rapid industrialization of China and India over the past two decades - and the resultant growth of a new middle class fast approaching the size of America's - has driven demand for oil toward the limits of global supply capacity. That has pushed oil prices to levels five times what they were in the mid 1990s, which has also raised pressure on food prices by driving up agricultural costs and by prompting the substitution of biofuel crops for edible ones on scarce farmland. Moreover, those new middle class people are eating a lot better than their parents did - particularly more meat. Producing a single calorie of beef can, by some estimates, require eight or more calories of grain feed, and expanded meat consumption therefore has a multiplier effect on demand for grains. Throw in climate disasters such as the Australian drought and recent rice crop failures, and you have food inflation spiraling so fast that even the U.N. agency created to feed people in emergencies is warning that it lacks the funds to fulfill its mandate.

The reason officials such as Zoellick are sounding the alarm may be that the food crisis, and its attendant political risks, are not likely to be resolved or contained by the laissez-faire operation of capitalism's market forces. Government intervention on behalf of the poor - so out of fashion during globalization's roaring '90s and the current decade - may be about to make a comeback.


Putting aside all of the bizarre contradictions of this last quote let me just summarize his point: it's all capitalism's fault and the solution is Karl Marx and more government intervention. The definition of insanity is "a relatively permanent disorder of the mind". Those that think the worlds' problems are a consequence of capitalism and look to Marx for solutions can no longer be dismissed as simply making an honest error. I submit that given the overwhelming evidence and facts against this position, one would have to literally be insane to advocate it.

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