By Daniel Taghioff.

This development has brought on a wave of angst across the civilised world, as middle-class lefties realise they will have to brush up on their modes of production and dust off their anecdotes on ideology (See Thus Passim). But the thing is, none of this is difficult. So with no further fanfare, here it is:

The THUS potted guide to political economy:

Profit: If you have an unhealthily high rate of profit the money moves away from the poor to the rich. If you have a low rate of profit the rich get pissed off. 

Capitalist Crises: Too much of the former, you crush the poor – who then, incidentally, can’t buy stuff. Too much of the latter, a counter-revolution like Neo-liberalism.

An even briefer history of Neo-Liberalism: TheThatcher revolution and ’Reaganomics‘ both inspired by Milton Friedman (and Ayn Rand et al) led to redistribution of wealth, largely from the middle to the top and ‘light touch’ regulation in the financial markets. The stated objective was smaller government and an end to Keynesian supply-side economic dogma, but this didn’t happen. It all went horribly wrong (Thus passim).

Inequality: The poor got richer (in absolute terms) despite the robbery from above because there were more resources coming in from the environment.

The environment: A lack of natural resources makes inequality more of a problem (free summary), as you loose cheapo consumer goods as a way of buying off the poor, and as prices spike, especially for food… (Thus passim).

Productivity: Productivity gains or ‘advanced technology’ allegedly defeated Marxism, or rather the lumbering economic giant of Communism. But in reality, it actually dramatically increased natural resource usage. All that growth from the ‘white heat of technology’ can be accounted for as increased available energy in the economy,(Full text here) which nowadays means Big Oil.

Consumption: Productivity should really be measured in terms of goods per unit of natural resource. This is not going up anywhere near fast enough (look at page 20). To quote Monbiot (if you must- JK) “if our economy grows at 3% between now and 2030, we will consume in that period economic resources equivalent to all those we have consumed since humans first stood on two legs.” Hence we are running out of stuff, like Oil, though there will be peak other things too, like available fresh water.

Revolution: So there will be a crunch (or several). Printing money will not buy us out of trouble if there isn’t stuff to buy (Thus passim). Developing countries, especially those with a a big exposure to food price rises such as India will not be able to hold onto democracy if basic natural resources totally deplete. Revolutions, on a small or large scale are imminent. We are in for some interesting decades (Thus Passim)…

Conclusion: This recession is a phoney war. Our kids won’t need to worry about levels of debt – which, by the way, are notional – a future dictatorship of the proletariat could abolish these by simply refusing to honour them (or just by printing money). Our kids (and their parents) need to worry about natural resources, because we can’t print more of them.

The only way out is to win a quiz show

Aravind Adiga’s Booker winner White Tiger and Danny Boyle’s Golden-Globe-harvesting film Slumdog Millionaire (based on Indian Diplomat Vikas Swarup’s novel Q and A) illustrate a “Shining India” that has long shown up in the statistics of those critical of the Globo-glorifiers. It bears repeating (Thus Passim) that 70-80% of India’s population cannot afford to feed themselves to international minimums, that is 2400 calories of cheap stodge per day, assuming they spend on nothing else.

Yet in the UK we continue to talk about “the poor” as if they live on council estates, and as if all they need is the chance to show how bright they are in order to climb up into our middle class paradise. Meritocracy may imply that the less intelligent ones should stay where they are, but what if they were dulled by malnutrition? The world is not made up of a series of Westminster villages, but being good nationalists, the policy makers and pundits seem reluctant to acknowledge this.

The implication of this is that national governments tend to live in a room full of mirrors, where all that they see is themselves, especially in rich OECD countries. Almost everyone uses the poor to justify their policies and positions in these compassionate days of media-conveyed suffering, yet our policy and political debates do not at all reflect their circumstances. This is a flaw of the Left as well as the Right. The legacy of Marx and the Union movement is that we see emancipation of the poor in terms of workplace rights, yet only around 8% of people in India have formal employment contracts, so this is mostly irrelevant and this is probably the case in most poor countries.

If people cannot feed themselves in the cash economy, as the numbers show, then they have to be feeding themselves in the non-cash economy. How can this be so? Where does food come from if not from shops? That’s because the poor are in the environment. Either an urban one, scavenging the remains and polishing the shoes of those visible to us, or a rural one, growing or gathering food under unpredictable conditions. But since policymaking is largely about economics, and economics largely about the cash economy, and the cash economy about people with purchasing power, and not the environment or the poor, these humans (of whom there are rather a lot) remain largely invisible. But what is the problem with them, and their environment, remaining invisible to policy makers, particularly in the rich world?

