What exit for Brexit?

March 8, 2019

As the deadline looms, nothing is clear about what will be next for Brexit. At this stage, it is everyone’s guess, and I do not have a crystal ball. However, one can make a number of statements about what is already obvious.

First of all, I suspect that everyone would agree that the current situation is a mess and a mess is never a good basis to build something on it. The adage that the failure of preparation is the preparation of failure has probably hardly ever been more relevant than in the case of Brexit.

Another obvious fact is that hardly anyone in the UK had thought of the entire process and about the consequences of a victory of Brexit at the referendum. The current situation is now different in the sense that there have been two years of real discussions about what Brexit actually means. One can wonder whether voting in a referendum without knowledge of what the result may mean is not very conducive for a strong future. Yet, this referendum, just like most other referendums, has been organized without providing thorough understanding of the consequences to voters. Democracy maybe the best system in spite the fact that it is not perfect, a democracy will not be strong if it rests on ignorance and bias, but that is another story. Another aspect that deserves some serious thinking about referendums that mean a rupture is that majority should be a proper majority to enforce the result of the vote. There are many systems. Some choose the absolute majority as a valid number. For some decisions, a majority of two-thirds is required. What is the right number? Well, considering the many times people argue that those elected do not represent the people because of low voter turnout that makes them elected by a minority of the total number of eligible voters, while being elected at a majority of votes actually put in the ballot, it is not that much of a silly question. The very least should be that a drastic rupture with the status quo should not pass unless at least 50% plus one of the total eligible voters would be a fairer absolute majority. Brexit did not get the votes of 50% plus one of all eligible British voters. Only a minority of the people decided for it, and not based on solid knowledge of the matter, either. Considering the mess that resulted from this, would it be illegitimate or unreasonable to want to reconsider the result of the referendum?

The British Parliament is struggling with this, and does not seem to find a workable solution. The EU is not faring all that much better. Clearly, on both sides, many would really like more time, but the political game in the public eye also forces them to take more rigid stances. Yes, I guess theatre improvisation is not an easy art to perform.

What do I think will happen? It is difficult to say but I believe that both sides will try to buy some time to either find a workable agreement and/or to get the public accustomed to the idea that it may not be wise to proceed with Brexit and find an honorable way out of the mess, probably through opinion polls and possibly another referendum, which this time will happen with voters being much better aware of what Brexit means. After all, the number of searches on Internet about consequences of Brexit peaked after the referendum, which clearly showed that voters went to the polls ignorant and started to educate themselves only after the facts.

What do I think should happen? All of what I have written above. A good first step would be to acknowledge publicly all the mistakes made in the entire process, without trying to point fingers at anyone because, frankly, everyone has contributed in some way to this mess. The second thing would be to acknowledge that it is only a minority of the people who voted for Brexit and start a conversation of what an absolute majority parameter would be for decision with such consequences. And finally, unless a workable agreement can be found within reasonable timelines, just put Brexit on hold and start a national debate with no particular deadline. Instead, it would be more productive to have a thorough reflection, both in the UK and in the EU, about the role and the functioning of the union to meet all the future concerns of the European and British people, in order to build a strong region that will become the leader the world needs, because even though the EU has many shortcomings and flaws, the current and potential alternatives are worse.

Copyright 2019 – Christophe Pelletier – the Happy Future Group Consulting Ltd.

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The math and the myth

March 22, 2011

No, this is not one of those “are in a boat” riddles. Those who have read my articles or my book know that I like to bring some perspective by crunching numbers and double checking statements that seem beyond any discussion.

During National Agriculture Week held last week in the US, one of such statements popped up in most of the social media dedicated to agriculture: In 2010, one US farmer provided on average for the needs of 155 people, while in 1960 this number was only 26!

Of course, if you follow social media, you know that, immediately, the partisans, mostly in the Midwest, spread the good news as fast and as much as they could. To them, this number of 155 is the best proof that large-scale industrial technology and mechanization driven agriculture is the best there is, and US farmers are the best in the world! So that the world knows it this time!

