The Vulgar Economist

I write about labor, economics and other stuff that annoys me.

[gekkyo]

花の詳細なサイズを設計図にしたアート。かっけー。 (via Macoto Murayama)

[vulgareconomist]

I love how this artist blends technical precision, symmetry and realism while simultaneously enhancing his subject's individual beauty.  His work seems to express the subtle but very real connection between art and engineering.  

[vulgareconomist]

After watching Super 8 for the first time recently (which was just a fantastic movie), I couldn't keep this music out of my head.  It is just a gorgeous composition. (yes I know it's a soundtrack!) Michael Giacchino (

I do not own the original material. All credit goes to each artist and their members for each song that they performed, as well as Super 8 producers. Sources: Wikipedia

[vulgareconomist]

Volkswagen, the U.A.W. and the south: Why unionization at Chattanooga is more important than you realize.

According to a September 6 2013 article in the New York Times, Volkswagen is in early stage talks with the United Auto Workers [U.A.W.] regarding unionizing its plant near Chattanooga Tennessee.  The German automaker began quiet talks with the U.A.W. in an attempt to install a German-style system of worker representation in its American plant, prompting immediate and explicit condemnation from the state’s Republican leadership, including Senators Bob Corker and Lamar Alexander.  Holman Jenkins Jr., a columnist for the Wall Street Journal, tried to downplay the significance of this move in a recent op-ed stating, “Don’t mistake a fight over a Volkswagen factory in Tennessee with the great episodes of labor history. The Flint-Sit-Down Strike of 1936 it’s not”. 

 Granted, unionizing Volkswagen’s Tennessee plant is unlikely to be remembered as the defining, resurgent moment for labor in the 21st century but the mere idea, however abstract, that unionization is gaining traction there is very significant for two reasons: first, the U.A.W. has made virtually zero progress organizing foreign-owned plants in Southern right-to-work states despite thirty years of trying, that is perhaps until now.  Second, Volkswagen’s factory is one of the lowest paying auto plants in the country, paying its workers roughly half the compensation of normal U.A.W. and non-union workers across the United States.  

 If the U.A.W. succeeds –which is far from guaranteed- the Volkswagen facility would be the first major auto plant to be successfully organized in the south in more than three decades of trying.  Establishing a beachhead in the south could potentially give the U.A.W. inroads into the other German auto companies - Mercedes and BMW –operating manufacturing facilities in Alabama and South Carolina.  That alone makes the story unfolding at Chattanooga noteworthy but based on the research I’ve already done, I think the stakes are much higher here for the U.A.W. than most realize. 

 Most accounts fail to note that at $14.50 an hour, wages at Volkswagen undercut standard compensation at peer facilities - union and non-union alike - by 50%, making workers at Chattanooga the lowest paid in the entire country and from a bargaining perspective, an important if ominous bellwether of future wage growth. 

 The origin and broader significance of this extraordinarily low wage however, is more complex – and alarming – than it may first appear, as Volkswagen modeled its compensation not on the standard wages for U.A.W. and non-union workers, but on so-called “entry-level” U.A.W. wages, a new category of extremely low paid workers born out of a ruinous set of concessions on compensation and health care that the union agreed to roughly ten months before the financial meltdown.  In other words, Volkswagen shrewdly- if ruthlessly -capitalized on the fallout of the financial meltdown and the bankruptcy of General Motors to secure itself the lowest cost automotive workforce in a generation. 

 The U.A.W.’s contract that year rolled back workers’ compensation and retirement benefits in exchange for more long-term stability for retiree health care and for financially healthier auto companies.  The union made these concessions however, with the explicit condition that they were temporary and would be re-negotiated in 2011 after the automakers returned to profitability.  The worst fear of the U.A.W. was that these concessions would somehow become a permanent and debilitating feature of future negotiations and a source of long-term wage depression across the industry.  That, unfortunately, is exactly what happened and Volkswagen was the first company to take advantage of it.  

 The 2007 contract segmented hiring, wages, benefits and promotions between continuing and newly hired workers.  While regular, continuing workers typically earn $28 dollars an hour ($50 dollars in total compensation) “entry-level” workers start at $14.78 an hour, have their raises capped at $18.28 an hour and are barred from being promoted until the next contract is implemented in 2015.  As a point of comparison, new workers are earning appreciably less than General Motors’ janitorial staff did twenty-four years ago, who made $30 dollars an hour with better benefits (adjusted for inflation of course). 

The financial meltdown of 2008, General Motors’ bankruptcy restructuring in 2008 and 2009 respectively extended the full compliment of those concessions through 2015 and to top it all off, when Volkswagen brought Chattanooga online, it offered even less in wages to its workers than that, fueling the rather disquietous notion that the 2007 contract had become a permanent wage floor for the 2015 negotiations. 

