Food derivatives cause of mass starvation

[commandlinegamer]

According to Johann Hari, writing in the Independent:

http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-how-goldman-gambled-on-starvation-2016088.html

[kevinquinnyo]

Food derivative?

Are you sure they aren't actually referring to a weather derivative?

And also, Farmer Giles doesn't actually sell his physical crop to Goldman Sachs, or some hedge fund manager, he just buys "insurance" on the payout of 10k, regardless of the season's output. That way can be assured that he will make 10k, no more, no less, and plan for it. The people who speculated at 30k will eat the loss. Farmer Giles will still sell the food at the market rate.

Right? What am I missing here?

edit: Is what's missing from the article, and what I'm missing, the fact that whoever bought the derivative at the ridiculously inflated bubble price, defaulted, and Giles never got his money? Or what?

[kevinquinnyo]

hold on, i'm just confused.
:confused:


I hate derivatives. How does this work again?

[Puppycow]

According to Johann Hari, writing in the Independent:

http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-how-goldman-gambled-on-starvation-2016088.html

I prefer to blame the Catholic Church.

Starving Third World Masses Warned Against Evils Of Contraception (http://www.theonion.com/articles/starving-third-world-masses-warned-against-evils-o,50/)

SÃO PAULO, BRAZIL—During a visit to the teeming slums of São Paulo Monday, Cardinal Anthony Bevilacqua warned the city's starving masses against the evils of contraception, urging them to "be fruitful and multiply" and do "everything in [their] power" to resist the mortal sin of birth control.

"In Genesis, God commands us to be fruitful and multiply, to fill the Earth and subdue it, and have dominion over the fish and birds and every other living thing," said Bevilacqua, speaking before more than 200,000 malnourished São Paulo slum dwellers. "It is not for man to decide whether the world should have more babies than it can reasonably support. God will decide whose seed shall find purchase and when."

The gathering, which took place on a muddy hillside crowded with tin-and-tarpaper shacks, was one of many to take place around the world Monday—a day Pope John Paul II declared World Childbirth Day.

"No wonder we are plagued by disease and high infant mortality," said São Paulo father of eight Oranjinho Cruz, speaking from his dilapidated one-room home, which lacks electricity or potable water. "God has been punishing us for trying to prevent the miraculous gift of conception."

Or, the anti-science, anti-corporate hippies who are against more productive agricultural techniques and genetically modified crops.

If we're going to play a blame game, there's plenty of other villains to blame too.

[kevinquinnyo]

I prefer to blame the Catholic Church.

Starving Third World Masses Warned Against Evils Of Contraception (http://www.theonion.com/articles/starving-third-world-masses-warned-against-evils-o,50/)



Or, the anti-science, anti-corporate hippies who are against more productive agricultural techniques and genetically modified crops.

If we're going to play a blame game, there's plenty of other villains to blame too.

Well of course. Luddites are always to blame, hippie or not

[quarky]

Hippies are cool with the blame.
That's what's so great about hippies.

Blame some today!

[Aepervius]

Food derivative?

Are you sure they aren't actually referring to a weather derivative?

And also, Farmer Giles doesn't actually sell his physical crop to Goldman Sachs, or some hedge fund manager, he just buys "insurance" on the payout of 10k, regardless of the season's output. That way can be assured that he will make 10k, no more, no less, and plan for it. The people who speculated at 30k will eat the loss. Farmer Giles will still sell the food at the market rate.

Right? What am I missing here?

edit: Is what's missing from the article, and what I'm missing, the fact that whoever bought the derivative at the ridiculously inflated bubble price, defaulted, and Giles never got his money? Or what?


I think the article is bunk unless they omited something.

The derivative has nothing to do with the price of the food directly. it *speculate* that the food price will rise above the derivative price itself, if I understood corectly, and if you overshoot the price the food will sell, you lose money. It is quite clear that the price of the food will then drive the price of the derivative. But I utterly fail to see how the price of this "insurance" has any bearing on the market price (the feedback loop in the article theory). Pumping the derivative price to ridiculous high will not help if food is overabundant and nobody buy it. And selling it cheap will not do anything is food is rare and high price... I think this is just one such article using the actual tactic of cranks : pretend there is some research from a so called "professor" but never show a mechanism.

