Tuesday, June 11, 2013

How to Profit from Green Starvation

Engage Mid Hudson has released its ICLEI-based environmental plan while  President Obama continues to push for environmental regulation.  Although America can become energy self-sufficient and cut greenhouse gases through exploitation of its massive natural gas reserves, the environmentalist movement, the Democratic Party, and the New York Times push for  regulation and government-sponsored alternative energy schemes that fail at public expense. It is unclear whether they will be successful at inhibiting natural gas exploration because the public cost of reducing energy output will be enormous, and the American public may react at the ballot box as their living standard falls. This is not necessarily true, though, because the public has been made ignorant and foolish by the education system and the media.  Americans are now so dumbed down that they might accept a 50% reduction in their standard of living because of an implanted fear of windstorms. America got through the Great Depression and the dust bowl, but we must impoverish ourselves because of Hurricane Sandy, according to environmental extremists and the American media. 
 The situation is worse , though, because environmentalist regulation will lead to mass starvation in the third world.  The left invented the use of junk science to justify destructive economic policies that lead to mass murder, so the mass starvation that may result from today's  green movement is part of a great, bloody tradition.

The Times's complicity with the Stalinist mass starvation in Ukraine through the propaganda and lies of Pulitzer prize-winning reporter Walter Duranty is well documented. (Duranty won his Pulitzer at the Times based on falsified reporting that implicitly denied mass starvation.) During the 1930s Gunnar Myrdal, Swedish, Nobel prize-winning socialist economist, was a leading supporter of Nazism and Hitler.  During the post-World War II era, American universities often apologized for the socialist mass murders occurring in the Soviet Union and in China. In the 1960s American academics like psychologist David McClelland claimed that the Soviet Union's industrial development was so rapid that it would overtake  the United States by 1999--ten years after the real-world Soviet collapse.  McClelland used a "scientific" regression model to prove his point, and who could argue with science? 

In 1972, at a time when the Chinese regime had murdered over 25 million people, the Times ran John Kenneth Galbraith's article about his and fellow economists Wassily Leontieff and James Tobin's trip to China.  Galbraith praised the Chinese system, which by then had committed worse abuses than Hitler had.  Galbraith did not mention mass murder once; mass killing of Chinese dissenters was a matter of indifference to him and the Times.  Subsequently, left-wing linguist Noam Chomsky denied the existence of mass murder in Cambodia, claiming that the commonly accepted numbers of victims of Pol Pot's genocide had been overstated.  Just as the Nazis deny that the holocaust occurred, so did Chomsky argue that there was a less serious mass murder in Cambodia than people thought.

Environmentalism is the latest junk science to pique the left's genocidal lust.  

What do green policies have to do with mass starvation?  The green development scenario aims to reduce carbon energy use, but agricultural productivity depends on carbon energy. Therefore, a reduction in carbon energy will reduce agricultural efficiency and increase hunger. This has the most extreme effect in poor countries.  This is a classic level curve tradeoff taught in elementary economics classes.   Repeated proposals based on UN Agenda 21 to reduce carbon emissions by 30% in places like Great Britain are only the beginning.

In agriculture the less energy used the more land used. Yet the amount of land used has been reduced significantly in recent years because of Federal Reserve, European Bank, and other central banks' monetary policies, which led to the real estate bubble.  Scarcity of agricultural land is most extreme in the third world, where food represents a significant share of the peoples' budget.  Green restrictions on carbon energy production will affect third world agriculture.  The green movement is very much in the left-wing tradition:  its policies will come to the same end as the Times's did in 1930s Ukraine.

College professors, who are on the forefront of green advocacy, will not starve.  Indeed, we intend to profit.  This morning I thought of three strategies to profit from green starvation.  I am not selling my investments in natural gas and energy infrastructure, but I view the following investments as a partial hedge. They will do well in any case.

