Return to traditional values or an even slipperier slope?

Economic crisis has major implications for diet, health and other food issues.

Martin Shuker, KFC’s chief executive, says that the chain’s cheap prices are helping win custom. “We do offer good value, so you can buy a bargain bucket and feed a family of four for a tenner, [which is] definitely appealing in these difficult economic times,” he said. Does anybody else find this SCARY?

I seem to remember having myself predicted some sort of return to austerity, or more "traditional values" this year in response to economic decline and falling consumer confidence, it seems however, that in the UK for example while people are turning their backs on the fashionable restaurants, gourmet, ethical and health foods that boomed as incomes peaked, far from cooking up cheap healthy veg at home they are filling up on buckets of fried chicken, takeaway pizza, supermarket value brands and stuffing themselves with comfort foods as the recession deepens.

The high street landscape is already begging to change as the likes of Domino's, Subway, Aldi and Lidle implement expansion plans in response to the strong growth they are enjoying in the current climate. This is not the change we needed!

It strikes me that there are various fundamental issues/questions here, two major points for analysis and action standing out:

1. The premiumisation of "health" and "ethical" - the use of health and ethical categories to boost profits worked while incomes were rising but this is now unravelling in response to weakening consumer making the question of whether it is appropriate to be paying a premium on health more prescient than ever.

2. Poor consumer choices - why do consumers choose unhealthy foods over cheaper healthier ones? Why do consumers choose expensive health foods when they are buying more branding than health benefits.

The Era of Cheap Food is Still Over Too!

Last year and up until recent unprecedented hikes in agricultural commodity price started easing, it was the "structural price rises" in food commodities that were at the top of everyone's minds and the agenda, I blogged here about the "structural shift in agricultural commodity prices" and food as "the new oil"and about how high prices, price volatility and lack of market availability was driving the growth of a new trend towards bilateral agreements bypassing international markets in order to secure directly stable prices and supply.


While global commodity prices have gone into overall decline (despite notable exceptions like cocoa etc.), the impact of the current financial and economic crisis on agricultural markets may mean that we cannot expect any return to business as normal, with major implications for agricultural markets and consequently trade, food security and politics. The drying up of trade finance resulting from financial and economic crisis is increasingly damaging the ability of markets to function efficiently, helping to perpetuate the bilateral food trades and deals that had grown increasingly more popular in response to rising prices and increased volatility over recent years since a whole list of countries increasingly are turning to barter where trade finance is hard to obtain.

For those moreover, who presume recent price hikes were a bubble now pricked with a deflationary pin and whom are anticipating a return to mean, there is in fact perhaps little cause to suppose that the current easing in agricultural markets is anything structural at all. Despite the deflationary pressures of the current environment, the underlying upward pressure on global food prices generally is likely to be maintained, particularly as the need to incorporate the true cost of resources into our food supply becomes increasingly pressing. Certainly we should be prepared for food price issues to return with a vengeance when the economy starts to recover, as no doubt will oil prices (see "The Era of Cheap Oil is Still Over") - with supply constraints only exaggerated further by the unravelling of production and investment resulting from the current economic downturn.

As a side note, it is interesting also to note the impact of currency market volatility on food prices, with current weakness of the sterling here in the UK for example, not only cancelling out declines in dollar denominated commodity items, but also pushing up the cost of local products since UK farmers enjoy increased pricing power domestically thanks to their ability to sell to Europe at a higher return on account of sterling weakness. This sort of general volatility is increasingly pushing food up the agenda and resulting in a rash of protectionist think tank papers etc. I attended a talk hosted by the UK's Fabian Society and given by UK Secretary of State for Environment, Food and Rural Affairs Hilary Benn on the topic of food at the end of December, the first speech made on food by a cabinet minister in the UK for many decades, and it is not only the UK that food is receiving attention.

The questions posed by these and other trends are massive and highly significant. Questions concerning the location, means, ownership, control, distribution etc. of supply and more. These are questions that need addressing and which I hope to start exploring here.

The Era of Cheap Oil is Still Over

Today's low oil prices the anomaly..
If you are breathing a sigh of relief thinking that the free fall oil prices went into late 2008 and cheaper petrol at the pump are a return to the proper order of things and the end of a painful speculative bubble, don't be deluded, the era of cheap oil is still over: today's low oil prices are more likely only masking temporarily a looming crisis and recent high energy prices may be expected to return with a vengeance.

Unwinding of demand in response to downturn accelerating this trend...
Indeed, if oil supply was not keeping up with demand driving prices up last year, the current collapse in oil prices is only accelerating this trend. As oil producers slash production to try and prop up prices and new and non-traditional (deep sea; oil-sands etc.)projects are scrapped as plummeting oil prices mean they are no longer profitable etc. we are seeing a scaling down of production not unlike the coiling of a spring. The big question is, will supply not be even more out of sync with demand when the global economy starts to recover?