[Aepervius]

Hippies are cool with the blame.
That's what's so great about hippies.

Blame some today!

I prefer to "blame canada" :P.

[quarky]

I prefer to "blame canada" :P.

Canada is a hippy.

[Beerina]

I thought the cause of mass starvation were the kleptocracies and wars of those regions.


Go figure.

[Puppycow]

I thought the cause of mass starvation were the kleptocracies and wars of those regions.


Go figure.

Impossible. The villain is always a greedy Western capitalist. Or a Jew. Goldman Sachs sounds like maybe it fits both categories. Perfect.

[geni]

Food derivative?

Are you sure they aren't actually referring to a weather derivative?

And also, Farmer Giles doesn't actually sell his physical crop to Goldman Sachs, or some hedge fund manager, he just buys "insurance" on the payout of 10k, regardless of the season's output. That way can be assured that he will make 10k, no more, no less, and plan for it. The people who speculated at 30k will eat the loss. Farmer Giles will still sell the food at the market rate.

Right? What am I missing here?

It's pretty clear they are talking about futures rather than derivatives.

[geni]

I thought the cause of mass starvation were the kleptocracies and wars of those regions.


Go figure.

No. Outside of noth korea and zimbarwe most of the world has got the hang of aranging one way or another for enough food to be around. It takes something unusual these days for them not to be able to manage that.

[geni]

I think the article is bunk unless they omited something.

The derivative has nothing to do with the price of the food directly. it *speculate* that the food price will rise above the derivative price itself, if I understood corectly, and if you overshoot the price the food will sell, you lose money. It is quite clear that the price of the food will then drive the price of the derivative. But I utterly fail to see how the price of this "insurance" has any bearing on the market price (the feedback loop in the article theory).

If I can buy insurence cheaply this means I can risk paying more for futures. I can also risk buying more of them. This means that I've effectively forced third parties to use me or people like me as a middle man. Since the buyer in this case doesn't have much of a food reserve and will suffer signficant negative impacts if they fail to buy they are going to struggel to keep the price down.

[Toke]

The article does not sound like news.
There were a lot of money slushing around after the housing crack, it caused a spike in prices of oil and food.

I have no idea how to put a shorter leash on the marked forces to prevent something like this.

[PixyMisa]

Well, you can apply socialism until everyone is starving all the time. That works. For small values of "works".

[geni]

Well, you can apply socialism until everyone is starving all the time. That works. For small values of "works".

Unless they go all out stalinist communist states have tended to be able to feed themselves. Even Cuba manages it.

[stilicho]

Unless they go all out stalinist communist states have tended to be able to feed themselves. Even Cuba manages it.

Cite?

The issue may be the quality and quantity hard-line communist regimes are able to provide their citizens. While the price may be set nominally low, the real price is much higher on the black market. Cubans still stand in bread lines reminiscent of the Great Depression everywhere else in the world.

[geni]

Cite?

http://en.wikipedia.org/wiki/List_of_famines#20th_century

Note that the post 45 fammines tend to be in non communist countries and those that were tended to be under either literaly under stalin or under stalinist type leaders.


The issue may be the quality and quantity hard-line communist regimes are able to provide their citizens.

Quality mostly but thats unrelated to stavation. Until you've got the stavation problem solved you don't get people complaining that they have no bananas.


While the price may be set nominally low,


You might want to consider what EU and US subsidies do in the area of nominal pricing. There are very few countries where the nominal price of food isn't artificialy low.


the real price is much higher on the black market. Cubans still stand in bread lines reminiscent of the Great Depression

But they don't actualy stave. For that these days you have to see the various nominaly capitalist countries in africa.



everywhere else in the world.

You missed the food riots in various countries last year.

[Toke]

Well, you can apply socialism until everyone is starving all the time. That works. For small values of "works".

