Nato's Economic War Is Causing Global Famines

NATO's economic war, its boycotting of Russian exports, and action to exclude Russia from global payments systems such as SWIFT, which prevents countries being able to buy Russian commodities, and pay for them via these systems, controlled by the US, is leading to famine in Africa, and other parts of the globe. That is both because it has caused a huge rise in primary product prices, including food, but also of actual shortages of them, including for things like fertiliser, needed to ensure successful crops.  UNCTAD produced these charts.

Africa was already suffering increased poverty and malnutrition, even before the recent spike in food prices, because, although Africa was not badly affected by COVID, as it has younger populations, who are not affected by the virus, it did suffer from the global imposition of idiotic lockdowns of economic activity, which slashed global output of everything, and restricted trade, which combined with huge amounts of liquidity injections, led to rampant inflation, which is continuing to rise across the globe.

As Human Rights Watch state,

“Many countries in East, West, Middle, and Southern Africa rely on Russia and Ukraine for a significant percentage of their wheat, fertilizer, or vegetable oils imports”

And,

“Even countries that import little from the two countries are indirectly impacted by higher world prices for key commodities.”

A look at the FAO, Food Price Index for so far this year, illustrates the point, compared to recent years.

NATO has tried to claim that the food shortages are due to Russia blockading Ukrainian grain exports. The inability of Ukraine to export its grain undoubtedly contributes to that, but a look at this other graphic shows that that is less than half the truth, because Russia accounts for double the amount of grain exports that Ukraine, does, and most of it goes to countries in the Middle East and Africa, such as Egypt, Sudan, Nigeria, Senegal, and Yemen, as well as to Asia, to Bangladesh, Turkey, and Vietnam.

It was known back in January that NATO sanctions on Russia would slash its grain exports, and so cause global food prices to soar further, and that was their intention. The claims of NATO that the current famines are solely the responsibility of Russian blockades of Ukraine, are clearly false, and just part of its global propaganda war.

#	Country	Value in thousands of USD
1	Russia	7,918,294
2	United States	6,318,111
3	Canada	6,317,889
4	France	4,528,591
5	Ukraine	3,594,217
6	Australia	2,698,498
7	Germany	2,105,865
8	Argentina	2,029,494
9	Kazakhstan	1,137,140
10	Poland	1,047,399

A look at the list of the world's top wheat exporters shows that Ukraine is only the fifth largest wheat exporter, with Russia leading the pack, and exporting double the amount of Ukraine. It is fairly clear that, on that basis, NATO's boycotts and sanctions against Russian exports are what is having most effect on limiting supplies, causing prices to spike, and leading to global famines.

Nor is it just with foodstuffs. The same sanctions are preventing Russian exports of fertiliser, essential for farmers across the globe, and particularly in developing economies, where they do not have domestic production. But, also, the sanctions on Russian oil and gas exports have caused oil and gas prices to rise astronomically, meaning that feedstock for CO2, required for fertiliser production has also become too expensive for many producers.

On Bloomberg on Wednesday, Ed Morse, Global Head of Commodities Research, at Citigroup, said that we actually have a global oversupply of crude oil. The reason we have a spike in oil prices is the NATO sanctions on Russian oil exports. And, whilst the hapless Biden bemoans rising energy prices in the US, as petrol prices have hit record levels, hitting drivers, and the delivery system, it is Biden's own sanctions against Russia that has created it!

Morse says, that, across the globe, customers sought alternatives to Russian Urals Crude, and could not find it, other than from the US, which then responded to the higher prices, by increasing its exports of oil by around 2 million b/d, which then drew down US oil inventories, and led to higher domestic fuel prices. Before US sanctions against Russia, oil and gas prices were rising, because, as the global economy emerged from the idiocy of lockdowns, all of the liquidity that had been pumped into it, in the previous two years, in income replacement schemes, flooded out into expanded monetary demand, and suppliers could not increase supply fast enough, so that the liquidity fed into rising prices for everything, including all those primary products whose supply is most difficult to increase quickly.

But, even then, prices rose from around $50-60, where they had been for some time, only to around $70-80. It is the NATO sanctions that have pushed oil prices to $120, with the potential for them to go higher. Who is hurt by that? Not Russian oligarchs, or Putin, because, Russia still manages to sell oil to China, and, elsewhere, even if it has lost markets in Europe, and elsewhere, but, now does so at much higher prices, selling at around $90-100 a barrel.

The people who suffer are the developing economies who find that they must now pay much higher prices for vital energy, and who now find that things like fertiliser are not available, or else available only at exorbitant prices. Those who suffer are European countries which, in order to play second fiddle to US imperialism, have voluntarily reduced their imports of Russian oil, crippling their economies, whilst the US takes advantage of the situation to charge higher prices, and to become the world's top exporter of oil. It is European workers who have seen petrol prices rocket, heating oil prices rocket, and gas prices rise by 1000%, at one point!

But, its not just European workers, and workers and peasants in developing economies that have suffered from NATO's economic war against Russia, it is US workers too. They have also seen petrol prices soar, even if to levels that Europeans would love to be able to enjoy. And, those much higher prices for petrol in the US, also feed through into distribution costs for food and other commodities, contributing yet more to the soaring levels of inflation being seen in the US, as the oceans of liquidity that previously hyper-inflated asset prices, now flood out into the real economy. What do the speculators want in response to that inflation? They want the state to cause another recession to stop workers demanding higher wages, as unemployment rises, and to stop interest rates rising to stop asset prices crashing!

Who has benefited? It is, of course, the US oil majors, who, as Morse, says, have coined it in, as a result of NATO sanctions against Russian oil exports.

COVID19 Deaths Set To Peak, Other Deaths Set To Soar

According to the study by researchers at Oxford University, at least half the population is already infected with COVID19. Given that each infected person infects 3 others, and, of these, each of them infects 3 more, and so on, then, as I set out in a previous post, once the virus had infected a large enough proportion of the population, it became impossible to contain it, by testing and tracing, a strategy that the government has not even yet provided the resources to achieve. The government having failed to contain the virus, via such testing and tracing, as South Korea did, then collapsed under pressure from the media, amid the moral panic whipped up over the virus, and instead adopted the idiotic policy of closing down the economy, rather than effectively isolating the 20% of the population at risk of serious illness from it. Today, we see the army standing around in the large sheds constructed as modern day leper colonies for COVID19 patients, sheds that continue to remain as empty as a Tory promise, and are likely to mostly remain so. The army would have been better used to provide essential supplies to the homes of people in the 20% actually at risk from the virus, starting a month ago, so that they could properly self-isolate for the duration. But, now, having shut down – or actually tried to shut down – the economy, even those vital supplies are disappearing from supermarket shelves and elsewhere, so that increasingly, there is nothing to distribute anyway. Britain is probably a fortnight away from the social unrest that Italy is experiencing, as families object to being starved to death. 