Investment in the alternatives we will need also suffering...
The concerning thing is that it is not just traditional oil, gas and other fossil supply that which is suffering as investment dries up, alternative technologies which are more important now than ever, are also seeing investment dry up as low oil energy prices make technologies that were competitive with oil when oil prices were high, left high and dry now that prices have fallen so much. Only Monday it was reported that "The economics of the world’s biggest offshore wind-farm project are “on a knife-edge”, ...its viability called into question by the falling prices of oil, gas and carbon dioxide emissions permits."

Current global trends unsustainable says IEA.
At the current rate of decline, said the IEA 2008 oil outlook report, oil production from existing fields will fall to just 30 million barrels a day by 2030 – or roughly 73 million barrels short of the expected level of demand. The chances of finding the necessary new demand from somewhere to fill this gap is - besides being horribly undesirable - also highly implausible. The reports executive summary starts "Current global trends in energy supply and consumption are patently unsustainable." And concludes with a similarly potent call to arms: "Time is running out and the time to act is now."

Without drastic measures the market will only force feed us more cruelly the medicine we are rejecting...As this report highlights the era of cheap oil is over and unless drastic measures are taken to reduce energy consumption and speed up the development of new energy sources, the world could be headed for a serious energy crisis as soon as 2015. If this happens, and without wanting to sound melodramatic, our current economic woes will be entirely overshadowed by this crisis. It is important that investment in new and alternative energy is sustained and expanded to ensure we are as prepared as we can be against the comming supply shock.

Comment: Utility companies again

Following up on an old post of mine

http://informationotherwise.blogspot.com/2008/10/comment-unscrupulous-energy-utilities.html

I was interested to see these articles run on Guardian Unlimited recently (Maybe I should write for the Guardian?):

Energy firms press customers to sign up for premium-rate tariffs

http://www.guardian.co.uk/money/2008/dec/15/energy-providers-fixed-rate-tariffs

Watchdog tells energy firms to speed up price cuts

http://www.guardian.co.uk/business/2008/dec/17/ofgem-energy-companies-prices

Would still be interested to know more about these companies marketing strategies.

Comment: Unscrupulous energy utilities try to lock customers in at peak tariffs

The Daily Express today ran the headline " £100 OFF GAS BY CHRISTMAS" this predicted cut in gas bills comes after the wholesale cost of gas dropped 30 per cent from its summer peak. In a message of hope to households, TheEnergyShop.com said power giants should soon pass on these lower prices to their customers.

This headline came as no big surprise to me, since I had rather expected a falling off in gas prices after the summer peak in wholesale prices began to soften. While I have certain doubts over how swiftly utilities companies are likely to pass these savings on to customers since they are always quick to pass on costs but slow to pass back savings, I was surprised and concerned to receive a direct marketing call from British Gas around the time that wholesale prices started softening, aggressively pushing a pricing plan that would lock me into current gas rates at for the next year.

When I asked the sales person "what happens if gas prices go down?!" his only answer was "When did your gas bill last go down, this is an opportunity you should not miss - lock your prices in now". Despite my concern at the danger of locking in prices at peak level the sales person aggressively pushed this plan (the contract I discovered when I really pushed also including a £70 escape fee).

Call me cynical, but my concern is, that British Gas knew very well - far better we may reasonably presume than myself - that prices had likely peeked and were thus expecting downward pressure on rates, and were actively trying to lock customers in at peak level while they could. I never had an offer to lock prices before, but then prices were going up before. I happened to be on the whole informed thanks to the nature of my job, had I not been, I may very well have taken the guys point and locked myself in to a very disadvantageous deal and found myself unable to benefit from falling energy prices amidst a deepening recession.

This sort of shameless abuse of the inevitably often under informed customer seems to be relatively common practice across many service providers all of whom make extensive use of direct marketing campaigns. A consultation of other utility company web sites like EDF reveils that many are recommending fixed price plans.

I would be interesting to investigate further the direct marketing strategies of these firms in particular, and the consumer groups and demographics they are target ting.

News: Russia to buy Iceland!

Reuters just published that Iceland's central bank announced today Russia's agreement to provide the country with loans of 4 billion euros ($5.4 billion) - about half of Iceland's c.$11 billion GDP.

The central bank said the loans were for 3-4 years on terms that would be 30-50 points above Libor rates (very attractive loan terms).

The Icelandic Kroner has stabilised dramatically following this announcement and regained some of the value it has lost over recent days.

