Thursday, August 17, 2006

E n e r g y C r o p s : W.T.O S t a l e m a t e

How farm subsidies are perpetrated in the west :

I like pretty much everything about France - about its stance on the Lebanon issue, about its European goal of development, about its social welfare system etc.. So I have been looking very hard to discover something that is bad about France !

And I found it - in the form of agricultural subsidies.

European countries spend a total of 400 billion dollars as a subsidy to farmers. Technically, the farmlands of Europe and USA are not making any profit ! Lots of external money is being pumped into the farming community to keep it economically competent against the cheaper grains from the third world.

The USA spends an equivalent amount of money (100s of billion dollars). Japan spends a phenomenal amount of money subsidizing the cultivation of rice.

Even though it is ecnomically very unsound to do so, these countries do this because of political lobbying from the rural community. The reasons the lobbyists give are (1) Keep USA/UK secure from the world price fluctuations of grain (2) Avoid famine (3) Promote a countryside way of life (4) Tourist industry thrives on the agricultural backdrop.

How the western farm subsidies harm the third world :

Due to these subsidies, the developing countries (India, Brazil etc) are not able to compete in the marketplace. Even after a lot of import tariffs and shipping costs, the cost of the US soybean gets to be cheaper than the homegrown variety in India.

Since the local agricultural community is unable to make surplus profits, the economy of India gets slowed down. In several places, the farmers find it profitable to cultivate cash crops such as coffee, sugar cane which are not available in the USA / Europe. This cultivation makes them more vulnerable to famine. At some places such as Afghanistan, farmers cultivate opium to remain economically profitable.

USA/Japan dump a lot of excess produce in the African countries in the form of food aid, so as to stabilize the price of grain. This kind of food aid harms the local producers, and helps nothing towards the actual economical development of those countries.

Agricultural subsidies are evil.

So I understand that USA does these (going by its political track record). But, to my surprise, these are even more perpetrated by France.

France is one of the most agricultural countries of Europe (the size of cultivable land is huge, even though only a tiny 6% of the population lives on agriculture). France spends one of the biggest purses on agricultural subsidy. By doing this, it is hitting on the poor third world countries.

These subsidies do not help the small individual farmers in any way. Most of this money goes into the pockets of huge agricultural corporations. To obtain a list of these evil corporations (which includes your favorite cheese/chocolate maker Nestle/Cadbury etc), please look at this website -

In economically educated circles, it is widely believed that cutting down these subsidies is a great boost to the country's economy itself - with lesser taxes, more money available for social spending, and so on.

This blog maintained by the Guardian newspaper of UK provides the update information about this debate.

How industrial revolution is denied to the third world :

The poor countries (Brazil, India and so on) have been at loggerheads with the economical giants over the issue of farm subsidies. The WTO talks of this year have ended in a stalemate because the rich countries did not agree to lower the subsidies on agricultural products. By a stroke of evil genius, USA has agreed to do this if only the poor countries reciprocate the act by reducing import tariffs on high-tech gadgets. India/Brazil cannot afford the fledgeing home electronics industry suffer by doing so.

As I mentioned in a previous post, industrial revolution is not an automatic process in an economy. It is a painful process. People usually lack education to adapt to the changes brought by the industrialization. It is extremely necessary to have a trading partner to buffer these changes, and let the country sail smoothly into a developed nation.

The rich countries had that buffer in the form of colonies.

The poor countries don't have any such buffer currently. So it is doubly harder to make the transition. It becomes inherently impossible, especially when the rich countries hit the poor countries by giving agricultural subsidies in their backyards !

Do we have a win-win answer to this stalemate ?

Yes, in the form of energy crops. And this is a particularly nice answer because it brings in energy security and environmental wellbeing as its bi-products.

Bio-fuels - especially the ones which are used to produce ethanol have the capacity to meet the energy needs of the world, and let it escape from the clutches of rising oil prices.

Peak Oil Crisis :

This doomsday website provides grim warnings that civilization is coming to an end with the growing oil prices.

Do we have alternatives ?

But the solution is near at hand - in the form of growing energy crops, and this solution is economically viable. In saying so, I mean that it is cheaper to use bio-fuels rather than fossil fuels. Thus this change is a self-sustaining chain reaction, if only it is kick-started.

The kick-starting process is extremely difficult because the oil companies vehemently oppose any such transition which is against their interests.

But, now there is a campaign in the state of California, lead by the Indian entrepreneurial genius - Mr. Vinod Khosla, to kick start such a change.

Please look at his presentation in the google tech-group which is available freely on Google Video. This presentation got Larry Page (founder of Google) convinced, so it is not surprising that it impressed me too.

In the presentation, Mr. Khosla explains how ethanol is a cheap, environmentally-nice and economically viable alternative to gasolene. But any fledgeing growth of the alternative fuel usage will be attacked by a slashing of oil prices by the rich Saudi oil companies, and thus killing these initiatives before they can germinate.

Mr. Khosla believes there has to be a legislation to prevent the oil companies from doing so, in order to ensure a level playing-field.

So I wish California to take the lead and pioneer the use of bio-fuels. (In fact, it has already been successfully pioneered by Brazil, but California's energy needs are much higher). There is an act called Act 87 which is being brought in front of the california legislature to help the growth of ethanol. But the oil industry is spending a lot of money on spreading FUD about this act. Please look at its evil propaganda inside this website.

Mr. Robert Rapier, an oil company executive, has raised some educated criticism about Mr. Khosla's evangelism. Specifically, he criticizes the use of corn ethanol, and also identifies some errors in Mr. Khosla's numbers.

On the request of Mr. Rapier, Mr. Khosla has replied to these issues here, in the true spirit of educational communication. He explains that corn ethanol is only to help make a smooth trajectory towards more efficient fuels such as cellulose ethanol, butanol and other bio-fuels. He also explains that he is not against measures of energy conservation such as electric trams and cars, and that these issues are not in conflict with his own work.

These bio-fuels are going to become cheaper and more efficient, by the revolutions that are happening currently within bio-technology and molecule synthesis.

In a world which uses bio-fuels, the great wastelands of Africa and South America will transform into great sources of income for those countries. Also, with agricultural land in demand to produce bio-fuels, the farmers of USA and Europe no longer need any farm subsidies and these can be abolished. Consequently, the farmers of China and India would competently sell their produce in Europe and Japan, and this additional raise of income would trigger further industrialization in the poor countries.


Sukesh Kumar said...

see this
good one

The Ephemeral Ivy said...

wonderfull post... learnt a lot.. wonder where do ppl get this stuff from.

Ray Lightning said...

Hi Sukesh
Thanks for the link. I have gone through Mr. Robert Rapier's criticism, and also updated my blog post with this information !

CyraX said...

You are forgetting something quite important. A long time back GM introduced an electric car. Extremely useful for the American public for short distances. However it was killed presumably by the GOVT policies of encouraging SUV sales by tax rebates (100K USD) on each vehicle. Its the govt that causes the downfall of mature tech, of course lobbying* groups play a huge role in this.

lobbying* - American English for bribing.

Unknown said...

I am surprised you did not mention anything about Bio-diesel being produced from a shrub called Jatropha on a wide scale in India. Our good old APSRTC is using it in the city buses in Hyderabad.