Yesterday, it was learned that several electricity supply companies have written to their vulnerable customers telling them to stock up with candles, warm clothes, and torches etc, because they cannot guarantee electricity supply. That is not because the government is shutting them down, which would actually flow logically from the government's insistence that all workers stay home. Rather it is because, given all of the moral panic that has been engendered, some workers are themselves being panicked into staying home rather than contract a virus, which, for 80% of them poses no serious health risk. In addition, some of those workers, have fallen ill, so that the electricity supply companies are lacking the number of maintenance staff to undertake necessary repairs. But, in an economy based upon a high degree of social division of labour, which any economy capable of meeting our needs must be, its not just the electricity supply workers whose labour is crucial. They require tools, materials and so on to do the necessary work. If the workers in those industries are not working, none of those basic requirements get produced either. 

Fortunately, the majority of workers have not stayed home, as the government demanded. If they had, the economy would already have collapsed, causing millions of deaths in its wake, not to mention a significant and permanent reduction in living standards, and the capital base of the economy that would lead to much higher deaths and ill health for decades to come. Of course, workers have also paid the price for that too, because, as millions of businesses continued to operate, they also pressured their employees to come into work in defiance of the government diktat, threatening them with not being paid at best, or the sack at worst, if they failed to comply. But, they have failed to also enable any of their own at risk workers to self-isolate, and failed to provide adequate PPE, and safe working.  The destruction of effective trades unions over the last 40 years has meant that employers could get away with that behaviour, and, if Johnson and the Tories get their way, that behaviour will get much worse. That, after all, is one reason they wanted Brexit. 

Workers have continued to go to work, they have continued to need to go to the shops, and so on, and as they come home to their families, the virus has necessarily continued to spread, which is why it has undoubtedly, now, already infected half the population, or about 30 million people. That figure, is, of course, many, many times higher than the 100,000 plus figure of reported cases given out by the government, but that figure is meaningless, because it is only a measure of the tiny number of people who have been tested for the virus, and its basically only those who have been ill enough to go to hospital who have been tested. Care workers in old folks homes, and nursing homes have no effective PPE, and so spread the virus amongst their elderly and sick residents. The same is true with many healthcare workers, and patients. Hospitals and care homes have become killing fields in which COVID19 can run riot amongst a vulnerable and confined population, as happened in Italy, and as happened here some years ago with MRSA and C-Dif. The number of deaths is bound to rise in the next week or so, as these vulnerable people, in these confined environments, succumb to it. Indeed, a look at the mortality rate in relation to reported cases, shows such a sharp increase already. But, given that many of those in these confined environments themselves have no doubt been infected by now, it would be expected that this increase in deaths should be close to a peak, as it takes around three weeks between infection and death. 

With about half the population also already infected, that is close to the 60% of the population required for herd immunity to develop. The government's attempts to slow the spread of the virus by closing down the economy, will have failed on both counts. Firstly, they failed to actually close down the economy, something they could never have really wanted, because the consequences would be immediately catastrophic, but, as a result, they also failed to stop the spread of the virus. They may have slowed it, slightly, but that has only acted to slow the development of the herd immunity required to kill it off, in the absence of a vaccine. Moreover, as the various studies show, even if you do manage to slow the spread of the virus, the consequence is to simply cause new infections to start up again as soon as you relax the lockdown, because there is no effective herd immunity to stop it spreading. Its like a few burning embers after a forest fire, that once again engulf all of the trees that are still unprotected against it. 

The governments halfhearted attempt to close down the economy has simply resulted in the economy grinding to a halt more slowly, as the evidence from the electricity supply companies, and the emptying supermarket shelves indicate. A report out today says that 800,000 businesses are on the brink of bankruptcy. In the US, its now estimated that, in addition to a 9% drop in GDP in the first quarter, it is on track to have fallen by a staggering 34% in the second quarter. US unemployed rose by 10 million last week! The sclerotic, inefficient British economy, also being undermined by Brexit, is certain to do much, much worse. Its not just a matter of a drop in GDP and output, as I wrote recently. If 800,000 businesses go bust, that is approximately 20% of the total number of businesses in Britain. They will no doubt be predominantly the smaller businesses, many of them people who are basically self-employed, and these will be people who have little in the way of savings, and large amounts of debt. This will be a process of concentration and centralisation of capital with a vengeance, and the millions of those people cast out will be in a very precarious situation for years to come. 

The number of deaths from COVID19 in the hospitals and care homes, is probably near a peak. The vast majority of deaths is among the elderly congregated in such locations, as well as among those suffering underlying medical conditions. The media continues to publicise the isolated case of this or that younger person without known conditions who has died, but the reality is that for every such person who dies, several hundred people in the over 70's group, or amongst those with underlying conditions dies. Yet, the media ignores this vast majority of deaths, because it contradicts the hysterical, headline grabbing narrative it has promoted from the beginning. 

But, if half the population is already infected then we would expect that the peak of deaths from the general population should also be close. If, as Sir Patrick Vallance said, last week, the mortality rate is actually 0.1% of those infected, we would expect that total deaths from amongst the 30 million would be around 30,000. However, total UK deaths, so far, are only 1,800, and that is overwhelmingly from those over 70, and undoubtedly skewed to all those in that cohort who were already in some form of home, or in hospital, where the spread of the virus amongst them would have been pretty much unconstrained. On the basis of this 1800 deaths so far, it would appear that the actual mortality rate is probably much lower than the estimated 0.1%. 

The 1800 COVID19 deaths is only a quarter of the 8,000 deaths from flu on average each year. It is only about 10% of the 17,000 deaths from flu in 2018. Indeed, in all of the tests done in hospitals for COVID19, only 10% came back positive, with the other 90%, therefore, presumably suffering from some other flu like virus. COVID19, therefore, appears to have been fortuitous for the Tory government in providing it with cover for the collapse of the NHS in the face of what is really a traditional seasonal flu pandemic. Indeed, some doctors have admitted that many of those over 80 who have died would probably have did from some other cause anyway.  The failure of the NHS, even compared with the performance of other socialised health care systems across Europe, particularly in Germany, is the real lesson here. It is not just another illustration of how such a state capitalist health care system is not geared to protect the health of the working-class, as Stafford Hospital, MRSA and other instances demonstrated, but how, in particular, ten years of Tory and Liberal austerity further made it unfit for purpose, as anyone who has visited A&E, or tried to get a GP appointment, over recent years is well aware. The Tories talk about the NHS as being “Our NHS”, but of course, it is no such thing. If it was, we should be thoroughly ashamed of “ourselves” for its totally inadequate nature. But, it is not “our” NHS it is “their” NHS. It is the health system of the ruling capitalist class managed on their behalf by the ultimate capitalist, the capitalist state. It is run for their benefit not ours, and when a Tory or Liberal-Tory government is in office, it is even more likely to be sacrificed on the altar of austerity than when a Labour government is in office. But, Labour government's too run the NHS for the benefits of capital, not of workers, because they too start from the fundamental principle that the needs of capital are paramount, and only by catering for the needs of capital can the needs of workers be addressed as a consequence. 