The possibility of organizing Chattanooga is more than just a potential union foothold in the south, more than a victory for unions in a series of setbacks, it's a glimmer of hope that 2007 will not permanently define compensation for a core component of the middle class.   

[vulgareconomist]

How the Obama administration & the Jobs Council let big finance off the hook

President Obama, in early 2011, assembled a non-partisan commission to advise on the best ways to produce middle class jobs and ensure the long-term global competitiveness. 

Too bad they missed the boat. 

The President’s Council on Jobs and Competitiveness,or the “Jobs Council”, represented a cross-section of national economic interests, including major American corporations, labor unions and leading academic economists. 

But the Council’s recommendations on regulatory reform were shockingly flaccid.  Their work partakes of a larger problem in the evolving literature on the economic recovery—the dubious under-emphasis on financial regulatory reform.  Their position is, in essence, that the American economy can be bolstered simply by aiding labor and investing in education and infrastructure, but without any accompanying reform of the financial sector.  They make no room for the argument that financial reform may be more important. 

With this limited focus, the Council makes a series of anodyne recommendations—for better data on educational performance and more investment in science, technology, engineering and math education (STEM) at all levels; for energy market reform; and for the benefits of advanced manufacturing being sourced here in the U.S..  These recommendations are obvious and non-controversial—and for that reason, aren’t the subject of any serious debate among economists.

The Council’s final recommendation is perhaps the most interesting.  It cites the need for robust laws and regulations that protect Americans from excessive risk, various negative market externalities and asymmetric information distortions.  After the greatest financial meltdown since the Great Depression, it’s dumbfounding that regulatory reform isn’t higher on the Council’s list of priorities.  Many economists—present company included—posit that financial regulation is perhaps the most important reform for securing the long-term prosperity of the middle class.  Without it, unchecked financialization introduces an unacceptable level of risk and uncertainty into the real economy.  Let me illustrate.

Alan Blinder, former Vice Chair of the Federal Reserve, sums up the danger of unregulated finance in three words: opacity, complexity and leverage.  Hidden and unregulated investment operations, complex and intentionally convoluted financial instruments and leveraged balance sheets allowed companies like Goldman Sachs and Bear Stearns to concentrate an unprecedented amount of economic power that brought the global economy to edge of another Great Depression, according to Blinder. 

A concrete example is drawn from my own research:  General Motors.  When GM combined its unregulated, leveraged financial operations with its auto manufacturing business, it created a freakish, new type of company—one so large, complicated and unstable (leverage ratio was 72-to-1), no union, market force, or government institution was capable of effectively checking its raw, economic power.  They financed over $1 trillion dollars in mortgages between 2000 and 2008, assets that were subsequently plugged into a myriad of derivative agreements, with virtually no assets in reserve to back it up.   Put differently, no wage concessions or raises, no amount of increasing sales or changes in any other labor market factor would have foreclosed General Motors’ inevitable collapse.  This reality has forced re-consideration of the sustainability of these and other proposed labor market reforms given the inherent risks, instability and market distortions inherent to financialization. 

It may be correct, as stated by Richard Freeman, that no matter what our education policies are, no matter what infrastructure we build or the skills our workers acquire, there will be no meaningful middle-class economy security unless we institute robust barriers between the financial and real economies. 

The Jobs Council did splendid work in their report, but Freeman is right that the “Road Map to Renewal” really begins and ends with finance. 

[generalelectric]

A GE MS5002E Gas Turbine, seemingly halfway between our world and an illustrated space.

[vulgareconomist]

I don't know why, but I kept returning to this song this week. 

[vulgareconomist]

Why conservatives and liberals may be wrong about Detroit

On July 18, 2013 the city of Detroit filed for Chapter 9 bankruptcy, becoming the largest American city ever to do so.  Joseph Stiglitz, the 2001 Nobel laureate, argues that the narrative of Detroit’s demise, though multi-faceted and complex, was the logical end-result of decades of social, political and economic policies that have widened inequality in America.  Drawing directly from Thomas Sugrue’s work, Stiglitz caution readers against thinking Detroit’s slow-motion collapse began with the Great Recession, the rise of global auto competition in the 80s or the stagflation of the 70s.  Detroit's fall rather, began sixty years ago and was defined primarily by a costly and elaborate program of industrial emigration, union-busting, de jure and de facto racial segregation and the regional atomizing of employment, wealth and political influence. 

 Midwestern automakers took advantage of post-war highway construction and advances in industrial automation to scout Greenfield production sites, hoping new suburban and rural operations would weaken industrial unions in the north and open new markets.  Not just any non-urban location would do however as auto companies had compiled quite an intricate list of prerequisites that new sites needed to meet.  Potential locales had to offer better market access, proper infrastructure, have no history of organized labor or heavy industry, a business friendly local government, robust tax incentives and a workforce that was young, educated and appropriately desperate.  While work, wealth and political influence dispersed away from urban centers, racial segregation kept communities of color anchored to a city with a collapsing tax base and fewer and fewer opportunities.

