Tuesday, November 25, 2008

Crash of '08: Bailout Stats

Here are some staggering statistics about how much money has been pledged on behalf of the U.S. taxpayer...and it may be worse than you realized. This graphical application from Bloomberg delineates the expenditures and promises (save for the latest guarantee to Citigroup). According to this article; each man, woman and child is on the hook for a cool $24k.

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and
Treasury Secretary Henry Paulson acknowledged the need for transparency and
oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

Bernanke’s Fed is responsible for $4.74 trillion of pledges, or 61 percent of the total commitment of $7.76 trillion, based on data compiled by Bloomberg concerning U.S. bailout steps started a year ago.

“Too often the public is focused on the wrong piece of that number, the $700 billion that Congress approved,” said J.D. Foster, a former staff member of the Council of Economic Advisers who is now a senior fellow at the Heritage Foundation in Washington. “The other areas are quite a bit larger.”


It should be noted that all of this money has not been distributed yet, and much is in the form of loans that theoretically should be paid back. However, I doubt we are anywhere near the end of the road on this, and there are plenty of new promises on the horizon.

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Monday, November 24, 2008

Global Trends 2025: Globalization and the Crash of '08


Here is the next installment of my review of Global Trends 2025. This excerpt examines how the 2008 financial crisis may affect world relations.

Globalization at Risk with the 2008 Financial Crisis?

As with most of the trends discussed in this report, the impacts from the financial crisis will depend heavily on government leadership. Proactive fiscal and monetary policies probably will ensure the current panic and likely deep national recessions will not turn into an extended depression, although reduced economic growth could slow globalization’s pace, increasing protectionist pressures and financial fragmentation.

The crisis is accelerating the global economic rebalancing. Developing countries have been hurt; several, such as Pakistan with its large current account deficit, are at considerable risk. Even those with cash reserves—such as South Korea and Russia—have been severely buffeted; steep rises in unemployment and inflation could trigger widespread political instability and throw emerging powers off course. However, if China, Russia, and Mideast oil exporters can avoid internal crises, they will be in a position to leverage their likely still sizeable reserves, buying foreign assets and providing direct financial assistance to still-struggling countries for political favors or to seed new regional initiatives. In the West, the biggest change — not anticipated before the crisis — is the increase in state power. Western governments now own large swaths of their financial sectors and must manage them, potentially politicizing markets.

The crisis has increased calls for a new “Bretton Woods” to better regulate the global economy. World leaders, however, will be challenged to renovate the IMF and devise a globally transparent and effective set of rules that apply to differing capitalisms and levels of financial institutional development. Failure to construct a new all-embracing architecture could lead countries to seek security through competitive monetary policies and new investment barriers, increasing the potential for market segmentation.
Observations

- This report is highly optimistic that these "proactive" measures will have a lasting positive effect on the world economic system. From my layman's viewpoint, the measures seem anything but proactive and coordinated, and very well could do more harm than good.

- I agree that there will certainly be calls for more protectionism and isolationism here in the US in the near term.

- A big question is how low commodity prices will drop, and how long they will stay there. (See deflation) Big energy producers will have fewer options with declining oil and gas prices. This could exacerbate internal strife in these nations.

- The nationalization of financial institutions certainly concerns me as well, and it is not clear that the financial sector is where these intrusions will end.


Other Global Trends Posts:
Global Trends 2025
Global Trends Update
Global Trends Update II
Globalization and the Crash of '08
Demographics of Discord
Timing is Everything
Winners and Losers in a Post-Petroleum World
Scarcity in the Midst of Plenty
Final Thoughts

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Thursday, November 20, 2008

Global Trends 2025: Update


The National Intelligence Council (NIC) has released its final version of the report Global Trends 2025: A Transformed World. (pdf here) Here are some initial assessments:

  • The whole international system—as constructed following WWII—will be revolutionized. Not only will new players—Brazil, Russia, India and China— have a seat at the international high table, they will bring new stakes and rules of the game.
  • The unprecedented transfer of wealth roughly from West to East now under way will continue for the foreseeable future.
  • Unprecedented economic growth, coupled with 1.5 billion more people, will put pressure on resources—particularly energy, food, and water—raising the specter of scarcities emerging as demand outstrips supply.
  • The potential for conflict will increase owing partly to political turbulence in parts of the greater Middle East.
I will be dividing my commentary into several posts over the coming days. I will begin by highlighting two sections that set the stage for the rest of the report. First, the report is compared to its predecessor, Mapping the Global Future: Report of the Intelligence Council’s 2020 Project.

