Ted Auch

From The Economist January 14th 2010

“Liberal democratic governments can make all manner of blunders, but they are less likely to commit mass murder. Amartya Sen, a Nobel prize-winning economist, has famously argued that no country with a free press and fair elections has ever had a large famine. And research by those three CFR scholars found that poor autocracies were at least twice as likely as democracies to suffer an economic disaster (defined as a decline of 10% or more in GDP in a year). With no noisy legislatures or robust courts to hold things up, autocracies may be faster and bolder. They are also more accident-prone.”

I wonder how someone who states that “…no country with a free press and fair elections has ever had a large famine.” wins a Nobel in anything let alone theology…..I mean economics. This is the argument you attributed to the economist Amartya Sen. Does Mr. Sen and The Economist for that matter not understand the dangers associated with conflating causation and correlation? Large famines are largely functions of climate, external demand, and agricultural subsidies. Are they related to free press? Doubtful if there is a linear connection. Are they related to fair elections? Probably but this is a correlation that I would not get passed peer-review.

This is a quote used more now than everything sans “Green Shoots” right now and it is purported to have been spoken by former Illinois Senator Everett Dirksen, although there is no question as to whether he ever said or wrote such words. Regardless of whether Mr. Dirksen did or did not construct this phase it seems an interesting thought given that the Obama administration is now discussing upping US food and agricultural aid to nations around the world to $5 billion annually.  Under the Bush administration this figure was about $2.3-2.7 billion. Now given the quote attributed to the late senator from Illinois this sum should ≈ real $$.

I and others contend that no where is this statement more false than with respect to international aid. Should we look to solve all the developing world’s problems, whether they be health or technology? Absolutely not these folks need to stand on their own 2 feet and it is time to clip their wings with respect to funding for weapons and war related infrastructure. However, the figures mentioned above account for 0.0181-0.0335% of our GDP ($14.93 Trillion FY 2008). At the ultra-macro level the US donates about 0.2-0.4% of GDP in toto (http://www.globalissues.org/article/35/us-and-foreign-aid-assistance#ForeignAidNumbersinChartsandGraphs).This is markedly less than the 0.7% of GDP agreed to by rich nations at the UN General Assembly……..in 1970! Yes it is true we donated $25 billion in 2008 as Official Development Assistance (ODA), which is ≥ Germany and the UK combined and realistically dwarfing every nation on an absolute scale. However, as any economist or pragmatic person would admit absolute values don’t say much, while relative figures say a ton.  The US ranks dead last among the 22 rich nations as a % of GDP. Pekka Hirvonen called this Stingy Samaritanism. The only nations that exceed the 0.7% target are Sweden, Luxembourg, Norway, Denmark, and the Netherlands (0.8-0.99% of GDP)……………..Damn Socialists!

Lets just quickly contrast this with Defense spending, which was 4.7% of GDP last year and has a 45yr average of 5.3% ($702-792 billion annually) (http://www.heritage.org/research/features/budgetchartbook/obama-budget-would-return-defense-spending-to-pre-911-levels.aspx). So, why don’t we just take 0.4% of defense and transfer it to international aid. This would still leave 3.73-4.33% of GDP for making tons of bombs, guns, missiles, tanks, etc. allowing us to continue to engage in mismanaged, ill-conceived, spineless, and pointless wars. How can you argue with that Bush, Cheney, et al?

Further folks like Peter Orzag the Director of President Obama’s Office of Management and Budget has noted that if we don’t get healthcare under control it will mushroom from 5% in 1960 to 20% of GDP sometime between 2020 and 2040. If we were to actually shear some of the fat from this beast we could give more generously, but that might actually require a national healthcare option that would apparantly run private industry out of business. However, this is hard to reconcile given that most in the private sector feel the US government would do a horrible job if they got in the business of healthcare. If this is so than what’s the problem?

We have a TRUE Axis of Evil in this country  Defense, Banks, and Healthcare/Big Pharmaceutical. Cutting these folks down to size even if that meant a 5-10% decrease in their nefarious profits, would permit the US government to cut taxes for Joe the Plumber (ie The Common Man and Woman!) and permit more giving to those around the world in desperate need of real aid. Not food in boxes or finished product but rather the tools and knowledge to make their own stuff and feed themselves by themselves.

