Frog endorses a market response

May 16th, 2008 at 11:56 am by David Farrar

Frog Blog notes that Afghan farmers are converting their farms from poppy growing to wheat due to the low prices for and high prices for food.

Good to see Frog so approving of a market solution to a problem, rather than a regulatory solution.

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25 Responses to “Frog endorses a market response”

  1. Bryan Spondre (554 comments) says:

    Surely wheat is expensive because of government subsidies for biofuels ?

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  2. Fabt3 (28 comments) says:

    And wtach how quickly they will replant when the price goes the other way.
    Either way I am sure Frog would be happy

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  3. roger nome (4,067 comments) says:

    Surely the US government should just start spraying the poppy fields (and all other crops) with a cancer-causing herbicide like it does with cocoa (cocaine) in Colombia (Colombia provides up to 80 percent of all cocaine).

    Oh that’s right – it only does that in areas controlled by leftist gorillas (and leaves the right wing militia’s crops in tact).

    All the Northern Alliance has to do is start putting in place some left-wing policies, then the US govt can start spraying there too.

    http://www.cocaine.org/colombia/drugwar.html

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  4. Brian Smaller (3,915 comments) says:

    Gnome said said “Oh that’s right – it only does that in areas controlled by leftist gorillas”

    That must be because of all the bananas they grow there.

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  5. goodgod (1,363 comments) says:

    “Oh that’s right – it only does that in areas controlled by leftist gorillas…”

    Cripes! Better stay away from Wellington then.

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  6. stephen (4,063 comments) says:

    Thing is, markets are volatile. And with such weak government in Afghanistan, people can act and plant more poppies if the prices change again…

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  7. roger nome (4,067 comments) says:

    ha ha damn – ok ‘guerrillas’.

    No goodgod – I said leftist. As far as I know Rodney identifies the other way :-)

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  8. roger nome (4,067 comments) says:

    “Thing is, markets are volatile. And with such weak government in Afghanistan, people can act and plant more poppies if the prices change again”

    Especially if the heroine money’s going through US banks – thus helping with liquidity, propping up the US dollar :-)

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  9. roger nome (4,067 comments) says:

    i.e. – in 2001 a senate inquirey found that 500 billion to $1 trillion of illegal money was being laundered through the US’s banking system every year – and half of all the world’s dirty money got washed in the US.

    The Scholarly French Journal “Le Monde Diplomatique” printed in its spring 2000 edition:

    Financial crime is first and foremost a market, thriving and structured, driven by supply and demand. Big business complicity and political laissez faire is the only way that large-scale organised crime can launder and recycle the fabulous proceeds of its activities. And the transnationals need the support of governments and the neutrality of the regulatory authorities in order to consolidate their positions …. Politicians are directly involved, and their ability to intervene depends on the backing and the funding that keep them in power. This collusion of interests is an essential part of the world economy ….

    http://books.google.co.nz/books?hl=en&lr=&id=ezyLJrAu1SIC&oi=fnd&pg=PR9&dq=1994+UN+%24440+billion+drug+money+banking+US&ots=gfrOkCUClA&sig=icHyPL48qTPye6IrbUU9ISZl2T4#PPA76,M1

    In other words – the US’s major banks and corporations would lose a significant advantage if they stopped laundering the hundred of billions of dollars in drug money. And consequently the US economy as a whole would suffer.

    So the money would be laundered using other banks in other countries using other currencies, meaning a rapid drop in demand for/value of the US dollar, inflation, an increase in interest rates, a contraction of the money supply, and ultimately slower economic growth.

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  10. Clunking Fist (25 comments) says:

    Nah, Roger, you write as if the MONEY was the crime. It’s the ACTIVITY that MADE the money that is criminal. Not the money.
    And spending (laundering) doesn’t increase liquidity, lending does. So, again, lending, not spending. That’s why this gummint is fucked.

    And don’t get all anti-US on us: US dollars are used because they are trusted not to change value unexpectedly (well, not TOO fast anyways) unlike local currencies, and are widely accepted.

    And that lovely quote from Le Monde? Substitute almost ANY criminal activity and you prove what “right” wingers know: that’s it’s ALWAYS about a thriving market.

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  11. stephen (4,063 comments) says:

    *minor threadjack in progress*

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  12. roger nome (4,067 comments) says:

    So to follow on from the last post – it isn’t in the US’s economic interest to stop these countries growing heroin or cocaine when they’re laundering the massive profits through its banking system. It’s only when they aren’t ‘friends’ of the US that they’ll experience “the war on drugs”. Thus the US troops in Afghanistan continue to do nothing about the heroin boom there.