That is clear. Or is it really? Then let’s look at the numbers a little closer and do some math.

Knowing that China became the first export destination of US agricultural goods since only last month, finally passing Canada and its gigantic 35-million population, I had some doubts.

First, one statistic that is not mentioned in the 155 per farmer is the total number of farms. This number dropped from 4 million in 1960 to 2.2 million in the latest (of 2007) census mentioned on the USDA website. Going from 26 to 155 would have been very impressive if the number of farmers had been stable, but this is not the case.

In 1960, 4 mio x 26 = 104 million people fed.

In 2010, and by keeping the number of 2.2 million farms, the calculation is 2.2 mio x 155 = 341 million people fed.

Instead of increasing 6-fold (155/26) as the fans try to make believe, the actual improvement of US agricultural production has increased only 3.3 times. Over a period of 50 years, this represents an average year-on-year increase of people fed by US agriculture of only 2.4%. It is higher than the average year-on-year increase of the world population over the same period, but it is not stellar, either. As an indication for comparison, the world’s food production has increased by 3% year-on-year over the same period.

This becomes interesting when comparing with other parts of the world. I choose India, because, it is often presented, especially in the Anglo-Saxon press, as a country that does not tackle agriculture properly. According to those articles, India should be a lot more like the US, going big and industrial, instead of keeping their large rural population.

India has 1.2 billion inhabitants, and statistics indicate that 200 million people are malnourished. This implies that 1 billion people are fed reasonably. Now, let’s compare another number that rarely appears in analyses. The population density of India is 10 times higher than the American population density. This means that if the US had the same population density as India, there would be 3 billion Americans, and only 341 million of them would have food. In such conditions, they would not eat much meat, they would not suffer from obesity and they certainly would think twice before growing food to feed their cars. If India had the population density of the US, there would be only 120 million Indians. India would probably be the largest food exporter in the world.

Maybe this comparison is not the best to make. After all, the Indian diet is rather different from the American one, and India still needs imports to feed its people. Let’s try something that is closer to America in terms of eating situation: the EU.

There rarely passes a day by without some article from a US industrial agriculture supporter that criticizes Europeans to resist the American model, especially GMO crops. According to the biased pundits, Europe is losing ground because of this shortsighted stubbornness. There again, some math can help. Once again, the population density will provide us with insight. If the US had the population density of the EU, there would be 1.1 billion Americans. Once again, that is much higher than the 341 million that US farmers can feed. As far as the EU is concerned, the region is self-sufficient, and in most European countries, the yearly per capita consumption of meat is close to 100 kg. There is no food security problem in the EU. In this case, we are not comparing meat eaters and vegetarians. Just as it looked that India was doing not such a bad job at feeding its people, the EU actually delivers a nice and enviable performance.

The math shows us that the number of people fed by one farmer is not a good indicator of the actual performance of the national agriculture. I would compare it with bragging about the number of horsepower in one’s car engine without looking at how far that car can take you. Gas mileage is more important. In the case of the US, the 155 only indicates that there are very few farmers, and that they have to manage very large farms. It is not an indicator of yields. Bigger, more intensive or more technology do not necessarily mean more efficient. It has to be the right size, the optimal level of intensification and the proper use of the right type of technology.

A much more relevant number is the number of people that one hectare (or one acre) of land can feed. With this indicator, the performance of the US is average. The key is the yield. In the case of wheat, which is grown in most regions, the yield in the EU varies between 6 and 9 tons per hectare, depending on the country. In the US, the yield is of only 3 tons/hectare, which also happens to be the world average.

What the math really shows is that the world is very diverse. It is diverse from demographic, economic, sociocultural, climatic, agricultural points of view. Agriculture is not mechanics. It must consider all these parameters and be adapted to the specific environment to meet food demand optimally. There is no universal model, and there does not need to be any. We simply must focus on producing high yields in a sustainable manner, meaning that this performance can be repeated indefinitely for the generations to come. To grow food, we need good seeds, fertile soil , proper financial resources and skilled farmers!

