Money is only metal and paper without intrinsic value, philosophy of money

In the future, the natural resources will be the most important instrument of interchange. The majority of the world population still is not aware of the natural resources critic situation and their consequences at mid and long term. The reason, perhaps, is because the effects are not yet enough perceptible in the developed nations and, therefore, the mass media do not give the due importance at the issue. The perception of the world reality is completely different from New York, London or Paris, than the perception since the undeveloped nations, where the people everyday struggle by the resources: the lack or scarcity of water, food, energy, other essential goods and services.

Index

1. Overview
2. Economy and money
3. Gold and silver has a restricted utility
4. The Financial Capitalism
5. Water and food will be the most valued goods
6. Changes in the monetary economy
7. Financial crisis in the undeveloped nations
8. A country can print all the amount of money that need
9. Financial crisis in the developed nations
10. Origin of the economic supremacy of the United States
11. The United States do not have limits to issue dollars
12. Europe and the Euro
13. Monetary ideas of the big thinkers: Smith, Ricardo and Marx
14. Conclusions

1. Overview

The coins and paper money that circulate in the world do not have an intrinsic value. They are simply pieces of metal and paper without own value. The unique value of money is the confidence of people in money as mean of interchange.

At the beginning of the times, man employed the barter for their commercial activities but that system could not survive because of the increase and complexity of the volume of transactions. To change goods by other goods was a complicated task; therefore, man began to use bars of metals like instrument of value and interchange. Small amounts of metals represented big amounts of value, but this system neither was effective and man invented the coin of metal. Some time after he decided to guarantee the quality and value of money and invented the minting or coining, which was a legal mark settled in the coins.

During the most part of history the issue of money was made by Kings and governments but sometime after appeared the private banks, which shared with the governments the issue of money. In his book Principles of Political Economy and Taxation, (1817), Chapter XXVII, On Currency and Banks, David Ricardo says that:

“After the establishment of Banks, the State has not the sole power of coining or issuing money. The currency may as effectually be increased by paper as by coin; so that if a State were to debase its money, and limit its quantity, it could not support its value, because the Banks would have an equal power of adding to the whole quantity of circulation.”

“On these principles, it will be seen that it is not necessary that paper money should be payable in specie to secure its value; it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard. If the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effect, with every rise in the price of goods.” End of the quote.

2. Economy and money

In the evolution of the monetary economy the coins were made of iron, copper, silver and gold. Later appeared the paper money supported in reserves of gold.

In the epoch of the Roman Empire, the copper was the metal employed as money, especially; in the Feudal period too. The situation began to change years after the discovery of America in 1492, because conquers razed the reserves of silver and gold of the continent, and led that fabulous wealth to Europe.

The discovery of America provoked the Commercial Revolution of the 16^th century which would exert an important influence in the monetary situation of Europe. The new wealth in silver and gold brought from America to Europe changed the patterns and economic custom. Silver and gold began to have preeminence and consolidated its importance like instrument of value and change.

Between the centuries 16^th and 17^th a political-economical trend appeared in Europe, the Mercantilism, based in three basic ideas: a) The participation of the State in the economy to guarantee the progress of the countries, b) The surplus in the external commercial balance and c) The use of precious metal, especially gold, as main source of the wealth of nations. Three philosophers, among others, had an important participation in that time: Thomas Gresham (1519-1579), Thomas Mun (1571-1641) and William Petty (1623-1687), they are my favorites of that historic stage. Gresham is remembered by his concept which assures that people retires of circulation the most valued coins, the coins of gold, to melt and keep them in bars. This concept is known as the Law of Gresham.

The 17^th and a part of the 18^th century was a period of transition, in which must be highlighted the names of big philosophers like John Locke (1623-1704), David Hume (1711-1776) and Jeremy Bentham (1748-1832).

At the middle of the 18th century appeared a new philosophical trend in Europe: the Physiocrats, which main idea was that the agriculture, the land, is the basic source of wealth and that the principal function of the State must be to guarantee the property and the natural order of the society. The French philosopher Francoise Quesnay (1694-1774) was the most important figure of this trend. Quesnay wrote the Tableau Economique in 1758, in which developed for first time a complete analysis of the economic interrelations, base of the modern econometrics.

In the 18^th century appears the Classic Economy, which most relevant figure is Adam Smith, (1723-1790), who published his book An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. The other big members of the Classic School are Thomas Malthus (1766-1834), Jean B. Say (1767-1832) and David Ricardo (1772-1823).

In his book, Adam Smith criticizes the influence of the State in the economy and concedes a particular importance to the new form of production that already had begun to surge in Europe: the industry. The conception of Smith is the antithesis of the Mercantilism on the paper of the State in the economy and the antithesis of the Physiocrats ideas on the agriculture.

It must be underlined that the different schools of thinking, the Mercantilists, the Phyisiocrats and the Classical Economy coincide in one aspect: they recognized gold like source of value and base of the monetary system. Later, Karl Marx, (1818-1883), the main critic of Capitalism, would recognize also gold as principal support of money.

In the monetary history there are other emblematic dates. For example, the Bank of England was founded in the year 1694 as a private organization, which is considered the first central bank of the world. But it was in the year 1946 when the bank was nationalized and assumed the monopoly on the issue of banknotes. The Bank of Japan was founded in 1871 and reorganized successively in several stages, among them, in the year 1942, in the post war, and in the decades of the seventy and ninety years. The Federal Reserve of the United States, central bank, was created by the Congress on 23 December 1913, and since then it has the legal authority to issue legal tender.

In the 20^th century was established the majority of central banks. The most recent central bank created in the world is the European Central Bank, which administrates the monetary policy of the 17 countries of the Euro zone. The Bank opened their doors in the year 1988 and its headquarter is in Frankfurt.

