Adam, you’ve got to say something more substantial than this (I know that you do flesh out the argument in the Bright Green blog post). Somalia is a highly unsuitable country to use to illustrate general critiques of international economic systems, because it largely is not plugged into international economic systems, and has much more immediately important issues of local politics driving the situation.

It’s the Oil companies it’s the gas companies it’s to many cars it’s to many planes.

But of course it’s jobs it’s life.

I remember playing in my street and if you had a car you were rich, one or two cars in any street, yet each day I would be coughing and spluttering with Smog, alertserts on the news or weather would be very warm tomorrow look out for smog.

The sad fact is we have to cook and we have to stay warm which means no gas or electricity we’d use coal simple as that.

How do we stop starvation, drought I’ve no idea anymore, I do not think pumping millions into charities which now have become big business paying high wages for the top group, placing millions into so called emergency bank accounts and leaving it there for years for the lean times.

I watched an MP and a minister from one of the ravaged countries with drought the TV camera showed people so thin, then turned to the eighteen stone local MP, who stated they are all use to begging now, then a minister who must have been twenty stone stated to much begging, give the money to the government we know what to do with it, yes I bet.

What do we do, well we have to sort out the problems that’s for sure but not only use is it the rest of the world has to do something to sort this out

Adam Ramsay shows a very poor understanding of economics here. The fact is that speculation reduces price volatility and smooths consumption/production over time. Speculators will bid up the current price if they expect demand to grow faster than supply in the future (ie. they expect a higher future price), but by raising the current price they induce more current production and reduce current consumption (saving more for the future). It’s quite simple, but it’s a very important process.

Is that all just theoretical gibberish spouted by “neo-liberals” who hate people and want them to die? No. A very famous example of the efficiency of speculation is the onion market. Futures trading in fresh onions was banned in the US in 1958 and can you guess what happened? Price volatility increased: http://chla.library.cornell.edu/cgi/t/text/pageviewer-idx?c=chla;cc=chla;rgn=full%20text;idno=5033566_4125_002;didno=5033566_4125_002;node=5033566_4125_002%3A6.3;view=image;seq=0019

No surprise to an economist, but perhaps it will make Adam Ramsay give this issue a bit more thought. While he means well, his “solution” would lead to thousands of unnecessary deaths. Foreign aid or policies designed to increase economic growth in Somalia would be much, much better.

Inyourhouse, quite aside from the debate on speculation, which you wrongly present as a closed debate (there is no consensus among economists), I don’t think the international food regime is really is a key factor at all in the Somalia context, which is highly cut off from normal market processes anyway (i.e. the debate around the effects of speculation probably is better applied to those countries that are more opebn to international trade.)

“there is no consensus among economists”

Yes there is. Speculation reduces price volatility. That is a consensus.

In fact, we can actually derive it from the very World Development Movement report that Adam links to.

Look at the graph. Rice prices change massively more than wheat and maize, yes?

As the WDM report itself says, there’s a much, much, larger market in speculation in wheat and maize than there is in rice.

No, really, the report does say that. So, the markets with more speculation had less price volatility than the one with less speculation in it.

Oh my, Adam Smith was right 235 years ago. Wealth of Nations, Book IV, Chapter 5 paragraph 40 to read his explanation about how speculation reduces price volatility.

I’d trust you Tim, but you sounds suspiciously like an overconfident academic.

Tim is entirely right about agricultural futures markets: if you think they’re the problem, rather than a counterweight to the problem, you literally don’t know what you’re talking about.

Futures make life less painful for farmers, and send price signals than help farmers to understand in advance how much to plant thereby reducing the chance of shortages in the first place.

And it’s annoying, because it makes the piece sound entirely stupid, whereas the points about the impact of AGW, biofuel idiocy, failed colonialism and failed decolonisation being more important than anything “natural” are entirely correct.

It is actually increased demand, poor harvests linked to drought- weather, climate change? and most importantly declining yields that is driving food prices as anyone with a clue would know. Here is one of your own pointing out for you the decline in the growth rate of crop yields.

http://greedgreengrains.blogspot.com/2011/05/declining-crop-yields.html

The outlook for this years crops in the US do not look promising.

http://greedgreengrains.blogspot.com/2011/07/noaas-8-14-day-temperature-outlook.html

Hey, it is more fun to blame speculators and bankers, that meme has been running since ancient Greece so it will not be ending anytime soon.