Figure 1: Icelandic currency









The big question is why? And what does this mean for the future? The loan terms etc. suggest Russia is not pricing risk for the well run but high risk Icelandic economy the same way the market is (see Figure 2). This however, is not a financial investment for Russia - the geopolitical implications for the world may be far more significant than are the economic implications (though for Iceland of course both economic and geopolitical implications are likely to be significant!).


Figure 2: Iceland - Credit Default Swaps (market price for risk of default)










Shall write on this as soon as I have a moment!

Analysis: The return of history and the beggining of the end for US empire?

Does Wall Street’s crack-up presages the beginning of the end for American power and global dominance? Empires of the past have seen their ideologies corrupt, their economies corrupt, their currencies devalue, finally loosing their military supremacy. The US increasingly is relying on its military. Cracks appearing here as well (Georgia etc.).

The US is short of metals, short of oil, increasingly short of water for agriculture, has debt beyond belief, a crippled and dysfunctional financial system, a population accustomed to living beyond there means, consuming things they do not need and cannot afford, as well as the most powerful military force in the world.

Russia has heaps of savings, no liquidity concerns given the cash government is sitting on, natural resources - oil, gas, minerals, vast agricultural land and resources etc. Russia is increasingly challenging the value of foreign investment, (macro economic problem according to Russia, other countries may follow) for less volatile internal investment and displaying increasingly assertive foreign policy. I have to say, long term, if I were a betting man, my money would not be on the USA.

There is increasing posturing for control and resources - new players, China, Russia, as well as non state players like islamist movements - this is leaving Americans feeling increasingly insecure. Unfortunately, the American reaction seems to be to fall back on military power as recent global events (Georgia etc.) seem to be pushing voters more and more to the "reassuring" figure of McCaine - veteran generation - but this is not going to help America's relationship with the world. If America wants to retain its grip on power it needs to display a little more benevolence. If I were America I would be doing everything I could right now to make sure I had some friends ahead of when the revolution comes, since it is obviously going to be America first with its back up against the wall - Scary thoughts.

News: Norway's wealth fund blacklists Rio Tinto

Ethics of investing, can activist shareholders make a difference? Here a major investor talks with its feet by walking away from Rio Tinto for stomping all over local environment in Indonesia with its heavy mining boots.

Reuters reported today that Norway's sovereign wealth fund sold out its stake in Rio Tinto - the worlds largest mining company - in protest against its environmental credentials.

Specific reference was made to the Grasberg mine in Indonesia, and the Finance Ministry is reported as having said yesterday Rio Tinto was a joint venture partner in this mine with US-based Freeport McMoRan Copper & Gold, which was blacklisted by the Norwegian fund in 2006, and as having referred to the "severe environmental damage'' being inflicted at this site.

Rio Tinto spokesman Nick Cobban is reported as saying that the environmental measures at the mine were deemed satisfactory by independent audits. He also said that even though Rio Tinto owns a 40% stake in the mine, it is Freeport which runs the operations. "We are surprised and disappointed by the ministry's decision,'' Mr Cobban said.

The ministry also said however that it decided to continue its investments in US-based Monsanto, which develops genetically modified plants, despite recommendations by their ethics council to exclude the firm over concerns it was using child labor in India.

According to the ministry, Norway's ownership activities in Monsanto "have contributed to a significant reduction in the use of child labour in the company's hybrid cotton seed production in India.''

Rio shares had another bad day, losing 5.1%, or $5.47, to close at $102.03, their lowest since September. Major investors and minor stake holders should get active!

Event: Media Talk - Is Somalia the new Front in the War on Terror?

Thu 11th September, 7.30pm Price: £10.00

Chaired by Patrick Smith (Africa Confidential)

Ahmed Abdisalam (TFG)
Mohamed Gure (Somali Concern Group)
Sally Healy (Chatham House)
Mary Harper (BBC)


Location: 13 Norfolk Place, London W2 1QJ

This event will be webcast live on Fontline Club's website - you can view it for free via the link - www.frontlineclub.com


Since 1991, Somalia has been a dangerous, violent and lawless place, home to numerous conflicts and civil war. From localised inter-tribal and clan warfare, to regional tensions and international disputes, Somalia remains a highly complex battleground. Is Somalia really the new home to Al-Qaeda and the next front in the War on Terror?

Somalia's intricate and fiercely loyal clan-based system means that the country is primarily under the control of clan militia. On a regional level, the longstanding tensions with Ethiopia continue, while the proxy war between the US-backed Ethiopian government and the Eritrean government - which backs the Islamic Courts Union (ICU) - adds an international dimension to the wars.