If more than half the population are already infected by COVID19, then we should expect that the peak in deaths should arise within the next two to three weeks. Even if deaths double each week, that is probably no more than around 16,000 deaths, which is no doubt why the official figures coming from advisors has dropped from the earlier hysterical numbers of half a million to less than 20,000. 

But, as Italy shows us in advance, whilst deaths from COVID19 are about to peak, deaths from other causes are about to surge. In Italy food is running short, causing riots and organised violence. Britain is not far behind. If electricity supply does go down, then thousands will die in short order, not least those requiring ventilators, but also anyone requiring dialysis and so on. Elderly and vulnerable people living in homes with only electric heaters will start to go down with hypothermia, and even if you have gas central heating, it will not work without electricity for the pump. Without electricity, the Internet becomes useless, and so all of the things that now depend on its use come to a stop. The same applies to TV, and other means of communication. Petrol pumps stop working, so motor transport ceases, and so on. 

The economic consequences already means that millions will lose their jobs, and will do so at a time when inflation is set to soar as governments have turned their currencies into confetti by money printing. That will cause a huge drop in living standards, and a consequent rise in ill-health and death. This deliberate destruction of physical capital on a large scale is not like anything seen before in a developed economy, even in wartime. In World War I, Germany suffered a large destruction of its capital, exacerbated by the Treaty of Versailles, and it ended in the hyperinflation of the Weimar Republic. But, around it other developed capitalist economies had their productive capacity more or less left intact. Indeed, it was that fact, that meant that the destruction of the value of that capital, in the 1920's, and 30's created the basis for a rise in the rate of profit, and a new uptrend. As Marx puts it, 

“A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.” 

(TOSV2 p 496) 

But, what governments are doing currently, is the opposite. They are destroying the use values that comprise capital, whilst at the same time, by causing a significant drop in productivity, they are causing the exchange value of that capital to rise, which thus leads to a drop in the rate of profit, and tie up of capital. If you think of a farmer, their seed comprises their capital. But, if, in desperation to be able to eat, they eat that seed, they have no capital to be able to grow grain in the following year. Businesses that are liquidating their assets, currently, to obtain money, are in a similar position. Buildings left empty, machines and equipment left to rust, material left in warehouses that deteriorates, is all a physical destruction of the physical elements of capital that can no longer be used for production. So, when this crisis does end, a large proportion of output will simply have to be set aside to cover the replacement of all this physical destruction of capital. That is what makes all of the proposals for large scale government policies for economic expansion Utopian and dangerous. 

Some of the capital abandoned will be taken up by other producers, but large parts of it will simply be laid waste. The wear and tear of such capital is reproduced in the value of output, so long as production is taking place, but that is not the case with depreciation. It represents an outright capital loss. If the government continues with its commitment to make good all businesses for any losses they incur then this implies a huge commitment that the government simply cannot fulfil. Or, at least, it can fulfil it by printing money, but that will simply result in a massive hyperinflation that will cause further economic and social dislocation. The economic and social consequences of the policy of closing down the economy will cause far more deaths and ill-health than COVID19, and those consequences will continue for years to come. 

We know that tens of thousands died from the effects of austerity after 2010 alone. But the economic and social disaster that is being created, as a result of deliberately closing down the economy, will be much, much worse than the effects of austerity. Austerity could be reversed, and its effect was simply to reduce GDP. The current policy is destroying the actual capital base of the economy. We can expect a sharp rise in homelessness as the rise in unemployment causes millions to default on mortgages, and rent payments. The same ten years of austerity means that we have inadequate social housing to accommodate those thrown out of their homes. So, there will be a consequent rise in rough sleeping, with all of the health problems and deaths that comes with it. 

The devastated economy will have far fewer revenues to finance the expenditure that will be required for the health service, which itself will find an increased burden due to the consequences of the poverty caused by closing down the economy, and also from all of the other healthcare requirements that have been put on hold. With lower revenues, and increased requirements for social security benefits as unemployment soars, the government will be forced to reduce benefit levels, even as it borrows hundreds of billion to bridge that gap, causing interest rates to soar. 

COVID19 deaths are about to peak, but the rise in deaths caused by the idiotic policy of closing down the economy, are about to start to rise sharply, and if the policy of closing down the economy continues that trajectory will accelerate. 

COVID19 And The Water-Diamond Paradox

Marx and Engels told us that commodity production and exchange has existed for around 10,000 years. On the basis of this commodity production and exchange, value then takes the visible form of exchange-value, and the objective basis of this exchange-value is the value of each commodity, i.e. the social labour-time required for its reproduction. As soon as money arises as the universal equivalent form of value, this exchange-value takes the form of a money price. Under capitalism, the value of commodities continues to be the underlying determinant of prices, but now these prices are not exchange-values, but prices of production. Prior to commodity production and exchange, the value of products was also determined by the labour-time required for their production, but this value was individual value, and the labour was the actual labour embodied in their production. These products were also exchanged, as different tribes met, and exchanged gifts as part of wedding rituals and so on. Indeed, these exchanges form the basis of the development of trade, and, from there, the development of commodity production and exchange itself. But, prior to the development of commodity production and exchange, there was no objective basis for the ratios in which these products were exchanged. The basis of exchange was purely subjective, based upon supply and demand. As commodity production is brought to a standstill, by government diktat, in response to the moral panic over COVID19, we are again placed in a similar condition. It is a condition in which the favourite argument of the proponents of subjective value comes into its own. 

That argument is known as the water-diamond paradox.  I discussed it, and what is wrong with it several years ago. The neoclassical economists argued that the basis of exchange ratios was the subjective value that buyers and sellers place on commodities, and this subjective value is equal to the utility that each believe they obtain from them. This concept was put forward by Samuel Bailey in the early 19th century, and is refuted by Marx in Theories of Surplus Value, Chapter 21. It was pointed out that, if the basis of the value of commodities was their utility then the value/price of water should be much higher than the value/price of diamonds, because water has far more utility than diamonds. The subjectivists eventually responded to this objection, by saying that what was determinant was not the total utility, but only the marginal utility. The way they made this argument was with the example of someone dying of thirst in a desert, who is in possession of a diamond, but no water, and a water seller, who has water to sell, and so is able to exchange it for the diamond. On this basis, the marginal utility of the water, for the man dying of thirst, is greater than the marginal utility of the diamond, and vice versa, so they exchange. 

As Marx says, in Capital I, Robinson Crusoe tells
us all we need to know about value.  Like the
 primitive commune, he has limited labour-time,
he must use to produce all of his requirements.
The value of each of these items is determined by
the time required to produce it.  He must balance
this value against the use value/utility he obtains
from it.