 It didn’t stop there however, as the meticulous process of regional industrial emigration served as a kind of technical blueprint for the eventual global turn in the 80s and 90s as manufacturers used similar parameters to search for global production sites.  Off shoring, while not determinant, dealt a swift blow to the rust belt as technologically sophisticated labor markets in the global south packed a one-two punch of high productivity and extraordinarily low production costs.

 Finally, the financial meltdown in 2008 delivered a decisive blow to Detroit’s already winnowed tax-base.  The city now finds itself at the center of a quandary, one with national implications, over how to restructure its obligations to workers’ pensions and the city’s $300 million dollars in outstanding bonds. The obvious subtext to these negotiations however, is the financialization of municipal funding – or the fusing of global capital markets with city financing - and the naked attempt by banks to preserve the value of their assets at the expense of worker pensions and health care.

 I paused however, when Stiglitz’s argument touched on manufacturing work.  He appears to suggest that declining manufacturing related employment – in Detroit and elsewhere – is part of America’s inescapable transition away from heavy industry.  It is the role of government, in his estimation, to ease this structural change and re-train people for jobs in the new markets, not to stop it.  This is rich considering Stiglitz spends most of his article documenting how Detroit was racked by decades of racial segregation, industrial emigration, distorted trade policies and of reckless financialization.  Yet, Stiglitz's tone changes when he touches on manufacturing and chalks up the loss of American manufacturing to unavoidable “structural changes”. 

 It annoys the hell out of me when I read economists sweep aside the value of manufacturing work because I think if they understood, or took the time to appreciate, all that the goes into it, they’d realize that a city like Detroit still has a lot to offer the broader economy, in particular, a skilled, high tech workforce.  If we understand the technical definition of skill to be an implicit and individually understood combination of theoretical knowledge, technique and practical experience then working on cars – even at the most elementary of levels – is about using an invaluable set of capabilities that have broad industrial applicability beyond manufacturing vehicles. 

It should be noted here that I am not from Detroit. I was born in California and spent my formative years in a medium sized, semi- rural town in the Central Valley.  My family lived on a nice sized property with almond, plum, peach, cherry, walnut trees and where two of our nearest neighbors were an almond orchard and an empty field.  Growing up in a town like that, without much for young people to do, learning how to rebuild and repair classic American muscle cars on a Saturday afternoon was all too common. 

I remember in the fall of 1997, I decided to help my friend tune up his Tang-orange colored 1974 Volkswagen Beetle; a car with an air-cooled engine that is as mechanically simple and sturdy as cars come.  One of the drawbacks of the Super beetle however, is that the intake and exhaust valves on each cylinder head need to be adjusted every few thousand miles, a responsibility that I reluctantly accepted.  After consulting my Chilton manual and readying my feeler gauge with the proper width, my friend Jeff, a rather under-appreciated mechanical genius, told me that I'd know I gapped a valve properly when it “bites” the feeler gauge.  I double-checked the manual gave him a confident nod knowing that I had absolutely no idea what he meant by that.  He started the car and within seconds of hearing the engine shut it off again, knowing by sound alone that I messed up.  I learned that afternoon, that much of automotive work – even relatively simple procedures – are processes that are as much tactile as they are technical.

 The engineering skill necessary to design and assemble the powertrain of a modern car is a staggering feat of industrial capability, the value of which seems to be lost on most economists. Whether it’s a supercharged Corvette engine or four-cylinder commuter, engineers are tasked with a near impossible set of competing demands: design a system with hundreds of moving parts that work in seamless unison under constant duress, make it reliable enough to circumnavigate the globe four times before needing anything more than an oil change, shoehorn it into a tiny engine compartment and then make it fuel efficient and affordable. This requires that every single aluminum, titanium and steel alloy engine component be laser machined to exact specifications – sometimes down to the micron – before assembly.  The level of quality in design, production and assembly leaves no room for error. 

The most difficult portion of the manufacturing process, to the un-initiated, would appear done at this point.  Workers need only bolt the computer-machined pieces together into a finished product.  The reality however, is that the tedium has only just begun.  Autoworkers on the line have the enormous responsibility of assembling a massive and expensive metal jigsaw puzzle in synchronicity with workers up and downstream under constant time pressure and with only minutes of spare parts available. Workers assemble each finely machined component in a meticulously specific order, using specific procedures, using specific tools to exact specifications and tolerances. Workers then repeat this meticulous process hundreds of times a day without error.

Adding to the pressure, modern automotive operations operate skeletally, with as little available inventory possible, tightly coordinating their line operations with nearby suppliers to replenish inventories on-demand.  So-called “lean” operations save money on expensive component re-designs because they, in part, rely on assembly workers to quickly identify and fix errors. The unfortunate side effect for workers on the line is that, without spare parts, they don’t have anything to fall back on if they make a mistake or if any components are defective, forcing them to execute their work correctly the first time, every time.