It is necessary to underline that until the first decades of the 20^th century, the issue of money was made by private banks with public support, but, from the second decade of the 20^th century, the world governments attributed to the central banks the exclusive capacity to issue money. The coins were not more of gold and silver and the paper money began to be only a legal instrument of change without support in gold. So that the money (coins, bills) and sovereign bonds that exist currently in the world are only simple legal instruments of change issued by the governments, which unique value is its acceptation, the faith in the instrument as mean of change. You can change a piece of bread or a medicine by any other thing, but you cannot change a bill or a coin for other thing if that currency does not give confidence about its capacity of interchange. For example, the U.S. dollar and now the Euro are the accepted currencies to realize the international transactions. If you want to pay with the national currency of other country it is very likely that it will be not accepted.

3. Gold and silver has a restricted utility

The currencies support in gold and silver was also an illusion. Why? Because of gold and silver has had ever a restricted utility. The major use of them has been in jewelry. Man attributed value to gold and silver and during centuries the possession of those metals was the wealth of nation’s sign.  In the modern world, gold has been employed as instrument of International Reserves by the central banks of the countries. But the value of gold and silver has been an invention of man; they do not have a real and broad utility.

On the contrary, oxygen, water and food are the true wealth because you can live without gold and silver, but you cannot live without oxygen, water and food. We do not appreciate its value because it has had abundance of them so far. But already the situation is changing and many people in many regions of the world are verifying that these resources have begun to be scarce. So that, at long term, the true instrument of value, the true instrument of international interchange will be the natural resources and not money. This fact will imply a new form of power and economic relations, where the undeveloped nations, owners of big reserves of natural resources, will play a new role in the international scenario. I do not want to say that money will disappear, no, I am not saying that. What I want to say is that the world shall recognize that the true wealth is the natural resources and not money. But money will exist forever because in money will be measured ever the amount of goods and services that will be interchanged in the economy.

4. The Financial Capitalism

Until now, money has dominated the world. You can buy anything with money. The Financial Capitalism has decided the life and the power of the world. But, if the natural resources scarcity acquires a new and more intense dimension, the Financial Capitalism influence would diminish and the natural resources owners would acquire a new and decisive importance.

The power of the natural resources owners was demonstrated in the years 1974 and 1975, during the Arab oil embargo. In those years, the Arab nations decided do not give a drop more of oil to the Western countries and especially to the United States, in reprisal by its support to Israel during the Six Days War in the Middle East. The embargo caused a catastrophe for the world economy. I remember the image of a citizen reading a book with the light of a lantern because there was not enough electric energy.

In that time, the financial capitalism could not doing nothing to change the situation of oil scarcity, and this demonstrated that its power was relative, it depends of the politicians, because it was a political decision of the Arab nations which determined the crisis. The example commented in the previous paragraph reveals that the true power is not money but the natural resources.

Nevertheless, it must be recognized that the financial sector obtained an advantage of the oil crisis of the years 1974 and 1975, because the new financial wealth acquired by the oil producers went to the Western banks, and the banks lent that money to the undeveloped nations. The explanation is the following: As a consequence of the oil prices increase of those years, which reflected their effects on the prices of the most goods and services, many undeveloped countries had not other option than to request loans to the international agencies and the private financing system. That is the main origin of the undeveloped countries burden debt.

5. Water and food will be the most valued goods

The signs of water scarcity and contamination are already visible in many regions of the planet. This affects the food production possibilities. Official documents of the Food and Agricultural Organization, FAO, recognize the production vulnerability.

On 7 June 2011, the New York Times columnist, Thomas L. Friedman, in an article entitled The Earth is Full, assured that Sana, the capital of Yemen, could be the first big city in the world to run out of water within a decade, and said moreover that “that is what happens when one generation in country lives at 150% of sustainable capacity.”

China and other countries of Asia are threatened by the intensification of water scarcity. If, at mid term, China reduce its production of cereals, the alimentary situation of the world will be hard, because this fact would rocket the food prices. Already the situation is difficult because in the recent years the food prices has reached a high level. The World Food Program, WFP, has warned that “Rising food prices have pushed 44 million people into extreme poverty and hunger since June 2010.” www.wfp.org

The Food and Agricultural Organization, FAO, Index of food prices confirms the appreciation of the World Food Program.

6. Changes in the monetary economy

The 21^st century shall be a time of big changes since the economic point of view. In the monetary economy the transformation will be intense, because the nations will understand that the current system of interest payment is unsustainable in the new reality of the world. That system does not let to pay the debt and it become in an eternal debt. Money cannot produce money. That is a perversion of the system, and one of the main causes of the world poverty.  Wealth must not be money; wealth must be the natural resources and the goods, services and work that create those goods and services.

7. Financial crisis in the undeveloped nations

With the exception of the Western European countries, that adopted the Euro as common currency, the majority of world countries have the sovereign capacity to issue money.

The issuing of national money is an act of sovereignty of the different countries. They can finance their internal needs with own financial resources, this mean, with their national currencies. It is truth that the international monetary system has settled rules for the issuing of national currencies. The most important is its support in U.S. dollars and/or gold. But these rules are used in a flexible form by the monetary authorities of the countries, issuing more or less national money according to their needs. In some countries of Latin America, there are economists that talk about organic and inorganic money, which is absurd. Money is simply money and cannot be qualified like organic neither inorganic. They do not explain the two concepts. We might suppose that they consider inorganic the money not supported in reserves of dollars and/or gold. But these economists are wrong because the support in international currency, U.S. dollars or gold is also an illusion. That support does not exist in the reality, they are conventions created by man.

