IMPLICATIONS OF CLIMATE CHANGE. 

REPORTS BY CGIAR/FAO/WFP.CCAFS, CSACC 

The reports published by the Food and Agriculture Organisation;

the World Food Programme;

the Consultative Group on International Agricultural Research [November];

Climate Change, Agriculture and Food Security [October];

Commission on Sustainable Agriculture and Climate Change [March];

during 2012 were concerned to identify that Climate Change will result in significant changes in the distribution of poverty and hunger,

the organization of World Trade,

the social and economic priorities of governments,

the development of social protection of the poor,

the types of food that can be grown and the emergence of sustainable diets,

cultural changes associated with food: vegetarian/vegan/omnivores. 

They wished to emphasise that climate changes over the next 40 years will not only lead to different weather, rain, heat, winds, drought, storms but also to economic, social, political, cultural  changes.

However, it is clear that the UN and Agriculture agencies support the current systems of trade and growth, and ignore the impacts of economic inequality. They identify the roles of small holders in growing local foods for local communities without paying any attention to the realities of  the economic power of the 1%.........their control of  funding and investment. If local farmers are to be able to respond to the failure of crops, it is necessary for them to have direct access to finances that will allow them to innovate and develop new crops and new methods.

Inequality, Poverty, Hunger, Injustice

At a time when more food is grown in a year than at any other time, 1 billion people are undernourished - go hungry, and 1 billion suffer obesity -the effects of over-eating!

In 2012, out of a world population of 7 billion, 10 million are multi-millionaires with access to $42 trillion, of which 1225 are billionaires with $4.2 trillion: the so-called 1%!  The unregulated global banking services operate derivative/ futures markets creating $800 trillion, along with a credit default swaps market creating $600 trillion.  The Gross Domestic Product of global trading is estimated  by the Bank of England at $500 trillion. Clearly, we live in a world where there is more money than ever before. But most of it is controlled by  a small minority. Unless this wealth is released for agriculture, it is unlikely that the poor and hungry will survive.

Alongside this elite minority of plutocrats, there are 1.5 billion people who are trying to survive on less than $1.25 a day. There are up to 1 billion people who go hungry everyday.

 The reports published in 2012  by the FAO, WFP, IFAD, CGIAR, CCAFS declared that 868 million people suffer undernourishment.   30% of the world’s population suffer micronutrient deficiency. 2 billion people suffer the consequences of micro-nutrient deficiencies. 100 million children under 5 are underweight. 2.5 million children die every year due to malnutrition. 12.5% of the global population are undernourished. There are more hungry people in Sub Saharan Africa, western Asia, and North Africa now than in 1992. The number of overweight children has reduced, and the stunting of children under 5 has decreased.

We live in a global society in which the majority  are poor.

The extent of deprivation is appalling, given the luxury of the few!   

Many of their problems could be eliminated if the elite plutocracy shared their wealth in cooperation with the poor majority! If the cycle of poverty is to be broken, political action is required to redistribute wealth, and develop social welfare programmes.

World Trade

Most of the world’s poor depend on farming. Therefore, agricultural growth could reduce poverty. But the reports reveal that agricultural situations are very complicated.

The farmers are not necessarily the owners of the land. One of the impacts of globalization has been that many  crops and land are controlled by sovereign funds [that is, national governments] and banking investment funds. World Trade influences what is grown, harvested, and sold. For example, China controls many acres in Ethiopia. The crops are stored for use in China, not sold for food in Ethiopia.  The UK and the EU sponsor farmers in Kenya to grow flowers for export on some of the most fertile lands in the country. Crops are not always grown to feed local communities. Too many crops are grown as products of world trade.

Across the world, commodity corporations like Glenstrata, Unilever, Walmart and other supermarket corporations, support the growth of such crops as wheat, maize, rice, potatoes, bananas, oranges, apples, satsumas, tea, coffee, lemons, pineapples, palm oil, olive oil, sugar, nuts, and so on,  for sale across the world. They keep prices of food low in the field, and protect their profits by manipulating the prices in the shops.

In the face of a world population rising to 9 billion, the global demand for food is expected to increase by 60% by 2050. [It is worth noting that no report explores the possibility that the undernourished and hungry will die, and the world population will decline or be static].

At the moment, agriculture is regarded as a good investment by many corporations, countries, and investment funds not for the food but for the profits. It is these agricultural investors who manipulate supplies and demands, and prices, making food supplies more insecure. It is important to realize that not only climate change  imperils food security, it is traders and investors, who alter food prices at a time of maximum production? who decide that bio-energy crops are more profitable than food crops, without any regard for the needs of the vulnerable and hungry and deprived -the poor.

Social Priorities

Given that we live in a global society in which most of the wealth is controlled by an elite plutocracy, and the majority of people are poor, the social and economic priorities must change in the future. The  FAO insists that in order for economic growth to enhance the nutrition of the neediest, the poor must participate in the growth process and its benefits: (i) Growth needs to involve and reach the poor - small holders should share the profits of their labour, and not be subject to capitalist exploitation.

(ii) the poor need to use the additional income for improving the quantity and quality of their diets and for improved health services; and

(iii) governments need to use additional public resources for public goods and services to benefit the poor and hungry. Agricultural growth involving smallholders, especially women, will be most effective in reducing extreme poverty and hunger when it increases income to farmers and generates employment for the poor.

 In those countries where most people are dependent on agriculture, small holders play a key role in meeting food demands.  The FAO asserts that small holders are more efficient than large scale monocultures; more sustainable, and promote a green economy. The FAO argues that in the future, so as to respond positively to the predicted rising demands for food small holders will need

access to credit so as to be able to invest in new crops and land;

to gain access to transport;  and storage  with  refrigeration,   so that they can look after the harvests and reduce waste;  

to secure land tenure,  and establish their property rights so that they can withstand land grabs by corporations and governments;

constant access to education, in particular literacy and numeracy,  so that they can understand new laws and policies and practices.  