Copyright 2011 – The Happy Future Group Consulting Ltd.


Of food riots and economic hardship

January 31, 2011

The riots in North Africa are getting a lot of coverage. This is good, because the problems in this region have been ignored for a long time. In 1987, I had bought a book “L’Europe Submergée – Sud-Nord dans 30 ans” by the late French economist Alfred Sauvy, the man who created the term Third World. His book was a description of the demographic differences between Europe and the nations from the South, and of the likely consequences. His prediction was by then that within 30 to 40 years, Europe would see a flow of immigration from the other side of the Mediterranean Sea that would replace the original European population. He also saw in this migration a great opportunity in terms of economic renewal for Europe. He certainly would have deserved the title of futurist!

When I wrote Future Harvests, I dedicated a chapter on the changing demographics. It clearly appeared to me that he was right, and that the evolution of the population numbers between the different regions of the world will influence decisions about food production, food supply, and economies altogether. In Future Harvests, I indicate in which regions I think tensions would arise. The Arab world was number one on my list. Here is the map of the median age per country. The median age of a country is the age of half its population. Most of Arab countries have half their populations under 25. And what to think of Sub-Saharan Africa where that age is lower than 20? This is in sharp contrast with Western countries where almost half the population is older than 40. It was really striking to see the pictures of Tunisian rioters: there were teenagers. With a chronic unemployment, especially with the youth, reaching levels of 25%, and many people living on a pittance, riots erupting and governments being toppled are no surprises. This situation has been going on for a few decades. A new generation of people who see little hope and future is simply sending a message. Change must come or change will come.

In the news, everything is mixed together and it may appear a little difficult to understand what causes Arab countries to flare up like this. Everyone speculates which country will be next. Of course, food is mentioned as one of the many causes, and I can read all sorts of opinions about that. From what I understand, the riots in Tunisia were caused by the arrest of a food street vendor for not having the proper license, which immediately cut his meagre source of income. After the success of the Tunisian upheaval, it is not surprising to see neighbouring  countries with a similar demographic and similar dire economic situation following a similar path. Does this mean that there will be riots over the entire Arab world? Probably not all at once. It might not be successful everywhere, either. Other rulers in the region will make some moves, even symbolic ones, to defuse potential tensions. Both the Tunisian and Egyptian rulers are doing their best to defuse the tensions, and by resigning if this is what it will take to avoid complete chaos. The lesson is hard for Arab countries and they are now more aware than ever of the dangerous situation they are in. This is also a loud warning to the rich nations. However, at the Davos conference, the elite were not even aware of what was going on. Eventually, they heard it, and paid attention. Stock markets dropped for one day only as unrest was spreading in Egypt. Interestingly enough, markets were up on the days that a bomb exploded in Moscow’s airport and when Japan’s economic rating was downgraded by S&P. Certain things matter more than others. Europe must now realize that unless it helps its southern neighbours solve the problem, they are going to become a part of it. Yet, European countries seem to have trouble taking some clear position on the events. North Africa, just like the rest of Africa needs economic development. The people of these countries need to regain hope in the future. The generation that comes of age to leave the parents’ home and start, and support, their own families must see reasons why it will be possible for them. At this juncture, they doubt that they will be able to do so.

In Future Harvests, I mention two regions with a demographic time bomb waiting for a food security problem to explode. One is the area between Russia and the former Central Asian Soviet republics, extended to Iran and Pakistan. The other one is the border between Mexico and the USA. Mexico is disintegrating and law and order are fading away. Both these regions are going to have to work together to find strategies to ensure stability. This probably will not happen without serious clashes.

Many of the countries where booming demographics, poor economic situation and precarious food security are the normal state of affairs need a 21st century Marshall Plan. As I have presented in previous articles, the potential for feeding the world population is there, but the main cause of hunger is the lack of affordability of food. In 2008, there were food riots, but there was no real food shortage. The main problem was that the populations could not pay for it because the price had skyrocketed, especially the price of basic food staples such as rice, wheat and corn. This time, although according to the FAO, food prices are even higher than in 2008, we have not seen the same kind of riots. A reason for this difference may have been the fact that retail prices of food staples remained contained. So far.