I have set out what is wrong with this example, in the post linked to above. Essentially, it has nothing to do with the determination of exchange values of commodities in systems of commodity production and exchange, let alone under capitalism, as a specific historical form of such a system. Prior to commodity production and exchange, primitive nomadic tribes, and communistic societies produced use values to meet their own direct needs. Each of these products had an individual value determined by the amount of labour-time the tribe or commune had to spend to produce it, as Marx sets out in Capital I, and in A Contribution To The Critique of Political Economy. So, even here, the exchange relation/value between different products is not subjective or arbitrary, as Marx again describes in Capital I, and in his Letter to Kugelmann explaining this Law of Value. Each tribe or commune had only a limited amount of labour-time at its disposal, and so the value of each use value, determines how many of them can be produced by this total labour-time. If it uses all this labour-time to produce one type of use value, it cannot then produce any other type of use value. 

The tribe or commune must then make decisions about how to allocate this total labour-time so as to maximise its welfare, i.e. to maximise the amount of use value/utility it can obtain, given the value of each type of use value. Its true that the use value it places on each type of product is more or less entirely subjective in nature – not entirely, because given the need to live, you are objectively constrained, first, to produce those things that make that possible, even if you would like to have been able to be producing something else – but that only tells you how you might allocate the available labour time; it does not change the actual value of the product, or its relation to other products. The fact remains that if you use an amount of available labour-time to produce potatoes, the cost of that, is not just this labour-time, but the other products that could have been produced instead – what orthodox economists call the opportunity cost. The measurement of the value of the potatoes is immediate, direct and independent, and is measured in labour-time; the measurement of its exchange-value, is contingent, indirect and dependent, because it depends not just on the value of the potatoes, but on the value of anything for which it is to be exchanged, and is measured in terms of the quantity of these other use values for which it exchanges. 

When tribes and communes first begin to exchange, therefore, they exchange products not commodities. These exchanges occur at ceremonies such as weddings between members of the different tribes and communes. One tribe has a surplus of some product, which proliferates in its area, and the same applies to the other. The first exchanges, therefore, have no objective basis. They are simply founded upon supply and demand, in the same way as the example of the exchange of water for a diamond. However, as I set out in relation to that example. It has nothing to do with systems of commodity production and exchange. If the market price of water, as measured in diamonds is high (its diamond price), relative to the cost of production of water, then more people will engage in the production of water for sale, in exchange for diamonds. The supply of water will rise, and the diamond price of water will then fall, until such time as the ratio matches the relative values of each. Under capitalism this appears as when the market price of each commodity is equal to its price of production, i.e its cost of production plus average profit. 

However, under current conditions, the subjective theory of value, represented by the water-diamond paradox comes into its own, precisely because commodity production is being brought to a halt by government diktat. The determination of prices by exchange-value, or by price of production can only operate where the supply of commodities can be increased by additional production, in response to the price of some commodities being higher than their exchange-value, or price of production. Someone who has a monopoly of supply over some commodity that everyone must have to live, such as water, can effectively charge whatever price they like for it, because the supply cannot be increased by other suppliers, and so competition cannot act to drive down its price. That is one reason that Marx saw that capitalism fulfilled a highly progressive role in breaking apart all of the old feudal monopolies. 

If the policy of governments, around the world, for example, leads to bakery workers staying home, so that no bread is baked, shops that have existing stocks of previously baked bread will be able to charge more or less what they like for this bread, because consumers will still want to have bread. The shops will have the added incentive to sell the bread at extortionate prices, because it has a limited shelf life. They will not want to miss a golden opportunity to maximise the price/profit they obtain from selling the bread, because once it has gone they too will have no more to sell, and someone else will have an even stronger monopoly of its supply. So, its no wonder that supermarkets have an incentive to blame their empty shelves on panic buying, because pointing to the fact of empty shelves only encourages more people to seek to obtain the commodities they need, and to pay higher prices for them. They are like the water seller who tells the thirsty traveller that they should hand over their diamond because there are no more water sellers for miles around in the desert. 

And, what applies to bakery workers applies to all other food production workers and those producing vital commodities. If production stops, prices for these commodities rise without limit, because demand cannot be met by supply, and so competition cannot act to regulate prices. The price of non-essential items may fall, as people use their money to buy the essential items whose prices are soaring, but that does not change the fact that these essential products will rise in price inexorably.

Moreover, as the diamond-water paradox indicates, what is essential depends on the particular conditions. It may be that people do not view a car as essential, for example, but if your own car breaks down, and cannot be repaired, because all car mechanics have stopped work, then buying a replacement car might be your only option so as to make essential journeys, and to be able to avoid contact with others using public transport. In that case, the car may become essential for you, and you may then be prepared to pay a high price for it, so as to meet that essential need. As you will only be able to buy from the existing stock of cars, as car production ceases, the car dealers who have the monopoly supply of this stock of cars, will, like the supermarket selling bread, or the water seller exchanging water for diamonds, be able to charge whatever price they like, and that price will get higher and higher, the more the stock of existing cars for sale is depleted, and that will get more severe the longer the production of cars is stopped. With no vaccine for COVID19 likely for another 18 months to 2 years, if governments continue their idiotic policy of deliberately cratering economies, the stock of cars will run out long before then. After all essential workers like health workers, require cars to get to work and so on, essential services require cars and commercial vehicles in order to function. 

Its always in such conditions when the supply of commodities is constrained that market prices can rise unrelated to underlying values, and in which black markets, and criminality rise on the back of it sharply. Just think about the price of alcohol under Prohibition in the US, or the price of illegal drugs today, or the exchange rates that people in Iron Curtain countries were prepared to offer on the street for Western hard currencies, and so on. The longer the constriction on supply continues, the higher the prices go, and the more the black marketeers step in to profit from those rising prices, and the more criminal gangs enforce that constriction on supply so as to maximise those profits. Its no wonder that alongside the idiotic policy of closing down economies, and thereby supply, governments around the globe are introducing lockdowns, curfews, and martial law! 

Those that suffer, at least initially, in these conditions are the poor and vulnerable, because they are least well placed to get access to these dwindling supplies of goods, and when they do get access, they are least well placed to be able to pay for them. Again, as wartime rationing showed, introducing rationing of goods is no answer, because it simply encourages the development of black markets. Those that can pay, pay, and buy from black marketeers and spivs, and the latter always have their own access to products via illicit channels, often depleting the stocks available for legal distribution in the process. The attempt to hold down prices by such rationing acts to further suppress legal production and supply of products, whilst encouraging the illegal production and supply of products, as was seen with Prohibition, with wartime rationing, and now with illegal drugs. 