The subject here is a specific problem with marked economy, one that can, as you might be pointing out, be solved by most versions of socialism.

Socialism have it´s own disadvantages, depending on version.


Getting a mixed exonomy right is a bit of a challenge.
Snarky comments are not really helpfull.


(My current vessels internet connection is irregular, I will have days without logging on.)

[stilicho]

http://en.wikipedia.org/wiki/List_of_famines#20th_century

Note that the post 45 fammines tend to be in non communist countries and those that were tended to be under either literaly under stalin or under stalinist type leaders..

If the only two choices were to live in Cuba or Eritrea then you might have a point.

[drkitten]

If the only two choices were to live in Cuba or Eritrea then you might have a point.

His point is that if you're talking about "starvation," then communism isn't that bad a system.

In a kleptocracy, starvation is a real problem. Under communism, everyone seems to get enough to eat, but it also tends to be a rather bland and boring diet. Which almost everyone from the kleptocracy would find a major step up.

Capitalism works well only if you keep the inherently kleptocratic tendencies in check.

[stilicho]

His point is that if you're talking about "starvation," then communism isn't that bad a system.

In a kleptocracy, starvation is a real problem. Under communism, everyone seems to get enough to eat, but it also tends to be a rather bland and boring diet. Which almost everyone from the kleptocracy would find a major step up.

Capitalism works well only if you keep the inherently kleptocratic tendencies in check.

Assuming that kleptocracy and communism (or a command economy) are not mutually exclusive. I think this is why he or she carefully distinguished "communism" from "Stalinism".

The problems facing, say, Eritrea are a lot more severe than something as ephemeral as "capitalism v communism". It's more like a kleptocracy combined with militarism, lack of infrastructure, climate impact, gangsterism, etc, etc, etc.

Proponents of "communism-as-cure" like to avoid including the disaster of forced collectivisation and decry it as "Stalinist" or whatever. Forced collectivisation led directly to mass starvation with few other mitigating factors such as climate or warfare to affect its severity.

[drkitten]

Assuming that kleptocracy and communism (or a command economy) are not mutually exclusive. I think this is why he or she carefully distinguished "communism" from "Stalinism".

The problems facing, say, Eritrea are a lot more severe than something as ephemeral as "capitalism v communism". It's more like a kleptocracy combined with militarism, lack of infrastructure, climate impact, gangsterism, etc, etc, etc.

Proponents of "communism-as-cure" like to avoid including the disaster of forced collectivisation and decry it as "Stalinist" or whatever. Forced collectivisation led directly to mass starvation with few other mitigating factors such as climate or warfare to affect its severity.

Which supports geni's statement to which you originally objected -- "Unless they go all out stalinist communist states have tended to be able to feed themselves. Even Cuba manages it." It also manages to invalidate Pixy's statement to which geni rightly objected -- "you can apply socialism until everyone is starving all the time. That works. For small values of "works"."

Socialism, communism, and Stalinism are three different but related beasts.

And which, in turn, makes the "communism-as-bogeyman" meme you were promoting look rather silly. I'm glad you've recognized that and are backing away from it.

[stilicho]

Socialism, communism, and Stalinism are three different but related beasts.

Communism doesn't include forced collectivisation? This is actually news to me. Any cites?

[stilicho]

Which supports geni's statement to which you originally objected -- "Unless they go all out stalinist communist states have tended to be able to feed themselves. Even Cuba manages it." It also manages to invalidate Pixy's statement to which geni rightly objected -- "you can apply socialism until everyone is starving all the time. That works. For small values of "works"."

Hey, wait a second. Eritrea has a command economy:

Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country, accentuated by the recent implementation of restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice (PFDJ). Like the economies of many African nations, a large share of the population - nearly 80% - is engaged in subsistence agriculture, but they produce only a small share of total output.

And...

The government strictly controls the use of foreign currency by limiting access and availability. Few private enterprises remain in Eritrea. Eritrea's economy depends heavily on taxes paid by members of the diaspora.

