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Economics

Wealth and the storage of food

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All wealth is just the storage of food. Or, more pedantically, wealth allows one the ability to buy and trade for the necessities of life, food and water being among them, at a later date. Food and water, by themselves, are also wealth.

A corollary of this is that all wealth comes from the land. One can generalize this to mean the environment which among other items would include sun, rain, and land.

These statements may seem blatantly obvious to some, but there is a great deal of confusion regarding wealth, money, economic activity, cost of living, and growth. Whether it’s a developing economy or an established economy, the measurement of wealth is very misleading. In simpler times[i], corn was used as a currency and rent / taxes were paid via a portion of what was produced on the land. In some places, this is still the case. In North America, we’re blessed with the great plains, an abundance of cheap energy to produce our wheat, and the infrastructure to transport it. The rest of the world isn’t so lucky.

Consider a thought experiment about being stuck on an island with food, gold, and paper money. If those are the only items available, which is the most valuable?

Money is a medium of exchange and at various points in time has also been a medium to store wealth. Naturally, it’s ability to have future worth is tied to the belief that a) it has intrinsic worth or b) someone will accept the currency as a form of exchange in the future. Comparing fiat currencies vs gold, we can clearly say that fiat currencies require faith that someone will accept payment with it in the future. In the creation of a fiat currency, that taxes need to be paid in the currency issued by the government creates a nominal value for that currency. However, is gold intrinsically valuable? I can’t convince myself of that, as I see it as a metal that gets dug from the ground, transported to a room, and then protected by people we pay to guard it. If all the gold disappeared, what would happen? Certainly not the same level of crisis as if all the food disappeared.

Societies develop on the basis of a food surplus. If it is easier to produce food, labor can be diverted to other activities. The fertility of the land and the constraints of transportation predicates how large a society can grow. Athens was a city state with relatively fertile land, but as they grew they needed to have additional trade. As Rome grew, it had food shipped in. England had to repeal the Corn Laws to feed its citizens, otherwise, it was growing too expensive. Now food is shipped across the world, but doesn’t necessarily reach all the world’s citizens.

There can be no proper discussion of this without understanding the limitations of the law of comparative advantage, but we can see that food can be used as a diplomatic weapon. Consider the “Food for Oil” program with Iraq or other uses of cheap food with favorably disposed countries. Without food security, economic and diplomatic dependance grows considerably. One can certainly say the same about energy security, which in modern times, is on par with food. In my travels, I’ve encountered many rumors, and quite frankly, I’m not an investigative journalist, but there must be some credence to the rumors that countries like China are buying lands in Africa and South America for food production. Stability in any region requires a stable food and energy supply.

So how did food deficits happen? Surely, every region had to be at an approximate food equilibrium before the industrial era and world food transportation is a recent phenomenon (perhaps topic for another post). The consequences of this food importation is that some countries don’t have the infrastructure to make food, let alone the seeds anymore. Countries now have to import food and export whatever can fetch enough money to buy food. There’s not much negotiating leverage at this point. This specialization even with purely benevolent motives is dangerous. Every country in Europe currently imports food except for France. Any change could have huge effects and cause the system to fall apart, the speculation of Goldman Sachs on food prices in 2008 and still ongoing comes to mind. The dependence on North American wheat and corn will certainly be felt this coming season due to drought.

But let’s say that in an ideal world that this worked. One country produced wheat and the other sugar and they traded. But why are people still hungry if there’s enough food to go around? Logistics and transportation are a slight problem to rural areas, but let’s assume that isn’t a problem. What if the food was there? Unfortunately, those in rural areas don’t have very much money to begin with, so they wouldn’t be able to buy the food anyway. A bit of a catch-22. The question becomes what’s easier to produce: the food which they need or something else to buy the food?

Naturally, reality is much more complicated and has a lot more conflating factors.

While I was in Mombassa, Kenya, I talked to many of the locals. A good job paid 12000 KES / month to feed a family and there was a great deal of unemployment. This didn’t used to be the case as they previously just worked on the land and fished. In one village, the story was that an acre of land used to produce 30 bags of maize over fifty years ago, but now only produces 8. I asked why and the answer was remarkable. They told me it that the rains didn’t last as long as they used to. I asked about crop rotation, leaving lands fallow, fertilizer, but nothing had changed but the rains according to one family account. This leaves them struggling to sell trinkets to tourists to survive.

Another story comes from Nigeria from a volunteer with Médicins sans Frontier in 2011. They found that they were treating many children with lead poisoning. There was a small bit of gold mining going on in the area, but then there was an issue with the crops. I’m not sure if the crop problem was weather or mining related, but essentially, they had to dig for more gold and the children being either playing in the area or involved in the mining got overdosed. From my understanding of the situation as I heard it, if the crops were abundant, they would not have needed to increase their mining. This story was recently published by the mainstream news.[ii]

In both these situations, the degradation of the production of food was the root cause of the underlying problems.

Wealth is just the storage of food. And whether it be food or gold, all wealth is ultimately derived from the land. The production of food is paramount for both developed and developing nations. A food deficit can be very costly to the poor of every country. Our ability to nurture the land instead of extract from it is to our ultimate economic advantage.

tl;dr: Food is more important than money – take care of the land that provides you food.

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  1. Or perhaps simpler only in my imagination []
  2. http://www.reuters.com/article/2012/05/11/nigeria-msf-idUSL5E8GB50920120511 []
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