The less obvious difficulty this presents however, is that assembly workers are not simply bolting component A to component B, they are responsible for detecting design flaws – which in a complex mechanical system is nearly impossible if you don’t understand how it fits with the whole – and fixing errors without interrupting the line.  The extreme technical demands of automotive manufacturing means it is not enough for someone to read a book and know how a camshaft fits onto the engine block; if someone is going to identify and fix errors as they occur, they have to know how it sounds and how it feels when its installed and working correctly.  That level of understanding cannot be taught; it must be experienced.  “Skill” in this context means that autoworkers fuse technical mastery with an implicit “feel”, or experiential understanding for their tools and materials and it is from that unique combination that they generate quality, productivity and constant innovation.

 Assembling an aluminum jigsaw puzzle with few spare inventories, fixing errors on the fly, executing under constant time pressure and to exact specifications is not a skill to be dismissed so cavalierly. When students do similar work at M.I.T., economists call it “engineering” but when someone with only a high school education does it, they call it “obsolete”.  Detroit still has a rich and dense core of people with engineering skills –generations deep in some families - that have broad industrial application and use. You want to talk about innovation - it's going to emerge from that. 

[103sp]

[vulgareconomist]

This artist’s work is just friggin’ genius.  The artist (Daniel Martin Diaz I think) combines an anatomical and scientific style of illustration with that of an engineering blueprint that dissects and labels the body in a cold and detached manner.  But simultaneously he puts an extraordinary amount of effort into texturing and contouring the body’s fibrous tissue and nerve endings that transforms the body’s exposure and frailty into a thing of beauty. 

[vulgareconomist]

America, Heal Thyself.

Having recently had the pleasure of paying my health care premium, I decided it was time for me to write about a topic that has angered me for quite some time: healthcare costs.  It angered me that I never understood why our system was so complex and convoluted and it angered me even more that I never sat down to find out why until now.  I thought I had a broad understanding of the issues, that healthcare in the United States is more costly because of the number of people involved, our aging demographics, our high stress levels, poor lifestyle choices and the over utilization of advanced medical equipment.  Finally, I assumed that there was at least some vague correlation between the high costs we pay and the quality of the care we receive.  It turns out that I was wrong on many, many levels. 

 According to a 2011 report from the Organization of Economic Cooperation and Development (OECD), the United States outspends all other high-income nations, both in absolute terms and per capita, by obscene margins.  As a percentage of all economic activity, America spends 18% of its GDP, or the total value of all goods and services produced annually, on health care.  The Netherlands sits comfortably in the number two position on the list and spends 12% of its GDP, or 30% less than the United States, on its healthcare.  The median among OECD countries is 9.5% of GDP. 

 Just to put American spending into a more graspable form, if American health care were its own country in 2012, at $2.8 trillion dollars it would have been the 5th largest economy in the world, slightly ahead of France and behind Germany.  Since 1960, American health care costs have skyrocketed 818%, making it the largest and fastest growing sector of the economy and if current trajectory holds, health care will consume 30% of our GDP within the next three decades.  Much of this increase occurred relatively recently, with costs rising 131% in the decade between 1999 and 2009, exponentially outpacing both inflation and earnings growth over the same time period.  Put simply, the United States devotes about twice the national resources to its healthcare industry than most high-income countries.

 Examining health care expenditures from a per capita basis paints an equally bleak picture.  The United States spends an average of $8,000 dollars per person a year, while the statistical middle for other high-income nations is $3,200 dollars a year. Data from 2009 demonstrates that in comparison, the average expenditures of the next five highest spending countries (Switzerland, Canada, Germany, France and Japan) average out to less than $4,000 dollars a year per person.  America spends 45% more per capita on health care every year than the country in second place, Norway. 

 In every statistical category, America outspends other high-income nations by a silly margin. The United States, in 2011, spent 247% more on administrative costs, 238% more on ambulatory care, 163% more on hospital care and 152% more on pharmaceuticals per capita than the average high-income nation.  In other words, I can’t dismiss cost comparisons between the U.S. and Canada (or France, Germany, Japan ect.) on the grounds that they are much smaller countries.  The problem for the United States therefore, is both one of scale and of relative proportion.

 The most common defense you will hear from Americans, myself included is that we may spend outrageous amounts of money on our health care but at least we get better, higher quality care than the rest of the world.  Most objective measures demonstrate however, that greater U.S. healthcare expenditures are not associated with better or higher quality care.  Baseline measurements highlight an interesting bifurcation in that American healthcare ranks among the best in the world in the treatment of cancer and other “acute” diseases while consistently ranking at the bottom among high-income nations in preventative care, infant mortality, life expectancy and rates of medical “avoidable mortality”.   