(Source: https://www.cia.gov/library/publications/the-world-factbook/geos/er.html )

Here's what the New Internationalist says about their president:

A couple of years after the end of the war, demobilized women fighters complained to the President about the rising rate of divorce in the military – former male fighters preferring well-dressed ‘city girls’. To their amazement, Afwerki’s response was: ‘Perhaps you should wear dresses and apply lipstick more often.’

(Source: http://www.newint.org/columns/worldbeaters/2004/03/01/isaias-afwerki/ )

OK, that wasn't his economic programme but try this:

Afwerki, who once took pride in being a humble comrade among his people, has shed his casual attire for fancy suits and is developing a taste for autocracy.

Here's another tidbit:

The three economists met President Isaias Afwerki in his office in Massawa. No sooner had Dr. Woldai Futur began with "Mr. President, the economy of the nation is in dire straits…" when Isaias cut him off with, "you are such a weakling! What do you know about economics? Who told you the economy is in bad shape, the American government?" The two others attending the meeting shuffled their paperwork and held their counsel. The meeting was over before it started and the three headed back to Asmara.

(Source: http://www.awate.com/portal/content/view/4524/3/ )

So what is Eritrea? A command economy? Certainly not a capitalist economy. The President is a "former" Marxist who doesn't seem to know very much about economics and changes his cabinet as often as he changes his suits.

[Toke]

Well, hardcore socialism/communism does a pretty good job at ensuring everyone basic, food, education and clothing.
So if your country is poor enough it might well be the best option. (not knowing anything about Eritrea, he could just be incompetent)

As you get richer it is time to change gradually towards marked economy, but of coerce leave essential services and infrastructure in public hands.

[stilicho]

Well, hardcore socialism/communism does a pretty good job at ensuring everyone basic, food, education and clothing.
So if your country is poor enough it might well be the best option. (not knowing anything about Eritrea, he could just be incompetent)

As you get richer it is time to change gradually towards marked economy, but of coerce leave essential services and infrastructure in public hands.

What so-called "market economies" or "capitalist systems" do instead is vigorously subsidise food prices and agrarian production. Combined with an efficient infrastructure and at least nominally competitive wholesalers and distributors, the effect is what most of us are used to. No food shortages, variety, and a relatively cheap price.

I like to look at individual countries instead of tarring everyone with some kind of brush. That way we can see if having a command economy is relevant or not. As it turns out, I'm having a hard time finding these "market economies" where people are starving. I picked one failed economy (that can't feed its people) at random and it's a socialist/communist/command/Marxist economy.

[Toke]

Sorry, "vigorously subsidise food prices and agrarian production"???

Well, I know that both the EU and US is doing this extensively, but are you sure that it is really kosher capitalism? :D
To me it sounds more like socialism/planned economy.

[stilicho]

Sorry, "vigorously subsidise food prices and agrarian production"???

Well, I know that both the EU and US is doing this extensively, but are you sure that it is really kosher capitalism? :D
To me it sounds more like socialism/planned economy.

The distribution network is still competition-based. I don't think anyone's had a real free market agrarian production base for probably a century or more. Even the political structure of institutions like the US Senate are favourably biased toward thinly populated rural states.

[Toke]

As it turns out, I'm having a hard time finding these "market economies" where people are starving.

Perhaps you overlooked the OP. :)

The tread is about how the marked economy can distort food prices through speculation and make people starve, in spite of an abundance of food.

[Skeptic]

Except for the fact that there isn't mass starvation anywhere that isn't cause by political upheaval, not by economics. The little flaw in the evil capitalist opressors theory is that it is precisely those third-world countries which had the MOST evil capitalist countries and corporations invest in them that are doing best, indeed, many of them (e.g., South East Asia, now China and India) either are, or are on their way, to leaving the third world. It's mostly "revolutionary fighters against the evil opressors" whose economy hovers above subsistence level.

[Skeptic]

Well, hardcore socialism/communism does a pretty good job at ensuring everyone basic, food, education and clothing.

If you're willing to ignore the mass starvation it caused in the Ukraine, China, North Korea, etc.

Nor do the millions sent to the gulags or reeducation camps seem to have much in the way of clothing or food.

