Friday, December 3, 2010

Humans, Environment & Investment

I have taken several minute steps in the last few posts to put humans in proper context, and to show how the many invisible layers have been built up over the millennia as the human specie struggle for survival in this world.

I must say what a woeful lot we humans are! It is the madness of crowds, the whole colossal folk dashing here and there migrating and spread like cancer in search of its own preservation but only find itself painted in the corner. That paint is the deforested environment which becomes uninhabitable to all but sand and a few lizards.

The race out of the garden of eden into the big wide and wild world has set the rate of growth of the human population against (a) the rate of growth of agricultural output and (b) the rate of decline of the forest and wild life. Thomas Malthus was right. The size of human population on earth will be limited by agricultural output ultimately. That limit may be a long stretch away. In the meantime, there is a dynamic interaction between the two: population surge following new discovery of food production which encourages the population to overshoot food supply, adjusted by hunger and disease and famine.

Probably with such a history embedded in our genes, we find ourselves unwittingly living in perpetual fear of inadequate food. This great search for certainty in an uncertain world creates the world and society as we know it to be today. The incessant urge to save and investment in the future that is already here.

In the world of goods, to save is to set aside some portion of the current output for future consumption such as by salting or sugaring or fermentation. That preserved food can actually be eaten tomorrow when it become rainy. There is no waste. When there is overproduction in the current period, and when the preserved food is in huge surplus, the most logical response is to take a break from work, do some maintenance work, and spend the leisure drinking and dancing and telling stories - activities which are collectively called "culture." There is a constant adjustment between output and consumption and saving and investment.

If food is taken out of the forest, the most logical step is to protect and preserve the forest so that it can continue to sustain the community. But we know that a finite forest can only support a finite community because hunger and war break out. At this limit, Malthus is spot on. This means that, at the limit, there is so much preservation of the forest can do for humans. In the meantime, any limit that is felt is determined by technology and human knowledge of how to extract more from less. This can be seen as a fact, and we simply just have to accept it. But even so, the community must protect the food source from selfish greedy individuals who may have no qualms about destroy the food source thinking that he or she can stored it off somewhere purely for his or her own consumption. In nature, any other method of storage apart from leaving nature alone is foolhardy.

This problem of the short-seeing long-sighted selfish person is compounded in a world of tokens (paper or commodity money) where its special quality of not decaying physically (because it's a computer number or a piece of metal) may create the illusion that accumulation of pile of metal or paper or a larger number on a computer is the way to go into the future for generations. All things lie in the present, this accumulation of uneatable assets is being balanced against the liability of persistent destruction of the environment (by chopping down trees or digging up stuff or polluting). This is being gleefully done today by warlords with the collusion of multinational firms and global finance.

At the same time, the overproduction of goods (unsold inventory) or services (unemployed workers) is being happily ignored and misinterpreted - with the later overproduction (unemployment) probably from good agriculture or bad education is being used as a basis for further overproduction (of goods) which floods the world both in terms of huge quantity, low price and bad quality. And central banks continue to churn out the tokens.

In this world of mindless pursuit of economic growth, we are drowned in a sea of useless constructs. The rich becomes very rich and the poor becomes very poor, all within the economic system that we have immersed ourselves. We have to get out.


walla said...

The central economic challenge of man seems to be how to beat the law of diminishing returns such that those who succeed in doing so will become rich but those who fail to do will become relatively poor.

Relatively speaking because to fight that law the rich will have to invest to enable the poor to be more productive which will in turn increase their wealth. Like an industrial engine pulling the carriages of a train.

However in the very process of doing so, the rich will become so engrossed in increasing their wealth by investments that they will neglect to reproduce themselves more. Especially when they see how the poor live.

Which seems to imply their kind while increasing in economic productivity by proxy will be decreasing in numerical reproductivity by social determination.

From a global viewpoint, that should imply the per capita global economic productivity will decline, for if the rich become less in numbers, their total investment will start declining one day.

The question then is whether they are investing fast enough today in order to enable the poor to become like them on time to arrest the decline. A question that presumes they have a coin of selflessness in them. Which reminds us of one of those 'give and thou shalt receive' sayings. However some will say capitalism is not very religious; others may say capitalism succeeds because it is not very selfless. On the other hand, if the rich become less in numbers, they may lose some of their impetus to beat that law because they will say they have more than enough for themselves so why park money in the next lehman brothers or bear stearns?