As power struggles and violent clashes continue between the Transitional Federal Government (TFG) and the ICU in the centre and south of the country, the emergence of Al-Shabab - whom the US have branded a terrorist group linked to Al Qaeda - has exacerbated the situation and fuelled speculation that Somalia is the new front on terror and harbouring international terrorist networks.

While the risk of new fighting between Ethiopia and Eritrea is apparently higher than ever as the UN ends its border peacekeeping mission, we examine and demystify the many wars in which Somalia is involved, and which make it such a violent and politically charged country. Is Somalia really the new front on terror?

Ahmed Abdisalam is Deputy Prime Minister and Minister of Information, Youth & Sports for the Somali Transitional Federal Government.

Mohamed Gure is a Somali political activist and one of the founders of the Somali Concern Group (SCG) - a political organization that represents the interests of Somalis at home and abroad. The SCG was established in June 2003 and is a voluntary non-governmental, non-profit organization established to promote peace and reconciliation between warring Somali groups through dialogue.

Mary Harper is an African specialist for the BBC.

Sally Healy OBE is an Associate Fellow of the Africa Programe at Chatham House. She was formerly an East Africa specialist at the Foreign Office. She led a collaborative study of conflict in the Horn of Africa, the findings of which were published by Chatham House in June 2008: Lost Opportunities in the Horn of Africa: how Conflicts Connect and Peace agreements unravel.

Patrick Smith is editor of Africa Confidential

Links

Africa Confidential
http://www.africa-confidential.com/home

Frontline Club
http://www.frontlineclub.com/index.php

Blogger: Somalia
http://crigler-somalia.blogspot.com/

Analysis: Has oil gone M.A.D?

Economic mutually assured destruction? What do trends in high oil prices
mean for global geopolitical stability? Who can afford to disrupt oil
production or supplies? Importers cannot sustain higher prices and fear the
pain, exporters cannot afford the damage higher prices would do to their
export markets and inevitable demand side adjustment.

Given the mutual
interdependence of Russian and European markets, rumoured threats published today (Kommersant and the Telegraph in the UK) that Russia could cut some oil supplies to Europe as soon as Monday in response to European threats of sanctions seem unlikely to materialise, as do the sanctions themselves. Since August 8th and the outbreak of the current Georgia conflict, un-surprisingly there has been a Westward flight of money from Russia. Renaissance Capital suggest US$8-20bn has left the country August 8th to 15th and the flight continues in response to geopolitical destabilisation.
What do trends in high oil prices mean for geopolitical stability?

The world has witnessed a string of "oil wars" as concerns over energy
security rise and major economic powers vie to secure resources for present
and future. With oil prices now as high as they are however, and
threatening to shoot back up to their recent record levels and beyond at
the slightest provocation, the geopolitical situation seems to have grown
increasingly precarious, precarious to the point perhaps, where it is not
unreasonable to speculate that where oil has precipitated conflict, at
current prices oil may have a certain geopolitical stabilising affect -
after all with oil prices already at nose-bleed levels, the pain that would
inevitably be induced by any conflict in an oil region and the consequent
disruption to supply/production, seems likely to have an inhibiting effect
(not least of course for a major oil importing economy such as the US).
This is not a happy or a comfortable equilibrium however, since it is an
order bound together only by a principle of mutually assured destruction
(M.A.D) and increasing competition for resources will increasingly stress
this balance.

With ever more fractious power manoeuvres in eastern Europe, and the Arctic
increasingly crowded with a buzz of survey ships and submarines from all
sides of the circle fighting over where continental shelves begin and end
etc. it seems clear that, current bickering over who is starting the new
cold war aside, we are clearly returning to a cold war type geopolitics.
While things have clearly been brewing for some time, it is sobering to
speculate on the significance of the latest developments in the Georgia
conflict which apparently marks a clear aggressive shift in Russian foreign
policy: an ever more confident and assertive Russia has declared itself
"not afraid of another cold war" and Russia's representative to NATO Dmitri
Rogozin declaring that "There are two dates that have changed the world in
recent years: September 11, 2001, and August 8, 2008," Mr Rogozin explained
that the West has not fully grasped how the Georgia conflict has heightened
Russians' fears about being surrounded by NATO. "They are basically
identical in terms of significance. September 11 motivated the United
States to behave really differently in the world," he said. "That is to
say, Americans realised that even in their homes, they could not feel safe.
They had to protect their interests, outside the boundaries of the US. For
Russia, it is the same thing."

The undeniable economic interdependence of Russia and the west as suppliers
and markets is bound we must expect, to keep this a cold war and to keep
the situation from escalating beyond certain bounds, but given the shift in
Russian sentiment and confidence, there seems to be something of a question
mark over what to expect next from Russia which cannot be good for business
relations and this incident may well demonstrate how tied, in many ways,
Europe's hands are as they are forced to accept the situation.