Social Protection

Social protection is crucial for accelerating hunger reduction. First, it can protect the most vulnerable who have not benefited from economic growth. Second, social protection, properly structured, can contribute directly to more rapid economic growth through human resource development and strengthened ability of the poor, especially smallholders, to manage risks and adopt improved technologies with higher productivity.

Economic and agricultural growth should be “nutrition-sensitive”. Growth needs to result in better nutritional outcomes through enhanced opportunities for the poor to diversify their diets; improved access to safe drinking water and sanitation; improved access to health services; better consumer awareness regarding adequate nutrition and child care practices; and targeted distribution of supplements in situations of acute micronutrient deficiencies. Good nutrition, in turn, is key to sustainable economic growth.

To accelerate hunger reduction, economic growth needs to be accompanied by purposeful and decisive public action. Public policies and programmes must create a conducive environment for pro-poor long-term economic growth. Key elements of enabling environments include provision of public goods and services for the development of the productive sectors, equitable access to resources by the poor, empowerment of women, and design and implementation of social protection systems. An improved governance system, based on transparency, participation, accountability, rule of law and human rights, is essential for the effectiveness of such policies and programmes. Of course, the problem is that in many countries of the world these programmes are not being developed, and government elites are taking all grant-aid monies for their own benefits, and their families. The recent revolts in Libya, Egypt, Tunisia, Yemen, Syria have revealed that the ruling families have taken all the money to sponsor their lives of absolute luxury! in the midst of total poverty.

The United Nations must work to educate citizens and their rulers as to the needs for hunger reduction, for social protection, for the empowerment of women, for human rights, and rule of law.

Diet Changes

Climate patterns will lead to direct changes to crop survival. Droughts and floods will cause crop failure immediately. 2012 has seen the failure of the maize crops in the USA. The FAO and its agencies are exploring the implications of climate change for food crops that provide the staples of regional and local diets. The three main sources of our calories, maize, rice and wheat, face  extreme weather events that could significantly depress yields. Key sources of animal protein, including cattle, goats, sheep, and fish likewise may be imperiled.

According to the FAO, more than half of the calories consumed globally come from the three crops: but maize, wheat and rice production will be severely challenged by climate change. In some places, it may be possible to overcome the challenges by breeding more resilient varieties, such as those that can withstand high heat, drought or flooding. But  climate change may threaten the livelihoods of nearly one billion people living on less than two dollars per day who keep livestock. Already, they do not eat enough food to meet their energy requirements. This problem will rapidly intensify as an additional two billion people populate the planet during the next 40 years. The dramatic increases in food production that are needed must take account of the impact of climate change on farming regions and crop varieties.

So what is going to happen when it is no longer possible to grow wheat, rice, and maize? How many people will die?

One of the crops that can be used to fill this calorie gap is cassava, which is both a cash crop and a food staple in Africa and Asia. More importantly, cassava tolerates numerous stresses, ranging from infertile soils to heat and drought. Certainly, cassava could help to meet food needs in South Asia, where higher temperatures and prolonged dry periods will reduce the viability of wheat and rice.

Bananas are another crop that could fill regional agricultural gaps. Plantains and cooking bananas provide some 70 million Africans with more than a quarter of their calorie requirements. They are currently grown in the humid and sub-humid tropics, the tropical highlands and drier subtropics. Climate change may affect banana cultivation in certain areas, but its range is expected to adjust, not shrink. In the near future, it may be possible

to cultivate bananas at higher altitudes with a shorter time between planting and harvesting (although bunch size may decrease).

The important point is that agriculture has to adapt beyond maintaining the viability of wheat, maize and rice in the face of climate change and finding replacement crops. And given the thicket of technical, environmental, cultural and political issues involved in shifting dietary staples, this adaptation work needs to rapidly accelerate to keep pace with climate change. Adaptation will have to take place all the time over the next 40 years in response to climate changes and population growth

One of the more common sources of vegetable protein is the soybean. While widely grown in the United States, Brazil and China, soybean is a relatively new crop in sub-Saharan Africa. But it has been adopted with some success in the savannah regions. Some African cultures are already adding the soybean, high in protein and vegetable oil, to their traditional recipes. Soybeans, however, are extremely susceptible to increased temperatures. The areas in the US and Brazil that cultivate proteins for export would face steep declines once the temperature exceeds 30°C. There are estimates that US soybean production alone could decrease by as much as 80 percent in this century.

Chickpeas, another traditional source of vegetable protein, are grown and eaten across

five continents, including regions where hunger is a constant concern. The chickpea may be vulnerable to climate shifts, in part because it is usually grown on marginal lands and with minimal amounts of fertilizer and irrigation. In these settings, the crop is already vulnerable to attacks from pests and environmental stresses.

Climate change is likely to have a mixed effect on chickpeas. The anticipated increase in carbon dioxide levels could be beneficial, but higher temperatures will hinder their growth.

Cowpea, known in sub-Saharan Africa as a “poor man’s meat,” is an essential part of the

diet in many regions. Not only does it have ample protein, but several varieties contain

an exceptional amount of micronutrients. The crop is grown mostly in the dry savannahs and is generally more drought-tolerant than other plants. Cowpea vines play a valuable role in providing dry-season feed for ruminant livestock.

Barley is one cereal, though, that could help improve nutrition, especially in drier parts of the world. It contains high levels of micronutrients—especially zinc and iron—and can be used as livestock feed. Barley also can fetch a relatively high price in markets as the grain is valued in producing alcoholic beverages. Barley could be attractive in a world of rising seas and more frequent droughts, as it is known for its ability to withstand salinity in the soil, in addition to heat and drought. There needs to be more research to determine just how much stress barley can sustain, but its ability to adapt to climate change appears to surpass many of today’s most important crops.