You know, we go over this tired routine on food speculation on Liberal Conspiracy every few weeks, and it’s the same people saying the same things. Someone says there is a huge problem about speculation and then Tim and all the others come in with blanket statements saying there isn’t, and the same old things about onions and rice are wheeled out as if any debate on the planet works through finding counterexamples and throwing them at each other. Seriously guys, there’s an actual academic debate going on. I’m not making it up. It takes all these factors very seriously (regardless of whether it is biofuels, meat consumption, supply/demand shocks, Russian export bans, speculation etc. etc.). I find it suspicious the way that some of you represent it as if there isn’t a debate going on, and as if everything has been resolved, which is clearly contradicted by the new research pieces and opinions I see coming out every week. My god, that OECD report came out last year and has since been heavily critiqued by many academics, and for that matter, actual traders. So the question that comes to my mind whenever I’m going through this time-wasting process of commenting on these pointless straw men, is why do so many people neglect to mention the real lively debate?

Quite aside from that, I really don’t think Adam is right to use Somalia as an example for any of this – it just has such a different situation to most other countries to be used as the basis for any meaningful extrapolation.

@ 9. Suitpossum

Some points are debated interminably with no conclusion. A Green like Adam could make valid arguments about drought and rising food prices and explain them from a climate change Green perspective. There is absolutely no need for speculators in his model of what is happening in the world because the fundamentals would still be happening with no commodity futures. Therefore, it just distracts from his argument.

‘Oh my Adam Smith was right 235 years ago’
Yep, at that time he was right for the economic base which existed at that time. And the existing economic base in Somalia is not so far away from the conditions which existed in the time of Adam Smith. The smaller the number of producers and products involved and the smaller the market, then predictions are easier.
Metaphorically speaking, it’s the difference between quantum and classical physics.

When we see dying Somalis, it is all too easy to see a natural disaster.

I gave up on this article here. You’d have to be pretty dim to think that a drought ‘naturally’ caused thousands of people to starve. There has been drought in parts of Australia for years now and I doubt one person has died of hunger. It’s perfectly normal for people to live in drought and desert areas. Las Vegas is in the desert.

Adam,

The chaos in the South of the country is the result of a culmination of history – a result among other things of British and Italian and Soviet colonialism and of IMF conditionalities designed for Western corporations not Somali people.

Any analysis of Somali problems which fails to mention militant Islam or clans needs to go and do a bit more work. We can blame the past for many things, but since none of the colonial powers messed up the food production for the area (because they were not interested particuarly – if anything, they improved agriculture and communications) it seems a bit odd to blame current problems on the past without noting current factors as well.

Not that I am defending colonialism, but if you have armed clans fighting for control, food production will suffer you know…

Good point Watchman – the situation in the country is clearly out of the bounds of the normal

They seem to be getting on fine – free from the shackles of colonial oppression.

Oh.

Wibble Wibble,

They seem to be getting on fine – free from the shackles of colonial oppression.

Still, at least they don’t have Berlesconi to make things worse…

@9 – “I find it suspicious the way that some of you represent it as if there isn’t a debate going on”

There isn’t any real debate, only a debate manufactured by heterodox economists and special interest groups. In the top peer-reviewed economics journals the matter is quite settled. To be honest, I can’t even remember the last time I saw an article in the AER saying that commodity speculation increased price volatility. It’s a dead issue. Pretending that it isn’t only ends up making you look less credible.

Suitpossom,

Good point Watchman – the situation in the country is clearly out of the bounds of the normal

I’d suggest it is more normal for Africa than we allow – one of colonialisms worst legacies was the fact it turned something as amorphous and mutable as clan identity into something fixed as part of your identity – which meant communal conflict became more about violence and less about assertion of power and changing control of resources. Literacy and record-keeping can be particularly dangerous at times.

Somalia is just what happens when other systems breakdown – elsewhere in Africa (other than in parts of DR Congo and Sudan at the moment) these tensions are generally kept in check.

Inyourhouse: Guess I’ll bite the bullet and look less credible then. Glad to see at least one contentious issue in the world has been resolved forever. Viva for static knowledge and linear graphs.

“one of colonialisms worst legacies was the fact it turned something as amorphous and mutable as clan identity into something fixed as part of your identity ”

Bit weird. Somalia was really only a colony from 1920 to 1960. For most of the previous milliennium Somalia had been the empire building state.

Inyourhouse: I really liked this former trader’s attitude to knowledge when it comes to the debate on speculation: http://www.ft.com/cms/s/0/acf3b70c-ac67-11e0-bac9-00144feabdc0.html#axzz1T7rG6boA

His subscription to the AER has obviously expired. I guess you should send him an email to tell him the issue is resolved. I’ve got it if you want it…

Tim,

Bit weird. Somalia was really only a colony from 1920 to 1960. For most of the previous milliennium Somalia had been the empire building state.

I think a generation of written record is long enough to firm up identities as fixed, especially as the writing stayed after the colonialism (to be fair, the Somalis have been literate for at least as long as the British, but they did not use writing in the systematic organisational fashion the western Europeans developed).