The most dramatic difference between Mapping the Global Future: Report of the Intelligence Council’s 2020 Project and Global Trends 2025: A Transformed World is the latter’s assumptions of a multipolar future, and therefore dramatic changes in the international system. The 2025 report describes a world in which the US plays a prominent role in global events, but the US is one among many global actors who manage problems. In contrast, the 2020 report projects continued US dominance, positing that most major powers have forsaken the idea of balancing the US.

The two documents also differ in their treatment of energy supply, demand, and new alternative sources. In 2020, energy supplies “in the ground” are considered "sufficient to meet global demand.” What is uncertain, according to the earlier report, is whether political instability in producer countries, supply disruptions, or competition for resources might deleteriously affect international oil markets. Though 2020 mentions the global increase in energy consumption, it emphasizes the domination of fossil fuels. In contrast, 2025 sees the world in the midst of a transition to cleaner fuels. New technologies are projected to provide the capability for fossil
fuel substitutes and solutions to water and food scarcity. The 2020 report acknowledges that energy demands will influence superpower relations, but the 2025 report considers energy scarcity as a driving factor in geopolitics.

Both reports project probable strong global economic growth—fueled by the rise of Brazil, Russia, India, and China, absent major shocks. The 2025 report, however, assesses the likelihood of major discontinuities to be high, emphasizing that “no single outcome seems preordained” and that the next 20 years of transition toward a new international system are fraught with risks, such as a nuclear arms race in the Middle East and possible interstate conflicts over resources.

The scenarios in both reports address the future of globalization, the future structure of the international system, and the dividing lines among groups that will cause conflict or convergence. In both reports, globalization is seen as a driver so pervasive that it will reorder current divisions based on geography, ethnicity, and religious and socio-economic status.
Next, the hazards and pitfalls of attempting to foretell the future are examined. Predictions such as these are notoriously inaccurate, so a grain of salt is in order.
In the 20th century, experts forecasting the next 20 years—roughly the time frame of this study—often missed major geopolitical events, basing their predictions largely on linear projections without exploring possibilities that could cause discontinuities. Before WW I, while tensions between European “great powers” were on the rise, few had an inkling of major changes in the offing, from the extent of mutual slaughter to the downfall of age-old empires. In the early 1920s, few envisioned the lethal situation about to unfold, ushered in by the Great Depression, Stalin’s gulags, and an even more bloody world war encompassing multiple genocides. The postwar period saw the establishment of a new international system—many of whose institutions—the UN and Bretton Woods—remain with us. Although the bipolar and nuclear age did not lack war and conflict, it did provide a stable framework until the collapse of the Soviet Union. The development of a globalized economy in which China and India play major roles has opened a new era without clear outcomes.

Lessons from the last century, however, appear to suggest:

- Leaders and their ideas matter. No history of the past hundred years can be told without delving into the roles and thinking of such leaders as Vladimir Lenin, Josef Stalin, Adolf Hitler or Mao Zedong. The actions of dominating leaders are the hardest element to anticipate. At several junctures in the 20th century, Western experts thought liberal and market ideas had triumphed. As demonstrated by the impacts of Churchill, Roosevelt, and Truman, leadership is key even in societies where institutions are strong and the maneuvering room for wielding personal power is more constrained.

