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Archive for July, 2010|Monthly archive page

How secure is Britain’s food supply?

In Uncategorized on July 31, 2010 at 3:10 pm

BARCELONA, SPAIN - JUNE 10:  A woman looks at virtually empty shelves in a supermarket during a transport strike on June 10, 2008 in Barcelona, Spain. Truckers in Spain stepped up protests against rising fuel prices causing mayhem on highways and is resulting in supplies not reaching stores. (Samuel Aranda/Getty Images)

In September 2000 a lorry strike in Britain threatened the country’s food supply as large supermarket owners rushed to the government to inform that they only had stock for three additional days. Ten years on, the situation hasn’t improved by much. The country’s major supermarkets now have 8-10 days of food stock at a time. What are the threats to our food supply system and is the system resilient enough to withstand the shocks?

Andrew Opie, of the British Retail Consortium and Tim Lang, professor of food policy at City University, discuss the question in a BBC podcast

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News digest 30 July 2010

In Uncategorized on July 31, 2010 at 12:39 am

Speculative land grab

In Uncategorized on July 30, 2010 at 3:04 am

A girl carries a container of water at Sakale Wali IDPs camp in the South Darfur town of Nyala May 29, 2010. REUTERS/Mohamed Nurdldin Abdallh (SUDAN - Tags: SOCIETY)

A World Bank report leaked to the Financial Times raises concern that wealthy investors are targeting arable land in countries, especially African, with poor governance laws to benefit from rising commodity prices and demand for biofuels. Also, countries like China and Saudi Arabia are buying prime agricultural land in Africa to ensure food security for their people.

In many cases promises for development of land and investment in infrastructure and job creation are not fulfilled by the buyers. The purchase is often for speculative gains rather than increasing the productive potential of the land.

Poor farmers in these countries are losing out on their local resources and their governments seem to be more keen on making fast money rather than protecting livelihoods and local community interests. Although records are not very reliable, the report suggests that land transfers included, for instance, as many as 3.9 million hectares in Sudan and 1.2 million in Ethiopia between 2004 and 2009.

For more details, readers are urged to look at the website dedicated to raising awareness on the issue of farmland grab in the developing countries. John Vidal of The Observer also wrote an investigative piece on this subject.

And who owns the land in Britain?
Reading about this issue reminded me of the stark land inequality in Britain that was highlighted by the book “Who owns Britain” by Kevin Cahill and also a BBC programme based on the book titled “Whose Britain is it anyway?“.

Here is a list of key points about land ownership in Britain:

  • 69% of the land is owned by just 0.6% of the population, and nearly 30% is still owned by the aristocracy.
  • 90% of the British population lives on under 10% of the land.
  • While ordinary people pay council taxes and have to deal with very high property costs due to “apparent” scarcity of building land, large land owners are exempt from any taxes on land ownership. On the contrary, they enjoy enormous taxpayer funded subsidies simply for owning land designated as “agricultural”, even when they often do not use the land productively for agriculture.
  • We still do not know who owns up to 50% of the land in England and Wales as there are no records about it in the Land Registry. Clearly, many among the landed class strongly oppose making this information available to the general public. 

So far the aristocrats and other large land owners have prevailed in maintaining the concentration of ownership. Countryside land has been more or less beyond the means of low or even middle-income people. But there are initiatives like Landroots that are attempting co-operative ownership models to change that and make rural land more accessible for people.

News digest 28 July 2010

In Uncategorized on July 29, 2010 at 7:01 pm

Big Four audit firms under scrutiny for their role in the financial crisis

In Uncategorized on July 28, 2010 at 9:04 pm

Vote for ‘Our Economy’

In Uncategorized on July 28, 2010 at 3:52 pm

Please vote for “OurEconomy.co.uk” in the 2010 UK best blogs poll.

Click here to vote in the Total Politics Best Blogs Poll 2010

Just three days left. You can email your top ten (but not less than five) favourite UK blogs to toptenblogs@totalpolitics.com. Find other interesting political blogs from last year’s results.

News digest 27 July 2010

In Uncategorized on July 28, 2010 at 3:38 pm

Cameron courts India: for whom?

In Uncategorized on July 27, 2010 at 7:34 pm

Britain's Prime Minister David Cameron (R) speaks to India's Trade Minister Anand Sharma during their meeting at number 10 Downing Street in London June 28, 2010. REUTERS/Andrew Winning (BRITAIN - Tags: BUSINESS POLITICS)

David Cameron will arrive in India today accompanied by 39 executives from some of Britain’s largest companies in a bid to strengthen bilateral business ties.