I must admit rather reluctantly that I did a rough calculation of how much I gave in aid/donations last year and it came out to approximately 1-2% of my income. That is a figure that I really don’t know how to square with others as the data for individual households in this country is scant with respect to charitable donations.

So, it seems to me that a billion here, a billion there does not equal real money when it comes to international aid. This country owes it to the world to stop exporting so much defense related technology and get going on the stuff that makes countries function in the interim. That includes alternative NRG, agriculture, smart-growth, etc. and the myriad skill-sets they need to stop relying on external aid. Its the least we could do.

Dairy farmers are in real trouble and it isn’t the kind associated with stepping in a present left by the resident ruminants. No they will be facing serious decisions in the coming months and years, with many here in Vermont (32 since December 1 2008) already having decided to abandon business they have invested decades in. I am specifically speaking of organic dairy producers who have seen demand for their product climb from approximately 75 million pds. in 2006 to a high of 150 during the later stages of 2008 followed by a precipitous drop this year to 125 million pds. (http://www.nytimes.com/2009/05/29/us/29dairy.html?em) Sales growth has slowed from 20% last November to near zero presently, although projections range from 6 to 12.7%. Many organic farmers owe upwards of half a million dollars from conversion to organic.

Yet, the pain is not exclusive to organic farmers what with the extremely volatile (And getting more so! (http://www.nytimes.com/2009/01/02/business/02dairy.html?sq=dairy%20california&st=cse&scp=10&pagewanted=all)) price of milk declining from a high historical high of $19.13 per cwt in 2007 to $12.06 (-36%) presently. Couple this with a steady (1952-2004) and at times marked (1945-1950) aggregate inclination to move away from milk consumption here in the US. While it is true that some of this market decline has been nullified by the doubling of dairy consumption in developing countries and China from 33 in 2002 to 63 pds per year in 2007. Although as with CO2 they pale in comparison to our 580 pound annual habit. Yet, I would ask the Chinese already own a large portion of our debt do we really want them to control our farmers as well?

SO, is it all doom and gloom you may ask? Well the answer in my humble opinion is not so fast my friend! We have only to look inward at Green Mountain Dairy Farm in Sheldon, VT. where the Rowell brothers are getting the most out of their beloved bovines (http://www.nytimes.com/2008/09/24/business/businessspecial2/24farmers.html?scp=1&sq=methane%20vermont%20cow%20farm&st=cse). If we use their calculations and assume that 0.25 Kilowatt Hour (kWh) can be generated per dairy cow and we assume there are approximately 141,000 head in Vermont (1,498,100 in th Northeast) we would could potentially generate 35,250 kWh per day (374,525 in the Northeast) of electricty from our friendly ruminates here in Vermont. This translates to about 1,286.7 MW annually, which would provide electricity to 10% of Vermont housing units (311,434) or 12% of all households (240,634) (http://quickfacts.census.gov/qfd/states/50000.html; vermont-area-sheet-us-census-2005), which no matter how you slice it is not a trivial piece of the pie (Pardon the pun!). Assuming the average price of a kWh in VT is 12.5 cents (12.1 cents in NE (http://www.eia.doe.gov/neic/brochure/electricity/electricity.html)) and a 5-6 cent premium (ie 17.5-18.5 cents) we are talking about a net income of about $2,187,263, however, if scaling up of this type of effort increases efficiency by lets say 0.15 kWh revenue increases to $3,499,620.

Better yet if we use this process as a Heat Generating mechanism, which has been proven markedly more efficient for biomass relative to fuel or electricity the numbers inflate substantially with 27-35% of homes heated, 3,602.5 MW annually and $6,124,335 in revenue.

Yet, there is more and it involves looking to France a country and mindset that in many ways mirros ours here in Vermont. Folks in southeast France ever wary of financial institutions (Yeah those!) have taken to investing in Holsteins, which bring 4-5% returns annually, while basic French banks tend to offer 0.75 interest rates (http://www.nytimes.com/2009/05/12/world/europe/12cows.html?scp=4&sq=france%20cow&st=cse). Yeah I know this is much less than our banks, but the fact is that investing in a neighbor’s struggling dairy or beef operation would I presume give one far more satisfaction. Currently interest rates fluctuate between 1.6 for CDs and 8.8% for home equity. According to Pierre Marguerit managing director of a cattle investment firm in France “People have saved money and don’t want to waste it. Stocks have fallen a lot, and people see it. We need somewhere to put our money for a long-term investment, something more stable. At this difficult time, it’s a much better investment than real estate and much more tangible than the stock market. This is part of the patrimony.”