- Economic volatility introduces a major risk factor. Historians and social scientists have discovered a strong correlation between rapid economic change—both positive and negative—and political instability. The massive dislocation and economic volatility introduced by the end of the “first” globalization in 1914-1918 and the rise of protectionist barriers in the 1920s and 1930s, combined with the lingering resentments over the Versailles peace settlement, laid the groundwork for WW II. The collapse of multinational and ethnic empires—begun after WW I and continuing with the end of the colonial empires in the post-WW II period—also unleashed a long series of national and ethnic conflicts that reverberates today. Today’s globalization also has spurred the movement of people, disrupting traditional social and geographic boundaries.

- Geopolitical rivalries trigger discontinuities more than does technological change.
Many stress the role of technology in bringing about radical change and there is no question it has been a major driver. We—as others—have oftentimes underestimated its impact. However, over the past century, geopolitical rivalries and their consequences have been more significant causes of the multiple wars, collapse of empires, and rise of new powers than technology alone.


Other Global Trends Posts:
Global Trends 2025
Global Trends Update
Global Trends Update II
Globalization and the Crash of '08
Demographics of Discord
Timing is Everything
Winners and Losers in a Post-Petroleum World
Scarcity in the Midst of Plenty
Final Thoughts

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Wednesday, November 19, 2008

Mitt Romney on Detroit

From Mitt Romney's Op-Ed in the NYTimes:

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

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Tuesday, November 18, 2008

Where Do We Draw the Line?


Interesting look
at the potential for a Detroit bailout from George Will...

The answer? Do nothing that will delay bankrupt companies from filing for bankruptcy protection, so that improvident labor contracts can be unraveled, allowing the companies to try to devise plausible business models. Instead, advocates of a "rescue" propose extending to Detroit the government's business model for the nation -- redistributing wealth from the successful to the failed, an implausible formula for prosperity.
...

Some opponents of bankruptcy stress that it might terminate health-care coverage enjoyed by UAW retirees who are too young for Medicare. Think about that. If people want to retire before 65, or 35 for that matter, that is their business. But there is no public interest in protecting the luxury of retirement in the prime of life just because in palmy days a private contract between a union and a corporation established it as an entitlement for all seasons.

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Monday, November 17, 2008

Who is Getting the Bank Bailout Money?

Here's a list of the banks that have received funds so far:

10/28/2008 Wells Fargo & Co. San Francisco Calif. $25,000,000,000
10/28/2008 JPMorgan Chase & Co. New York N.Y. $25,000,000,000
10/28/2008 Citigroup Inc. New York N.Y. $25,000,000,000
10/28/2008 Bank of America Corp. Charlotte N.C. $15,000,000,000
10/28/2008 Merrill Lynch & Co. Inc. New York N.Y. $10,000,000,000
10/28/2008 Morgan Stanley New York N.Y. $10,000,000,000
10/28/2008 Goldman Sachs Group Inc. New York N.Y. $10,000,000,000
11/17/2008 U.S. Bancorp Minneapolis Minn. $6,599,000,000
11/17/2008 Capital One Financial Corp. McLean Va. $3,555,199,000
11/17/2008 Regions Financial Corp. Birmingham Ala. $3,500,000,000
11/17/2008 SunTrust Banks Inc. Atlanta Ga. $3,500,000,000
11/17/2008 BB&T Corp. Winston-Salem N.C. $3,133,640,000
10/28/2008 Bank of New York Mellon Corp. New York N.Y. $3,000,000,000
11/17/2008 KeyCorp Cleveland Ohio $2,500,000,000
11/17/2008 Comerica Inc. Dallas Texas $2,250,000,000
10/28/2008 State Street Corp. Boston Mass. $2,000,000,000
11/17/2008 Marshall & Ilsley Corp. Milwaukee Wis. $1,715,000,000
11/17/2008 Northern Trust Corp. Chicago Ill. $1,576,000,000
11/17/2008 Zions Bancorporation Salt Lake City Utah $1,400,000,000
11/17/2008 Huntington Bancshares Columbus Ohio $1,398,071,000
11/17/2008 First Horizon National Corp. Memphis Tenn. $866,540,000
11/17/2008 TCF Financial Corp. Wayzata Minn. $361,172,000
11/17/2008 Valley National Bancorp Wayne N.J. $300,000,000
11/17/2008 UCBH Holdings Inc. San Francisco Calif. $298,737,000
11/17/2008 Umpqua Holdings Corp. Portland Ore. $214,181,000
11/17/2008 Washington Federal Inc. Seattle Wash. $200,000,000
11/17/2008 Provident Bancshares Corp. Baltimore Md. $151,500,000
11/17/2008 Bank of Commerce Holdings Redding Calif. $17,000,000
11/17/2008 1st FS Corp. Hendersonville N.C. $16,369,000
11/17/2008 Broadway Financial Corp. Los Angeles Calif. $9,000,000