1.  Agricultural real estate.  There are few real estate investment trusts that specialize in agricultural land.  The only one I could find is Gladstone Land Corporation (NASDAQ: LAND).  It yields a 9% dividend.  It is falling today along with other high-yield securities.  It is a new REIT with a small capitalization; therefore, it is risky.

2. Potash Corp.  Fertilizer will be in demand as land becomes more important to agriculture.  Potash, one of the most important fertilizers, is a scarce commodity (NYSE: POT).  Potash is a Canadian firm, but it trades on the NYSE as well as on the TSX.  Its dividend is over 3%, and its risk (beta) is higher than the market average.

3. Canadian or Australian real estate.  I'm holding off on actually buying a home in one of these places, but they have the highest farmland per capita among all the nations.  It might be nice to know that you can live near an ample food supply.

Monday, June 10, 2013

Book Review: China's Silent Army

China's Silent Army:  The Pioneers, Traders, Fixers and Workers Who Are Remaking the World in Beijing's Image.  By Juan Pablo Cardenal and Heriberto Arajúo. Translated by Catherine Mansfield.  New York: Crown Publishers, 2013. $26.00.

China's Silent Army
is a tour de force.  Cardenal and Arajúo have written, and Catherine Mansfield has translated, an exceptional book based on around-the-world journalism from Beijing to the Democratic Republic of Congo to Costa Rica.  Their vivid, beautifully panoramic descriptions of their journeys to suffering third world countries, to Burma's jade mines and to Peru's iron mines, will fascinate any reader, but their great contribution is in their book's on-the-spot reportage about the complex role that the Chinese have played with respect to resource-and-human exploitation in mining, logging, construction, other extractive industries, and, in a few instances, vice.
There are at least three levels of implications of the rapid expansion of China's silent army, i.e., the increasing involvement of the Chinese state, Chinese nationals, and foreign citizens of Chinese extraction, with the economies of third world countries.   

First, the silent army is involved in distribution as well as resource exploitation.   The Chinese diaspora-- businessmen and businesswomen who have, since the 19th century, left China but retained links to their homeland--serves as a distribution system for Chinese merchandise and development of Chinese retail investments. These can be seen in massive distribution centers that have been built in places like Dubai.

Second, the Chinese have developed a formula for exploiting third world human-and-natural resources; the book carefully recounts it.  The Chinese formula is this:  offer infrastructure and financial subsidies, as well as graft, to third world politicians and dictators in exchange for much more valuable natural resource rights.  The infrastructure subsidies include Chinese construction of stadiums, roads, and public works.  In exchange for, say, $5 or $10 billion in such projects, which are presented to the host countries' rulers as completed or turnkey ones--which they can use to garner public support--the governments sign away resources worth, say, $50 or $60 billion.

Put another way, third world rulers who have short time horizons, who are corrupt, and who are unconcerned about future generations, are willing to trade $5 billion in football stadiums and roads for $50 billion in natural resources.  Moreover, there is frequently a cognitive issue: the third world rulers are not adept negotiators and may not do the math, as seems to have been the case with respect to Hugo Chavez's oil deal with the Chinese.   

Moreover,  in the third world countries some Chinese firms often maintain racially based pay differentials between Chinese and indigenous workers that they justify (in accordance with simple free market models)  in terms of signaling or compensating differentials: Chinese workers are more reliable, in the view of some Chinese firms.   This kind of pay differential is illegal in most of the world for obvious social equity reasons. It is remarkable that the economic endeavors of a socialist state frequently witness racial and ethnic discrimination.
According to the Chinese imperialist formula, indigenous workers are underpaid and subjected to serious health-and-safety risks, often for a small increment in profit to Chinese firms.  The authors point out that the Chinese themselves, even within China, are also typically underpaid and subjected to health-and-safety risks. Indeed, there are cases, recounted in the book, where Chinese nationals are duped to take jobs in Africa and then treated as little more than slaves.   This pattern raises a question as to the real meaning of the Chinese economic miracle:  Is it a primitive, unsustainable form of mercantilism based on human and environmental exploitation?  The authors present a balanced view, and there is no doubt that the buyers of cheap Chinese merchandise around the world, including the third world as well as the United States and Europe, benefit.  But is the benefit of cheap manufactured goods going to last forever?  If it does, will the low wages to Chinese and third world workers continue forever?  