Millet and lentils are highly nutritious foods that are similarly able to withstand harsher growing environments. They are ready-made to help poor communities maintain and increase food security as climate conditions reduce yields from other food sources. However, they are not a bullet-proof adaptation option since certain climate stresses can reduce their yields as well.

Cultural Change

The FAO and agencies accept that food and cooking and diets are important aspects of ways of living, and expressions of social cultures. For example, the Mediterranean diet with olive oil, yoghurt, oranges, apples, herbs, feta, garlic, fresh fish, tomatoes, wheat is seen as part and parcel of living in Greece, Italy, and Spain.  The adoption and use of new crops and different foods and cooking requires farming changes as well as different eating habits.

Crops, such as cassava, yam, barley, cowpea, millet and lentils  could fill in the gaps caused by declining harvests of other crop  types. A key source of tension, however, surrounds adaptation that would involve abandoning a traditional food source for an entirely different one: for example, forsaking maize in the face of rising temperatures and cultivating cowpea instead. Will people embrace the new staple, however nutritious it may be? This cultural challenge is another facet of climate change adaptation that should get as much attention as plant breeding.

Despite the enormous challenges climate change will bring to food production in the developing world, and in wealthy countries as well, a number of actions can be undertaken to prevent these problems from exploding into costly crises. In its final report, issued in March 2012, the Commission on Sustainable Agriculture and Climate Change issued a number of recommendations that that can help ensure agriculture not only survives but also thrives.

These include:

Financing initiatives to help agricultural production systems become more resilient to weather variability and shocks, while contributing significantly to mitigating climate change. This includes supporting national climate risk assessments and developing mitigation and adaptation strategies.

Reshaping food access and consumption patterns to ensure basic nutritional needs are met and to foster healthy and sustainable eating patterns worldwide, and then promoting these changes through innovative education and outreach campaigns.

Significantly raising the level of global investment in sustainable agriculture and food systems in the next decade. This includes increasing the knowledge of best practices and innovation by supporting revitalized extension services, technology transfers and communities of practice.

Developing specific programs and policies to assist populations and sectors that are most vulnerable to climate changes and food insecurity. This includes creating and supporting safety nets and other programs to help vulnerable populations in all countries become food secure.

Establishing robust emergency food reserves and a financing capacity that can deliver rapid humanitarian responses to vulnerable populations threatened by food crises.

These recommendations focus our attention on the necessity for making finance available; promoting sustainable diets; sustainable agriculture; support for vulnerable populations; and food reserves. 

REFERENCES

Recalibrating Food Production in the Developing World, Policy Brief 6

CGIAR/CCAFS 2012.

Achieving Food Security: final report by the Commission on Sustainable Agriculture and Climate Change/ CGIAR 2012.

Climate Change and Food Systems: Annual Review Environmental Resources.

Vermeulen, Campbell, Ingram 2012

State of Food Insecurity in the World FAO/ WFP/ IFAD.  2012

TOWARDS A GREEN ECONOMY

CLIMATIC EVENTS.

October 29/30 2012, Hurricane Sandy, a weather system covering over 1000 square miles of the Atlantic Ocean, is busy wreaking havoc across the eastern coasts of North America.

Its size and energy has revealed clearly to the tenants of the ‘millionaire cities’ of the USA and Canada how helpless they are in the face of climatic catastrophe. For example, it is reported that 7.4 million people are without electric power, and 12,000 flights have been cancelled, and all airports closed. In New York, all people have been told by Mayor Bloomberg to stay home! Upstairs!

Its size and energy has shown that rich communities in New York, New Jersey and Washington DC are as subject to storm destruction as the poor villages of Haiti and Cuba.

Its size and energy has restarted the debates in the USA about climate change and global warming.

GLOBAL WARMING

Global warming and climate change are linked to the pollution of the atmosphere by human action.  Pollutants stop heat escaping from the biosphere, and increase the temperature differences between the tropics and the polar zones, and the upper and lower atmosphere. The greenhouse gas emissions of carbon dioxide from plants and fossil fuels; methane from animals;  chloroflourocarbons, CFCs, from refridgerants; and sulfur dioxide from volcanoes and other sources of geo-thermal energy release excess heat energy into the atmosphere . Atmospheric carbon dioxide comes from the decay of plants, volcanic eruptions, waste products of animal respiration. It is removed by photosynthesis in plants, and dissolved in water. It stays in the atmosphere for 100 years. These emissions are recorded as particles per million: 450ppm is critical, and 600 is catastrophic. This year it has been reported that 400ppm have been found above the Arctic, and that 395ppm will become normal, leading to significant climate change, and weather extremes.

Will it be possible to limit the pollution of the atmosphere by controlling gas emissions from farming, forestry, fisheries, fossil fuels like petroleum and coal and timber? At the moment, by products of farming create a lot of gases and pollutants. For example, many supermarkets and food commodity companies grow foods which are transported by lorries and shipping across the globe all year round.

Extensive attempts have been made to produce bio-ethanol from maize and other crops, and to limit the use of fossil fuels. But these attempts have resulted in increasing competition for land and crops, food and fuel, and water supplies, making the conditions worse in parts of Africa, Brazil. 

SUSTAINABLE FARMING

At this time, October 2012, the Food and Agriculture Organisation, the World Health Organisation,  the United Nations Environment Programme and other agencies of the United Nations, as well as other environmental groups, have decided to promote sustainable farming by linking what farmers grow with what people eat: sustainable diets.

If many people want to eat meat, then the farmers will rear cattle, sheep, goats, chickens. And the production of methane will increase.

If people want to have milk, cream, yoghurts, then farmers will produce dairy products,

with cows grazing on grasslands creating methane and carbon dioxide.

The evidence is that as communities become wealthier, meat consumption increases, using more resources such as land and water to raise sheep, poultry, cattle.

