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Michael Perelman, On globalization, economics, and the history of food crises

Michael Perelman is a prolific and compelling scholar of contemporary economics and politics who teaches at California State University in Chico.  He has published 19 books on a wide variety of topics.  Graduating with a degree in agricultural economics, questions of the global inequalities of food production and distribution, both past and present, led Perelman’s to write several early books including Farming for Profit in a Hungry World (1977), Classical Political Economy, Primitive Accumulation and the Social Division of Labor (1983), and Karl Marx’s Crises Theories: Labor, Scarcity and Fictitious Capital (1987).  All three touched on the “environmental, social, and economic costs of the current agricultural system” and the way those costs are disguised by reigning economic paradigms which facilitate the privatization of social wealth.

Perelman’s abiding concern with, on the one-hand, burning social issues and, on the other, the brutal deficiencies and complicities of mainstream economics has animated his career ever since with books including The Pathology of the U.S. Economy: The Costs of a Low Wage System (1993), The End of Economics (1996), Class Warfare in the Information Age (1998), The Invention of Capitalism: The Secret History of Primitive Accumulation (2001), Manufacturing Discontent: The Trap of Individualism in a Corporate Society (2005), and his most recent The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression (2007).

In this interview Perelman offers his insights into the contemporary food and economic crises, some of their historical antecedents, and themes ranging from speculation to dependency to class.

Max Haiven (MH) for Politics and Culture: Before the recent financial crisis, discussions of an endemic and deepening food crisis was making its way into the mainstream press thanks largely to spectacular demonstrations in the global South and some anomalous prices for things like cereals at Northern supermarkets.  Since the financial crisis was fully realized last fall, that food crisis seems to have been largely forgotten (along with the related problems of “peak oil” and general resource scarcity).  Is this coincidence of the food and financial crises an accident?

Michael Perelman (MP): The relationship between the financial crisis and the food shortage is not coincidental at all, although I do not believe that the ongoing crisis is merely a financial crisis.  Instead, crises like these are endemic to a capitalist economy. A decades-long distortion of the entire economy, reflected, for example, in an epidemic of inequality and deregulation, has made this particular crisis even worse.  I tried to describe the entire pathology in historical context in my recent book The Confiscation of American Prosperity. Inequality and lack of investment in productive capital, among other things, led to a speculative fever that eventually produced a financial crisis.

Once the bubble was set in motion, speculation in all sorts of raw materials, including food and energy, became part of the contagion.  Once crops became seen as a cheaper form of energy production, a mania for producing biofuels created food shortages.

Now that speculation in raw materials is running in reverse, people in the less developed countries, whose economies depended upon the export of raw materials, will face markets with sufficient food, but without the wherewithal to afford it—a different kind of food shortage, but one that is just as lethal.

MH: One interesting aspect of the rallying cry of “food sovereignty” is its mobilization of the term sovereignty.  Social movements around the world are using the term to speak to their demands for autonomous control over their food production and markets, often at the sub-state level.   The term sovereignty is familiar to many from anti-colonial movements for national liberation.  But it’s also a loaded concept which mainstream political science associates with the European order of imperialist nation-states. What’s your sense of this term sovereignty and how it relates to food?

MP: Here, you’re treading on very difficult terrain. In an ideal world based on principles of equality, virtually everybody could be better off with some trading in food.  Trade today, however, is not among equals.

Food—especially spices—was among the earliest goods involved in long-distance trade at the beginning of the age of empires.  These spices were extraordinarily profitable. Ideally again, the producers of the exotic spices could have profited from their product, which cost very little to produce and commanded a premium price in Europe.  Instead, the spices were a curse.  The colonial powers often fought each other over control of the places where exotic spices were found. When they were not fighting each other, they were subduing the inhabitants of the areas.

When you get to trading in basic food commodities on international markets, market forces can threaten basic survival of countries that depend on imports—not just because of the threat of embargoes, but to the variability of the market  on which those commodities trade. We saw this happening recently when grains were discovered as a source of fuel: the price increased dramatically making a normal diet unaffordable for millions of people.