Furthermore, the poor are poor because too many of them have been licked by the law of diminishing returns. While the next mouth might create a new pair of hands, those hands have a gestation period of economic dependence which drags the locomotive from moving forward until such time they can be productive on their own. And that piece of land will have to be shared between more so that productivity has to rise which requires investments in more science, technology, training and marketing, all of which require money they don't have.

It is therefore an irksome task to try and think about the two malthusian equilibria interplaying with each other. One for the rich, and the other for the poor.

At pains of being labeled jingoistic, the interplay of two different equilibria of three factors, namely birth rate, death rate, and living standards, will not yield a simple matrix. Especially when interest and exchange rates can thin margins and jeopardize loans, particularly applied to volatile commodity markets and low-cut high-volume trades that form the lifelines of the relatively poor.

Meanwhile the weather has changed a lot. Winter comes earlier and lasts longer these days, and blizzards stop agriculture completely. So too droughts and downpours in magnitude and lassitude too big to ignore. It has been mentioned that the global agricultural output must double within the next forty years to sustain the natural growth of the human race. Perhaps the advanced nations have seen the futility of such a situation which might well explain why they persist in conducting war-games at the front doors of others much poorer in order to egg on a war to decimate those poor populations so that there will be temporary reprieve from this year's malthusian trap with the attendant benefit to them of priming their economies to help raise employment. Such a reassuring global concern but to be procured at the cost of blood and destruction of others.

walla said...


Despite such a sad prospect, the mind can turn to other more positives. For instance, new hybrids of edibles. Perhaps the issue of genetically modified foods and husbandry can be revisited with calmer consideration, nudged by the prospect of mass starvation which is already thinning international food aid budgets, as well as the cost of agrochemicals which has been increasing too much too fast, eating into the incomes of poor nations.

And there is plenty of desert around. But there are also new discoveries of how to conquer it with modern and ancient methods of irrigation and desert farming. Thus Africa beckons as the next food basket of the world.

The ocean is also quite big, covering three-quarters of this planet's surface. There hasn't been enough investment in deep undersea fish-farming and the urgent need to grow more plankton, itself challenged by a carbonizing atmosphere.

Indeed there are other challenges and prospects as well. Rapid urbanization has created the challenge of finding people to work farms. Mechanization is the answer but that will cost money and involve know-how, both outside the domain of the poor.

The growth of megacities has also created the challenge of logistics. How to economically transport raw food from dispersed areas to outskirt plants to be processed into preservable food stock for highly dense areas.

There have been many designs for vertical farming. But not enough study to answer whether it will be economically viable. Imagine high-rises spiraling into the sky with level after level of climatically controlled internal farms. The greening of a city while providing food less transport and distribution costs.

Closer home, our domestic housing designs remain uninspired. Potatoes, tomatoes, chilies and peas can be planted on more suitably designed terrace link roofs which in addition will reduce the internal heat of those houses whose ceilings are perpetual heat traps raising the power bills ill-afforded by too many households these days.

Lastly, the malthusian factors are also affected by healthcare and education. Because the richer countries can afford to invest more in research, they produce the better medicine to reduce death rates. In the very process, the cost of their healthcare rises to astronomic levels. A lot of their ailments come from eating too much and wasting even more. Less for them will make them healthier which will remove the impulse of pharmaceutical companies from pegging the prices of medicines too high, which can then be afforded by the poorer countries. But together with the donation from richer countries of excess food to the poorer countries, that will reduce the mortality of the poor and increase their population which will diminish the returns of their effort even more. So if the rich eat less, the poor will have even less to eat.

So much for logic. It thus seems that the only way out for the poor is to produce less. Since reproductive inclination is driven by dopamine concentration in the human brain but neutering is out of the question, the poor must be educated to use the appropriate prophylactic but looking at trends, legislation may be required. However since politicians only want to be popular, we can finally and definitively conclude that greed and craving will lead to the final destruction of the human species.

According to Thomas Malthus's new economic model. And if you think that's sinister, wait until you read the other NEM.

The end (;P)