Ironically, as people become more affluent they adopt poor eating habits such as ‘take-away foods’, ‘fast foods’ leading to poor nutrition, obesity, poor health. The so-called ‘western food model’ with high meat, high salt, high sugar, low fibre, low nutrient content has led to 2 billion people being overweight and obese. The increasing competition for land and crops has resulted in 1 billion people suffering from hunger and malnutrition, and 2 billion showing under nutrition and micro-nutrient deficiencies [2011]

While there is no agreement on the nature of sustainable diets, there is agreement that there should be less meat and dairy products, and more vegetables and fruits.

The Mediterranean diet is held up as a model: with olive oil, wine, nuts, fruits, vegetables, pulses, beans, herbs, spices, low fat yoghurts, meats: all locally grown.

It has been realized that farmers produce what they can sell, what people eat. So if we want to alter what is grown on the farm, we have to alter what people eat. When people eat more fruit and vegetables, farmers will grow  more. The argument is that :

Sustainable diets lead to sustainable farming and encourage local foods at local farmers markets.

Current practices which use chemical fertilizers, as part of  industrial scale monocrop  farming, with irrigation  and global transport and international storage, undercut basic natural conditions, including water, soil formation, biodiversity.

Current practices have side effects such as ground water contamination; pollution of surface waters; green house gas emissions; soil erosion, degradation.

Threats to agriculture arise from competition for water; competition for land such as

 bioenergy crops or food crops or expanding cities; and climate change.

Food waste and loss is huge! Globally, 1.3 billion tonnes per year, an estimated one-third of food produced for human consumption, is lost or wasted in storage or transport.

Current practices will have to change.

Sustainable food systems are part of a ‘Green Economy’.

Sustainable diets aim to reduce the impact of food production on resources and the environment by encouraging consumption of foods that require smaller amounts of  resources than others; a plant based diet that enhances the nutrition of diets so that fewer people suffer from diseases, malnutrition, or obesity.

A sustainable diet is one which is good for humans and the eco-sphere both in the present and

the long term and take into account factors such as

• environmental: including biodiversity, energy, climate change, water, land use, and

soil preservation;

• public health: including food safety, nutrition, equality of access, and waste reduction;

• socio-cultural: including acceptability, ethical and moral, identity, information, and

education;

• economic: including affordability, accessibility, true price, productivity, efficiency,

employment and waste reduction;

• qualitative: including taste, pleasure, appearance, perceived value, freshness, and

seasonality.

These factors are often addressed in food policy and supply practice as separate ‘single issues’ when they need to be viewed coherently, as an integrated policy framework.

The challenge for the twenty-first century is to produce sustainable diets that are

biodiversity-promoting, food-based diets meeting nutrient requirements while conserving and

promoting sustainable ecosystems and human wellbeing, optimizing natural resources and

respecting environment carrying capacity. Sustainable diets require a strong emphasis on local production, distribution and consumption, to reduce embedded energy, while others stress the need to prioritize incomes of farmers, associated workers as well as of the food industry or respecting and protecting cultures of consumers and communities.

In this regard,  the Sustainable Development Commission (SDC) of the United Kingdom Government  suggested a new definition of food security in terms of “genuinely sustainable food systems where the core goal is to feed everyone sustainably, equitably and healthily; which addresses needs for availability, affordability and accessibility; which is diverse, ecologically-sound and resilient; which builds the capabilities and skills necessary for future generations” [2009]

According to FAO, sustainable diets are defined as “those diets with low environmental impacts which contribute to food and nutrition security and to healthy life for present and future generations. Sustainable diets are protective and respectful of biodiversity and ecosystems, culturally acceptable, accessible, economically fair and affordable; nutritionally adequate, safe and healthy; while optimizing natural and human resources” (FAO, 2010).

A Green Economy

UNEP defines a green economy as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. In a green economy, growth in income and employment should be driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource

efficiency, and prevent the loss of biodiversity and ecosystem services. These investments need to

be catalysed and supported by targeted public expenditure, policy reforms and regulation changes. The development path should maintain, enhance and, where necessary, rebuild natural capital as a critical economic asset and as a source of public benefits, especially for poor people whose livelihoods and security depend on nature. The concept of a “green economy” does not replace sustainable development, but there is now a growing recognition that achieving sustainability rests almost entirely on getting the economy right.

UNEP: Towards a Green Economy, 2011

UNEP: Avoiding Future Famines, 2012

FAO: Sustainability Diets and BioDiversity 2012

www.sustainablediets.com

www.eateco.org/environment

BANKS, DEBT, LOANS, AND BAILOUTS: DEBT SLAVERY!
Why do we want banks?

I am talking about 'we' : those people with spare cash, with savings, with a regular income, with at least 100GBP each a day..... the minority who think they are the ‘norm; the 500 million out of 7 billion’.
We want banks as places to receive our payments, our salaries, our pensions; to pay our bills; and when necessary, give us credit........let us be DEBT SLAVES. In fact, many people think that when you put money into a bank, that money is kept there.  It is assumed that your money is safe and available on demand. This is known as ‘Full Reserve Banking’, and does not operate in the UK nor anywhere else. It is a fantasy. There are a number of versions of this system. According to the narrow version, a bank would function as a ‘deposit box’, in which the total monies are held, for a fee, until withdrawn by the depositors. The bankers would be driven to set up as many accounts as possible, so as to increase fee incomes. The bankers would focus on their customers and their accounts. A broader version recognizes that the monies held are never withdrawn simultaneously, sitting in their accounts for long periods of time. Banks could invest and loan the deposits held in the bank, for profit. Banks can act as intermediaries between investors and business enterprises, and loans can be made for profit. The significant aspect of Full Reserve is that a loan must be secured by an agreed sum, on deposit either at the bank or the Central Bank.  
For example, in order that 10,000GBP be lent at 10% interest for 10 years, 10,000GBP must be held in reserve on deposit. The full reserve ratio is 1 to 1: or 100%. This would mean that if there was a default, the bank could recover the loss from this collateral. This is not how banks operate today.  But this is how many people think banks work. In fact, many people do not know how banks operate!