Event: The Credit Crunch

Graham Turner in conversation with economics editor for The Guardian Larry Elliot

Thursday, September 11, 2008, 6:30pm - 8:00pm
Waterstone's, 82 Gower St

Something else for your diary. I will review this book and raise some questions concerning the credit crunch and global economy post event. For now here is a brief outline of book and event for any body interested to check it out or come along:

This book argues that the current financial turmoil signals a crisis in globalisation that will directly challenge the free market economic model. Graham Turner claims to show that the housing bubbles in the West were deliberately created to mask the damage inflicted by companies shifting production abroad in an attempt to boost profits. As these bubbles burst, economic growth in many developed countries will inevitably tumble he says. The Japanese crisis of the 1990s shows that banks and governments may struggle to contain the fallout he argues, stating that the problem has not been limited to the US, UK and Europe but that housing bubbles have become endemic across wide swathes of emerging market economies. As the West slides, Elliot says, these countries will see an implosion of their credit bubbles too, shaking their faith in the free market.

Turner is an economic forecaster, who founded and runs an independent financial and economic consultancy - GFC Economics (See link below).

Graham will be discussing and signing his new book with Larry Elliot of The Guardian

Tickets £2 redeemable against the price of the book

Links:

Book
http://www.plutobooks.com/cgi-local/nplutobrows.pl?chkisbn=9780745328102&main=

GFC Economics
http://www.gfceconomics.com/index.html

Event: FOOD versus/and FUEL

Malcolm Shepherd probes increasing concerns surrounding and policy shift away from biofuels.

Monday 29th September, 18:45 to 20.45

The Gallery, 70/77 Cowcross Street, Farringdon, London, EC1M 6EJ

The production of biofuels from agriculture to replace fossil fuels was originally widely applauded, but concerns over the displacement of food production, doubts about carbon savings, and dismay over deforestation for land use are increasingly shifting public opinion and putting pressure on policy. In July the UK government announced a reduction in its biofuel targets.

Malcolm Shepherd asks however, if the bio-fuel picture has been over simplified, and misinformed by powerful interests, including those who don't want to lose their lucrative market share in liquid fuels?

Malcolm Shepherd is Managing Director of Biofuel Matters Ltd, a company that provides specialist consultancy services on biofuel issues, and he has spoken widely on his investigations into the issues and facts surrounding the "food versus fuel" debate.

He on the current complex situation, he will suggest that if properly produced, the use of food crops for biofuels can actually improve food security, stabilise food prices and reduce poverty. (BBC radio programme “Our food, our future” 28th July)

Link:
http://www.mondediplofriends.org.uk/calendar.htm

Event: Beyond Microfinance:

"The Next Frontier For Sustainable Poverty Alleviation"

Rosalind Copisarow
Chair of the Board, Global Village Energy Partnership; former Chief Executive, International Development Enterprises.

18th September, 6.30-8pm. DFID, 1 Palace Street, London SW1E 5HE

Presentation
When micro-finance first started, enabling ‘access to finance’ was considered virtually automatically to lead to ‘poverty alleviation’. Over time, however, the many important innovations increasing access to finance have not translated into the same levels of poverty alleviation. More importantly, the vast majority of the world’s unbanked will remain below the reach of MFIs unless an integrated package of support is made available to them. In her presentation, Rosalind will provide examples of organizations that have successfully combined micro-finance with other support tools and show how this approach could well be the next big breakthrough towards eliminating global poverty.

Speaker
After 15 years in investment banking with Citigroup, HSBC and JP Morgan, followed by 13 years in micro-finance largely pioneering cutting edge products and models of delivery, Rosalind is now on her third career, most recently as Chief Executive of International Development Enterprises (IDE). She is applying her business and financial skills and passion for working with micro-entrepreneurs to the service of the 2 billion people either below the reach of MFIs or for whom micro-finance is inadequate as a stand-alone tool to help them out of poverty. A serial social entrepreneur, Rosalind is now starting her fourth social enterprise, to be based in the UK, having founded and led three microfinance-related organizations: Fundusz Mikro in Poland, Street UK and the Microfinance Centre for Central and Eastern Europe. Rosalind has written a number of publications, perhaps the most influential of which, “Self-Employed People in the Informal Economy: Cheats or Contributors?” (2004), offers a secure platform for the transition of UK micro-entrepreneurs into the formal economy. Rosalind holds a BA in Human Sciences from Oxford University, an MBA from the Wharton School and an MA in Latin American studies and Spanish from the University of Pennsylvania. In 2000, she was awarded the Officer’s Cross of the Order of Merit of Poland.