 It’s relatively easy to see the titan inefficiencies of United States healthcare as Americans spend more and get less than all other high-income countries.  It’s more difficult however, to explain exactly why this is so.  The literature (as far as I’ve read so far) offers no clear explanations on why costs are so high but there is enough evidence to eliminate some common explanations.  

 An oft-cited 2011 study from the Commonwealth Fund contends that rising costs cannot be attributed to America’s aging demographics, lifestyle, population or greater rates of physician and hospital utilization.  The United States has a below average share of elderly population relative to other OECD countries (13% to 16%).  Second, in terms of lifestyles, Americans do tend to be overweight but these costs are statistically offset by the fact that Americans have the lowest rates of smoking and tobacco use in the OECD.  Third, Americans go to the doctor less often and when they’re hospitalized they stay fewer days. 

  In other words, Americans are overweight but they don’t smoke.  The elderly population in the United States isn’t extraordinarily large relative to other countries and this demographic has grown relatively slowly.  Finally, Americans visit the doctor less frequently and use fewer medical services than people in other high-income countries.

 The caveat to this however, is that when Americans do get care, it is always much more expensive.  According to June 2008 report from the American Medical Association, “It is more costly care, rather than high volume, that accounts for higher expenditures in the United States”.  The report finds that Americans may not use their health insurance often but when they do, their procedures are more elaborate and involve newer and more capital intensive forms of medical technology that push up the costs of inpatient and outpatient care. Part of the problem is that America’s use of a fee-for-service system incentivizes this kind of behavior, including the use of tests that are expensive and unnecessary.  It is these factors, the over utilization of technology and the providing of superfluous care, that account for most of the cost divergence we noted earlier. 

I might be more willing to give quarter to this type of argument if there was any semblance of order in the prices that hospitals charge.  As it turns out, there is not. In May of this year, the Obama administration opened a federal database containing lists of hospital procedures and pricing schedules to the public.  This database is a tangled web of opaque and unexplained disparities in the prices hospitals charge for the same procedure often in the same locales.  According to the Huffington Post article that was among the first to report on it, the price of joint replacement surgery in the New York City metro area as one example can vary by as much as $90,000 between hospitals that are less than 30 miles apart.   According to the Post, treatments for Chronic Obstructed Pulmonary Disease (COPD) come with a price tag of nearly $100,000 in New Jersey while the same treatment costs less than $8,000 dollars across the river in the Bronx.  I have a hard time believing technology is what’s primarily driving this difference. 

The database is vast and is searchable by city and zip code but be warned, it is unwieldy.  The variety of pricing schedules between different hospitals, even with a cursory glance, is staggering and without an apparent pattern, seems fundamentally detached from reasonable market fundamentals.  Hospitals have countered that they “cost shift” to make up for shortfalls in Medicare reimbursements and to keep less profitable areas of their operations solvent.  But those arguments will fall on deaf ears once people get a look at the scale of these disparities for themselves. 

One of the real problems I noted during this research is that market for healthcare in the United States operates with a disturbing level of industrial opacity that makes reaching any definitive conclusions near impossible.  More data on hospital “charge lists” and pricing schedules is coming out everyday but the endemic lack of transparency across the industry is troubling.  I do not know of any other industry that is allowed to operate in such an oblique and unexplained manner.  When I go to Taco Bell for god’s sake, I know the calories and the price of a bean burrito before I buy it.  There’s something wrong when Taco Bell is more transparent about its pricing, service and products than a hospital. 

 T.R. Reid, author of The Healing of America: A Quest for Better, Cheaper and Fairer Health Care, did a fascinating job of highlighting the economic disparities in American care.  But the most moving and effective part of his argument is that he sees choices on health and the well-being of people living and working in this country as being one grounded in morality, not economics; that it is our principles that should be guiding our policy on this issue and not shareholders.  I could not agree more. 

All right, that’s enough editorializing for one day. 

Sources Referenced:

 Barbash, Gabriel.  “New Technology and Health Care Costs – The Case of Robot Assisted Surgery”.   New England Journal of Medicine 363:701-704.  August 2010. 

 Calsyn, Maura & Emily Oshima Lee.  “Infographic: America’s High Health Care Costs”.  Center for American Progress.  July 2012. 

Emanuel, Ezekiel.  “How the Federal Government Can Save $100 billion dollars or More in Health Care Costs: Alternatives to Blunt Misguided Policies that Merely Shift Costs”  Center for American Progress.  October 2011.

Fuchs, Victor.  Health Care Reform – A Collection of Articles.   Stanford Institute for Economic Policy Research.  2010. 

Gould, Elise.  “Employer-Sponsored Health Insurance Coverage Continues to Decline in a new Decade”.  Economic Policy Institute.  December 5, 2012.

Kuttner, Robert.  “Market Based Failure – A Second Opinion on U.S. Health Care Costs”.   New England Journal of Medicine.  358:549-551.  2008. 