It gives us a totally misleading sense of the future. Economists, particularly historically oriented ones, write as if it is the swing of a pendulum that determines economic history.  Presumably this means that after this latest desperate burst of neo-Keynesianism we will turn back to more liberal and less risk-averse approaches once times are good again. But that invisible thing, the environment, is changing, and it will impact on all of us, but mainly on those other invisible things, the poor, so that our whole perception of risk, and thus how to organise ourselves, will have to change. We are not going back to a nice cosey stable world with seemingly unlimited natural resources, and we are not replaying the Industrial Revolution in countries like India, even if our policy makers have been Oxbridge-raised on a diet of social thinkers from the steam-engine age. We can talk about public spending as a way of stabilising things until we are blue in the face, but how do we propose to get money to those really at risk under our undoubtedly changing circumstances?

Via NGOs? Well they are not coping well with spending the fraction of the 0.7% of GDP put to aid budgets efficiently. Via business? Well their track record of behaving well in the absence of strong regulation is not so good. Via governments in poor countries? To quote Aravind Adiga’s lead character in White Tiger, “what a fucking joke.” Survival of the fittest in a world where pro-poor leaders in the poor world, particularly those that interfere with rich world access to natural resources tended to “dissappear” has left a legacy of governance that does not exactly channel funds to the needy as a first priority.

We can perhaps hope that our rich world “Social Mobility” thesis works in poor countries, and the poor can suddenly help themselves. Sadly the post-industrial boom in India seems not to be creating lots of jobs, so the whole 1950′s rich world idea of mechanising agriculture and shunting people into the cities is creating shanti towns rather than a lovely unionised industrial base. Also, it takes rather a lot of planets, at current levels of inequality, to lift the poor out this way.

So we have a big problem that our current policy debates are simply not up to addressing. We don’t know how to think about the dependency of the poor on the environment, or how to support them in the face of environmental change or indeed how, in short, to stabilise the world through the coming times of trouble (Thus Passim). There is the  Keynsian idea of a “Green New Deal”, but this is not a cyclical issue we are facing, actually the problems are likely to grow gradually but inexorably over time, so a short-term spending strategy won’t do it (though long-term rural employment guarantees may help a bit, even if dogged by corruption).  Maybe we in the rich world should look to the artists for answers, because right now, it looks like our wonks are all out of ideas.

A surefire sign that something's wrong

India and China sit on an awful lot of coal, and there is a heated debate going on amongst agonized environmentalists that Fast Breeder Nuclear Reactors might be necessary to avoid it all going up in smoke. Carbon sequestration – capturing the carbon as it leaves the chimney and then storing it underground-  sounds like a good idea, but it is a long way from being commercially viable, and there is not a lot of time left. The Greenpeace energy plan for India avoids coal and nuclear, but leans on “biomass.” This means plants mainly, and it raises the same problems as bio-fuels, namely that it becomes more economic to power machines than feed poor people.

One thing that has become clear with the recent nuclear deal is that the chances of the US stopping India from further developing its military nuclear capability are next to zero. So in this version of events, the risk of nuclear proliferation is a sad side-effect of what has to be done to stop us from cooking ourselves more slowly.  However, in another version of the story, proliferation is the main event. It involves a dark place, deep underground, where a small yellow bird sits in a cage.

Before the invention of the Davy lamp, canaries were used by miners because they are sensitive to gas. When they died, the miners knew they had to get out. Today’s canaries are the poor, such as subsistence farmers. When they start to perish in accelerating numbers, we know that there is a calamity upon its way. This makes the recent slew of farmer suicides in India a bit worrying. Actually a country with 80 odd percent of its people at or below starvation incomes – the 27% poverty figure you see for India is based on snide statistics –  can only really be described as a Canary state. India uses 90% of its freshwater for irrigation, and looks set to get drier. Tweet, tweet.

Canaries are useless if you don’t pay attention when they start expiring. Indeed, if recent trade rounds are anything to go by, the rich world seems unconcerned about the fate of Indian farmers under climate change. But here’s the twist. The US has just given India what looks like a license to power up their nukes.  So India is now unlikely to go out with just a chirrup. It also has nuclear-enabled neighbours, China and Pakistan, who are not going to sit on their hands as India tools up. So we have probably got the best part of Asia cooking up a nuclear storm.

Forget Africa, with its huge land area and tiny population (ten times the area and 200 million less population than India alone.) The subsistence farmers in Africa are not hugely dependent on chemical inputs, and thus on Oil prices as in Asia, and they have a lot more space to move around in, with a huge North-South gradient to traverse in search of the weather they need. No, it is Asia with its incredible population densities supported by mechanised agriculture that will feel the pinch between Climate Change and Peak Oil. And that is where America has been is tending its nuclear flower bed.

So things are bound to change a bit: Rather than valuing the Canaries based on their “willingness to pay” for their lives (THUS passim), we have to start thinking about what happens to their nuclear-armed governments if they show a strong willingness to riot. Ironically, this means that George “W” is an accidental hero. Having upped the ante, the world now needs to work hard to ensure that India is not forced into a situation where food riots lead to catastrophic nuclear proliferation, enabled by the US. In the words of another great American, Forrest Gump, “life is like a box of chocolates, you never know what you are going to get.”