Information about Rosalind’s new social enterprise which packages modular kits to build decent homes with home-based income-generating opportunities and microfinance
The organization will operate in the areas of overlap between the housing, renewable energy, water and sanitation, micro-enterprise development and micro-finance sectors. Its objective is to improve the living conditions of the 2 billion people currently inhabiting shacks without water, sanitation or power, in such a way that it also builds their short term income and long term assets, leaves the lightest possible ecological footprint, and insulates them as much as possible against major political and economic risks likely to directly affect them.

Attendance:
If you are interested to attend, please register online at London Microfinance Club's site by filling in their online attendance form (No later than 10am on Friday, 12th September 2008).

http://www.microfinanceclubuk.co.uk/

Event: Commodity Prices, Capital Flows and the Financing of Investment

Secretary General of UNCTAD Supachai Panitchpakdi, will present The Trade and Development Report 2008, subtitled "Commodity Prices, Capital Flows and the Financing of Investment.”

Tuesday 2nd September 2008, 18.30-20:00
Key Speaker: Supachai Panitchpakdi
LSE, New Theatre, East Building
Discussants: Heiner Flassbeck and Professor Robert Wade
Chair: Professor Stuart Corbridge

The report, which is under embargo until 4 September 2008, highlights the implications of commodity price volatility and one of the major paradoxes of globalization, namely that the “capital poor” developing world is exporting capital to the “capital rich” developed countries. Moreover, those developing countries that are the largest capital exporters tend to invest more domestically and to grow faster than those that still depend on capital imports. These facts create serious puzzles for mainstream economic models and reject most of their predictions. The report calls for a fresh approach to development financing that focuses less on the mobilization of savings and more on the direct stimulation of investment. UNCTAD also makes an important contribution in the report to the Doha Conference to review the implementation of the Monterrey Consensus on financing for development (Qatar, 29 November - 2 December 2008).

Supachai Panitchpakdi began his four-year term as Secretary-General of UNCTAD on 1 September 2005, following his appointment by the UN General Assembly. Dr. Supachai previously served as Director-General of the World Trade Organization (September 2002 to August 2005). He is a former Deputy Prime Minister of Thailand who was entrusted with oversight of the country´s economic and trade policy making. In this role, he was actively involved in international trade policy and represented Thailand at the signing ceremony in Marrakech of the Uruguay Round Agreement in 1994. He was also active in shaping regional agreements, including Asia Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN) and the Asia Europe Meeting (ASEM).

Heiner Flassbeck is UNCTAD Director of Division of Globalization and Development Strategies. Robert Wade is Professor of International Political Economy at LSE.

The United Nations Conference on Trade and Development was established in 1964. UNTAD promotes the development-friendly integration of developing countries into the world economy. It has evolved into an authoritative knowledge-based institution whose work aims to shape policy debates and thinking on development, with a particular focus on ensuring that domestic policies and international action are mutually supportive in bringing about sustainable development.

The event is free and open to all with no ticket required. Entry is on a first come, first served basis. For more information, email events@lse.ac.uk or phone 020 7955 6043.

http://www.lse.ac.uk/collections/LSEPublicLecturesAndEvents/events/2008/20080728t1155z001.htm

Analysis: Reversal of globalisation?

How flat is the world of the future?

Rising oil prices; US$ devaluation; currency re-valuation and upward pressure on labour costs in emerging markets etc. - what are the implications for global supply chains, global trade and economy?

I sense that globalisation's forward momentum has been taken for granted, has even seemed irresistible, but how robust are the mechanisms which have driven it and could we potentially currently be witnessing some reverse momentum? While much progress has been made on liberalising global trade over the last few decades, record high oil prices, the failure of WTO talks and the re-assertion of state interventionism - driven in part by increasing resource scarcity and competition - all have major implications for global trade. An interesting report I read by Canadian investment bank CIBC World Markets back in May (see link below) says that “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” and concludes that as a result “has effectively offset all the trade liberalization efforts of the last three decades.” Russia meanwhile has declared its intentions to revise trade policies and tariffs it was pressurised into by WTO talks which are disadvantageous to Russia; scarcity and price hikes in agro-commodities meanwhile provoked a rash of dramatic market interventions etc.

It seems hard to avoid the conclusion that globalisation has been fueled by cheap oil and energy prices generally. If oil prices remain high, and especially if they go higher, the efficiency/practicality of the long and complex supply chains circling the globe which we have come to take for granted may come under considerable pressure. The Wal-Marts and the Tesco´s of this world and many many other industries have highly fuel-intensive business models (especially for example where they rely on air-freight), but there long supply chains are becoming bloated as costs are inflated at every stage. While there is a general presumption that as emerging economies develop and the differential in cost of labour is eroded, production will be shifted to less developed countries (the rush to outsource to Eastern Europe has already cooled) there is little escaping the cost of oil.