Total: $158,561,409,000

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Saturday, November 15, 2008

Sugar and the Environment


High Fructose Corn Syrup has a bad reputation for many reasons; both its health and environmental effects have been derided quite a bit in the last few years. As I examined in this post, some of these have more merit than others. Before one decides to switch from HFCS to sugar for environmental reasons, however, the ecological effects of sugar cane should be examined. My inspiration for this post was a segment of Bill Nye's "Stuff Happens" on Planet Green. He pointed out that sugar production is killing the Great Barrier reef and the Everglades, so I thought I'd dig around a bit to see what others had to say.

Digression: Am I the only one who finds a lot of Planet Green's programming to be really annoying? I can only take so much of Hollywood-types telling me how much money they "save" by installing PV solar cells on their roofs of their 10,000 sq.ft. palatial estates. Sure you have a smaller power bill...but how much did you spend upfront to install them? Have your accountant run the real numbers and get back to me. Don't go patting yourself on the back to hard, you might strain something. Anyway, back on track...

According to this report, Sugar and the Environment, produced by the World Wildlife Fund, cane sugar has some major effects on the environment. The report is very detailed, but I will include some highlights here.

The cultivation and processing of sugar produce environmental impacts through the
loss of natural habitats, intensive use of water, heavy use of agro-chemicals, discharge and runoff of polluted effluent and air pollution. This leads to the degradation of wildlife, soil, air and water where sugar is produced and of downstream ecosystems.

Although many of the environmental impacts of cane and beet cultivation are generic to agriculture, some impacts are distinct, particularly in their severity. Impacts relating to irrigation of sugar cane and pollution runoff are of particular concern.
Environmental Impacts
Sugar cultivation and processing impacts on biodiversity and ecosystem services at the field, farm and wider landscape levels.
Field Level: Soil erosion, compaction, salinisation and acidification

Farm Level:
The suite of micro-organisms associated with a crop is often overlooked, although it
plays such a critical role in ecosystem function, for example in the turnover of soil
organic matter. Most intensively cultivated agro-ecosystems are relatively lacking in
biodiversity.
Landscape Level:
Impacts of sugar cultivation on downstream ecosystems: Agriculture is arguably the
predominant influence on the Earth’s land surface and undoubtedly represents the
main cause of wetland habitat loss. This occurs through the runoff of polluted effluent
into water courses, due to the heavy abstraction of freshwater resources upstream
of wetlands habitats, or by altering the natural flow regime.

The impacts felt downstream are the cumulative result of a complex set of land
and water use decisions in a river basin. Within this context, cane or beet can play
an important role in some sugar producing countries.

The sugar industry in Australia has been a significant player in major infrastructural projects, including damming of the Burdekin, Tully and Barron Rivers, which has altered the pattern of freshwater flow into the Great Barrier Reef lagoon.
Cane growing has shown to increase sediment and nutrient loads, particularly following heavy rainfall, which can carry these materials into the sea, reducing water quality and impacting on inshore reefs. The sediment export rate in the lower South Johnstone River has been estimated at 180,000 tonnes of fine sediment/year, with sugar cane farming contributing to these sediment loads.