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  13. Rex Widerstrom (5,129 comments) says:

    Sheesh roger, I’m rarely in agreement with what you write but I’ve never classed you as being a wearer of tinfoil hats. The US government doesn’t spray poppies because they’re grown in the territory of a non-left government??!

    The US government’s response to drugs is ineffective and inconsistent because well before Nancy Reagan decreed it was as simple as “Just Say No” its drug policy been predicated (as has NZ’s, Australia’s and most of the Western world’s) on prohibition and “zero tolerance” (which sounds good, specially at election time and when the Police want more money), filling the jails with people whose dependence has driven them to crime while allowing the cartels to flourish and the price of their product to remain artificially high.

    It’s the same level of thinking that says it’s okay to pay a US farmer a subsidy to not grow certain things or even to leave land empty (other than for environmental purposes), but thinks it morally reprehensible to pay Afghan farmers not to grow poppies.

    To attribute failed drug policy to the VRWC is stretching credulity, roger, even for you.

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  14. roger nome (4,067 comments) says:

    Clunking -

    “you write as if the MONEY was the crime. It’s the ACTIVITY that MADE the money that is criminal.”

    If the criminals can’t use their profits they aren’t very useful. So of course the laundering is an essential part of the criminal operation.

    And increased securities, allow greater lending = greater liquidity.

    “And don’t get all anti-US on us”

    The value of the US dollar is kept artificially high due to it being the world’s defacto-trading currency. The global financial system has been structured this way ever since the post-WW2 Breton Woods agreement. But now because it’s fiat currency instead of gold-backed (as it was when the agreement was sign by the victors of WW2) the federal reserve can print off as much US currency as it likes, and the govt can use its muscle to ensure that demand for the $US stays strong (its involvement in international drug trafficking is but one aspect of this).

    Rex – I think you’ve got the domestic aspect of the ‘war on drugs’ right. But there’s an international aspect as well. Something you don’t seem to have read anything about.

    So please don;t take this as an ‘anti-US” diatribe. Just trying to shed some light is all.

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  15. Rex Widerstrom (5,129 comments) says:

    roger nome opines:

    But there’s an international aspect as well. Something you don’t seem to have read anything about.

    There’s a lot of things I’ve read nothing about, roger, but criminal justice policy isn’t one of them. I’ve even thought about it, rather than parroting endless research undertaken by others. I’ll grant you that my reading focuses more on domestic law making than foreign policy, but I’ve gleaned enough along the way to conclude that the foreign policy responses are as ad hoc, ineffective and short-sighted as the domestic ones because lawmakers simply can’t get past the “ban it and we’ll fix it” model.

    Eric Sterling of Criminal Justice Policy Foundation, for instance, accuses the US foreign policy on drugs of having “racist and imperialist overtones” and takes a very left wing view even of domestic policy claiming, for instance, that:

    The first American antidrug laws—penalizing the smoking of opium in San Francisco (1875)—were enacted to stigmatize Chinese laborers competing with white immigrants for employment and to keep whites from socializing with Chinese.

    And he goes on to list policies, ostensibly aimed at drugs, which he claims were in fact little more than thinly veiled racism. Aside from this somewhat hyperbolic view, he does make some good points in his paper, such as that making it illegal for physicians to prescribe narcotics to treat narcotic addiction is probably the single most counterproductive strategy possible.

    But even someone as opposed to US foreign policy initiatives on drugs as Sterling concludes that:

    …military force and violence are deployed against peasant farmers who grow opium, coca, and cannabis to support their families… [my emphasis]

    And on that (as well as on many of the solutions he recommends) I agree with him, both as to the fact that it occurs and the ineffectiveness of it as a strategy when compared with a market-driven response such as paying opium and coca growers to produce something less harmful (such as biofuels – swapping one inedible crop for another rather than paying other farmers to uproot food crops. But that’s too much like common sense, I guess).

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  16. roger nome (4,067 comments) says:

    Rex:

    The US’s support for foreign narco-growers and traffickers is contingent upon their doing the US’s bidding. So of course it doesn’t support all such people.