One of the downsides to mercantilism is that it does not emphasize innovation.  In The Power of Productivity William Lewis emphasizes the importance of the organization of work and free market innovation to increasing productivity.  The Chinese invited the world's best manufacturing firms to open up shop in China, but it seems that the Chinese have continued along the path of what Lewis calls resource-intensive development, which cannot sustainably elevate the world's standards of living.   Because the Chinese mercantilist model rests on cheap labor and natural resources and not technological innovation, it may not lead to progress.   In the US, 40 years of wage stagnation has run parallel to the Chinese economic miracle, and the incentive for breakthrough innovation seems to have been reduced (but not eliminated) by the ease of moving factories to low-wage China.

The third level of implications is that when it comes to military and social issues, there is a long-term versus short-term paradox.  While the Chinese claim to think long-term with respect to investments in third-world countries' infrastructure in exchange for longer term payouts in the form of oil, iron, jade, and other resources, when it comes to adopting risky strategies with respect to transfer of nuclear technology to Iran or threatening Taiwan and other countries located near the South China Sea or on the Mekong River, the Chinese seem to think short-term.  The same is true of their attitudes toward labor relations and the environment.  They are remorseless polluters;  for example, they are willing to defoliate the Siberian forests without concern for replanting or sustainable harvesting.  The West learned these lessons a century ago; China's short-term thinking about pointless risk taking with respect to transfer of nuclear materials and technology, labor relations, and the environment,  should benefit from the West's recent errors, but it does not.   

China's Silent Army  is first and foremost a human drama that hearkens back to Dickens and even  further back to the era of mercantilism in Spain, Britain, Holland, and France and to the imperialism that is concomitant with the mercantilist, resource-based model of economic development.  An irony that runs throughout the book is that the Chinese state, which adopted socialism, an ideology based on rectifying human exploitation, has become exploitative on the level of the most rapacious periods of European state capitalism.  

 In the end, I wondered whether the Chinese economic miracle is not about, more than anything else, the narcissism of the Chinese communist leaders.  The Chinese people suffer and the third world workers suffer.  In exchange, the world gets cheap consumer goods, the profit from which the Chinese state uses primarily to enhance its own--and its leaders'-- power. The world seems to have struck a bargain with Chinese socialism to unsustainably ravage the environment in illogical deals that provide us with cheap t shirts and watches.

Just Say No to King Hussein's Crank Environmental Policies

King Hussein's administration doesn't know sh*t from shinola about climate change, but his army of scientists on the take don't shy from making politically motivated predictions.

I just sent this email to King Hussein:

Dear King Hussein:

You should fire Energy Secretary Ernest Moniz and Agriculture Secretary Tom Vilsak, and, because you are factually wrong, you might  reconsider your claim that global warming is accelerating.  Going around saying  “the science is settled” confirms that you, Moniz, and Vilsak are badly educated.  Science is never settled; ignorant people think that it can be.

Claims of extremely rapid global warming are  nonsense.  The dust bowl in the 1930s was a worse storm period than now.  Someone recently compared the models used by your ideologically motivated "scientists" with observed mean temperature increases. The reality is one fourth of the projections, so the models are wrong.  

Your scientists' models are 75% off target.  In economics that is excusable (although no competent economist would claim to be able to predict the future), but in physics a 75% error is junk.  You sound ignorant, bub, when you go around making predictions based on junk models.  

King Hussein, you aim to cripple our economy based on scientific newspeak.  Your administration is a destructive maelstrom.


Mitchell Langbert, Ph.D.
Political Editor, Lincoln Eagle
PO Box 130
West Shokan, NY 12494

Ubi libertas, ibi patria