But APART from THAT, hardcore communism worked very well to those who managed somehow to not starve or end up in the gulags. Why, sometimes, there was still some low-grade hamburdger meat left even after waiting seven hours in a line in sub-freezing temperatures!

[stilicho]

Perhaps you overlooked the OP. :)

The tread is about how the marked economy can distort food prices through speculation and make people starve, in spite of an abundance of food.

Except for the fact that there isn't mass starvation anywhere that isn't cause by political upheaval, not by economics.

I read the OP.

The counterargument presented was that Cuba, a command economy, is able to feed its people in spite of the hijinks of the commodities markets. But Eritrea, also a command economy, could not. So the existence of a command economy as a mitigation against starvation can't be consistently right.

If you're willing to ignore the mass starvation it caused in the Ukraine, China, North Korea, etc.

Those don't count because they were "stalinist".

[Toke]

Yea, yea, yea, I am aware that commie dictators have perpetrated some of the worst crimes in human history.

That does not change that this specific problem with speculation can be stopped by a socialist approach to food production.

If socialism were so bad, why do both the EU and the US have farming subsidiaries to stabilise their food production?

[stilicho]

That does not change that this specific problem with speculation can be stopped by a socialist approach to food production.

If socialism were so bad, why do both the EU and the US have farming subsidiaries to stabilise their food production?

Subsidies are a feature of market economies and not necessarily of command economies. Investors and producers are provided incentives like subsidies or tax cuts.

In a command economy (say, Eritrea or Cuba) you're told what to produce. You don't have a choice between sugar beets for export or maize for domestic consumption. Sometimes it appears to work (eg Cuba) but most of the time it doesn't.

More importantly, in a command economy you don't have to subsidise or provide tax cuts. That saves money that you can use to import commodities you don't produce yourself. Needless to say, that means most of those imports go to President Stilicho and my friends, family, and colleagues. Nobody else can afford them because they can't trade their production on the open market in return for currency.

Here's a closer look at the Cuban Shangri-La where everyone is happy and plump:

It is hard to calculate the monthly food expenses of rationed goods because all items are not always delivered on time and because, in some instances, they are scheduled to be delivered bimonthly.

...

The average monthly wage in Havana in 1998 was 217 pesos (CEE, 1998, p. 107). Therefore, food expenses in the rationed market for a family of four, under the assumptions made, amounted to around 70% of the monthly wage if only one person was working and about 18% of combined monthly wages if all four members of the household were employed.

...

The total food bill, therefore, amounted to 656.70 Cuban pesos for the entire family, or 164.17 Cuban pesos per person.

...

Despite the fact that rationed products are sold at subsidized prices (fixed throughout the country), their supply always falls short. Since, according to the majority of Cubans, the rationed items are not enough to feed a person for the entire month, those who can afford it are forced to fulfill their needs for the remainder of the month (usually about two weeks) through purchases in other outlets where prices are much higher and/or where the purchases must be made with U.S. dollars.

(Source: http://edis.ifas.ufl.edu/fe482 )

I am not sure you're prepared to be rationed your income so that roughly seventy per cent was earmarked for your food and that you have no choice over its composition. I am also not certain you're prepared to not have enough but to report that you do.

I think you're probably like me and prefer a free market economy with necessary producers' subsidies, investment incentives, and tax cuts. These are not what happens in Cuba.

[Toke]

Subsidies are a feature of market economies and not necessarily of command economies. Investors and producers are provided incentives like subsidies or tax cuts.


So you do accept that the free market require government interference, to function optimally. :)

What is your problem with the OP?

The free trading in food derivatives drove the price to absurd levels, don't you think it could and should have been stopped by governments?

[MikeMangum]

Well, hardcore socialism/communism does a pretty good job at ensuring everyone basic, food, education and clothing.

Hrmm. I guess the story that I read in the BBC about some North Koreans surviving famine by eating grass and tree bark was about the capitalist North Korea in parallel universe #12?

Food, education, and clothing are wealth. Socialism/communism has proven to be one of the absolute worst ways to produce wealth of any type.