Phosphorus-rich runoff from sugar cane fields in Florida is held largely responsible for the decline of the Everglades. The Everglades is a naturally nutrient-poor wetland where sawgrass thrived because naturally low levels of phosphorous inhibited the growth of more aggressive species, such as cattails. However, the common practice of spreading phosphorus on the cane fields in the Everglades first caused the sawgrass to grow abnormally large before dying back to give way to cattails, which have now spread across more than 50,000ha of conservation areas, crowding out willow and bay and excluding fish.
Causes of Impacts

Habitat Clearance
Half of the world’s wetlands have been lost to drainage and conversion to agriculture
(70-90 percent in Europe and USA), and even protected wetland areas are subject
to agricultural impacts. Low-lying and alluvial areas in particular have typically been
reclaimed and drained for sugar cane cultivation, as they often support the richest
soils and enjoy a good natural water supply.
Overuse of Water
Although sugar cane is an efficient converter of biomass from water, it still needs about 1500-2000mm/ha/year and ranks among a group of crops noted for their significant water consumption (along with rice and cotton). It is a deep-rooted crop, which remains in the soil all year round and is able to extract soil water to depths well below one metre. In areas where sugar cane growth relies on rainfall, the crop can influence river flows as it intercepts run-off from the catchment into rivers and taps into ground water resources.
Intensive Use of Chemicals
Intensive agricultural food production in general uses high levels of pesticides
(herbicides, insecticides, fungicides, nematicides, rodenticides, plant regulators,
defoliants or desiccants), with herbicides representing about 50 percent of pesticides
used in many countries. A wide variety of pesticides are used in the cultivation of sugar crops. Herbicide use in sugar beet is among the highest compared to other crops.
Discharge of Processing Mill Effluents
Perhaps the most significant impact from cane and beet processing is related to
polluted effluent. In some countries with weak environmental laws, when sugar mills
are annually cleaned, a tremendous amount of matter is released, which is usually
discharged straight into streams. Cane mill effluents tend to be relatively rich in organic matter compared to other sources, and the decomposition of this matter reduces the oxygen levels in the water, affecting natural biochemical processes and the species inhabiting those freshwater systems. Potential pollutants in these effluents include heavy metals, oil, grease and cleaning agents.
Pre-Harvest Cane Burning
In many sugar producing countries, the cane fields are burnt immediately before harvesting
for easier cutting, post harvest cultivation and pest control.
While it has benefits, it also causes air pollution, soil degradation and a reduction in sugar yield.

Another thing to keep in mind is the distance sugar takes to get to your plate. Since it is primarly grown in tropical climates, it may have been shipped thousands of miles. This would no doubt increase the "carbon footprint". Luckily, we produce a lot domestically in Florida, but this is not without environmental consequences.

As this report (and Bill Nye) points out, even the most unassuming and ubiquitous products can have large, and perhaps unrealized, environmental impacts.


Other Sugar posts:
Evaporated Cane Juice: Part I
Evaporated Cane Juice: Part II
High Fructose Corn Syrup
Caramel Apples
Alternative Sugar Names
A Look at Agave

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Thursday, November 13, 2008

T. Boone Pickens on The Daily Show



"In America, we're gonna walk because we want to walk, not because we have to walk."

Mr. Pickens provides some inspirational words on The Daily Show. While it will not be easy, and I'm unsure of the accuracy of some of his statistics, I think his plan has merit.

More T. Boone here and here.

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Wednesday, November 12, 2008

FARM!


FARM! from Anthony-Masterson on Vimeo.

Here's a short documentary about young, sustainable farmers in Georgia.

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Tuesday, November 11, 2008

The Dark Side of Lower Prices


I am certainly enjoying the plummeting price of oil and gasoline. However, as with anything, there may be a catch. As I noted here, it is not just oil that is dropping, but many other commodities and goods. While this sounds great from a consumer perspective, this article examines why most economists think - if it continues - it is not good at all.

"When prices start to fall because of lack of demand, they can go well below the cost it takes to produce products," said Bernard Baumohl, executive director of the Economic Outlook Group. "Companies have no alternative than to cut back production and lay off a lot of workers. That cuts demand more. You get this vicious downward spiral in prices."

