Of States and Famine

Recently by Bill Bonner: The Role of US Debt in the CurrentRevolution

We never completed our reflections on why you need a refuge…a place to retreat…a family stronghold.

As society becomes more complex, each man depends more on his neighbors…and on people he has never met on the other side of the world. The Arab demonstrators in Tripoli, for example, have to eat. Their bread may have been baked by a local bakery, but the wheat may have come from Australia, France or Canada. And the oven in which it was baked may have been assembled in Germany or Ireland…with parts imported from China or India.

As each person becomes more specialized, the efficiency of the system increases. A man who focuses on a single thing is more likely to do it better than one who does several things. He is able to develop tools and tricks that help him be more productive, thereby defeating the generalist in market competition. Everyone gets a little richer.

But specialization makes the world more vulnerable to systemic risk. Small problems become much bigger ones. Local famines, for example, have the potential to become global famines.

Famines in Western Europe disappeared with the fall of Napoleon Bonaparte and the rise of better transportation systems. European wars closed borders and choked trade. Peace opened them up again. Then, canals and trains made it possible to move grain from one area to the next. The last major famine in Western Europe was in the 18th century. Since then, famines in Europe have been the result of politics.

The great famine in Ireland, for example, was triggered by a blight on potato crops. But had their land not been taken from them, and had they been allowed to buy and sell freely, rather than only with Britain on terms it set, the Irish would have fared much better. Thanks to the curious set of political circumstances in the mid-19th century, Ireland remained a food exporter, even while a million Irish peasants died of hunger. Likewise, in WWII, the Netherlands suffered 30,000 deaths in the “Hongerwinter” because of punishing restrictions imposed by the occupying German troops.

Since the beginning of the 20th century, many people have gone to bed hungry. Tens of millions have died of starvation. But almost all the deaths can be traced to the murderous intentions or incompetent administration of governments. In this regard, as in many others, the Soviet Union and China were world leaders. Goofy theories and bad policies reduced the amount of food available. Then, communist governments used food shortages as a weapon against their internal enemies.

Obviously, the first protection against famine is wealth. There is almost always food available – at some price. Generally, but not always, it goes to the highest bidder. So, having some money is in itself a measure of safety. Always has been.

But people with wealth can also be popular scapegoats when times get tough. The easy money policies of the Fed during the last two decades have made America’s rich richer than ever, while the incomes and wealth of 95% of the population has barely risen at all. If food supplies were short, it wouldn’t be at all surprising if the mobs turned against “the rich,” intentionally withholding food from them.

Hunger was largely responsible for the French Revolution. Mobs gathered in front the Tuileries Palace, protesting the high cost of food. Inflation and bad weather had driven up the price of a loaf of bread to almost an entire day’s wages by an ordinary laborer.

Marie Antoinette, wife of Louis 16th, is said to have asked:

“What are they complaining about?”

“They have no bread,” came the answer.

“Well, let them eat cake,” was her witty, but ultimately fatal, reply.

She lost her head in the Revolution. So did thousands of others.

Mobs need scapegoats. And hungry mobs are not particularly careful about whom they choose.

Reprinted with permission from The Daily Reckoning.

Bill Bonner is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and The New Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007). Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning.

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