What the governments of the different countries of the world do not have is capacity to issue the international currency of interchange that is the U.S. dollar. Only the United States government can issue that currency. The lack or scarcity of international means of payment, the U.S. dollars and now Euros, is the big limitation of the undeveloped nations.

The same a country or an entrepreneur, they obtain international means of payment, dollars or Euros, exporting to other countries. But if its capacity to export is not enough for obtaining international means of payments, dollars or Euros, the undeveloped nations do not have other option than to request loans to the International Monetary Fund, the World Bank, other regional financial institutions or the private banking system. So was born the burden debt of the undeveloped nations.

The undeveloped nations have made other big mistake. They have requested loans in dollars or Euros to become those international means of payment in national currencies. For example, if they need to build a highway and they do not have money in national currency they request a loan in dollars or Euros to pay the highway. That is a big error, and it was one of the causes of the big indebtedness of the undeveloped nations. 

The undeveloped nations should finance their national needs of development with their own national currencies and to request international loans only to finance their requirements of external goods and/or services. They have the sovereign capacity to do this.

8. A country can print all the amount of money that need

Money has not real, tangible value. The support in gold and silver was and is a lie. The same happen with the precious stones.

But money might be supported in essential goods of high demand, like water, food and petroleum, among other goods. They are a true reserve of value. The true value of things is its utility and the grade of necessity of them. There are essential things and not essential things. You cannot live without the formers but you can live without the seconds.

The economic theory defines inflation as the increase of prices as a consequence of a restricted or non existent supply. But this concept does not reflect exactly the truth. The truth is that inflation is a consequence of the human egoism that wants more and more money. The merchandisers enhance the costs and prices in a constant form in the three sectors of the economy, primary, secondary and tertiary. For ones is cost and for others price, but, in any case, they want more money, because they think that money is the true wealth. This process is more intense in those countries where the governments do not have political force, neither economic capacity to attack the speculation of the privileged sectors of the economy.

The world countries can print all the amount of national money that they need to satisfy the necessities of their economies. Nobody has the authority to impede this. Money is a simple instrument to make possible the economic transactions and not wealth itself. The amount of money in circulation do not determines the inflation.

9. Financial crisis in the developed nations

The financial crises in the developed nations are provoked essentially by two causes: a) The government’s weak supervision on the financial system and b) The unlimited ambition of some bankers. For example, these two conditions promoted the financial fallout in the United States and other European countries in the year 2008.

On 8 June 2011, Reuters informed that in the Asian markets, the U.S. dollar loosed value regarding the Euro because of the investors considered that the interest rates of the U.S. dollar would remain stables. The monetary economy is a big illusion, a castle of sand built in the seashore, because money really is nothing.

In May 2011, the firm Moody s reduced the qualification of the U.S. debt. This fact provoked an important impact in the international financial markets. Those appreciations of the firm let to make some questions, for example:

Who has the authority to qualify the debt of the first economic power of the world?

What is there behind those negative expressions?

It is obvious that behind those negative expressions on the U.S. debt is hide the objective of to debilitate the U.S. dollar to favor other currencies like the Euro and the Chinese currency Yuan. It might have, moreover, political interests in that kind of campaigns.

10. Origin of the economic supremacy of the United States

The economic supremacy of the United States is based in two facts: a) That the U.S. dollar is the international currency of interchange and, in consequence, the currency employed in the most international commercial transactions and b) That the U.S. dollar is the currency used by the central banks of the countries to maintain their international reserves, this means that the U.S. dollar is the world currency of reserve.

11. The United States do not have limits to issue dollars

Because of the U.S. dollar is the international currency of interchange and reserve, the United States can issue and must issue all the amount of money necessary to its internal activity and the world economic activity. Hence, the people that talk about the “burden debt” of the United States are not saying the true truth.

When the Federal Reserve of the United States issue one dollar it is issuing a debt, yes, that is truth, but that is an internal debt of the United States and not an external debt. Why? The answer is very simple: because according to the international rules, external debt is the acquired in foreign currencies. In this case, when the United States issue a dollar is issuing a debt in its own currency and therefore is an internal debt and not an external debt. So that the United States government has the sovereign capacity to issue the amount of dollars that need its internal economy and the international economy and it will be ever internal debt of the United States.

12. Europe and the Euro

With the adoption of the common currency, the Euro, the most European western nations resigned to their sovereign capacity to issue money. Which are the advantages of the common currency? Which the disadvantage?

Some weeks ago a read that merchants of Galicia, in Spain, are using the antique Peseta and the current Euro in their commercial transactions. The information did not explain how they obtain the Peseta which is a substituted currency.

In the recent weeks has been published also information’s about the financial crisis in countries like Portugal, Spain and Greece. This week was announced a program to help the last country. It is a program of economic restrictions, reduction of salaries, privatization and tax increase for the population that will do gravest the crisis of Greece. The program has been imposed by the International Monetary Fund and the European Central Bank.

The experience of the eighty and ninety years demonstrates that the programs of the International Monetary Fund are completely negative for the countries. Those policies enhanced the poverty, the unemployment, the inequality and provoked the born of leftists governments in Latin America. Sure, Greece shall not be an exception.

The countries accept the impositions of the IMF because they do not have other option. Usually, the nations that fall in the hands of the IMF are those countries highly indebted in the international markets that, moreover, need new loans.

If Greece had not resigned to its sovereign capacity to issue its internal currency by the adoption of the Euro, perhaps today might issue the amount of money that need for its internal need and request only a small amount of Euros to the international community. The case of Greece might be a good example for the other members of the monetary union.