In effect, despite some very advanced coastal civilisations, as with neighbouring Ethopia/Abysinnia, what you had was an area with pockets of literate and organised society with a tributary relationship (one way or the other) to neighbouring farming and nomadic areas based on what are generally called clans, which actually were very flexible in terms of membership and identity, and which could even absorb the costal areas at times (although more normally they took on an Arab identity). Actually ascribing identities to individuals – attaching them firmly to one particular group – was a colonial innovation.

Watchman 1:40Pm…nail on head! I would add that militant Islam and infighting clans also BANNED aid, exacerbating the problem (they banned aid due to the temerity of the aid orgs complaining about aid being SOLD for profit by the people it was handed to for distribution to the hungry)

Any analysis of Somali problems which fails to mention militant Islam or clans needs to go and do a bit more work

Fighting clans are pretty much inherent in the OP’s “national borders drawn in a way which makes no sense” analysis.

Militant Islam is a lot more complex. The bits of Somalia that are run under a Talibanic government are horrible places to live – far more so than Puntland (which I believe the west should recognise, BTW) – but still less horrible than the places where starvation is the worst, which are the ones which are in the midst of full-on anarchy. When things are at their very worst, Hobbes has a point.

Fighting clans are pretty much inherent in the OP’s “national borders drawn in a way which makes no sense” analysis.

Somalia’s not a particularly good example of that in Africa – the overwhelming majority of the population is ethnic Somali, with the division being into different Somali clans, rather than the more disparate tribal structures you get in places like Zimbabwe or the DRC.

The bits of Somalia that are run under a Talibanic government are horrible places to live – far more so than Puntland (which I believe the west should recognise, BTW)

As I understand it, Puntland doesn’t want independence. It styles itself as an autonomous region within a federal Somalia (and has done since the late 90s). It’s Somaliland that has declared UDI.

Tim J – my understanding is that both Puntland and Somaliland would rather be independent, but Puntland’s take is that since Somaliland singularly failed to get recognition, it probably will as well, so there’s no point in annoying everyone.

On the speculation point, this FT piece is worth a read. It’s noticeable that the examples that academic papers site for where speculation has a significant medium-term impact are minerals rather than food – as you’d expect, because if you keep minerals in an unrefrigerated shed for a year, it doesn’t really matter, whereas if you keep food under the same conditions, it isn’t food anymore.

john b,

Fighting clans are pretty much inherent in the OP’s “national borders drawn in a way which makes no sense” analysis.

I’m struggling to see how drawing boundaries in a way which reflected clans would work – even a keen supporter of the principle of recognising functioning states such as Somaliland and Puntland (as I am – Dibjouti gets by OK with less resource, so why should they not?) would probably draw the line at giving each clan its own territory, especially as they are all mixed up (because most of the time the clan identity has not been relevant until recently).

Mind you, I agree that the boundaries are often purely arbitrary – although Somalia’s are not too bad really – there are Somalis outside Somalia (Kenya and Ethopia) but no noticeable non-Somali populations within Somalia. But that just means the ethnic tensions shift down a level to clans anyway…

Did I read that right – western consumerism is killing Somali’s in the sort of numbers that Anders Breivik could only dream about?

In other words we are culpable of crimes against humanity – or is it just Northern Crock’s fault?

Another Adam Ramsey rant based more in his ideology than fact.

Food prices in Somalia have not been affected by specualtion. It’s a totally closed economy. Internal political problems are near enough the sole reason for this problem.

As an example, nearby Eritrea and Ethiopia aren’t having the same problems with their harvests.

It’s like saying the food crisis in Zimbabwe was caused by a combination of bankers and global warming. i’ll tell you for free, sitting as I do in South Africa, that it wasn’t…unless of course bankers and global warming’s effects stopped at the border.

As for global grain prices in general, and the reasons why prices are going up;

– Global population is increasing
– Global population is getting richer, so requiring more meat (= approx 7x more grain per calorie)
– US dollar has been devalued through QE

This is nothing to do with speculation, which reduces price volatility. Outright, pure speculators are simply too small to have a real effect on such a massive market. Government driven economic policies like Europe’s CAP have effects magnitudes larger.

As for the effect “in the West” that is ruining so many of our lives? Again, prices have increased and the currencies we use to pay for our goods have devalued. Add in high taxes and the debt overhang free spending governments have left us with, and you are closer to the truth than blaming global warming (last time I checked people use greehouses to trap CO2 and heat to IMPROVE crop yields) and speculators.

I’d agree with the point about the closed economies Tyler.

I’d question your depth of knowledge regarding climate change and agriculture though. They key concern is about large scale disruption of water systems, and last I checked, people used water in agriculture.