With inflation of costs at every stage of supply chains, and transport costs rising, it may increasingly make sense to shorten supply chains and move production closer to home. The implications are inevitably complicated, but there already seems to be a visible trend for US companies for example to look more towards Mexico and less to wards Asia for production, a tendency for outsourced services to be brought back onshore, and for Asia to turn more to Asian markets for trade volumes as US trade declines etc. A major question is how this will effect developing markets that have grown on the back of globalisation and US over consumption and we seem to find ourselves in the absurd situation where the world is hoping for the US, already over consuming, to keep up consumption in order to support the other economies of the world.

CIBC Report
http://research.cibcwm.com/economic_public/download/smay08.pdf

Shipping Costs Start to Crimp Globalization
http://www.nytimes.com/2008/08/03/business/worldbusiness/03global.html?_r=1&hp&oref=slogin

Some reasons high oil prices are not a bad thing:

Painful? Undoubtedly, but are high oil prices really such a terrible thing or are they a medicine we have to swallow? Below I briefly list some of the ways in which high oil prices could be good for us. I will go on to explore some of these points and others in brief articles to follow.

1. High oil prices may have a geopolitical stabilisation effect? With oil prices already at nose bleed levels, nobody can afford to start a war over oil?

2. High oil prices while a function of supply and demand, are more representative of the real cost of oil?

3. (As a corollary of 2) Prices feed through the whole economy so that for example rising shipping costs mean the real cost of food miles etc. is increasingly felt by the consumer (see "Reversal of Globalisation")

4. High oil prices incentivize reduced and more efficient consumption of energy. Demand side response already clearly visible.

5. High oil prices make environmentally more sustainable, renewable and geopolitically less contentious new energy technologies more competitive.

Event: The Price of Food: Hunger or Hope for Africa?

16 July, 2008 - 18.00 - Portcullis House, Westminster - London

Speakers
Dr Monty Jones
Executive Director, Forum for Agricultural Research in Africa

Dr Camilla Toulmin
Director, International Institute for Environment and Development

Professor Lawrence Haddad
Director, Institute of Development Studies

Chair
Hugh Bayley MP
Chair, Africa All Party Parliamentary Group

This forthcoming Royal African Society event will address some really key and really topical issues and is very much in line with the themes I have been pursuing and writing about here at InformationOthewise. I encourage anyone interested to come along and anyone who is unable to attend but has questions they would like to put to the panel, to get in touch as FreeHouse representatives will be attending.

The world food crisis threatens to destroy years, if not decades, of economic progress, and may push millions back into abject poverty, stated Kofi Annan recently. But others see the crisis as an opportunity to reform global agriculture and increase longer-term productivity in Africa.

The discussion will look at the implications of the food crisis for Africa – both the opportunities and the threats – as well as possible interventions. It will discuss the possibility of a Green Revolution for Africa. It will also critically assess the role of bioenergy in the current crisis and in the future of sustainable agricultural production in Africa.

Space is limited. RSVP essential: ras_research@soas.ac.uk

Please arrive 15 minutes prior the meeting to clear security. http://www.parliament.uk/documents/upload/faxmap.pdf

Letters from China: "Sichuan earthquake"

This received from a young Chinese high school student

"At 14:28 on 12th May , there was a terrible earthquake in Sichuan. Over 6, 000,0 people died. About 36,000,0 got hurt .So many people just closed their eyes by a second . Big blocks of rocks went down from mountains slopes,peoples’ houses collapsed before they had run out of them.So many young people became orphans,so many parents lost their cute children.
Every day, the TV talked about the Sichuan earthquake.People mourned for the people who died in the earthquake.So many doctors and soldiers went to rescue people.They didin’t care about themselves but the people in Sichuan.What wonderful doctors and soldiers we have!We are proud of them.

There are many moving stories about the earthquake.There’s a little girl named Xinyi.When the rescue team found her,she was held in her parents’ arms safely.But her parents were both dead.They used their bodies to protect her.What wonderful parents she has.When she grows up,she’ll thank her parents to give her another chance to live in the world.


If you wanna know more about the earthquake,tell me."

Letters from China: Subject: "I am safely escaped from the big shock and do some volunteer work"

vivilee1016@gmail.com

"All of my friends, thanks very much,!!