The others that suffer in such conditions are those involved in primary production, and many of these producers are also in poorer economies themselves, with their workers being correspondingly poor and badly paid. If car and vehicle production comes to a halt, therefore, the demand for steel drops. No one wants even the existing stocks of steel, and because steel rusts if left unused, steel suppliers seek to get rid of it quickly, at almost any price, before it becomes worthless. And, with steel production closed down, there is no demand for iron ore, limestone, carbon and so on, so that the primary producers of these products also see the price of their existing stocks fall sharply. The same has been seen with oil prices, now headed towards $10 a barrel, which spells doom for US shale producers, North Sea producers, and other high cost fields. With governments around the world committing to bailing out all of these businesses, the amounts of money required become astronomical. In 2008/9, the UK spent £2 trillion bailing out the banks and financial institutions, the US spent $9 trillion. To similarly bail out the whole of the businesses in the economy, in the same way, will cost ten times these amounts, sending borrowing, and thereby interest rates to unheard of heights. 

In my book, Marx and Engels' Theories of Crisis:Understanding The Coming Storm, I wrote, 

“Its obviously impossible to know when the next crisis will occur. But, we do know there will be another crisis, because capitalism is a system whose dynamism stems precisely from its inherent contradictions. It moves forward, each time it resolves those contradictions, and, because it is an unplanned system, the only way those contradictions can be resolved is through crises... 

Similarly, it is impossible to predict what kind of crisis it might be... 

But, we do know now from Marx and Engels' Theory of Crisis, that the potential for crisis arises from the contradictions between use-value and exchange value, that arise from the separation of production and consumption, between the role of money as means of circulation and means of payment, and from disproportions in supply. We also know, from their theories of crises that these potential causes of crisis can manifest themselves in a break-down in the circuit of capital in any of its three phases, a failure to convert money-capital into productive-capital, for productive-capital to be metamorphosed into commodity-capital, or for commodity-capital to become money-capital, and we know the reasons why these break downs might arise. We also know that in addition to economic crises of the kind described above, there are other forms of crises such as financial crises, and political crises. These are crises in their own right not determined by economic crises... 

It will only be possible to analyse it when it has happened. But, there are plenty of candidates to choose from. Not only might a crisis erupt, as a result of some black swan event, that no one has foreseen, but it could arise from a large number of grey swans that are in full view.” 

(Chapter 6) 

Well, the current crisis is certainly one of those Black Swan events, not because of COVID19 itself, but because of the moral panic, and action of governments that has arisen on the back of it. But, it is also, now combining with the other “Grey Swans”, a term I developed at the time that I talked about in the book. 

What has been said above, in relation to the prices of commodities applies also to the general commodity, money, and to money-capital. The supply of money-capital is dependent on two sources. Firstly, realised profits, but profits are disappearing, because production itself is being deliberately stopped by governments. Secondly, savings, but savings are being drained down at a phenomenal rate, because both firms, and households deprived of income, are using savings to fund their continued consumption. Banks, including the government National Savings and Investment body, are e-mailing customers telling them not to go into bank branches, or to ring the bank, but to conduct all transactions online. That is a clear indication that they now fear a bank run, as savers start to draw out their savings to fund their continued consumption. Large companies are doing the same, drawing down on their credit lines with banks to fund their continued operation, and so as to pay outstanding bills. Ford in the US has drawn down $15.4 billion on two credit lines, for example and this is happening across the globe. In India, the government has had to nationalise Yes Bank, for example, and ask regional governments not to withdraw funds from it. 

The global financial system was never cured from the financial crisis of 2008, and all of the additional liquidity, acting to further inflate asset price, has, in fact, only made its situation even more precarious. As asset prices collapse, as interest rates rise in response to the rising demand for money-capital, and sharp reduction in supply of money-capital, the underlying bankrupt nature of the banking system will again be exposed. As I wrote several years ago, following the collapse of banks in Cyprus, the precarity of other banks across Europe, such as Deutsche bank was even greater, and only disguised by the size of the bank and its balance sheet. 

The supply of money-capital is being curtailed, just as the supply of other commodities is being curtailed as governments shut down production. But, the demand for money-capital, not to be used as capital, but as Marx describes in his analysis of crises, just to be used as currency, to pay bills, is rising astronomically, and so those who hold stocks of money can charge whatever they like for it. That is why, despite the government pumping in further billions of Pounds of liquidity, UK banks are charging businesses 12% if they want a loan, as well as imposing further restrictions and conditions. If I am the local loan shark, with a suitcase of money in my loft, and I see people around me desperate for cash to buy bread, whose price rises by the day, as its existing supplies dwindle, then I will feel free to charge 100% a day interest, and more, on any money I loan to such people, with the threat of a broken leg, for anyone that fails to make good on their debt. Welcome to the world that closing down the economy is creating in the next few months. 

Food Population and Development

I’ve just started re-reading an old collection of essays on Development Economics – “The Economics of Underdevelopment” by Agarwala and Singh. I came across an essay by Colin Clark – “Population Growth and Living Standards”, which was originally published in the International Labour Review of August 1953. Although, the essay is more than 60 years old, it does contain some interesting observations.

One of the first myths he explodes is the idea of poverty, particularly food poverty being a result of overpopulation, or, more precisely, between the density of settlement and the value of agricultural output per head engaged in agriculture. For example, Britain and the Philippines had the same settlement density of around 5-10 people per square kilometre of cultivable land, but the value of Britain’s agricultural output was more than 5 times that of the Philippines - below 1,000 rupees per person in the Philippines, and between 4-5,000 in Britain.

He then took Denmark as a benchmark – because Denmark does not have particularly fertile soils or other advantages, and had at the time a reasonable level of food consumption – and calculated what percentage of the population needed to be engaged in agriculture to feed the population, and how much land was required, given the average conditions applying in Denmark. That calculation showed that 12.5% of the population needed to be engaged in agriculture, and 1 square kilometre of land would feed 200 people, or 1 square mile would feed around 500. As he demonstrates, on that basis, even allowing only for cultivable land, that is not ripping up the jungle or rainforests, or needing to cultivate the Sahara etc., there was, at that time, enough land, using the average techniques in Denmark, in 1953, enough land in the world to feed 12 billion people, or around six times the world’s population of the time! Not only that, but, looked at from this perspective, the places that should have had the most problem, were not the places that actually suffered from food poverty. The real problem was not excess population, but inadequate capital, to farm at the level of Denmark, for infrastructure etc.

As he points out the idea put forward by Malthus and by modern day Malthusians is shown to be completely wrong, because there has never been a time, and probably never will be a time, when population growth has exceeded the amount of food production that the world is capable of achieving. Even today, the world’s population is only half that 12 billion figure calculated for 1953, and with today’s technology having pushed up agricultural productivity way beyond what was possible in 1953, that 12 billion figure, for sustainable population, is more likely to be around 30 billion, or again around 5 times the actual world population. And, as Clark points out, there are common misconceptions about population and family sizes. He demonstrates that the average number of children per human family, where no attempt to restrict it is made, is around 6 children. That number comes from anthropological studies, and from biological and census studies. And as conditions improve, contrary to Malthus’s theory that family size tends to decrease.