So how do they operate? Financial groups, such as banks, mutual funds, hedge funds, investment funds, insurance companies, pension groups, operate ‘Fractional Reserve Banking’, according to which monies or assets held can be leveraged or multiplied by many times in the form of  loans, creating new money according to demand. For example, any 10,000GBP cash held on deposit will allow the bank to lend up to 100.000GBP; and any 100,000 on account can create 1,000,000; and that can be used to create 100,000,000. The fractional reserve ratio in this case can be 1 to100. The bank can use 10,000GBP to create 100,000,000GBP.
In this way, Fractional Reserve Banking is designed to create new money as loans. Money is regarded as debt not cash. Bank profits are generated from the interest paid on the loans. In this way 10,000 cash is used to create 100,000,000 ‘virtual money’ as debt. Today, of all the ‘monies’ available to bankers and fund managers, 97% is digital/virtual, 3% cash/coins/notes.  The amount of digital money lent has little to do with the amount of cash in circulation. Under Fractional Reserve banking, cash deposits are not held at the Central Bank. Bankers and financiers and traders manipulate ‘money numbers’ on a screen, talk ‘cash’, but  their electronic dealings take place without regard for the consequences of their trading in numbers  for cash, stock and commodities markets across the world. The ‘money numbers’ traded everyday in markets can be many  trillions GBP……in loans, in commodities; currency exchange; stock market dealings; derivatives, futures………..
Today, the only ‘cash’ is to be found in our wallets and purses, and ATMs, pay packets, and shops; and a bank does promise to pay cash to us on demand via an ATM or cash clerk.
Before 1986, fractional reserve banking in the UK had been subject to rules set by parliament and the Bank of England. After 1986 the Financial Services Act allowed an unregulated fractional reserve banking system, in which interest is charged and
profits generated from every transaction and the higher the interest rate, the greater the profits. Following the deregulation of the UK banking system in 1986, the pursuit of profits and fees was more important than customer care, and banks constantly enticed customers to take out loans at the highest interest rates possible. Few customers, including myself, actually worked out the total payment made on a loan and preferred instead to decide if they could afford the monthly repayment and negotiate the loan according to the monthly repayment, not the rate of interest.
Under both systems, new money is debt money.  ‘Full Reserve’ means that the 10,000GBP I borrow is secured by 10,000GBP in a deposit account. Every loan is secured against a cash deposit. Whereas ‘Fractional Reserve’ means that any agreed amount can be used as collateral for a loan, and the loan itself can be up to 100 times more than the collateral.  Money is debt!
Banks and financial groups were free to develop their services for maximum profit and efficiency. The first thing to change was that it was no longer necessary to deal in nor transfer cash. The transfer of cash had always required armoured vehicles and guards. But now all transactions were digital projects. No cash, only digital entries transferred at the stroke of a keyboard. Fractional Reserve banking means that money can be created more quickly and easily, x100, and facilitates growth.
Shops/factories/offices/ all enterprises can borrow monies, x100, to expand their facilities and services, irrespective of their savings, but dependent on their assets as collateral. Most of the ‘money’ that is used does not exist as ‘cash’, but is represented by digital numbers. It is assumed that monies are kept in bank accounts, ad infinitum. It was thought to be safe
for the sums on loan to greatly exceed the cash available and it was denied that banking becomes much more risky in the event of defaults. But as we saw following 2007, many people defaulted on their loans, and even more claimed their cash deposits, and the banks could not meet these demands, and went into liquidation. They could not pay cash as promised and so had to appeal to the governments for bailouts: that is, print the money.
FRACTIONAL RESERVE BANKING AND NATIONAL DEBTS.
Fractional Reserve Banking makes it easier to negotiate loans when the client has substantial assets. Countries have taxes, GDP, commodities, minerals, resources which entice banks to loan money to governments. Even though governments have the right to print money to meet their costs, most use Central Banks to organize their monies in the form of loans.
National debts can be as high as $15 trillion, as in the USA, with   interest payments of $500 billion per year; and the UK, with 1.2 trillion GBP debts, has to meet 43 billion GBP  annual interest. Other countries have large debts: Belgium $1.3 trillion; Japan, $1.5 trillion; France $1.7 trillion; China $1.9trillion; Ireland $1.8 trillion; Italy $2.2 trillion; Germany $2 trillion; Russia $76 billion; Greece E345 billion. Unregulated Fractional Reserve banking has led to sovereign debts being larger now than ever.
The Banks are free to negotiate deals to their advantage, and help governments to manage their finances for a fee. In Europe, the countries of Ireland, Iceland, Portugal, Greece, and others have borrowed more than they could afford and gone bankrupt. What that means is that they were unable to pay their debts, nor to pay their bills. They had run out of cash.
In order to pay their debts they have had to ask the Euro-zone for bailouts: that is, more debt to pay debts. The  public debates between the finance ministers of the EU have been about the balances of numbers in accounts, and how to reconcile the credits and the debits; the assets and income with the loans and the interest payments.
The negotiations have not been about the morality of a system that sacrifices social welfare for the protection of banking profits.
While poor countries borrow to meet their monthly costs, rich countries borrow, rather than use their assets, to pay for their projects. They are concerned to ‘leverage’ their incomes so as to fund major projects like wars, weapons, space travel. The 1:100 ratio enables them to borrow very large sums of money.
Poor countries like Greece or Portugal or Hungary or Argentina or Guinea or Somalia or Sudan or Niger or Congo borrow, knowing that they will default. On the other hand, why do some banks lend to countries that they know are likely to default? Or in the case of Goldman Sachs, devise strategies with governments like Greece that will enable them to default with minimum risk to the lender [the creation of credit default swaps]. All the dealings are about profits as embodied in the rates of interest. As long as the debtor country keeps paying, it raises the profits of the creditor.
We are involved in a ‘numbers game’, and one that punishes all who do not ‘pay up’. One of the rules of the game is that debts are paid on time and in full.  In the case of a ‘bankrupt’, debts are to be covered by more debts [that is, loans by more
loans, interest payments by more interest.] Another rule is that the ‘bankrupt’ is obliged to reduce costs, and increase income, so as to balance the books and repay the debts. The ‘bankrupt’ has to be punished. Greece has to be punished.
Over the last four years we have all been witnessing what happens to debtors who fail to pay, who default. For example, in the USA, sub-prime mortgage debtors have lost their houses. Often, in the cases of sovereign default, such as Argentina or Greece, the clients may have repaid the principal.  But as we know, the contract is to pay principal + interest, as the interest payment comprises the profit for the creditor. Recently, it was reported by Gavin Hewitt/Robert Peston of the BBC, that Greece has paid  the principal owed, but may be unable to pay the interest in full.
How much interest is generated by these transactions? Loans are subject to compound interest. For example, collateral of 1million GBP, enables a loan of 100,000,000GBP. The compound interest of 7.5% for 20 years generates 424.7millionGBP.
The client is liable for the payment of the principal + interest: that is, 524.7millionGBP. In effect, the original loan is subject to a fee of 424,700,000GBP. So the client borrows 100 million, and pays 525 million in return. In this case, the original sum of 1 million is used to generate 525 million as new money! All of which is gathered by the bank/hedge fund/investment group, etc. as profit. Banks charge exorbitant interest fees and prosper.  Countries and their peoples, die! simply because they have to pay back 4.24 times the original loan.
At the moment, let us say that the national debt of Greece is Euros345 billion, according to Wikipaedia/World Bank/CIA/EU. It is worth noting that the numbers vary from one report to another, and so it is difficult to be precise.
But if we follow Gavin Hewitt, the principal sum is not the problem!  The interest payable is the problem. It is easy to see why:  E345 billion @ 7.5% for 20 years, would be E1.46 trillion.
In 2011, the government was in the situation whereby it was being forced by the Eurozone to cut all expenses, and raise all incomes so as to repay the total interest of up to E1.46 trillion to the banks by 2020. As a consequence, the country has suffered intense social unrest …..strikes, demonstrations, riots.
However, recent negotiations in 2012 have led to the acceptance that the interest payments are ruinous to a country that is poor, and undergoing recession. There has been an agreement that 30% of the interest will be sufficient ….Even though the
banks have been ‘weeping’ over this ‘haircut’, 30% of E1.46 trillion is still a large profit on a ‘virtual principal’. It is still more than the original loan! We will have to wait to see if the debt interest is cancelled, so that Greece [and other such countries] can re-start with a clean
plate. Remember the original loan has been paid back, and the banks are being asked to reduce their profits, but the profits are still ruining the country. The payment of interest would not be seen as a problem for a country such as Germany, USA, or China whose economy was growing by +5%/7%/10% a year. But for Greece, and many other poor countries across the world, whose economies are shrinking by -7% per year, these payments have become impossible. These loans were made at the height of economic growth when the payment of interest [no matter how exorbitant] was thought to be ‘no problem’.CONCLUSIONS
In the years following the ‘credit crunch’ of 2007/8/9 when some of the biggest banks in the world went bankrupt, and many countries went into recession, and the global financial system almost collapsed, some alternative strategies are necessary so
as to ease the economic pressures on poor countries……that is, most countries.
One solution could be to lower the compound interest rates charged on loans. For example, a loan of E100million @ 1% for 20 years would generate E22million interest; and the principal + compound interest would be E122,019,004. Another solution would be to calculate the simple interest: a loan E100,000,000 @1% simple interest for 20 years would be E120 million.
These totals are significantly less than E424 million repayable on a loan at 7.5 %. But they are still exorbitant at a time of economic recession. And all represent significant profits for the creditors on transactions that are trading virtual sums created and deleted at the push of a button. These transactions are politically significant in circumstances when a government has to raise taxes and to cut all social services in order to repay the interest on a loan; or when a government, like the USA, has borrowed so much that it can only afford to pay the annual interest, and therefore has to sell off national assets so as to remain solvent. Governments, such as Greece or Ireland or Portugal or Iceland or Spain or Italy, may have repaid the principal of their loans, but cannot pay the interest. This interest could be four times the principal! Ireland with a national debt of $1.8 trillion is facing interest payments
of $7.2 trillion; or Italy, $8.8 trillion interest.  These are all inconceivable amounts of money: particularly for countries that are barely covering their costs. But the non-payment of interest is unacceptable because it is the profit for the banks.
Should any government be permitted to borrow more than it can ever possibly repay? Should any government be permitted to borrow sums at interest rates that will lead to bankruptcy?
Should funding agencies be able to charge punitive interest rates?
Should creditors be able to lend money to clients who cannot pay their debts?
Should interest rates be variable according to the circumstances of the debtor?
Should we follow the example of the Grameen Bank, initiated by Muhammad Yunus, and charge very low interest rates, for small loans ?
Should interest rates be capped for everyone, so as to limit the profits of the creditors? Would it be better if all loans had a fixed fee?
How could a regulator stop the debtors and the creditors from taking advantage of any preferential contracts?
This leads us to another  solution:  the necessity for oversight and regulation.
Which organization could be given authority to supervise, regulate, and control the financial affairs of individuals, corporations, countries? The World Bank, the IMF, the United Nations, the EU, the AU? among others.