13. Monetary ideas of the big thinkers: Smith, Ricardo and Marx

The opinion of the big economists, Adam Smith, David Ricardo and Karl Marx must be considered when we study the paper of money in the society. There are other important economists, but they are the most emblematic in this matter.

Adam Smith 1723/1790

In his book An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter IV, Of the Origin and Use of Money (1776), he analyzes the evolution of money and assures that:

“When the division of labour has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society.”

 “In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most inconvenient one, yet in old times we find things were frequently valued according to the number of cattle which had been given in exchange for them. The armour of Diomede, says Homer, cost only nine oxen; but that of Glaucus cost an hundred oxen. Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker's shop or the ale-house.”

“In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference, for this employment, to metals above every other commodity.  Metals can not only be kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation.”

 “It is in this manner that money has become in all civilized nations the universal instrument of commerce, by the intervention of which goods of all kinds are bought and sold, or exchanged for one another.” End of the quotes.

David Ricardo 1772/1823

He concedes great importance to the value and support of money. In his book On the Principles of Political Economy and Taxation, Chapter XXVII, On the Money and Banks, (1817) he says that:

 “Gold and silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them, and bring them to market. Gold is about fifteen times dearer than silver, not because there is a greater demand for it, nor because the supply of silver is fifteen times greater than that of gold, but solely because fifteen times the quantity of labour is necessary to procure a given quantity of it.”

“The quantity of money that can be employed in a country must depend on its value: if gold alone were employed for the circulation of commodities, a quantity would be required, one fifteenth only of what would be necessary, if silver were made use of for the same purpose.”

“A circulation can never be so abundant as to overflow; for by diminishing its value, in the same proportion you will increase its quantity, and by increasing its value, diminish its quantity.”

 “While the State alone coins, there can be no limit to this charge of seignorage; for by limiting the quantity of coin, it can be raised to any conceivable value.”

“It is on this principle that paper money circulates: the whole charge for paper money may be considered as seignorage. Though it has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin. On the same principle, too, namely, by a limitation of its quantity, a debased coin would circulate at the value it should bear, if it were of the legal weight and fineness, and not at the value of the quantity of metal which it actually contained. In the history of the British coinage, we find, accordingly, that the currency was never depreciated in the same proportion that it was debased; the reason of which was, that it never was increased in quantity, in proportion to its diminished intrinsic value.”

He assures moreover that:

 “Experience, however, shows, that neither a State nor a Bank ever have had the unrestricted power of issuing paper money, without abusing that power: in all States, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion.”

Other important concept of David Ricardo is the following: “A currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent. The use of paper instead of gold, substitutes the cheapest in place of the most expensive medium, and enables the country, without loss to any individual, to exchange all the gold which it before used for this purpose, for raw materials, utensils, and food; by the use of which, both its wealth and its enjoyments are increased.” End of the quotes.

Karl Marx 1818/1883

His opinion is very important in monetary matter. In his book Capital, a Critic of Political Economy, Chapter III, Money, or the Circulation of Commodities, (1867), Marx says that:

 “Throughout this work, I assume, for the sake of simplicity, gold as the money-commodity.”

“The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money.”

“It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realized human labour, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i.e., into money. Money as a measure of value, is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time.”

 “The price or money-form of commodities is, like their form of value generally, a form quite distinct from their palpable bodily form; it is, therefore, a purely ideal or mental form. Although invisible, the value of iron, linen and corn has actual existence in these very articles: it is ideally made perceptible by their equality with gold, a relation that, so to say, exists only in their own heads. Their owner must, therefore, lend them his tongue, or hang a ticket on them, before their prices can be communicated to the outside world. ^[2] Since the expression of the value of commodities in gold is a merely ideal act, we may use for this purpose imaginary or ideal money. Every trader knows, that he is far from having turned his goods into money, when he has expressed their value in a price or in imaginary money, and that it does not require the least bit of real gold, to estimate in that metal millions of pounds’ worth of goods. When, therefore, money serves as a measure of value; it is employed only as imaginary or ideal money. This circumstance has given rise to the wildest theories.  But, although the money that performs the functions of a measure of value is only ideal money, price depends entirely upon the actual substance that is money. The value, or in other words, the quantity of human labour contained in a ton of iron, is expressed in imagination by such a quantity of the money-commodity as contains the same amount of labour as the iron. According, therefore, as the measure of value is gold, silver, or copper, the value of the ton of iron will be expressed by very different prices, or will be represented by very different quantities of those metals respectively.”

“Paper money is a token representing gold or money. The relation between it and the values of commodities is this that the latter are ideally expressed in the same quantities of gold that are symbolically represented by the paper. Only in so far as paper money represents gold, which like all other commodities has value, is it a symbol of value.” End of the quotes.

14. Conclusions

-          Money is only metal and paper without intrinsic value.

-          The unique value of money is its acceptation like mean of payment.

-          The true value of the things is its utility.

-          At mid term, the restrictions in the availability of natural resources shall provoke important economic changes.

-          A country can print the amount of money that need.

-          The United States do not have limits to issue dollars.

-          Inflation is not an economic problem but of avarice, a problem of human egoism.

-          It is necessary create a new economic option less dependent of the international financial system, to promote the progress and the world commerce.