    According to professor Alfred McCoy – in 1975 none of the heroin in the US came from Pakistan, but by 1980 (several years after the US/CIA went into the country) 40% of the US’s heroin supply came from Pakistan. The US at the time was basing its Afghanistan operations in Pakistan. They armed Islamic fundamentalist warlords to fight the Soviet-friendly Afghani regime -thus sucking the Soviets into the Afghanistan trap. In return the Pakistani war/druglords gained access to the US market.

    http://books.google.co.nz/books?hl=en&lr=&id=ezyLJrAu1SIC&oi=fnd&pg=PR9&dq=1994+UN+%24440+billion+drug+money+banking+US&ots=gfrOkCUClA&sig=icHyPL48qTPye6IrbUU9ISZl2T4#PPA83,M1

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  17. labrator (1,691 comments) says:

    Low prices for heroin would indicate either a drop in demand or an increase in supply. Does anybody know which? I can’t see the demand dropping suddenly (unless prohibition works for the first time in history) so has Pakistan, Iraq or Iran got in on the action?

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  18. Steve Withers (98 comments) says:

    As far as I know, Greens have no problems with markets that function properly. Who would? What Greens don’t do well is pretend a dysfunctional market is actually working. Labour and National are experts in that area. Telecoms anyone? ;-)

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  19. roger nome (4,067 comments) says:

    labrator:

    Could be that supply in Afganistan is stil increasing.

    According to the United Nations Office on Drugs and Crime (UNODC), opium production in Afghanistan in 2003 is estimated at 3,600 tons, with an estimated area under cultivation of the order of 80,000 hectares. (UNODC at http://www.unodc.org/unodc/index.html ).An even larger bumper harvest is predicted for 2004.

    The State Department suggests that up to 120 000 hectares were under cultivation in 2004. (Congressional Hearing, op cit):

    “We could be on a path for a significant surge. Some observers indicate perhaps as much as 50 percent to 100 percent growth in the 2004 crop over the already troubling figures from last year.”(Ibid)

    http://www.globalresearch.ca/articles/CHO404A.html

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  20. toad (3,654 comments) says:

    Greens are very happy with markets when they are genuine markets with genuine competition.

    When they are monopolies, duopolies, or cartels, Greens have a problem, because that allows the (unitary) market to set whatever profit levels and therefore exploitation of consumers they like – eg Fonterra, Telecom, the Woolworths/Foodstuffs duopoly and the oil companies.

    No other player has a genuine ability to compete with any of them in the market, so they can price goods and services at almost whatever they choose – to the expense of the consumer.

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  21. helmet (807 comments) says:

    Nome- heroines and gorillas? You watching king kong and trying to blog at the same time?

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  22. roger nome (4,067 comments) says:

    But where’s the nasty barb? Who are you and what have you done with helmet!? :-)

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  23. Patrick Starr (3,675 comments) says:

    “Surely the US government should just start spraying the poppy fields (and all other crops) with a cancer-causing herbicide like it does with cocoa (cocaine) in Colombia (Colombia provides up to 80 percent of all cocaine)”

    Roger – As I understand it that isn’t ‘poisoning’- that is the ‘terminator gene’

    Are you suggesting a GM as a solution???

    Good for you, – we’ll change you yet !

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  24. Clunking Fist (25 comments) says:

    roger nome @ May 16th, 2008 at 3:16 pm, says:

    “If the criminals can’t use their profits they aren’t very useful. So of course the laundering is an essential part of the criminal operation. And increased securities, allow greater lending = greater liquidity.”

    I think you’ll find that laundering is such a teeny tiny part of the banking and global currency trading that it doesn’t add much liquidity.. Are you suggesting doing away with money? The banking system? “Great, so you want some crack? Fine, just let me sleep with your wife” type bartering may be the alternative, LOL! Remember, internationally, laundering IS being targeted. This is great, because it aims at those at the top, rather than, as Rex points out, being a policy setting that ends up targeting only the bottom ranks.

    “The value of the US dollar is kept artificially high due to it being the world’s defacto-trading currency.”

    Which would make sense only if the value of the dollar were high…but it has devalued against most major currencies in recent years (even the kiwi!). The reason the value of the US$ (and the yen) seems high against fundamentals is the shear size of the US (and Japanese) economy. This will likely abate as other economies grow and (more importantly) westernise, so that , on balance, you can trust and put some money into that economy (buying shares, bonds, etc). Money from sources like your retirement savings: State Sector Pension, Sullen Fund, Kiwisaver, etc, etc…

    THAT’s what REALLY provides liquidity in financial markets.

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  25. Clunking Fist (25 comments) says:

    PS maybe economics should become COMPULSORY.

    That way we won’t get so many silly comments about imperfect markets. And it would help people understand the differences between NATURAL monopoloies and any other monopolies!

    :^)

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