There is one aspect of Malthus’ theory, however, which may be relevant. Malthus pointed out that one problem is that, with a high infant mortality rate, resources are expended on raising new labour power, which does not reach the age where it is actually productive. So resources are expended, which do not result in any corresponding increase in output. In effect, resources are going to unproductive consumption. As Marx, points out consumption by workers is not unproductive as it is by capitalists or other unproductive sections of the population, because the workers consumption produces labour power. It is productive consumption. But, that is not the case if the consumption does not lead to the production of labour power that in turn produces commodities. And unproductive consumption is a use of resources, which could have gone to capital accumulation, and represents thereby a reduction of potential growth. The obvious conclusion, here, is not that of the Malthusians, of trying to restrict population growth, but that one of the most effective ways of increasing productive potential is to improve health and living conditions, to reduce infant mortality, thereby ensuring that the resources taken up by those children actually leads to them becoming productive workers, and thereby increasing total output.  That is why developed capitalist economies create welfare states.

Moreover, we know from the Engel Curve that one result of such development will be that as output increases the demand for food increases at a slower rate than for other commodities as real income rises. That means that both labour and capital are created, which can increase production of those other commodities, thereby encouraging further development.

Do They Think We Are Green or Something?

Looking at the media over the last few days, it has struck me how, in its various manifestations, it acts to subtly reinforce ideas. A few days ago, there was a report on the News, about the investigation into the Channel 4 Documentary, sometime ago, on Global Warming, which caused considerable controversy, because it challenged the consensus view that the world is going to hell in a handcart all caused by Man’s activities. The investigation concluded that Channel 4 had been correct to show the documentary – a conclusion now to be challenged by some of the scientists and others who disagree with the views expressed in the Programme, and so much for free speech – but that the programme, itself, had not been objective, by which it meant it had not reflected the majority view – which surely was the point of the programme in the first place!

Objectivity

A number of things strike me from this. Firstly, as I said the decision to challenge the ruling seems to give an indication of just how much the right to free speech is under threat. Those that advocate the thesis, that the world is on the edge of destruction due to Global Warming, already have behind them massive resources, and the majority of publicity. If opposing views cannot even be put forward, on a TV Programme, then this is a poor show, and to my mind says something about how sure those are that advocate this position of their views. It has often been the case that those who hold a minority viewpoint turn out to be right, and it is not uncommon that those who hold the majority viewpoint try to suppress the right of the Minority to express their views. Marxists in particular have personal experience of that.

Secondly, everyday we see newspapers like the Daily Mail and Daily Express print garbage about immigrants and asylum seekers being given free cars and houses, being paid thousands of pounds to live a life of luxury at the taxpayers expense. Anyone with a brain knows that such stories should be treated with the same contempt as those such as “Freddie Starr Ate My Hamster”, but unfortunately, talk to many ordinary workers and they will repeat these stories to you as though they were the Gospel truth. Such is the power of the media in being able to play on people’s prejudices, and limited knowledge. Yet, where are the worthies insisting on an enquiry into these stories that quite clearly are without any objective foundation?

Thirdly, why should such stories be “objective” i.e. try to provide a balance of differing views? When I write this blog I do not pretend to any such “objectivity”. In reality nor do the media. As a Marxist the basis of objectivity is to begin with the facts as you can as best uncover them, and to proceed from there. But, in proceeding from there you then reach conclusions based on a set of pre-existing value judgements. Certainly, for a Marxist those value judgements are not purely subjective based on some moral imperative of what is “good” or “evil”, but are based on a scientific understanding that everything changes, and that human society is ascending – not always in a straight line – to ever higher levels, based on the increasing development of the productive forces, and that consequently anything that facilitates such development is historically progressive and to be supported, or at least not opposed, and anything that hinders such development is to be opposed. But on that basis take two given facts. Let us say that an analysis shows that the working class is becoming increasingly unionised, and let us further say that this analysis shows that a larger number of strikes are taking place. On the basis of these facts a Marxist will conclude that the working class is becoming stronger, more confident, and more class conscious. As a Marxist views the working class as the vehicle of historical change this will be viewed as progressive and to be supported. But, a Conservative who views Capitalism as the end of history, as the best of all possible worlds will view such development with alarm, because it threatens to undermine and destabilise that best of all possible worlds, and will conclude that it is to be opposed. So, from the original objectively determined truths we have two contingent, but opposing truths.

Against the Flow

Marxists have experience of this in other respects too. Marxist Economics. Every Marxist economist knows that they have an explanation for the way that the economy works, whereas bourgeois economics does not. Yet, the vast majority of economic literature, all of economic teaching in school, and mostly in higher education only deals with bourgeois economic theory. In fact, most bourgeois economists if they were honest know that there are problems with their theories, even if that would not lead them to accept Marxist economic theory. And even Marxist economists are led in the academic world to have to accede to the prevailing viewpoint if they want to work. A self-reinforcing cycle is established. If you want to get a research grant to investigate Global Warming, you are much more likely to obtain one if the purpose of your research is to confirm existing theories, and the more that is true the more research does confirm existing theories.

In fact, I am impressed with the work of Bjorn Lomborg in this respect. See: Lomborg. Lomborg was a member of Greenpeace. He is a statistician, and began analysing the actual data rather than simply going along with his existing Green prejudices. As a result Lomborg found himself coming to a whole series of conclusions, which challenge the current consensus. It is not that Lomborg challenges the fact that Global Warming is occurring, or even that he believes that some if not a large part of it is due to human activity, but that he challenges the conclusions drawn from the facts. In large part I think he is right. For example, Lomborg points out that even if all of the tens of billions of dollars that Kyoto and other programmes require to be spent as part of the anti-Global Warming programme were actually spent, the consequence would be to put back the rise in sea levels by just 6 years. On a cost-benefit analysis that is simply a huge waste of resources. It would be far better as Lomborg argues to accept that sea levels will rise, and use those tens of billions of dollars to develop the economies of poor nations so that they are less effected by such climatic shifts, but moving their economies away from coastal areas, by lessening dependence on agriculture etc. etc. Capitalism will not do this because there is little profit in it. It will advocate the kind of Green Programmes required by Kyoto etc. because such programmes provide state subsidies for huge investment opportunities for the biggest companies, and therefore huge opportunities for guaranteed profits. Moreover, all of the environmentalist industry creates a climate in which consumer sentiment can be shifted. Just look at the way DIY companies began selling individual wind turbines for gullible consumers to put on their houses, which it turned out could barely in most cases produce enough electric to power a single light bulb.