In this sense, concerns about sovereignty sound reasonable. After all, people would be ill-advised to put their money in risky investments when a loss would expose them severe difficulties.  In the same sense, countries should take care to make sure that they have a certain degree of food security.

Market dependence makes countries vulnerable to political mischief.  I am reminded of a statement by Senator Hubert Humphrey (who later to become Vice-President of the United States) to the Senate in 1957:

I have heard… that people may become dependent on us for food.  I know this is not supposed to be good news.  To me that was good news, because before people can do anything they have got to eat.  And if you are looking for a way to get people to lean on you and to be dependent on you, in terms of their cooperation with you, it seems to me that food dependence would be terrific.[1]

The United States, of course, has no problem with such dependency.  First of all, it has plenty of basic foods and largely imports what might be considered luxuries. But the country is powerful enough to do great harm to any country that might interfere with its access to food. In short, trade does not represent much of a risk for the U.S.  In so far as food is concerned, the greatest fear of the United States is that the market may become glutted, making food prices collapse.

Of course, for many countries, food self-sufficiency is virtually physically impossible.  International solidarity is an important defense against either market forces,  political forces, or natural forces that might interfere with food supplies.

MH: In response to the food crisis, local organizers and global organizations have begun to adopt “food sovereignty” as their rallying cry.   Neoliberals, however, have been quick to accuse these voices of some sort of anachronistic “protectionism” or other crimes against the market.  This way of framing the debate also seems to dehistoricize this food crisis as merely the product of recent economic policies.  What’s your sense of the history of this crisis and the history of food crises in Capitalism’s development more generally?

MP: In 1866, British industry could not get cotton from the Confederate states because of the American Civil War.  Britain turned to it’s Indian colony for cotton, restricting rice cultivation and causing the infamous famine of 1866.  Karl Marx reported that this famine cost the lives of a million people in the district of Orissa alone—a more extreme version of the recent food crisis resulting from the destructive biofuels movement I mentioned earlier.  Similarly, when the potato famine hit Ireland in the 1840s, the country’s agriculture was largely geared to exporting crops to England.  Local poor people relied on potatoes.  When the British finally got around to sending relief, they sent wheat, but the people had no facilities for baking.

In my book, The Invention of Capitalism, I tried to show how British economists and the powerful economic and political forces that they represented went to great lengths to figure out how to make people dependent on purchased food by making it impossible for them to produce for themselves.  Masses of people were uprooted in the Enclosure Movement.  In this case, food dependency was not national in nature, but class dependent.  The idea was that once people had to buy on the market, they would have no choice but to accept wage labor, necessary for mass industrialization.

Today, wage labor is endemic.  People take it for granted.  Even so, extra-market forces continue to manipulate the food market.  Generally, the problem is the powerful countries want to dump their subsidized agricultural products on poor countries, where the farmers have no such support.  In fact, the U.S. and other developed countries force agreements on the poorer countries that prevent them from protecting their agriculture.

Peasants who had produced corn in Mexico prior to NAFTA felt the brunt of this manipulation of agricultural markets when cheap, subsidized U.S. corn flooded their local market, rendering their crops almost worthless in exchange.  Similarly, cotton farmers in Africa—admittedly not food producers—have been cast into a deeper poverty as the result of their exposure to international markets.

MH: It seems like food and food production has had an interesting career in the history of political-economic thought from the Physiocrats to the response to them by classical economics to Marx’s ambivalent and sometimes hostile approach to agrarian production to more recent attempts to retool Marxist political economy on a global stage.   You’re work often deals with the history of economic thought and especially the way ostensibly free-market thinkers were at the vanguard of the intellectual and legal justification of the enclosures of the agrarian commons.  What’s your sense of how food has factored into economic thought?

MP: Obviously, food played an important role in pre-capitalistic thought.  I was recently in China. People showed me one written character for family.  It was a roof and a pig. I took that to mean that if you could find food and shelter, you could have a family. Part of the character for happiness was another character for a field.