Why is Health Spending in the United States so High? Organization for Economic Cooperation and Development.  Health at a Glance 2011: OECD Indicators. 

Reid, T.R. The Healing of America: A Quest for Better, Cheaper and Fairer Health Care. The Penguin Group.  2009. 

[vulgareconomist]

In Defense of the Farm Bill...?

  In several of my posts, we have discussed how excessive subsidies for non-feed crops, ethanol production, the deregulation of commodities markets and trillions of dollars in oil and food related derivatives have distorted food prices and exacerbated global market volatility.  Academic and policy discussions on food prices and commodity markets inevitably come to a rest on a single, massive piece of American legislation: the “Farm Bill”. First enacted in 1965 as the Food and Agriculture Act, the Farm Bill is a policy that is now widely panned in the United States by both Democrats and Republicans as either an unnecessary giveaway to agro-business or as the epitome of big-government largess that should be eliminated as part of a broader austerity package.  Both criticisms it turns out have some basis in reality.  

 Comprised of twelve separate articles, the current Farm bill governs most of the United States’ agricultural policies including crop subsidies, direct payments and subsidies for several types of insurance. The total cost in 2012 for the Farm bill was a hefty $137 billion dollars.   According to an April 2013 article in The Atlantic, the Farm bill is an incoherent piece of protectionist legislation whose original premise, that small farmers need safety nets and protected markets, are no longer applicable in an industry that has consolidated in the last fifteen years.  According to the American Enterprise Institute, the federal government spent $12.7 billion dollars in 2012 on subsidies for elaborate and, in their opinion, unnecessary forms of crop insurance. 

 One particular form of crop insurance that has drawn the ire of liberals and conservatives alike is “revenue protection”, which is a unique form of insurance that protects producers from movements in price as well as in yields.  If a producer’s corn yield for example, dipped 10% and harvest time prices increased 15%, revenue protection will compensate the corn producer for that 10% loss on their yield not at the previously agreed upon price but at the higher market price at the time of harvest.  The criticism here is that agricultural producers that buy this insurance, mostly on the Federal government’s dime, essentially remove all risk from the industry.  The Congressional Budget Office projects that the federal government will spend $40.1 billion dollars on these insurance programs between 2014 and 2018 if current levels remain constant.  Including farm and disaster insurance along with crop insurance, the United States has already spent a total of $115 billion dollars on these programs since 1995.

 In addition to practically eliminating the cost of insurance for producers, the Farm Bill also directly subsidizes specific crops.  Looking at the commodity subsidies contained in article I of the Farm Bill, (separate from various forms of industry insurance) the U.S. has spent $177.6 billion dollars subsidizing a concentrated number of commodities since 1995 namely, corn/maize, sorghum, soybeans, cotton and wheat.  Corn producers, the most heavily supported group, received $84.4 billion dollars in Federal subsidies between 1995 and 2012.  Wheat, sorghum and soybeans producers together received a combined $96 billion dollars over the same period.  Supporters of this program argue that these subsidies are integral to protecting the country’s food security and are necessary to ensure that aging American farmers can be shielded from the unfair trading practices of other countries in order to make a decent living. 

 Most critics are quick to point out that subsidizing corn for biofuel and cheap livestock feed rather than subsidizing direct human consumption is not the best example of environmental “stewardship”.  Second, the argument that small American farmers need to be protected, while perhaps valid in the past, seems almost tongue-in-cheek given that the overwhelming majority of Federal payments are made to a handful of massive corporations.  Out of the $178 billion dollars spent on commodity subsidies since 1995, 70% of the total went to only 7% of the producers, hinting at the intense industrial concentration in American agriculture. The disbursements of payments are also geographically concentrated, with the states of Iowa, Texas, Illinois and Nebraska claiming 33% of the total subsidy payments since 1995. (California to my surprise was 9th on that list).  

 In addition to being an outdated, misguided and mostly unnecessary giveaway to big agro-businesses, critics also assert that the Farm Bill distorts global trade, effectively barring goods from lower income countries from competing in the American market.  An April 2013 article in Foreign Affairs notes that anti-poverty and rural development projects like “fair trade” certification for example, are doomed to fail if OECD countries continue to spend $252 billion dollars a year subsidizing and protecting their agricultural sectors.  In other words, buying “fair trade” coffee at Target (like I do, even though some of it tastes awful) will not do much permanent good with the Farm Bill in place.  