An important contribution to the human wellbeing, a thesis on the dairy sector of the University Federico II

In a world where the food is everyday more scarce and expensive, the initiatives for improvement the quantity and quality of the food production are something essential.
In the recent past years the food prices reached unbelievable figures. The price reflects the situation of a good in the market, its scarcity or abundance, so that the high level of the food prices reveals the vulnerability of the food production, distribution and marketing.
The damage to the environment is the other key element; one of the most serious consequences of the abuse against the environment is the reduction of the sources of water worldwide. Without water the food production is not possible.
The limitations to the food production is then a reality; for that reason one of the most important objectives of the scientific and technological research should be to carry out new methods to strengthen the food production since a qualitative and quantitative point of view.
The projections of the population growth for the coming years represent a true challenge. In that scenario, the production of cereals is and will be something essential but the production of proteins will be also very important. The dairy industry is one of the main sources of proteins and an effective road to tackle the problem of the poverty and the undernourishment now and in the near future. Hence, the scientific and technological research for improvement the dairy sector deserves be considered like a valuable contribution to the world wellbeing.
The universities that stimulate this type of research give an important support to the human development. Recently I read an interesting thesis for the improvement of the dairy sector; the author of the thesis is Dr. Paola Zinno, of the University Federico II of Naples, Italy. I think that this kind of works is important for the development and progress of humanity. The reading of that thesis of Dr. Paola Zinno motivated me to write these reflections.

Political economy food and demographic control

Traditionally, the power of the countries has been associated to the size of their population.
Power and population has been synonymous; but with the development of the science and technology that perception has changed.
Now, the synonymous of power is the scientist knowledge domain; the atomic weapons were the main cause of that transformation.
In the past, the military force was determined by the number of soldiers’ and the conventional weapons; now, the military supremacy is decided by the possession of nuclear weapons.
The atomic experience caused a great impact in the world. The nuclear powers learned the lessons of Hiroshima and Nagasaki in 1945. In the following decades the great nuclear countries participated in new war scenarios ---Korea, Vietnam and Middle East--- but in none case they used the atomic energy.
The military power and the economic power are strongly tied. Without economic development the military power is not possible.
In turn, the economic development is related to the size and purchase capacity of the market ---population--- and other key issues like the availability or not of factors of production and their appropriate use.
Since the theorist point of view, each one of the factors of production ---capital, land and work--- has the same hierarchy. None of them is more important than other. But, in the 21st century reality, the natural resources (land) have acquired a special paper; the reason? Because of signs of scarcity and contamination are already visible in many regions of the world especially in the agriculture sector in matter of water and land.
A similar perspective occur regarding the other forms of energy, like the petroleum, because the reserves are draining in specific areas, among them, the North Sea, the United States, Mexico and China. Hence, a constant increase of the petroleum price is very possible.
The agriculture is the basic form of energy because it provides the food that feed our lives. The food is energy. Now, in the modern world, the petroleum is a basic input for the agriculture because it determines the crops yield by mean of the fertilizers and supply the combustible that move all the machinery, among other basic inputs of the productive chain. So that any increase in the petroleum price touch directly the agriculture costs. The mentioned facts exert a significant impact on the possibilities of the agriculture expansion and the food production at mid and long term.
Demographic control
The other important issue is the population growth. According with the FAO projections, the most augment will occur in the developing countries. In change, the minor growth will be in the industrial nations, because of the demographic transition phenomenon, which mean a high rate of longevity and a small birthrate. If this phenomenon augments in the coming years, the industrial countries will suffer a process of deep cultural change since that new migratory flows sure will transform the custom of those societies. The influence of the migratory groups already is evident in the industrial countries like the United States and in Europe. This will provoke a change in the politics and the economy not only of the recipient countries but in the rest of the world. This is a subject that deserve be considered in a complete work.
The effect of the population growth on the food production will be one of the most important issues for humanity in the coming years.
There are three options to satisfy the growing food population needs: a) to increase the production, b) to reduce the population growth or c) both.
The restrictions that affect the agriculture expansion are well known like the land scarcity, the water stress, the contamination and the inflation in the energy prices; so that the demographic control might be an alternative to tackle the reality.
The demographic control is the action adopted by the states through their policies of population for regulating ---increase or diminish--- the birthrates in a country or region. The objective of the demographic control is to determine the population size at mid and long term.
There are successful cases of demographic control; China, for example, diminished their birthrates in the 20th century notwithstanding to be the most populated country of the world. Other overpopulated nation, like India, has employed too the demographic control to lessen their birthrate. Where the situation is out of control is in Africa.
In other moments of the history, like in the thirty and forty decades of the 20th century, leaders as Benito Mussolini and Adolf Hitler used the demographic control to stimulate the birthrate in its countries. They promoted the marriages and for each son the government gave a reward to the parents. The objective of those governments was to increase the number of soldiers for the war.
The mentioned examples demonstrate that the demographic control has been used in two contradictory directions: by a side to enhance and by the other to restrict the birthrate, according to the population policies of the countries.
A fact that must be mentioned is that the demographic control was employed principally by autocratic governments in the 20th century; but it does not mean that it is a mechanism proper of that kind of regimes, no, the demographic control is an instrument of the policy of population that may be used the same by the democratic regimes and other type of governments.
Unsustainable
The true problem is the global high rate of population augment of the last century ---the most in the history--- and their projection, a trend that will be unsustainable for the limited resources of the Earth at mid and long term. Only the technology might help to curb the consequences of the overpopulation improving the methods of production and distribution of goods and services.
In the thirty years between 1970 and 2000, the world population increase was of 64.43 per cent; the developing countries augment of 81.75 per cent and the industrial countries growth rate 24.48 percent.

The international agencies, like FAO, assure that the population growth of the thirty years between the year 2000 and 2030 will be the half of the average observed in the last three decades between the year 1970 and 2000. They do not explain which the reasons are for suppose that the historical behavior will change. The projection for the year 2030 is 2,059 million of inhabitants more regarding the year 2000, as may be appreciated in the following table.