We need a Global Climate Deal right now, but when even a Greeny like Al Gore worked hard to dilute the Kyoto Protocol, you start to wonder if the Americans have a collective death-wish. The answer, of course, is no. But why then the insistence on oil? Why the crazy misadventures in the Middle East, when the time (and money) in between could have been spent on re-fitting our energy systems or getting ready for bad weather? Much though I like having a moan with John Pilger, (each to their own, JK) and have personally enjoyed many a tirade against American power (ibid), one of the things that Climate Change really hammers home that we are all in this together. Hence, perhaps, the rather weak sounding position of the UN’s chief climate negotiator, Yvo de Boer, that Americans have economic interests they need to protect, and that we must to respect this. He is right though. We cannot expect even a relatively worldly President like Obama to ignore these interests. The EU are currently negotiating target carbon emission reductions of up to 40% by 2020, but if America continues to pursue a retrograde energy policy, the developing world can hardly be expected to line up with Europe.

America’s conundrum in relation to oil actually goes right to the base of their power-position in the world. America got into the position of being the main global power in the aftermath of the two great European Civil Wars (WWI and WWII as we like to call them.) The American negotiators were in a position, in the 1945-1948 period, to largely set the terms to the bankrupted powers of the old world. The deal negotiated was not Keynesian, as many say, but was created by the American negotiator, Harry Dexter White.

Keynes recommended a world currency. We got the dollar instead. It was fine for a while but . . .

Two crucial points emerged from this. The first was that, against the advice of Keynes who wanted a new global currency, international finance would be built around the Dollar. The second was that European powers, particularly the British, would start to hand over the international seaways and strategic control of areas such as the Middle East. This was partly through the dismantling of formal Empire, but also through the opening up of key sectors to American investment, oil extraction in the Middle East being an area that emerged as crucial in the subsequent decades.As this new international system bedded in, and as the postwar industrial boom took shape, the link between oil and the dollar emerged. Countries needed a continuous supply of fuel- increasingly oil, and you could only 100% reliably purchase oil in an emergency if you held dollars in your national reserve. Thus the dollar strengthened as a global reserve currency. This was very much as Harry Dexter White had planned it, since it gave the US an ongoing economic advantage. All the dollars that were printed in America and spent abroad meant goods and services for free. That is for as long as they were held abroad and not spent back into the American Economy.

But here lies America’s central problem: These dollars are now sitting abroad in overseas banks, but what happens if the dollar-oil link unwinds, and these overseas dollars come home to roost?  Hyper-inflation of the scariest kind. Even the International Monetary Fund’s insistence that foreign reserves be held in dollars does not re-assure American policy makers when Saddam and OPEC start discussing trading oil in Euros, so this is clearly a major percieved threat.

De-carbonising America is not impossible

Now climate science demands that we move away from an oil-based global economy astoundingly fast, we are talking de-carbonisation rates of 3-6% a year here. To put this in context, the decarbonisation rate of Russia as it collapsed economically under Yeltsin was 1% per year, so this is a huge shift. How could America survive such a rapid lurch away from oil? One way is to make it look like oil can in some way be made green. You stick with the same infrastructure, and keep the trade going by using a liquid fuel with green credentials to try and dilute the impact of your power-base. In other words, you back biofuels. The FAO has just released its State of Food and Agriculture 2008 report, and it is clear that biofuels are part of what is currently pushing up starvation rates around the world.  So the current American strategy looks like building a house of cards (Thus passim) since it involves making the lives of those at the bottom of the Global Economy even more unstable.

There is  another way out but it requires a level of innovative thinking about the economy beyond even that presented in the recent Green New Deal, and way outside the scope of what is being considered in the current economic summits. The only way I can think of avoiding the unwinding of the dollar (which would probably make us all suffer) without sticking to an oil base (which will definitely make us all suffer) is to allow the conversion of foreign reserves of Dollars into a new Global currency. The crucial point is that this conversion process needs to take these overseas dollars out of circulation whilst retaining the value that they held. So the new currency will need to be tradeable for oil in the very short-term, but designed so that in the longer term it phases out international trade in fossil fuels.

I am no expert (look here and here for some), but my main point is that there is a need for this kind of blue sky financial thinking. If we do not in some way take into account the difficult position that America faces and try and find solutions, then America and its rulers will be forced by circumstance to keep us running towards the precipice. Despite people trumpeting the “End of History” and the “End of Ideology” (Thus Passim) we actually need to rethink and to some extent politicise our financial systems in order to get through the roadblock that we face.

This looks like becoming a major nuclear flashpoint.

However, since this issue is about the decidedly mundane business of growing food, it is part of the world of the silent majority. The narrative of Kashmir as a Holy Land, Kashmir as terrorist stronghold for Muslim Fundamentalists fits into prevailing elite discourses about global religious conflict – good Christian democracies verses bad Islamofascism. The idea that the root of this problem might be about food, water, feeding poor people, the environment and climate change, simply does not fit the story. What if people were united by material rather than religious concerns? My God, you might even have to think about the circumstances under which people actually live.