One of the first things school students learn in elementary economics is about stratified marketing. The classic example that used to be given was of the two soap producers Lever brothers and Procter and Gamble. They produced essentially the same soap powder, and simply packaged it in different boxes. One set of boxes was designed to look cheap, another to look expensive. This was backed up with advertising, which emphasised to consumers the cheapness of one set, and the expensiveness of the other. By this means they could maximise profits. The middle class bought the soap powder, at a higher price because they thought they were getting something better, whilst the working class bought the soap powder in the cheaper boxes, because they thought they were getting better value. If you look in the supermarkets now you see the same thing, but in a different guise. There are a whole panoply of organic this and that, free range eggs, or whatever all at much higher prices than the same products in the non-organic packaging all aimed at assuaging the middle class angst, and making them pay through the nose to do so. All of the environmentalist industry and attendant propaganda plays into this as a means of shifting consumer preferences on to ranges of products that capitalists can sell at higher prices, and consequently higher profits having sated normal demand.

Burn Up

The other thing I was watching was last night’s first episode of “Burn Up” an environmentalist political thriller. One of the central themes is about the fact that there are vast reservoirs of methane gas locked up in frozen tundra around the world. Methane is 23 times more effective as a Greenhouse gas than Carbon Dioxide. As long as the gas is locked up in the frozen tundra everything is fine, but if it is released as a result of the ground beginning to that through Global Warming then the shit hits the fan as a snowball effect of warming is set in train. In fact we know such occurrences have happened in the Earth’s history due to other periods of warming.

But, watching the programme raised a fairly obvious question in my mind. The plot centres on a fictional Oil Company – Arrow Oil – which is heavily invested in exploiting Canadian tar sands. The company has a Green Division investing marginally in Solar Energy. The CEO having got his leg over Neve Campbell who plays the Vice President of this Division, and who has been badly affected by an Inuit woman campaigner who self immolates in front of him is led to consider increasing massively the role of the Solar Power division, funding it by pulling out of the expensive tar sands production.

Burn Off

But, here is the point. Tar sands extraction IS very expensive, some of the other sources of oil are becoming increasingly difficult to get at, and consequently very expensive too – hence the continuing rise in the price of oil. But, the methane locked up in this tundra, which threatens to destroy the Earth if its accidentally released is as the programme demonstrated just waiting to be tapped – huge quantities of it! This methane is effectively what is burnt now from the North Sea and elsewhere. So, why not reduce the possibility of the earth being destroyed by its accidental release, save the cost of extracting expensive oil, and instead simply tap this methane locked up in the tundra? Gas can be used not only for domestic heating, but for burning in power stations as a much cleaner fuel than oil or coal, it can be used in liquid form to fuel car engines and so on, again more efficient and cleaner than oil. This way not only is cheaper fuel produced, but a potential catastrophe waiting to destroy the Earth with or without Man’s help is reduced. Could it be that the reason this is not proposed is because the oil companies that own all the means of production that could exploit this cheap source of fuel, have trillions of dollars tied up in oil production, and it does not suit them to release a cheap source of fuel from which lower profits would derive?

Feast and Famine

The same thing is true of the other story I was watching the other day about famine in East Africa. The story said the famine was due to the high price of food. Actually, this was unlikely. The people shown in the clip were subsistence farmers. They would normally produce their own food not buy it. They were starving because of drought. In fact, the main cause of these people’s distress is not the high price of food, nor even Capitalism. As Lenin said about Russia in attacking the economic romanticism of the Narodniks, the problem is not Capitalism, but not ENOUGH Capitalism. The problem for most of the people in Africa is, in fact, that they live in societies dominated by precapitalist forms of economy, and consequently the productivity of labour is too low to enable subsistence let alone a decent way of life. Petit bourgeois moralising about trying to defend the very ways of life that cause this problem can then never offer any solution.

In fact, the high price of food is probably a means of salvation for such people. When oil prices rose in the 1970’s, it prompted the opening up of more marginal oil fields; it encouraged new types of technology to enable more oil to be extracted from existing fields. The high price of food arising from a rising demand as the people of China and the rest of Asia rightly demand a standard of living comparable to the West, means that other sources of food production will have to be opened up, and it will become profitable to do so. In most cases the real issue with food production is simply the application of enough and the right kind of Capital to overcome existing climatic, and soil conditions. As Lomborg points out, instead of spending tens of billions of dollars on ineffective anti-global warming measures, that Capital would be better employed in parts of Africa to provide irrigation, drainage, desalination plants etc. etc. in order to open up the vast potential that Africa offers for feeding the world. Yes, such developments would abolish the primitive ways of life that exist in some of these places, but as a Marxist we believe that is progressive. The question is how such change is brought about. But then given the choice of starving or working as an agricultural worker or even in areas where agriculture couldn’t be sustained working to maintain a wind farm, or solar energy farm on a living wage, I know which I would choose.

The Great Food Flim Flam

One of the few benefits of getting older is that you get a different, a more rounded perspective on life. Fewer things are completely new to you, just repetitions of things you have seen previously over the years, in varying degrees of modification. When you are young every new event appears to have world or historical importance - and of course some do - everything is painted in the brightest colours. But, often what appeared to be Earth shattering or crucial at the time, turns out not to be so, and the great calamity or great renewal that was expected never materialises, life goes on pretty much as before. As I said, not always had you been around when those huge meteors struck the Earth, like those that wiped out the dinosaurs, you would have noticed a change, and the Great French Revolution, and the Russian Revolution left lasting marks. But, such events are rare.

I think about that when I listen to all the current discussions about the price of oil and food, the way the Malthusians emerge again from the cupboard to argue, as Jonathan Porritt did a couple of nights ago on Newsnight that there are just too many damn people, and we have to stop them - nearly always them is considered to be people not in the developed capitalist economies - from breeding. Even the petit-bourgeois left, isolated from the working class it claims to put at the centre of its politics, has jumped with both feet into Environmentalism, keen no doubt to Party build within yet another petit-bourgeois milieu. But, as Porritt's statement demonstrates this kind of attitude inevitably leads to the development of reactionary ideas. It is very, very dangerous.

And, although young people today faced with oil having gone up to over $130 a barrel, and likely to go to $200 before the end of the year, with food prices going through the roof, and the bourgeois media reporting on food shortages and food riots in various parts of the world, and the potential for starvation such dramatic events must appear significant. In fact, when the same events occurred 30 odd years ago, I too then thought they were significant! I still have somewhere a record from the early 1970's by a soul band, Executive Suite, entitled, "When the Fuel Runs Out".