The foreseen total population increase for the year 2030 is a big amount, approximately the third part of the current global total; it mean that will be necessary producing the food that the new population will need. This requires more land and more water, including a most exploitation of the oceans resources and more petroleum and coal. In turn, this implies more contamination. How conciliate all these situations is the key question.
Conclusion
The political economy and the technology might supply the theorist and practice support to tackle basic issues like the production increase and the struggle against the poverty to face the future high population growth. But the demography must play a privileged paper. The demographic control to diminish the birthrate in the developing countries will be something necessary. On the contrary, the birthrate increase will be fundamental for the industrial nations to reduce the impact of the demographic transition phenomenon, which threat to become those countries in societies of old people, societies of senior citizens condemned to disappear at long term. A balance between the population growth of the developing nations and the industrial nations is the fair.
Realistic policies of population should be developed by all the nations; this encompasses key issues like the policies of immigration and the policies of population distribution in the space, to favor the nature and the environment, among others.
What do you think?

Political economy, food and population projections

Is able the Earth of to double the food production in the coming years?
That is the key question that some politicians, researchers and people linked to the agriculture have made themselves in the last months; the reason? An announcement made by the FAO food chief, Jacques Diouf on January 26 2009 during an international conference on food security in Madrid.
Jacques Diouf said that “…We face the challenge now of not only ensuring food for the 973 million who are currently hungry, but also ensuring there is food for nine billion people in 2050. We will need to double global food production by 2050…”
According with The Guardian of London in information of the journalist Juliette Jowit on April 19 2010, the Soil Association of the United Kingdom published a study with the title “The big fat lie about doubling food production,” where criticize the projection and assure that their origin is a FAO report of June 2006 entitled World Agriculture towards 2030/2050.
The Guardian informs that the Soil Association assures that “…The forecast increase needed in production would be closer to 70% by 2050…” and that “…The UK government has said that the difference between 100% and 70% is not trivial because it is more than the food production of the whole American continent…”
Nobody can predict the future with precision
I would like to comment an anecdote that I lived many years ago. In that time I was director of an area in the planning office of my country and helped a student to get a grant to study in one of the most advanced North Americans universities. I advised him to pay special attention to the planning subjects. One year after he came back and said to me: the studies have been excellent but I want to tell you something that perhaps will be disappointing. And he told me that one of his professors, a Nobel Laureate, said to him and to the rest of the pupils that the planning is possible only at short term, because the world change everyday to an unbelievable speed and for that reason is not possible to make plans at long term.
I did not forget the concept. In the following years I felt a great attraction by the philosophy and I could understand better what the professor wanted to express to his pupils. Indeed, the changes, sometimes radical and unexpected changes, are the essence of the live and they affect the possibilities of forecast at long term. It is true that there is a statistic reality, trends that we can to verify in the facts, but they are only tendencies that can change in any moment. I will give only one example in the following question:
Who could predict twenty years ago that twenty years after a young leader like Barack Obama would be the president of the United States?
The projections
The studies of the international agencies sometimes present contradictory information. The reason is, perhaps, that that information is gathered and interpreted by different people with different visions of a same phenomenon.
Observe you the three following paragraphs of the FAO document World Agriculture towards 2015/2030; the quotes belong to the Executive Summary:
“…There are three main sources of growth in crop production: expanding the land area, increasing the frequencies with which it is cropped (often through irrigation), and boosting yields. It has suggested that we may be approaching the ceiling of what is possible for all three sources…”
But in the same section says the following:
“…At global level there is adequate unused potential farmland. A comparison of soils, terrains and climates which the needs of major crops suggest that an extra 2.8 billion ha are suitable in varying degrees for the rain fed production on arable and permanent crops. This is almost twice as much as currently farmed. However, only a fraction of this extra land is realistically available for agricultural expansion in the foreseeable future, as much as needed to preserve forest cover and to support infrastructural development…”
And after it assure:
“…More than half the land that could be opened up is in just seven countries of tropical Latin America and Sub-Saharan Africa, whereas other regions and countries face a shortage of suitable land. In the Near East and North Africa, 87 percent of suitable land was already being farmed in 1977-99 while in South Asia the figure is no less than 94 per cent. In these regions, intensification through improved management and technologies will be the main, indeed virtually the only source of production growth. In many places land degradation threatens the productivity of existing farmland and pasture…” End of the quotes.
It is evident the contradiction between the first and third paragraphs and the second one.
Then the question is:
Is there or not enough water and expanding area for agricultural production?
The agricultural lands of Europe, Asia and part of Africa have been exploited by thousands of years and most of them are already exhausted; Egypt, for example, where the historians consider that the agriculture began. The lands of America have been also exploited but in less intensity and proportion; hence some of them are still a potential reserve.
The problem is that the agricultural exploitation means deforestation and a great damage to the environment. For example, since the sixty years of the 20th century ---before the region was closed for strangers--- the Amazon region has been destroyed, mainly, by the farmers, the lumberjacks and the miners. The great problem is that the Amazon area is vital for the environment sustainability of the planet. That is the last ecological reserve that survives in the world.
As a result of the expressed the other key question is:
Which are the tropical Latin American and Sub-Saharan seven countries that the FAO consider could be open to new developments in the agriculture?
How that development will affect the environment and the global sustainability?
Restricted possibilities
If you consider the reality of the planet presented by the own FAO, you will confirm that there are restricted possibilities of the agricultural expansion. The limitation in matter of land and water are a true. The FAO’s experts know and cope that true better than the rest of the world citizens but, perhaps, they can not recognize it publicly; notwithstanding, sometimes, in official papers as the quoted in the previous paragraphs, they do clear mention of that reality.
Why to hide the perspectives?
Everybody wait miracles in all the issues of the live. You expect your miracles I, the governments and the rest of the people too. Everybody wait a change, a good change. The hope of miracles feed the live of the people. Hence nobody want to see negative perspectives and anticipate measures for tackle them. Perhaps that would be an answer.
But to hide or to not recognize the true does not change the true. The governments and the international official agencies have the duty of to warn about the perspectives and to make the recommendations for a best future.
What is the most important?
The question that head this work is the most important:
Is able the Earth of to double the food production in the coming years?
The answer is in the hands of the scientists, the politicians, economists and the people linked to the agriculture: farmers and entrepreneurs, among others.
The true is that the world will need to increase the food production in an important amount to attend the growth population of the coming years. In this moment it does not matter if is 100 percent or 70 percent; the true is that any of them is an enormous quantity.
The perspectives of the world population are the base for the food estimations.