Most economists point out that the current economic conditions do not yet suggest that deflation is present, or even imminent.

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Sunday, November 9, 2008

Pictoral of Zimbabwe Hyperinflation


Zimbabwe has been experiencing unbelievable inflation for some time, but recently it has been calculated at 231 million percent. I really can't even wrap my mind around that, so here are some pictures that show day-to-day financial transactions. Quite amazing.

http://www.boncherry.com/blog/2008/10/26/global-crisis-this-is-the-real-crisis/

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Saturday, November 8, 2008

The Downfall




"I'm going to miss those granite countertops..."

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Friday, November 7, 2008

Cause for Depression


I found a very good resource that delves deeper into the financial meltdown. I have not finished reading through it completely as there is quite a lot of information.

Take a look: Cause for Depression

The world financial system is undergoing a kind of seizure, with assets crashing more wildly than they have done since the Great Depression. At the core of the crisis is the mayhem in the credit markets, where interest rates are going up sharply. The popping of the housing bubble has brought to dramatic pitch the unsustainable levels of US debt across wide sectors (not just housing). The extreme leverage on dodgy assets characteristic of US and European financial institutions has made many of them insolvent if their assets are judged on a “mark-to-market” basis. Various signs point to a deep recession, at a minimum, possibly much worse.

The financial crisis will have extraordinary implications for just about everything. It marks the birth of a new era quite as much as 9/11 did. We need to reflect about the lessons, nearly all of which are rather grim, and start asking in earnest about the political and economic consequences.

I give US authorities very low marks in their response to the financial crisis. Paulson and Bernanke have mistakenly characterized the crisis as a liquidity rather than solvency issue. They have also failed to introduce any coherent limit on the government’s acquisition of toxic private debt. The Paulson Plan is especially wrong-headed, as being neither equitable to the taxpayer nor efficacious in its stated aim (getting banks to lend again). The commitment of public funds to insolvent institutions must have shareholder wipeouts and debt-to equity conversions as a basic feature. The real bill of the US government’s strategy has been minimized in a kind of shell game, but the opportunity costs will likely prove tremendous. There is much cause for depression in both the terrifying implications of an economic collapse and in the response of US authorities to the crisis.
Two of my favorite posts: The Ten Steps & The Ten Commandments

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Wednesday, November 5, 2008

World Energy Outlook 2008


Just when we're getting used to falling oil prices, the Financial Times says the International Energy Agency (IEA) gives a decidedly pessimistic view in a preview of its World Energy Outlook 2008.

Output from the world's oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de-mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries' demand will require investments of $360bn (£230bn) each year until 2030. The agency says even with investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.
However, the IEA came out with a statement rebutting the early report:

The WEO is due to be published next month. The IEA said the FT article "appeared to be based on an early version of a draft from several months ago that was subsequently revised and updated."

It added: "The numbers in the article can be misleading and should not be quoted or considered to be official IEA results," the IEA said.

I guess we will have to wait for the full final report to make our own conclusions. The World Energy Outlook 2008 is due out on November 12, but the Table of Contents can be currently found here.

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Thursday, October 30, 2008

Farmer in Chief


Here is the counterpoint to yesterday's post, Nutrients for Life. "Farmer in Chief" is an open letter to our next President, written by Michael Pollan, the author of In Defense of Food. He outlines his vision for modifying American agricultural policy to positively influence three of our most pressing issues. No doubt you have heard the presidential candidates debate over how to solve our dependence on foreign energy, our health care system and the specter of global climate change. Since agriculture is such a cornerstone of our society, the author asserts that changes could provide positive results in all three of these issues.

Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis — a process based on making food energy from sunshine. There is hope and possibility in that simple fact.
The author outlines his ideas for improvement, which all involve major shifts in agriculture policy. I've included excerpts here, but please read the entire article.

Step 1, Resolarizing the American Farm:
What happens in the field influences every other link of the food chain on up to our meals — if we grow monocultures of corn and soy, we will find the products of processed corn and soy on our plates. Fortunately for your initiative, the federal government has enormous leverage in determining exactly what happens on the 830 million acres of American crop and pasture land.