It is not surprising that many clients, corporations or countries, become unable to repay the sum in total and default. It is clear that none of the funding agencies and their traders care about the circumstances of the debtors. All they are interested in is the generation of  profits and bonuses. It is none of their business that many countries like those in Africa, such as
Namibia, Niger, Sudan, Somalia, Congo, need loans to pay for foods to feed their starving peoples. The countries want grant-aid, but are driven to loans…..that will bankrupt them. To survive, these governments have to negotiate for debt-cancellation.
None of this would matter under a system of ‘full reserve banking’ simply because every loan would be tied to cash or assets.
It must be admitted that none of this would matter, because many countries would be unable to raise enough cash to provide collateral for any loans.
So we are faced by a dilemma. How to structure and regulate a ‘fractional reserve system’ that does not bankrupt those countries that try to borrow money? How to design a ‘full reserve system’ which is more flexible in demands for collateral and assets? On reflection, it seems that banking systems that are intended to benefit the banksters and fundsters, and sacrifice the debtors, are not socially nor morally justified. They protect the interests of the 1% and control the savings and investments across the world. They are only interested in peoples and governments who want to borrow money, and pay maximum interest.
One can conclude that any banking system that is totally dependent upon the generation of profits from the interest on loans is unacceptable. As we have seen, the calculation of the interest due from poor debtor countries leads to their bankruptcy.
Such loans and compound interest are not intended to alleviate global poverty. They are intended to maximize the profits and bonuses of the banksters.
A different system is essential: one in which the money needed for survival is printed and not borrowed. The cycle of debt, as organized by fractional reserve banking, and upheld by full reserve banking, must be abandoned.