The FAO consider that the world population will reach the peak of 9 billion of inhabitants for the year 2050 and estimates that since that moment will not have growth at global level. In the Overview ---page 3--- of the World Agriculture towards 2030/2050, they explain the forecast of zero population growth for the year 2050 as “…the net result of continuing increases in some countries compensated by declines in others…”
But they assure after that “…zero population growth at global level will not automatically translate into zero growth in demand and cessation of building-up pressures on resources and the wider environment…”
Conclusion
The great problem is how to arrive to the year 2050; how to produce the food that the population will require, in a scenario of water shortage worldwide, overexploitation of the land and growing contamination.
First of all it is necessary to recognize and to say the true at the world.
It is necessary an integral effort of many sectors, among them, the science, the technology, the political economy, the demography, the politicians, the farmers and the entrepreneurs, for giving answers to those issues. The demographers have an especial responsibility. They must be listened by the political leaders and other researchers.
Which is your opinion?

By lack of water China might increase their cereals imports

Asia -the most populated continent of the world- suffers the consequences of the earth resources overexploitation. A clear example of it is what happens with the underground waters and the China Rivers that irrigate good part of the agricultural lands. Those sources of water present a process of exhaustion that put in danger the agricultural production and might obey at China to increase their imports of food, specifically grains, since might be not able to satisfy their population's demand. This phenomenon already was observed in the Chinese society and was one of the reasons that motivated in 1995 the exports reduction of grains toward North Korea. When China interrupted the sale of grains to North Korea this country didn't have another alternative but requesting international help to the United Nations.

A restitution of the help in foods to North Korea by China seems not very probable since this country continues confronting serious production problems derived of the shortage of the most important inputs for the agricultural production as the water. An example is what happens in the Yellow River that had lost their flow and already doesn't reach the sea. In the year 1996 the River was dry during 133 days while in 1997 remained dry during 226 days. The County of Shandong is the last route of the river before arriving to the sea. This county produces good part of the corn and of the wheat and it has been seriously affected as consequence of the river drought.

What happens with the Yellow River also passes with other important rivers of China and with the more and more scarce underground sources of water. It is considered that China has around of 50,000 kilometers of rivers of certain magnitude and 80% of them are degraded and are not capable for the fishing, due to the contamination that receives. The Yellow River, for example, is polluted of heavy metals and other toxic matters that impede its use for human consumption and irrigation in good part of its route.

The decrease of the China capacity for producing foods will generate an important impact in the world economy, since will look those foods in the international markets causing the increase of its prices. The poor’s countries are not in capacity of resisting an increment in the price of the foods, they would not have how to pay the new prices and, in consequence, they would be in front of a true problem of survival. If the countries with more population as China and India diminish their foods production capacity, the world situation will be aggravated. India, the other giant of the world suffers a similar situation and should use very important part of the energy that produce to pump water of the underground.

World experts estimated that China would have enough water for few years more; this means that would have to import a good parte of their necessities of cereals. If this happen, the impact for the politics and the world economy would be very important.

The natural resources future

In the developed world, North America, Western Europe and Japan, for the majority of the people are not yet perceivable, at first, the signs of a natural resources crisis, but it is a latent process, a developing process that very soon will be felt globally.

An inhabitant of New York, Washington, London or Paris, possibly does not know what not having water for one or two days per week or for a long period of time is. Probably he doesn’t know what electricity restrictions are like; but in other regions of the world these types of limitations are something common or frequent.
Nevertheless, the situation in the developed countries has begun to change and already it exist regions and states in the United States where has been declared the water emergency supply and where also there are problems with the electricity supply.

You, the reader of this essay, perhaps have a doubt and ask yourself if really there is a worldwide crisis of natural resources.

The answer is yes.

Which resources?

There is a crisis of oil, water, food and electricity.

How may be it demonstrated?

The best prove of the natural resources crisis is the price increase of these commodities.

The price of a good reflects its abundance or its scarcity.
In the years 2007 and 2008, the evidence of the natural resources crisis was clearer than in other years:

- The oil price surpassed US$ 90 in October 2007 and two month later, on February Tuesday 19 2008, the West Intermediate Texas reached US $ 100.10 in the New York market; on March Monday 3 the price touched US$ 103.95, passing the barrier of April 1980, that adjusted by inflation was for March 2008 US$ 103.76. The race of prices continued on March 2008 and on Monday 13 the West Texas Intermediate went to US$ 107.
On Friday May 16 2008, the Light Sweet Crude for June delivery reached US $ 126.20 in the New York Market Exchange. In July 2008 reached their maximum level, over $140. As a consequence of the financial crisis and the recession the oil price dropped during the first months of the year 2009 but already has begun to increase over $70 in the last months of the year 2009.

