Monthly Archives: July 2010

Late Imperial Holocausts

In his disturbing but brilliant book Late Victorian Holocausts, Mike Davis documents the famine that spread through India during the late years of the British Raj.  Although granaries in many parts of the colony were overflowing, Britain had constructed a transportation network designed primarily to extract food from the rural hinterland.  Grain was transported across the sub-continent along the British-built railway lines, to urban command and control centers such as Calcutta, Bombay, and Madras, and then on cargo ships to Britain to support the government’s policy of cheap “corn” for the imperial homeland.  Just as Irish peasants had done during the potato famine, Indian peasants starved while their food was shipped off to their colonial masters.

Two years ago I wrote an article that was published in Counterpunch about the food crisis rippling across the world, leading to “tortilla” riots in Mexico City and bread riots in many other parts of the world.  At the time, I attributed the spiraling cost of basic foodstuffs around the world to the increasing costs of petroleum connected to speculation nd to the production of biofuels.  Large commercial farmers, I argued, would rather produce fuel than food when the former receives a higher price on global commodities markets.

It seems, however, that another factor was at work in the food riots of 2006-2008.  According to a recent article by Johann Hari in the British newspaper The Independent, the spike in food prices, which saw the price of wheat rise by 80%, the price of maize by 90%, and the price of rice by 320%, had another cause.  In order to explain this hitherto unacknowledged factor, we need to take a brief detour to understand how farmers around the world tend to use the market to try to protect themselves from the inevitable risks associated with raising crops.

To protect themselves from vagaries of weather, pests, etc., farmers in wealthy countries for over a century have sold their produce to traders at the end of the harvest season for a fixed price.  If they produce a bumper crop, they’ll make less than they might have if they’d sold their crops on the open market, but if they have a tough year, they’ll make more money than they would have independently and be insulated from the inherent risks of farming.

Such forms of trading in risk once used to be tightly regulated.  Throughout the 1990s, however, powerful speculators such as Goldman Sachs lobbied hard for deregulation.  Food suddenly became a fungible investment vehicle.  It was sliced and diced in the same way as risky mortgages were in the U.S.  Contracts between farmers and traders metamorphoses into “derivatives” that could be bought and sold by investors around the globe.

When the U.S. real estate market began to tank in 2006, speculators stampeded into the global food market.  The upshot was a huge spike in the price of basic foodstuff.  As Hari notes, food crops that were not traded on the open market remained stable while the cost of those that were shot through the roof.  The result was mass starvation and food riots.


Filed under environment, imperialism

Letter from London

The hammer has not yet dropped.  London is enjoying an Indian summer before the onset of cold, hard times.  During my brief trip to the UK, a government document estimating 1.3 million job losses as a result of the recently released budget was leaked to the press.  Right now in sites of culture like the Tate Modern and fleshpots like Shoreditch, this looming downturn is invisible and apparently weighs little on the minds of the average Briton.  But the downturn is coming nonetheless.  How did the UK get to this point of limbo?

In a recent conversation with Tim Lawrence, a British friend, in a very trendy pizzeria in London, much of this background came clear.  Going into the election, the PM, Gordon Brown, seemed exhausted both personally and ideologically.  After all, he was the architect of the policies of deregulation that led to the credit crisis and the recession.  Labour was in power for over a decade, and seemed to have few new ideas.  What’s more, Brown had played fall guy for Tony Blair’s love affair with the City and international finance.  True, Labour did spend huge sums on social programs like the National Health Service and Education.

This became the main theme of the election season: wasteful public spending.  But this attack, so skillfully wielded by the Tories that Gordon Brown actually seemed to accept the terms leveled against him, was based on totally false premises.  The UK is running a deficit of around a trillion pounds sterling.  But roughly 700 billion of this figure is the product of the credit crisis created by irresponsible and predatory lending practices and irresponsible speculation by banks.  So once again the left hand of the state was blamed for the practices of the financial sector which has come over the last thirty years to dominate the UK’s economy more and more.  The answer to Britain’s financial crisis thus becomes massive cuts to the public sector.

Of course it didn’t have to go this way.  In the last days of the election, Brown began speaking clearly about fairness and social justice.  The televised debates between him, the Tory candidate David Cameron, and Nick Clegg surprised everyone by being extremely contentious and exciting.  Many of my friends in the UK felt that the Liberal Democrats had some strong proposals, including changing the British constitution to allow proportional representation.   The result was a groundswell of support for the Liberal Democrats going into the election.  Liberal papers like The Guardian advised their readers to vote for the Lib Dems in order to secure social change.  But Clegg made it clear that he wanted virtually nothing to do with Brown, and so the possibility of some kind of rainbow coalition between the Lib Dems, Labour, and the Green Party was never in the cards.

The election resulted in a hung parliament.  The electorate, in other words, gave no clear mandate to any party.  Nevertheless, the Conservatives managed to convince the Lib Dems to side with them, and a kind of love fest ensued between Cameron and Clegg, who have similar very posh backgrounds.  Many progressives in the UK still felt hopeful since they saw the Lib Dems as exercising a moderating influence on the Tories and pushing forward their positive agenda for the UK by getting into power.

But now the Tory budget has been released.  They propose to completely eliminate the country’s debt in five years.  They will do this through massive cuts in areas like education and the NHS.  It’s clear, according to my friend Tim Lawrence, that these moves are purely ideological.  After all, Obama, by contrast, has been arguing a fairly standard Keynesian line – deal with the economic downturn by stimulating the economy through government spending.  The Tories have adopted a diametrically opposed line, one that seems to be emerging as the new global status quo.  It seems that every country is going to be Greece from now on.  Incidentally, Paul Krugman just wrote a very good editorial that totally debunks the idea that fiscal austerity is the solution to the current economic downturn.

Of course the silver lining may be that the electorate never voted for such draconian austerity policies.  The context is therefore very different from when Thatcher acceded to power after the turbulent years of the 1970s.  Public indignation at the coming drastic budget cuts may very well explode, making the protests and vibrant cultural resistance of the Thatcher years pale in comparison.

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Filed under class war, democracy