Early economists were struck by the fact that the 17th century Dutch economy flourished, despite the fact that it was heavily dependent on imports for everything. Although the Dutch had developed the most intensive farming techniques in Europe, economists paid virtually no attention to that part of their economy.  Instead, they marveled at Dutch trade and finance and the sophisticated futures markets.

Agriculture appeared to be the alternative to capitalism, because every culture seemed to be relatively self-sufficient, rather than dependent on traded commodities.  Its products are not valuable enough to export abroad.  As I described in my book, The Invention of Capitalism, early economists were very concerned to find ways to squeeze people off the land in what Marx called primitive accumulation.

You mentioned the 18th century Physiocrats.  Of course, their concern was very different. The French economy was relatively backward. Development, for them, meant finding ways to modernize agriculture, by ridding the country of peasant agriculture to make way for capitalist agriculture.

Turning to Marx, his understanding of agriculture evolved. In early years, Marx saw nature as something to be easily conquered through socialism.  Agriculture was the domain of peasants and aristocrats, neither of which fit into his vision of the future at the time.  But once the cotton famine hit during the Civil War in the United States, Marx’s thinking changed.  I discussed this in quite a bit of detail in my book, Marx’s Crises Theories. At the time, workers suffered greatly because industry could not get the raw materials necessary to produce textiles.  England’s response was to search for alternative sources of cotton.  This effort led the British to convert a substantial part of Indian agriculture, leading to the famine I mentioned earlier.  In the midst of these events, Marx began an intensive study of rent theory and agronomy, at one point saying that the agronomists have more to offer than political economists.  In his later years, Marx became sympathetic to the potential of old Russian villages, seeing that their cooperative system had the possibility of moving directly to socialism.

Today, agriculture has become just another industry as far as economics is concerned. It may not be not as innovative as biotechnology or as profitable as finance typically is, but it is still just another industry.  Given the direct share of agriculture in the US economy, food production is not a particularly important industry for economists.

The drought conditions affecting agriculture around the world may be a wake-up call.  Not only is draught restricting production in poor countries, but agriculture in Australia and in California is in a crisis mode.

MH: As every first-year textbook insists, economics is ostensibly about the “rational” distribution of scarce resources.  How can we imagine a form of economics adequate to dealing with the massive problems humanity faces concerning food?

MP: I think the economics textbooks today reflect the way most people think about the world in terms of food.  In the textbook world, there are no massive problems as long as people kowtow to neoliberal principles:  poverty exists because governments are too foolish or corrupt to open their economies up to market forces.

In short, the textbooks have more to learn from the activists than the activists could get from the textbooks.

One of the most important problems that economics—not just introductory textbooks—overlooks is the whole question of resources.  Costs are seen as merely the expense of producing one more unit, what economists call a “marginal cost.”  The concept of depletion has been disappeared from economics by assuming that markets somehow take account of scarcity.  At the same time, economists understand that business has a 10 to 20% hurdle rate, meaning that investment is not worth pursuing unless you can be virtually certain of a 10 to 20% rate of return. By that calculation, the entire world would depreciate away to relatively little value in a couple centuries.

I dealt with all this in a different book, The Perverse Economy, where I told the story of the passenger pigeon.  It turns out that the price of pigeons remained virtually constant as the entire species disappeared into extinction.

Our species does not face a threat as grave as the passenger pigeon, but the crisis is serious nonetheless.  I wish that my field, economics, had more to contribute.

Endnotes

[1] Humphrey, Senator Hubert. 1957. “Exchange in with Thorsten V. Kalijarvi, Deputy Assistant Secretary for Economic Affairs in the Department of State. United States. Congress. Senate. Committee on Agriculture and Forestry. 1957. Policies and Operations under Public Law 480, 83d Congress: Hearings before the Committee on Agriculture and Forestry, United States Senate, Eighty-fifth Congress, first session, on the Operation and administration of the agricultural trade development and assistance act of 1954, and its relationship to foreign policy (June 11-July 19) (Washington: G.P.O.): p. 128:

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