It is obvious what India can offer to these British companies. BAE Systems will be looking to push defence equipment deals worth around £1 billion. The private equity firm 3i will look into investing further in infrastructural projects in India’s rapidly growing economy. Barclays would like to extend its wealth management services to the high net-worth individuals and families in India. Then there are outsourcing opportunities with Indian IT powerhouses like Infosys, whose headquarters in Bangalore Cameron is scheduled to visit. British retailers such as Marks and Spencer would want a greater share of consumer spending from India’s rising middle class numbers.

India has many suitors among the developed economies and it should be in a good position to negotiate foreign investment which would create further jobs and consumer demand in its economy. However, the same cannot be said of Britain.

While Britain’s capital owners will largely benefit from investing in India, it is difficult to see a significant benefit to its larger population from these trade deals. For instance, much of the defence equipment from BAE will be manufactured under licence in India. BAE’s deal might only create some additional service level jobs in the UK, if at all.

Foreign investment in the UK has almost halved in the last year, according to a UN report. Britain is clearly an expensive place to build most products compared with the emerging economies. Its economy relies significantly on the services sector and a few niche areas of innovative technology industries like pharmaceuticals,  biotechnology and aerospace.

Over-reliance on the financial services sector has already proven to be risky after the recent crisis. At the same time, competition for the higher end technology industries is growing in the emerging economies like China and India, who are increasingly developing a skilled workforce.

Britain on the other hand is seeing a dwindling number of engineering graduates. As such, hopes of attracting more foreign investment into the high-tech industry in Britain remain weak. It will be good if the government is able to keep domestic investment from migrating elsewhere. Or else even if trade between the countries increases, the benefits will accrue to only a few investors positioned to benefit from the exchange at the expense of further job losses in the UK.

News digest 26 July 2010

In Uncategorized on July 27, 2010 at 3:08 pm

The “hunger lottery”: the role of financial speculation in food price rises

In Uncategorized on July 26, 2010 at 6:22 pm

PORT-AU-PRINCE, HAITI - APRIL 30:  Children wait in line for food at Saint Clare's church rectory April 30, 2008 in Port au Prince, Haiti. The church, headed by Father Gerard Jean-Juste serves about 1,000 people a day. Haiti is currently faced with a major food shortage crisis and is one of a number of countries struggling with the ongoing rise in the cost of commodities. Widespread food riots in Port-au-Prince and elsewhere this month left at least seven people dead. (Photo by Eric Thayer/Getty Images)

The World Development Movement has published a report arguing that financial speculation in commodities by banks such as Goldman Sachs was mainly responsible for the food price rises in 2007-2008. The drastic rise in prices made it impossible for low-income families in many developing countries such as Haiti to feed themselves and their children, leading in many cases to food riots.

While many reasons, such as increase in the price of oil, a rush towards biofuels, increasing demand for food in emerging economies, have been suggested by analysts to account for the increase in prices, the report presents strong evidence to support the claim that although other factors played their part, it was speculation in the global food markets that best explained the dramatic rise in wheat (around 80%) and maize (around 70%) prices. It also argued that a rise in the price of these food crops was also responsible for the enormous hike in the price of other commodities such as rice since rice producing nations were forced to curb exports in order to secure food for their population.

Global trading in food derivatives is supposed to help both producers and buyers of food crops protect themselves from unexpected risks. For example, the farmers need to secure a price for their wheat crop in the future, before they even sow the seeds, to avoid making a loss on their investment, in case the price of their produce falls in future. The buyers of that produce fix the price in advance with the farmers to protect themselves from any unexpected increase in crop prices. Hence, in theory both sides should be able to insure themselves against price risks.

However, speculators are neither producers nor those who are actually interested in taking delivery of the actual crop. They are simply interested in profiting from their bets about how prices may move in the market. Free marketeers, like those from the Adam Smith Institute (ASI), argue that speculators play a valuable role in the economy by using available information to forecast supply and demand and smoothen out prices to create a more stable price environment. According to ASI, even if the prices do increase in the short-term above real market levels, they do not do so by much, and are eventually corrected by the market.

This report shows that the free marketeers’ support for speculation is wrong on many counts. Many speculators do not base their trading decisions on real supply and demand conditions. The influx of excessive speculation money into the market has increased rather than decreased price fluctuations. Prices in oil as well as food and cash crops have in the recent past increased excessively at times, beyond the explanatory potential of supply and demand variations. Moreover, wealthy investors and financial institutions like Goldman Sachs are quite capable of influencing these markets for their own profit. Evidence suggests that they have done so on many occasions.

And even if it were true that market prices would eventually correct themselves, how would this help someone in the developing countries who cannot afford food due to a sudden rise in prices for a few days, let alone weeks or months?