GLOBALISATION: GLENSTRATA

Cheat, Fraud, Corruption, Tax Avoidance, Price Fixing.
On February 7 2012 it was announced that there would be a merger of the commodity trader, Glencore, with the mining company, Xstrata, to form a new corporation, ‘Glenstrata’.

August 2012 the merger is not complete. Shareholders are objecting that the creation of the new corporation will deprive them of dividends, and lower the value of their holdings. Opponents are claiming that the new corporation will have too much control over the commodities markets.

It is projected that the new corporation will generate revenues of GBP 156 billion, with profits of GBP14 billion. The current chief executive officers were at university together in Witwatersrand, South Africa, and are already multi-millionaires.
The new corporation will manage the mining of zinc, copper, lead, alumina, nickel, cobalt, iron ore, coal; and production of fuel oil, heating oil, gasoline, naptha, jet fuel, liquefied petroleum gas, steam coal, and coke, ferro-alloys; and the farming of grains, wheat, corn, barley, rice, oilseeds, cotton, sugar, biodiesel, ethanol, meals. The corporation operates enterprises in Brazil. Bolivia, Argentina, Peru, Chile, Colombia; Mauritania, Tanzania, South Africa, Mozambique, Zambia, Equatorial Guinea, Republic of Congo, Democratic Republic of Congo; Kazakhstan, Russia; Italy, France, Spain, UK., Ireland, Sweden, Norway;Texas, Canada; Singapore, Philippines, Papua New Guinea, New Caledonia, Australia.
It will have a significant global presence.

 

In a socially just and equitable world, one could imagine that such corporations as
‘Glenstrata’ [and RioTinto, and BHPBilliton, Anglo-American, and Cargill] would be examples of the benefits of globalization. They would support local workers and communities with fair wages, pensions, social benefits such as housing and health care; provide facilities for safe water and sanitation; offer education and training; provide roads and railways; enable local  mining companies to develop effective safety procedures, and to protect local environments from pollution. Such global corporations could make the lives of the local people better with higher standards of living in return for the rights to produce and process local commodities. Alternatively, if they did not want to bother to make such social provisions, the corporations and their subsidiaries could fully pay their taxes so as to allow the governments to provide all these amenities to the local citizens.
But such an humanitarian approach does not seem to be part of the agenda for international commodity capitalism!

Glencore produces, sources, processes, refines, transports, stores, finances, and supplies commodities, and trades them, playing the markets, selling them at the highest price. Xstrata mines ores and sells the minerals on the commodities markets. As part of the new corporation, it will become a trader. ‘Glenstrata’ will control the commodities it mines and grows from source to market. It will control the prices of everyday goods from fuels, electric wiring, bread, and cereals. It will speculate on futures markets: buying  commodities today at an agreed price, betting that the price will be higher, securing a profit, on the agreed sale date. And of course, because Glenstrata brings the commodities to the market place, it can control the supply and prices. Such a corporation will benefit from globalization by gaining access to resources and materials from many countries. It will have strategic control of essential commodities and will need to be closely regulated by international and national
governments.  
As reported by the New York Times, the Ecologist, Aljazeera, the Daily Telegraph, the opponents of the merger object that Glenstrata will be able to control the world supply and prices of vital materials by hoarding them until the prices rise e.g. holding grains in storehouses, waiting for a drought! They fear that Glenstrata will exert a price stranglehold over minerals, foods, and metals. However, some primary shareholders vigorously oppose the merger on the grounds that too much bonus money will be going to the chief officers to the disadvantage of the shareholders.
The past history of  both companies leads us to conclude that their corporate strategies are ‘hard-nosed’ and that they are highly likely to play the global markets to their advantage, without any consideration of the benefits of the countries and the communities in which they operate.

‘Minimise costs to maximize profits’ is a key principle of capitalist practice. For example, Glencore set up joint enterprises by private deals in the Democratic Republic of Congo with 6 mining companies that cost the government $5.5 billion in lost revenue as the result of operating tax avoidance schemes such as non payment of corporate taxes. In Zambia, the mines at Mufulira pay workers minimum wages, create serious pollution including sulphur poisoning, and acid rain. In Chile, and Australia, and Canada, Xstrata has been subject to worker disputes over wages and safety.