Some sort of Marshall Plan is a necessity. Development and stability is in the interest of rich countries, just as much as it is for developing countries. Europe, Russia and the USA cannot thrive with countries on the verge of complete collapse at their borders. If there has ever been a good investment, this would be it. It is interesting to look at the example of China. This hard-core communist country was on the verge of economic disaster and famine, until they decided to put the doctrine on the side, and open their doors to foreign investments. From the moment that China decided to feed its people, things changed. For the communist government, this was the only way to stay in power. A billion hungry, and angry, people are impossible to keep under control. For the capitalist “Satan”, it was convenient to present the Chinese “opening” as a victory of the aspiring capitalism, but mostly it was the greatest opportunity ever to reduce labour costs of consumer goods and boost corporate profits. Investing in China was not exactly like the Marshall Plan that rebuilt Europe, but the amount of money that flowed into the country helped turn around a bad situation into what soon will be the world’s first economy. While the middle class in Europe is stagnating at best, if not actually disappearing, China has grown its middle class to 300 million people (the whole US population) and it aims at increasing the number to 850 million by 2030. China is still (officially) a communist country with no elections, but that does not seem to bother too many people. Developing nations need money to flow into their economies to create jobs.

Many people are asking whether we will see food riots again. Unfortunately, the answer is yes. Although there is much political talk about food prices and risks of riots, nothing is really done to prevent it from happening. It does not look like there is much political will to make the necessary reform to prevent extreme tensions. Most world forums of all sorts seem to be more of an opportunity for the wealthy and powerful to hobnob than a place where actual decisions are made. The WTO Doha Round, which if well completed can bring many solutions, takes for ever to come to a conclusion. It looks like reason and leadership are not prevailing much right now. It is highly likely that the world, and mostly the rich nations, will understand the message and act only when they will feel that their position is in danger, too. Food riots will come as soon as food affordability drops under an acceptable level of suffering. Of course, Asia, Latin America and Arab countries are the most likely candidates for such unrest, but rich countries are not immune to that, either. Especially the USA is more vulnerable that many may think. In 2009, the USDA estimate of households that do not have enough money to feed themselves was of 14.6%. Although the economy seems to have stabilized, it has not recovered yet. Moreover, the housing situation in the US is far from stabilized. Many Americans have been able to keep consuming somehow because they simply stopped paying their mortgages and could stay in their homes. The number of mortgage delinquencies is so high that banks cannot handle all the cases. Actually, most cases have been postponed, but one day some decisions will have to be made. If the banks played by the book and foreclosed all houses, the owners of which cannot pay the mortgages, it would result in an incredibly high number of homeless broke people. The banks would have to report serious losses. Today a report indicated that 11% of all American homes are empty. More foreclosures will increase this number further. How will these people manage to eat by then? Banks can decide to settle according to individual situations. There will be less broke homeless coming on the streets and the banks will have fewer losses. In a previous article, I had mentioned the risk of a decreasing dollar, especially the risk of inflation as financial markets play the commodities only to hedge against the loss of value of the dollar. Inflation in an economy that is stagnating will reduce the affordability of food for the less wealthy. Unemployment is staying rather high and I have not seen any report from anyone presenting a situation in which employment would increase in significant numbers any time soon. In 2008, Gerald Celente, a trend forecaster who predicted the 1987 stock market crash and the fall of the former Soviet Union, told that by 2012, America would have food riots, a tax rebellion, and even a revolution. At first, I was sceptical, but I am starting to wonder if he might be right. After all, during the food price hike of 2008, Americans were hoarding goods from the supermarkets.

The food riots to come will finally force government to intervene and do what they are supposed to do, which is to ensure the stability and the viability of the society by setting the proper rules for the game. Especially, proper regulation on commodities markets and corporate near-monopolies will become crucial for social stability. The only unknown is the cost of our procrastination.

Copyright 2011 – The Happy Future Group Consulting Ltd.