 Additionally, there is troubling evidence that American commodity subsidies in concert with “free trade” liberalization have been instrumental in intensifying migratory pressure in one of America’s closest trading partners, Mexico.  According to the Institute for Agriculture and Trade Policy, American subsidies have made it nearly impossible for Mexico’s producers to compete and have worsened rural poverty and unemployment rates throughout the country.  The argument here is that Mexico’s agricultural sector and its workers were already left particularly vulnerable to the effects of the Farm Bill in the wake of the Latin American debt crisis and the structural adjustment policies of the 80s.  Orchestrated by the IMF, these austerity measures curtailed the scale of Mexico’s state support for its agricultural sectors, eliminating price guarantees, credit subsidies and tariff protections.  After the implementation of NAFTA and the Farm Bill in 1994 and 1996 respectively, the price of Mexican corn for example, was cut in half by 2001 as heavily subsidized American goods crowded out Mexican producers.  According to the U.S. Grain Council, Mexico now purchases 16% of American corn exports and is its second largest market behind Japan.  Consequently, more than 2 million people living and working in Mexico’s agricultural sectors lost their jobs between 1994 and 2006, with some top end estimates suggesting that nearly a million of those displaced workers moved north to the United States in search of employment.  These staggering numbers inform recent criticisms that the Farm Bill is not just naked, unadorned protectionism but that its continued presence is antithetical to reducing poverty in lower income countries.

Despite these rather deleterious effects however, there is one aspect to the Farm Bill that complicates these criticisms.  Namely, the largest, most expensive article in the Farm Bill is article IV, the Supplemental Nutrition Assistance Program (SNAP).  Formerly known as “food stamps”, SNAP helps low income households purchase food during hard times.  There are currently 47 million people receiving benefits through this program, which is an increase from 45 million people in 2011.  Just to put that number into some perspective, SNAP has more people enrolled than the entire population of Spain.  According to the Congressional Budget Office, ¾ of SNAP’s participating households have children, are elderly or have disabilities.  80% of these households make less than $18,500 dollars a year and in 2010, SNAP was instrumental in lifting nearly 4 million Americans above the poverty line.  The Farm Bill’s 2012 budget allocated $80 billion dollars out of its entire $137 billion dollar budget (60%) solely to SNAP and over the next ten years the program is projected to cost $760 billion dollars.  In comparison, the Farm Bill’s insurance and crop subsidies are miniscule.  Commodity payments for example by the year 2023 are slated to cost $64 billion dollars, or 12 times less than SNAP.  

 According to a recent article in Dissent magazine, the structure of the Farm Bill is the result of an “…unholy alliance” or political compromise between legislators who are supportive of big agro-business and others that want to expand the social safety net.  It is this political horse-trading that in the eyes of some, has made the Farm Bill so intractable and difficult to change. 

 After researching and writing this post, I find it difficult to support my previously strident views on the Farm Bill.  There are clearly aspects to it that are unfair, unnecessary and frankly, damaging.  Money should be going to fruits and vegetables we actually eat not exclusively to livestock feed and ethanol.  The Farm Bill distorts global trade and that’s difficult to justify.  But, there are 50 million people in this country that are poor, vulnerable and depend on SNAP to help feed their families.  With this understanding, would I be willing to strike a deal that distorts trade and gives billions of dollars in subsidies to agro-business if it meant that 50 million, struggling people could buy groceries for their families?   I’m not sure I’d say no to that.  

Sources Referenced:

American Farmland Trust.  “Farm Bill 101: What You Need to Know about the Next Farm Bill”. American Farmland.  Summer/Fall 2011. 

 Babcock, Bruce.  “It’s Time to ask farmers to pay more for crop insurance”.  Roll Call.  The American Enterprise Institute.  April 24, 2014. 

Chite, Ralph M. The Senate Agriculture Committee’s 2012 Farm Bill (S.3240):  A Side by Side Comparison with Current Law.  Congressional Research Service.  May 30, 2012. 

Congressional Budget Office.  “The Supplemental Nutrition Assistance Program”.  April 2012. 

Cook, Chris.  “Farm Bill Fisaco”.  The Progressive.  May 13, 2013.

 Environmental Working Group.  2013 Farm Subsidy Databse.  Farm.ewg.org

 Institute for Agriculture and Trade Policy.  A Fair Farm Bill and Immigration.  2007

Monke, Jim.  “Budget Issues Shaping a Farm Bill in 2013”. Congressional Research Service.  March 11, 2013. 

Nestle, Marion.  “Utopian Dream: A New Farm Bill”.  Dissent Magazine.  Spring 2012, page1 15. 

Narlikar, Amrita & Dan Kim.  “Unfair Trade: The Fair Trade Movement Does More Harm Than Good”.  Foreign Affairs.  April 4, 2013. 

Rosenbaum, Dorothy & Stacy Dean.  “House Agriculture Committee Farm Bill Would Cut Nearly 2 million People Off SNAP”.  Center for Budget and Policy Priorities. May 16, 2013. 

Sumner, Daniel A.  “ ‘ The World’s Most Outdated Law’: Why The Next Farm Bill Should be the Last”.  The Atlantic.  April 25, 2013. 