Your challenge is to take control of this vast federal machinery and use it to drive a transition to a new solar-food economy, starting on the farm. Right now, the government actively discourages the farmers it subsidizes from growing healthful, fresh food: farmers receiving crop subsidies are prohibited from growing “specialty crops” — farm-bill speak for fruits and vegetables. (This rule was the price exacted by California and Florida produce growers in exchange for going along with subsidies for commodity crops.) Commodity farmers should instead be encouraged to grow as many different crops — including animals — as possible. Why? Because the greater the diversity of crops on a farm, the less the need for both fertilizers and pesticides.

It will be argued that sun-food agriculture will generally yield less food than fossil-fuel agriculture. This is debatable. The key question you must be prepared to answer is simply this: Can the sort of sustainable agriculture you’re proposing feed the world?

There are a couple of ways to answer this question. The simplest and most honest answer is that we don’t know, because we haven’t tried. But in the same way we now need to learn how to run an industrial economy without cheap fossil fuel, we have no choice but to find out whether sustainable agriculture can produce enough food.

The second point to bear in mind is that yield isn’t everything — and growing high-yield commodities is not quite the same thing as growing food. Much of what we’re growing today is not directly eaten as food but processed into low-quality calories of fat and sugar. As the world epidemic of diet-related chronic disease has demonstrated, the sheer quantity of calories that a food system produces improves health only up to a point, but after that, quality and diversity are probably more important. We can expect that a food system that produces somewhat less food but of a higher quality will produce healthier populations.
Step 2, Regionalizing the Food System:

For your sun-food agenda to succeed, it will have to do a lot more than alter what happens on the farm. The government could help seed a thousand new polyculture farmers in every county in Iowa, but they would promptly fail if the grain elevator remained the only buyer in town and corn and beans were the only crops it would take. Resolarizing the food system means building the infrastructure for a regional food economy — one that can support diversified farming and, by shortening the food chain, reduce the amount of fossil fuel in the American diet.

A decentralized food system offers a great many other benefits as well. Food eaten closer to where it is grown will be fresher and require less processing, making it more nutritious. Whatever may be lost in efficiency by localizing food production is gained in resilience: regional food systems can better withstand all kinds of shocks. When a single factory is grinding 20 million hamburger patties in a week or washing 25 million servings of salad, a single terrorist armed with a canister of toxins can, at a stroke, poison millions. Such a system is equally susceptible to accidental contamination: the bigger and more global the trade in food, the more vulnerable the system is to catastrophe. The best way to protect our food system against such threats is obvious: decentralize it.
Step 3, Rebuilding America's Food Culture:
In the end, shifting the American diet from a foundation of imported fossil fuel to local sunshine will require changes in our daily lives, which by now are deeply implicated in the economy and culture of fast, cheap and easy food. Making available more healthful and more sustainable food does not guarantee it will be eaten, much less appreciated or enjoyed. We need to use all the tools at our disposal — not just federal policy and public education but the president’s bully pulpit and the example of the first family’s own dinner table — to promote a new culture of food that can undergird your sun-food agenda.

Changing the food culture must begin with our children, and it must begin in the schools. Nearly a half-century ago, President Kennedy announced a national initiative to improve the physical fitness of American children. He did it by elevating the importance of physical education, pressing states to make it a requirement in public schools. We need to bring the same commitment to “edible education” — in Alice Waters’s phrase — by making lunch, in all its dimensions, a mandatory part of the curriculum. On the premise that eating well is a critically important life skill, we need to teach all primary-school students the basics of growing and cooking food and then enjoying it at shared meals.

The president should throw his support behind a new Victory Garden movement, this one seeking “victory” over three critical challenges we face today: high food prices, poor diets and a sedentary population. Eating from this, the shortest food chain of all, offers anyone with a patch of land a way to reduce their fossil-fuel consumption and help fight climate change. (We should offer grants to cities to build allotment gardens for people without access to land.) Just as important, Victory Gardens offer a way to enlist Americans, in body as well as mind, in the work of feeding themselves and changing the food system — something more ennobling, surely, than merely asking them to shop a little differently.