However, unlike traditional Wall Street related investments the folks in France are finding volatility indices are far lower for cows relative to the latter’s “Masters of the Universe”. The data out of France suggests that such relationships free upwards of 17% of capital for investments and improvement, which in many instances were relegated to the back burner in perpetude.

The fact is that our friends and neighbors in the dairy industry here in Vermont and throughout the country need our help now and I don’t believe they have ever attempted the types of legerdemain the suits in NY, London, and Hong Kong conjured up. They deserve our respect and support during these tough times, because unlike the auto industry they can’t stop feeding and milking their cows. There is huge potential in them there cow patties and it is time to harvest it. Lets show the country and the world the softer side of capitalism!

This past winter/spring many were overcome with a sense of fear centered on the peanut and pistachio industries and products derived from these 2 nuts. However, lost in the debate was the fact that most of the problem lay at the feet of big processors such as ConAgra, Nestlé, or the Blackstone Group. In a recent article in The Times Michael Moss (http://www.nytimes.com/2009/05/15/business/15ingredients.html?scp=1&sq=Food%20Companies%20Are%20Placing%20the%20Onus%20for%20Safety%20on%20Consumers&st=cse) noted:

“…corporations that supply Americans with processed foods are unable to guarantee the safety of their ingredients… Other companies do not even know who is supplying their ingredients, let alone if those suppliers are screening the items for microbes and other potential dangers, interviews and documents show. Yet the supply chain for ingredients in processed foods…is becoming more complex and global as the drive to keep food costs down intensifies.”

All the while communities reliant on pistachio production in California and the peanut producing capital of the US Blakely, GA are being hit as hard if not harder than Detroit and Flint, MI. It absolutely appropriate to be concerned about food safety, but I would just suggest we not act hastily in breaking our peanut butter habits, without contemplating the trickle-down cascade this type of pullback has on many economies may be devastating and more importantly may be permanent. The profit margin for the folks in Blakely is quite small, with many already out of business and small operations not seeing much light at the end of the tunnel.

Given that the FAO is predicting we will have to double global food production by 2050 misplaced bullying of the world’s farmers does no one any good (http://www.commondreams.org/headline/2009/01/26-8).

These are real people with real families and real worries. When they take their commodity to processors they assume (somewhat naively) that the latter will safely and efficiently get the finished product to market. However, the constant lengthening of the food-chain is allowing for infiltration by some who feel an allegiance to a board or stockholders. So, for example farmers in California have turned to regulating themselves, because the FDA has continuously failed to perform their responsibility (http://www.nytimes.com/2009/04/17/business/17leafy.html?scp=1&sq=To%20Fill%20Food%20Safety%20Gap,%20Processors%20Pay%20Inspectors&st=cse). As I said California farmers are relying on self-regulation out of desperation…Need I say more?

The point is that we need to accurately identify the culprit(s) responsible for recent agricultural scares and shine a light on their practices and obfuscation of the data. I would imagine based on recent accounts that light will shine not on the rows of corn, peanuts, soybeans, etc. in this country and around the world, rather it will be the multi-nationals whose short-term fiduciary responsibilities have put the jobs and lives of small-town America (You know real America!) at risk of extinction. Who will feed us then? Monsanto? Sweet! Supporting local agriculture is not just about warm & fuzzies it is about safety. Small-farmers have a greater love of what they do, tend to use less chemicals and hormones, greater sense of purpose, and strong affinity for their communities. I would imagine they also take more seriously what they feed their kids and themelves. Data is scant and an undestanding of Concentrated Animal Feeding Operations (CAFO) would probably lend some insight into how the latest swine flu mushroomed (http://www.chelseagreen.com/content/will-allen-we-need-food-and-farming-regulation-now/). Treating animals this way will eventually cost us dearly just as treating our farmers as if they actually wanted to make us sick!