- The wheat price and the price of other cereals reached a record;
- The food price in general grew in an important percentage;
- “Over the past five years, municipal water rates have increased an average of 27% in the United States, 32% in the United Kingdom, 45% in Australia, 50% in South Africa and 58% in Canada.” - (1)
The electricity price registered the same trend; between the year 1990 and the year 2000 the electricity rates in the United States increased in an average of 5.23%but between the year 2000 and 2005 the enhance average was 26.25%, five hundred per cent more. (2)

Until now, first decade of the 21st century, the crisis due to water shortage has been limited to specific regions of Latin America, Africa and Asia and has not had a sufficiently important impact to have the attention of the big world-wide mass media nor of the governments of the developed countries. The same has happened with the oil crises, which only have generated increases in the prices of crude and its derivates but without affecting the availability or the supply of these products, except in the 1973 crisis, when the Arab countries decided to suspend their exports towards the United States and other nations of the West.

We can say then, that in spite of the oil crises which have lifted the prices, the inhabitants of the developed nations have always had abundance of derivatives of petroleum, gasoline, diesel, oil, lubricants and other products and this fact has contributed to create the illusion of the existence of infinite reserves, but this is not true.

But the situation of apparent abundance will change very soon as a result of two facts: the over-exploitation of the natural resources and the contamination. Water will be the most appreciated good and in second place will be petroleum, since these two resources are every day scarcer, as it can be verified when considering the evolution of the contamination processes, deforestation and blighting at world-wide level and analyzing the behavior of the oil reserves. The pollution increased by the emissions of carbon dioxide and other elements that contribute to the global warming, the extinction of numerous species, the contamination of waters of the seas, rivers and lagoons and the nuclear tests, among other elements, constitute a serious threat to life.

The aggression to the environment will have an immediate effect and it will be reflected in the reduction of natural resources availability and also in the diminishment of the food supply. At the same time it will also cause an increase of the conflicts among the countries and within the nations.

The intense fight for the natural resources hence will be the main characteristic of the international policy in the next years to come and this will not only generate important geo strategic and geopolitical changes, but also it will be a determinant factor for the War or the Peace in the 21st Century.

Other important nations, like China and India, the most populated countries in the world, have in front of them the perspective of a great burden due to the water crisis, while the United States, Mexico, the United Kingdom and Norway, among others countries, will see their petroleum reserves reduced drastically.

That, in general, is the international situation in the first decade of the 21st century. The territorial problems related to the problems of shortage of natural resources, constitute the main cause of the conflicts.

(1)Earth Policy Institute, March 7, 2007. “Water Prices Rising Worldwide,” by Edwin H. Clark II http://www.earth-policy.org/updates/2007/updated 64.htm
(2)Energy Information Administration Annual Energy Review 2006 table 8.10 page 257.

While millions suffer hunger other spend trillions in weapons and luxury

Dr. Josette Sheeran, Executive Director of the United Nations Food Program, has announced that the Agency has only one third of the resources that need for attending 108 millions of persons this year worldwide.
This means that millions of people will not have the minimum food for surviving. While this happen, the world spend trillions of dollars in weapons and luxury.
The problem of hunger is a shame for the humanity. All the citizens of the world have the right of receiving the necessary food for living. The governments have the main responsibility in the creation of the economic conditions: jobs and income for the population.
Dr. Sheeran said that the Food Program needs only $ 6.7 billion for the next year. This amount is something insignificant compared with the money used for saving the banks during the recent financial crisis.
The world leaders should reflect on this theme. Only it is necessary to make a review of the priorities. The peace and the human beings welfare deserve more attention than the war and the tastes, the preferences, of rich bankers.
I read recently that as a consequence of the financial crisis of the UN Food Program, only in Guatemala 100,000 children will not receive the food help. The figures in other countries as Bangladesh are unbelievable: 5 millions of affected people.
The food production is a priority. And this means that it is necessary to adopt measures to guarantee the environment protection. At the rhythm of pollution followed until now, in too few years the planet will confront serious problems for providing the food that the global population will need.
The scarcity and the lack of water is one of the principal threats. And one of the causes of this phenomenon is the climate change.
In Copenhagen, in December, the world leaders have the opportunity of to adopt the necessary policies to preserve the nature and the life of millions of persons.

Climate Change affects the food production

I would like to write good news ever. But when you analyze the human behavior sometimes this is not possible; specially, when you consider the human being attitude regarding the natural resources conservation.
Man is a depredator of nature. He has a trend to destroy the wealth given by God to humanity.
Two hundred ten years ago, in 1798, a brilliant priest and economist, Thomas Robert Malthus, (1766-1834), in his Essay on the Principle of Population said that “the power of population is indefinitely greater than the power in the earth to produce subsistence for man.”
Malthus could not imagine that two centuries after the Climate Change would confirm his theory. Malthus did not know the Climate Change. The Pre Industrial civilization ---the Second Industrial Revolution began at the middle of the XIX century--- was a green and not contaminated world.
But now, almost 210 years after, the facts are confirming that the possibility of producing food for feeding the growing world population is every day less. The Global Warming is affecting the sources of water worldwide. Without water the agriculture development is not possible and the true is that every day the availability of this resource is diminishing in the world.
The World Bank in its World Development Report 2010, Development and Climate Change, warns that “the developing countries would be the most vulnerable by the Climate Change, with permanent reductions in GDP of 4 to 5 per cent for Africa and South Asia.” In the Foreword of the same Report, the President of the Bank, Robert Zoellick assures that “it is crucial that countries reach a Climate Agreement in December in Copenhagen that integrates development needs with climate actions.”
To adopt the measures for resolve the problem of the Climate Change and its consequences is something essential to guarantee the world surviving especially, the future of our sons, grandsons and the next generations.