[MikeMangum]

http://articles.latimes.com/2010/jul/16/world/la-fg-north-korea-health-20100716
The human rights group, citing World Health Organization statistics, found that North Korea spent under $1 per capita on healthcare, the lowest in the world. The global average was $716 per capita.

The collapse of the healthcare system compounds the misery of a population that is chronically malnourished and suffering from digestive problems caused by eating weeds, tree bark, roots, corn husks, cobs and other "substitute" foods.

The poor diet also weakens the immune system, making people susceptible to diseases such as tuberculosis, which afflicts at least 5% of the population, according to the report. Meanwhile, about 45% of children under the age of 5 suffer stunted growth because of malnutrition.

[MikeMangum]

If socialism were so bad, why do both the EU and the US have farming subsidiaries to stabilise their food production?

They don't. Have farming subsidies 'to stabilise their food production', that is. They do have subsidies to benefit a fairly politically powerfull special interest group, though.

[stilicho]

So you do accept that the free market require government interference, to function optimally. :)

What is your problem with the OP?

The free trading in food derivatives drove the price to absurd levels, don't you think it could and should have been stopped by governments?

Having a market economy does not mean you have no government input. I don't think there's any such thing as a "pure" free market and never has been.

My issue with the OP is what I've suggested above. The price of food staples is dependent on a lot of different things. The economies that suffered the most did so in an environment of instability. Commodities market speculation does not directly cause anyone to starve any more than real estate speculation directly causes anyone to become homeless.

[Toke]

Having a market economy does not mean you have no government input. I don't think there's any such thing as a "pure" free market and never has been.

No, fortunately not. :)

My issue with the OP is what I've suggested above. The price of food staples is dependent on a lot of different things. The economies that suffered the most did so in an environment of instability. Commodities market speculation does not directly cause anyone to starve any more than real estate speculation directly causes anyone to become homeless.

Well, speculation without government to limit it have recently cause people quite a lot of trouble affording food.
The free marked got out of hand.

[Toke]

Hrmm. I guess the story that I read in the BBC about some North Koreans surviving famine by eating grass and tree bark was about the capitalist North Korea in parallel universe #12?

It looks more like some insane version of feudalism to me.

Food, education, and clothing are wealth. Socialism/communism has proven to be one of the absolute worst ways to produce wealth of any type.

More or less correct, but that does not stop it from preventing the specific problem of speculation. :D

If you look at Cuba you will find a dirt poor dictatorship, that have managed to get food, education and healthcare for it's population. They have shown it to be a good way to get from zero to a reasonable minimum for all. That gives a good basis to switch to mixed economy from. (which they are long overdue for.)

If you look at my country, you will find a very successful mixed economy.

[stilicho]

Well, speculation without government to limit it have recently cause people quite a lot of trouble affording food.
The free marked got out of hand.

I'm going to have to ask you for evidence, Toke. The commodities markets are based on an independent and fairly dispassionate assessment of producers' ability to meet or exceed expectations.

There are almost unlimited reasons for poverty and privation. An independent assessment, an "insurance policy" for want of a better term, is not one of them. Are automobile accidents caused by insurance contracts? Would starvation cease to exist if there were no commodities markets?

This is dangerously close to being classified as a conspiracy theory.

[stilicho]

If you look at Cuba you will find a dirt poor dictatorship, that have managed to get food, education and healthcare for it's population. They have shown it to be a good way to get from zero to a reasonable minimum for all. That gives a good basis to switch to mixed economy from. (which they are long overdue for.)

For each report you can provide (and you've provided none) I can provide an analysis indicating that Cuba cannot furnish all its citizens with basic needs. I did provide one, in fact, and I don't think you read it.

I don't have time to provide analysis of each constituency here but try a library for economic histories of Cuba, Portugal, Poland and Spain, as a few examples. You'll find that the combinations of turmoil and command economies caused undue hardship on their citizens at various points in their history. If you think a command economy mitigates against privation then you need to specify with data and/or analysis. You can't just say: "Well, Cuba feeds its people".