I bought my first car back in 1972, a Mark One Ford Escort. At that time not many people had cars. I only had mine because my parents, who didn't have a car, let me off paying any Board Money, and gave me the odd quid for petrol when I took them out. Not long after I had the car I started work at the other end of the City, and my girlfriend lived at the other end of the City too. At first, having the car made that easier instead of the long bus rides or walks I'd had to have before. But then, as a result of the Arab-Israeli War the price of petrol rocketed, and worse the Government announced it would be put on ration. I collected my ration coupons, but the rationing didn't actually come in. I did though have to make do with visiting my girlfriend, but leaving the car at her house while we spent the evening walking for a few hours.

The price of petrol went up to £1 a gallon. I remember around the same time that food prices rocketed too, even more than the general high level of inflation. In fact, I can remember giving up sugar because of the price increase, and coffee went up a lot as well. Compared to that £1 a gallon the current price of around £5 a gallon seems high, but of course wages have gone up too. In 1972 when petrol went up to £1 a gallon I was earning just over £20 a week. The average wage today is reckoned to be around £25,000 a year, even allowing for just £20,000 a year or £400 a week that is 20 times what it was in 1972. Put another way if petrol had gone up in line with wages then compared with 1972 it should be around £20 a gallon today. But, the fact is that even allowing for the high taxes, petrol is very, very cheap and the cost of driving has fallen by around 11% in the last 10 years. No wonder that compared with 1972 when few peole had cars, today we see 2, 3 or more cars on almost every driveway. And back in 1972 the environmentalists and Malthusians were saying the end of the world was nigh, and oil would have run out by the ned of the century. Well, it came and went, and it didn't run out, and oil was selling at the end of the century at a fraction of the price in real terms it was in 1972.

Part of the reason for that is that from the mid 1970's until the end of the 90's the world economy was in a long wave downswing, during which times the large investments made over the previous 25 years of upswing in new mines, and raw material production, food production etc. reach their peak, precisely at a time when economic activity declines relatively - hence the food mountains in Europe for instance - so that supply exceeds demand causing prices to fall or remain flat in nominal terms. But, another explanation is that because prices of these products is highest towards the end of the period of boom the capitalists that use these products have an incentive to find either alternatives, or ways of using these products more efficiently, not to mention of finding new ways of getting them out of the ground more efficiently. In the last 30 years the marginal increase in demand for oil per unit of GDP has fallen dramatically, as science has produced more efficient cars, more efficient boilers and generators, and a whole plethora of more efficient means of using oil. In addition, new techniques, and whole new companies have developed that enable more oil to be got out of the ground than was previously economically possible.

It is quite possible that the world HAS hit Peak Oil i.e.that the capacity to produce oil cannot be raised from current levels, and will indeed begin to fall from here. Certainly, no major oil fields have been discovered since the 1970's, and according to one oil geologist who predicted almost exactly when the US would hit Peak Oil, there is none to be found. The current attempts by the West to get OPEC to increase output reflect either woeful inadequate knowledge of the situation, or else are just PR by people who really don't know how to respond. OPEC countries like Saudi Arabia are already producing at such a high level that they risk damaging the longevity of the fields being exploited. The new fields announced recently in the North Sea are insignificant, and even ANWAR in the US, which is unlikely to get off the ground for environmental reasons only has enough oil to supply the US for around 6 months. Brazil has just announced some large finds, and there is oil in the Arctic, but it is expensive to exploit. There are billions of barrels available in oil sands, but again the cost is high.

Legendary US Oil man, T. Boone Pickens, has said that the US has to get away from oil, and he has proposed using natural gas, but the US has pretty much tapped out its supply of natural gas too, relying on gas from Canada. Even J.R. Ewing himself, Larry Hagman has converted his ranch to solar power!

But Capitalism has seen such crises before. At the beginning of the last century a similar crisis emerged when the same cry was raised that whale oil was running out, and people would have nothing to use in their lamps! Fortunately, the problem was solved by the introduction first of gas, and their electric lamps. Not only do motor vehicle producers have an incentive now for producing more efficient engines, but already large sums ar being spent on hybrid and other types of engines. The high price of oil will reduce demand to a certain degree, and unless the government gives in to the lorry drivers, there will be a great incentive to transfer freight from the roads to where it should be on the rails. For my part the road hauliers spokeswoman didn't do them any favours last week when she pointed out how inefficient road haulage was with lorries she said doing only 8 miles per gallon.

There is a whole range of economic, technological and social changes that can and likely will be brought about that will offset the effects of both the high price of oil, and its diminishing availability. Changes to the way people work to avoid travel, greater use of the Internet for a whole range of activities and so on. But, the revolution in computing has now been linked with the revolution in biotechnology and nanotechnology which although now in its infancy will open up vast possibilities for exploiting oil and other natural resources, probably without the need for mining and other environmentally damaging extraction techniques, using microbes, and nanobots to extract and process materials in situ before bringing them to the surface as finished raw material. That is without the use of such biological and nano technology to actually fabricate synthetically many of these products.

Just look to at all those products which were demanding of raw materials on a large scale which have been replaced. Instead of vast amounts of vinyl being used to produce records, we went first to cassette tapes, then to CD's, and now thousands of records can be kept on a single stick using virtually no materials. The same is true of films and many more products.

But the same is true with food. According to Newsnight a week or so ago, the average British family throws away a third of the food they buy. That is ameasure of how cheap food has been, another being the continual decline that food has comprised as a percentage of the average family budget. In 1990 the UN said that the world had the capacity to produce enough food to feed 35 billion people. Since then agricultural techniques have improved further so that figure will be even higher. The problem with feeding the world's poor is not one of technological capacity, it is a problem of capitalism. The fact is that although the current high food prices are likely to cause considerable problems for many poor people, in the longer term they could be of benefit to those same people. One of the problems of peasants and farmers in developing and poor countries is the fact that they face farmers in developed countries that benefit from large state subsidies. But subsidies are usually only needed when supply exceeds demand, and market prices are low. During periods like the present when demand outstrips supply and prices rise quickly it is more often consumers that get subsidies to offset the worst effects, and thereby raises demand further - such as the proposal from Hugo Chavez for the oil producers to create a special fund to subsidise and provide food for the world's poor. For farmers and peasants in poor countries this means at least the possibility of being able to sell some products profitably on the market, whilst retaining some food for their own consumption. In Africa huge potential exists for development in providing both raw materials and food if sufficient infrastructural development takes place to make the opening up of such resources worthwhile. China is embarking on such a programme in Congo, for instance. As with all of capitalist development such a process will happen via a series of crises, and given the nature of food supply, no doubt some horrendous suffering, but capitalism does have the means to resolve such situations and socialists should not fall into the trap of thinking it can't.

Just as the last long boom after the Second World War brought new economies into the frame in Asia, economies who as has happened in the past became the most dynamic as the new boom began following the logic of the process of combined and uneven development, so the current boom is likely to see the emergecne of new economies in Africa as the last area of the world where capitalist development has yet to bring about what Marx called its "civilising mission", the raising up of general living standards, and opening up to the working class of culture, art and education, the precondition for the development of socialism.