In view of the fact that GLENSTRATA is a new corporation, looking towards a new future, what are the possibilities of new corporate strategies? The countries of Africa have many poor people trying to survive on less than $1.25 a day. And these countries are rich in minerals and ores. Their tenants should be richer from the rents, and fees and royalties that ‘Glenstrata’ could be paying them. But the new corporation will continue to deprive the local communities of their rights and dues. This could change if the governments of countries like Zambia, and the Democratic Republic of Congo, Tanzania, South Africa, Indonesia, Philippines chose to develop systems of regulation, that would  establish and secure exactly what corporations ought to be paying for their mining and farming enterprises, ‘Glenstrata’ would be forced to choose to play fair, and operate for the benefit of  local communities and shareholders. A recent story by the BBC showed that this is not happening. John
Sweeney reported that in the DRCongo, at the Luilu refinery, Glenstrata continues to mine and refine copper by using sulphuric acid, and pouring the residues direct back into the local river........while declaring that it is busy looking after the environment, and improving the living conditions of the workers!

At the moment the World Bank, the IMF, the OECD, and the UN, all condemn the leaders of many ‘developing countries’ for their extensive practices of corruption. While this may be justified, it ignores the fact that the leaders of corruption in these countries are the multi-national corporations who are busy exploiting the resources of the different countries for the lowest cost and the maximum profit, as well as personal gain. It is well known and well documented that many global corporations, including ‘Glenstrata’, choose to use every means at their disposal to avoid paying taxes! For example, when there are tons of copper waiting to be sold, ‘Glenstrata’ would buy it from the local mining company, which it owns, at a low cost of  say $500million, and sell it in Switzerland at a premium price of say $11.4 billion.  Such transfer pricing is a normal practice operated by all the commodity groups of Europe and Australasia and is instrumental in depriving poor communities of any social benefits from the riches in their neighbourhoods.  
Another stratagem is to buy up local companies and to treat them as if they are competitors or subsiduaries or shells according to priorities at the time. ‘Glenstrata’ has a number of subsidiary companies in different countries. Sometimes they operate as integral parts of the corporation, contributing to the ‘total tax contribution’.  This is a scam developed by
PriceWaterhouseCoopers, PwC, whereby the auditors add together the total corporation tax; the total VAT paid by customers; PAYE and National Insurance payments paid by workers; and treat it as if it was the total tax paid by the corporation. The total tax contribution is used as the justification for the non-payment of tax. Sometimes the local companies are treated as independent, but dependent on the global corporation for loans. This scam is known as ‘thin capitalisation’. As business loans are usually welcomed by governments, they are subject to tax  relief schemes: the bigger the loan, the bigger the relief.  In this scam, the corporation is lending money to itself, so as to avoid paying tax and gaining relief.
Sometimes the local companies are operated as independent, mining the ores, and selling minerals to the corporation at the lowest prices.   

Tax havens such as Switzerland are essential to resource-seeking corporations operating in Africa: more than 85 per cent of asset portfolios for sub-Saharan Africa pass through tax havens. A tax haven is a territory/country that has low or nil taxes; allows companies to register, to be non resident; observe total privacy; enables individuals and companies to avoid paying taxes in their resident territory. A tax haven operates as a financial enterprise attracting as many cash deposits as possible. Shell companies are another scam that allows listed corporations to buy the name and listing of a company that no longer functions; has gone bankrupt, has no products, no officers, and no workers.  The shell enables corporations to hide monies in their accounts and audits. ‘Glenstrata’ has many subsidiaries in Africa that are registered in tax havens such as the British Virgin Islands.  It keenly utilises tax havens as vehicles for shell companies able to access legal and financial opacity tools including banking secrecy, thin capitalisation, little or no taxation, zero disclosure of company accounts, use of nominees, and - best of all - high-level client confidentiality, all of which is entirely legal. But all of which is immoral and corrupt. All of these scams enable corporations such as ‘Glenstrata’ to cheat the native workers, and their communities, and their governments of income and social funds and benefits. These complex webs of corruption raise issues about the legitimacy of such corporations and the intentions of governments that declare these actions as legal. These webs reveal that globalization is designed for the benefit of corporate capitalism.
GLENSTRATA is one of the largest owners of farm land in the world. Are they concerned to feed the farmers and their families, and raise their standards of living? or to hoard their products in storehouses?  Instead of playing the food markets to raise prices, should they endeavour to reduce hunger. Glencore already recognizes food insecurity and participates in the UN World Food Programme as a supplier of grain as well as a trader. However, shareholders of GLENSTRATA such as the United Arab Emirates and Korea are determined to gain access to the farmlands for the benefit of their own citizens in the future, without regard for the interests of the farmers in the supplier countries. We have to confront the facts that commodities markets reward the traders and keep the miners and farmers in poverty.                                                                                                  

Each year, Africa loses a minimum of $148bn - almost four times the sum of foreign aid it receives, to capital flight - of which 60 per cent is due to corporate mispricing. Clearly, the solution toward enabling African countries to recover their lost revenue and become economically independent, is to block revenue leakages, rather than provide further loans and grants characterised by conditionalities that undermine development.

The period between 2007 and 2012 has revealed more clearly than before that we are subject to a capitalist system in which the drive for profits leads banks and fund managers and corporations to seek for high prices and high returns without regard for the interests of the customers, the workers and communities across the world. We have to accept not only that poverty is the norm, but also that corruption is standard practice. It seems too that those individuals who have millions of dollars want more! They do not seem to care that if they could be satisfied with $500.000, they would release millions of dollars to alleviate the poverty of 6.9 billion others.                                                                                        
Is it so unreasonable to ask corporations like GLENSTRATA to adopt business strategies and working practices that benefit  the workers and their families? Instead of spending fortunes on auditors and financiers and lawyers to creatively account the books, those fees could be used to raise the standards of living of the locals involved in mining and farming across the world.