@ 30 Suitpossum

I do have some technical knowledge of both…and some knowledge of Somalia.

Greenhouses work on the basis of trapping heat and C02….which plants need a lot of both. This being good for agriculture – and not wanting to get into a debate about global warming on that front.

The links between AGW and disruption in water systems isn’t exactly proven science either…despite a lot of people calling every flood or storm a result of it. Statistically there is little significant change in the occurence of these events. It’s near impossible to assign definite causality.

What it really boils down to though, is that Somalia and surrounding regions are generally shit places for agriculture, and have been so for a very long time – long before anyone even mentioned AGW. Many parts of the country are essentially constantly shifting desert. Add in an almost constant war and poor land and water management and a significant increase in the population since WW2 and you have a recipe for disaster.

But basically the point is this is nothing to do with banks or AGW.

I suffer from postmodernism, which leaves me inclined to distrust unqualified statements of obvious fact. It seems to me that you don’t suffer from postmodernism, and indeed, despite your apparently nuanced technical knowledge, you didn’t think twice about implying that it was obvious that climate change is good for crops, based on your observations of small scale greenhouses. I’d trust you if it weren’t for the FAO and hoards of agricultural think-tanks which seem to think it’s less obvious than that (and my farming family in Zimbabwe for that matter).

But, all round, good points about Somalia Tyler.

i know nxt to nothing about economics but have worked across east and central africa so have a little knowledge of the local issues,
firstly the current upsurge in somali instability is linked to the american backed ethipian invasion in 2008/9. prior to this al shabaab support was dwindling rapidly as they have proved to be just as incompetent as the clans in delivering stability and progress but had severely curtailed freedoms, banning radio jingles was one of the more amusing crackdowns.
but nothing like the installation of an american puppet regime,the tfg, to polarise opinions. like it or not any fuctioning somali regime has to have clan backing. they provide the muscle in a state with no police or armed forces.
the root cause of african famine is the global aid industry. kenya could easily feed itself and the region if the local farmers were empowered to do so and the kenyan gov was forced to spend the aid money it receives and its own budget allocations on agriculture.
local gov know that starving babies=emergency aid and will therefore skim agriculture budgets mercillesly and plead helplessness when it all goes wrong.
kenyan agriculture is still rain fed. some of the drought area routinely suffer flooding when the long rains arrives and 6 mths later suffer crop failure if the short rains arrive late,ie the same problems of the last 50 years!!
also re the original post, v nice graph showing global wheat price! maize is the stable food in the region tho!

re post 27- fair point on puntland but djibouti?!! only if you give every other breakaway region a us airforce base! that base is the djibouti economy tho with cigarettes at 80 us cents a pack it not all bad.
seriously tho, the resistance to recognising puntland is in the knock on effect across the region, especially the ogden rebellion n civil war in ethiopia. hard to believe that when the ethiopians agreed to wage a proxy invasion for the americans that refusal to acknowledge puntland wasnt a condition

@ Suitpossum

I said I wasn’t going to get into the argument about is global warming good for agriculture argument, but there is a fair amount of evidence to show that a certain warming and more C02 in the atmosphere *is*.

As you should know, if you have farming family in Zim, is that famine there was *nothing* to do with AGW etc. It was all to do with Bob Mugabe. Here in SA crops were (and are) good and have bene for some time. AGW doesn’t stop at the border…

Nothing I’ve said has denied that. Indeed, I’m not arguing about the content of your arguments, I’m arguing about the way you argue.

ok fair enough…

I just though it a bit pointless to go into where I get my info when it’s not hugely relevent. in this case, I’ve done 3 diffrent physics degrees, so have at least some knowledge in the field…

Good, I’ll come to you next time I need nuanced advice on global climate.

Rather late for this thread but Owen Barder, who knows Ethiopia well, is worth reading

http://www.owen.org/blog/4818

As an antidote to “half baked commentary”, as he puts it

“British and Italian and Soviet colonialism” and Arab slavery.

No word on the mother of all Somali problems: al-Shabab and its Islamic ideology.

re 40- mainly cos the influence and importance of al shabaab is usually over stated. it enjoys no more level of popular support than al queada does in the larger muslim world. it did increase its support in the south following the outrage over the ethiopian invasion but that support been slipping ever since they took over running kismayo and baidoa and have been found to be just as incompetent as previous clan based administrations
the general somali view of islam is fairly liberal, this is not saudi or yemen, indeed a large number of al shabaab fighters are pakistani and yemeni, most if not all of the suicide bombings in mogadishu have been carried out by foreigners.
the clear parallel to somalia is afghanistan. both countries have endured decades of misrule, they are both awash with weaponry and are suscetible to any extremist group who can promise to “make the trains run on time”.