I am very safe now and be able to get enough food and water. So do students
in my campus of Sichuan University. So do people in the city of Chengdu.
Actually, the central of the shock is just about over 100km far way to the
city of Chengdu. We have safely escaped from the forth floor.
When the shock happended yesterday, I was studying myself for GRE test in a
classroom at the 4th floor. I felt the shock very quick and I am the 2nd
person of my classroom run out, then all of the students in the classroom
stood up and run out.
No words...
we just run...
nothing occured to me while feeling the stair was shaking heavily...

Just like that...we esacaped immedially...

many people died aroud the City of Chengdu...

over 10000
also, some people unknown and unfound may have died...a large amount over
our imagine,maybe more than 100,000

As the lackness of blood, we intend to go to offer some blood. But the
equipement and sanitation cannot offer enough sevice.

Thanks for all of your concerning. Also, we are trying to take care well of
ourselves and organize some volunteer do some help... I think we can get
over the serious calamity and we have to!!!
Regards!

Vivi Lee
From Chengdu, Sichuan POV. China.

life is everywhere, but not here"

Emerging land grab: investment for the future or the birth of a new food Imperialism?

A new rush to invest in agricultural production and the new land grab for Africa: Driver for agricultural development or the birth of a new food imperialism? Maneuvering to assure security of supply in the new global trade economy of "starve thy neighbour"

By the end of the 20th century commodity prices were depressed, mainly because of sluggish demand growth in relation to supply. Their value had been on a downward trend in real terms since the 1980's. Since 2002 however, commodity prices have rebounded, driven largely by growing demand in newly industrialising developing countries. If the cycle of growth and industrialization in these emergent economies continues, the current commodity boom may mark the beginning of a changed commodity economy in the twenty-first century characterized by a long-term demand growth for, and consequent resurgent value of, primary commodities in world trade. (See recent post: "Changing Commodity Economy").

The emergent economies driving this demand growth (China, India etc.) and increasingly competing with the developed world for global resources are inevitably maneuvering to secure their current and expanding long term commodity needs. This has led to a general resource "grab", or rush to secure access/rights to commodity resources principally concentrated in the developing world. Commodity rich Africa has inevitably become a major focus of this scramble for resources, and rising commodity demand has driven economic growth in the continent which has outpaced the developed world (though not developing Asia). This indecorous and at times unscrupulous rush to secure a share of Africa's resources however, has inevitably invited comparison to the "scramble for Africa" by western colonial powers at the end of the 19th century.

While the scramble for mineral and oil resources is a widely acknowledged geo-political phenomenon, with recent hikes in agro-commodity prices, there has emerged a new trend: a scramble for food supplies by direct purchase of agricultural land and investment in agricultural production, mostly in the developing world. Recent record food staple prices left big net food importers and big emergent markets like China and Saudi struggling to secure supply as well as provoking the slashing of import tariffs across the developing world - succeeding almost overnight where WTO talks had failed - but also provoking countries across Asia to impose export restrictions or bans on certain food products.

Apparently as a reaction to this environment, a number of countries are clearly maneuvering to secure food supply and price: Under a recently announced policy proposal being considered by Beijing, Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security. Saudi Arabia meanwhile, is looking at plans to establish joint ventures in Thailand, the world's largest exporter of rice, which guarantee the product to to Saudi and any surplus to other GCC countries in a bid to improve long-term food security. The UAE have been investing in agricultural land and production in Pakistan over the last year. Etc.

China already runs an agricultural trade deficit, and, while they are investing increasingly in rural development domestically, demand growth outstrips supply growth. Saudi meanwhile, while rich in oil, is unable to produce domestically the food crops it requires and in fact is scaling back what agricultural production it has in order to conserve on diminishing water resources. Faced with the prospect of higher global food commodity prices and increased price volatility, countries then, like China whose growing consumption outstrips growth in supply and oil rich but otherwise resource impoverished middle eastern countries like Saudi are clearly looking to bypass global commodity markets in order to secure directly affordable long term food supplies.

Saudi officials, apparently without appreciating the irony of this, have declared the necessity of purchasing, for example, rice supply, since they cannot be expected to remain at the mercy of price setting major exporters like India. These comments are thrown in an even more interesting light when considered against current proposals by Vietnam for the development of an OPEC style cartel of rice producers. Jiang Wenlai of the China Agricultural Science institute meanwhile was quoted as saying “China must ‘go out’ because our land resources are limited".

What though will these sort of policies mean for developing countries? Jiang Wenlai is quoted as saying "It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.” It is not especially clear from this in what sense the developing countries China invests in will benefit, and Jiang Wenlai could not be reached for further comment. It is I suppose suggested however, that foreign investment in agricultural development and improved productivity etc. will benefit the target countries. The situation however, is undoubtedly not this simple, what are we witnessing: new investment in agricultural production? Or the emergence of a new food imperialism and "starve thy neighbour" trade economy?