I don’t need to tell you that ripping out even a section of the White House lawn will be controversial: Americans love their lawns, and the South Lawn is one of the most beautiful in the country. But imagine all the energy, water and petrochemicals it takes to make it that way. (Even for the purposes of this memo, the White House would not disclose its lawn-care regimen.) Yet as deeply as Americans feel about their lawns, the agrarian ideal runs deeper still, and making this particular plot of American land productive, especially if the First Family gets out there and pulls weeds now and again, will provide an image even more stirring than that of a pretty lawn: the image of stewardship of the land, of self-reliance and of making the most of local sunlight to feed one’s family and community. The fact that surplus produce from the South Lawn Victory Garden (and there will be literally tons of it) will be offered to regional food banks will make its own eloquent statement.
Pollan is a good author, and makes his views seem quite easy to implement. I can see some major hurdles to these policy changes, however, and some minor quibbles with several of his points.

1. Economic troubles.

As money gets tight, food price increases will be hard to politically justify. It does not matter that food prices are at historic lows...perhaps the cheapest of any civilization, ever. People already started bitching about food increases this past year...it is an American right, cheap food and fuel.

Large scale unemployment, however, may provide a large base of manpower for more labor-intensive agriculture. Perhaps many people get a first-hand look at what jobs migrant workers are currently "stealing" from the American public.

2. Farmers as "drivers".
Farming without fossil fuels — performing complex rotations of plants and animals and managing pests without petrochemicals — is labor intensive and takes more skill than merely “driving and spraying,” which is how corn-belt farmers describe what they do for a living.
I find this to be quite patronizing. I know no farmer who would honestly describe himself in such a way. I suspect the author did not pick up on the humility and self-deprication of his subject. Organic farming is more labor intensive, that point is well recieved. Adding more human capital to the agricultural system will be a challenge of its own. But to say it takes no skill to run a modern farm is ludicrous. It takes a decidedly different set of skills, and new organic skills will need to be learned and disemminated. As the average age of the American farmer increases, this will be more and more difficult. It will take a youth movement, and few people (young or old) today are interested in the arduous and capricious way of life found in agriculture.

3. Energy Calorie per Food Calorie.
...a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food...
Much of this certainly can be explained by the long distances that food now travels. The other factor is that millions of farmers have left the business and there are simply much less human calories at work. This has been supplanted by fossil fuels.

4. Supermarket for the World

Some opponents of organic agriculture point to the fact that we might not be able to maintain the huge outputs of food that we once did. I tend to subscribe to the notion that it is not our duty to feed the entire world. Many of his suggested policies may lower the amount of available food. For years, our subsidized grain has driven world prices down, not allowing indigenous people to economically farm. Now will be their chance. I also feel grain prices are a great geopolitical lever that we control. China has become quite reliant on us, importing more and more in the last few years. We must not neglect this as a bargaining tool.

5. A Matter of Taste

The rise of the industrial food system was helped along by policies, but it rests on the simple fact that all people like to eat cheap, tasty, sweet, fatty and salty foods. This small, sticky fact will not go away, it is hard-wired in our DNA. It will be very hard to convince people to pay more for food that they do not prefer. However, the author brings up the pertinent point - this cheap, unhealthy food is being subsidized. Not only by farm subsidies for grain, but by our increasing health insurance premiums. If we remove these incentives and force people to pay the true cost, the decision calculus may begin to swing in a more healthy direction. The huge amount of political capital and will to do this may be simply unattainable, however.


All in all, there are some very interesting ideas contained in his letter. I believe that less reliance on huge agribusiness and heavier reliance on local small agriculture has many benefits. Whether we can make such a transition remains to be seen. The individual consumer now has more of a choice than ever; buy fresh, organic, local food and provide a market for these products. Don't eat fast food and prepackaged meals. Grow a garden. Small steps by large amounts of people can have huge impacts.

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