Thompson, Jeffrey.  “The Economic Consequences of Cutting the Supplemental Nutrition Assistance Program”.  The Center for American Progress.  March 2012. 

Wise, Timothy.  Agricultural Dumping Under NAFTA: Estimating the Costs of U.S. Agricultural Policies to Mexican Producers.  Mexican Rural Development Research Reports.  Woodrow Wilson International Center for Scholars.  Report 7, 2010.  

Wohlgenant, Michael & Vincent Smith.  “Bitter Sweet: How Big Sugar Robs You”.  The American.  The American Enterprise Institute.  February 14, 2012. 

[vulgareconomist]

This is what I've been listening to this week.

Extract of Scratch Massive new album "Nuit de rêve", with featurings of Jimmy Somerville (Bronski Beat / The Communards), Koudlam, Chloé, Daniel Agust (Gus Gus). Release date: 31 oct 2011.

Mixed by Sex Schön (c) Pschent Music (p) Because Editions / Sawnd

[shroomm]

Kazuhiko Nakamura -braintower

[vulgareconomist]

I love how this artist’s steampunk style blends organic with inorganic elements and how this image in particular takes modernist, deco-type themes that are supposed to denote the triumph of technological progress and re-constructs them into a dark, sinister critique.  I guess that kind of fits my discussion of high frequency trading.  Even if it doesn’t, it still looks cool.  

[vulgareconomist]

Corn, Oil and Derivatives: How deregulation and the financialization of commodities markets have affected food prices.

Following up on last week’s post on the influence of biofuel production on food prices, this week we address the role of financial speculation on food and energy prices. 

A September 2012 report by the United Nations Conference on Trade and Development (UNCTAD) argues that contrary to a small but vocal academic minority, shifts in supply and demand alone cannot explain the current volatility of global commodities markets.  Rather it is financialization, or the de jure fusion of markets for financial investment and commodities that has led to excessive speculation, exacerbated market volatility and pushed global prices for food and energy to record highs.  The strongest evidence of this according to this report is that less than a quarter of all participants in commodities futures markets in the mid 90s were financial investors.  Today, non-commercial investors constitute 85% of all market participants. 

 A little more than a decade ago however, commodities markets were structured and regulated in a fundamentally different manner as financial or non-commercial investors were prevented from playing as conspicuous a role as they do now. As a baseline comparison, financial investors in the mid 90s managed around $10 billion in commodity-linked assets.  After Congress passed the Commodities Futures Modernization Act in 2000 however, the size and character of investor positions in these markets were no longer regulated, allowing non-commercial investors to take larger, more complex and often more speculative positions.  Five years later in 2005, investment firms recorded approximately $80 billion dollars in commodity assets “under management” on behalf of investors.  In January 2013, the value of commodity-linked assets under management topped $430 billion dollars, which is an astonishing 4,300% increase in size of financial investment in global food and energy markets in twelve years, with 500% of that increase occurring since 2005.  

 Much of the recent financial intervention in commodity markets has taken the form of so-called “over-the-counter” (OTC) commodity derivatives.  OTC derivatives are private contracts (do not use an official exchange board) between two parties to trade money based on the value of a particular asset at pre-determined time intervals.  The value of these derivative contracts in commodity markets multiplied 19 times in just the five years between 2003 and 2008 when the total value peaked at an astonishing $12.39 trillion dollars. 

 Though the scale and value of these operations have expanded since 2000, the actual number of players involved remains concentrated.  In the first quarter of 2012, 93% of all OTC derivative contracts, which includes commodities, involved four banks: Goldman Sachs, J.P. Morgan Chase, Citibank and Bank of America.  The argument here, is that financial investors, or parties without any real stake in the physical commodity itself, are using derivative contracts to speculate and or bet on the price of baskets of oil and food commodities (indexes), bidding up the prices of these commodities independent of market fundamentals.  It is the scale and speed at which these operations take place, trading and hedging billions of dollars in assets around the clock, that has made commodity prices extremely volatile over the last decade. 

 Though much of this criticism is well supported, it’s important to note that derivatives play a legitimate role in commodities markets.  The structure of derivatives, swaps in particular, are ingenious because they allow sellers/producers to design a hedge that is customized to their concerns and predictions.  Commodity swaps, a specific kind of derivative, allow buyers and sellers to minimize the risk of non-payment or non-delivery by fixing a series of prices and exchanging money at specific intervals while deferring total payment until delivery.  Swaps are the Legos of financial instruments in that there are some basic parameters that can be re-arranged to suit any situation, making them an indispensible part of modern financial systems. 

 I constructed an illustration, not entirely of my original design, of how commodity swaps work, why they’re useful and how they can be easily used for speculative profit.  In this example, an oil company (the seller) contracts with another party (the buyer) to sell a single barrel of oil in one and two month’s time (month 1 and 2).  The price for each barrel of oil is marked at the current forward market price in 1 and 2 months.  For the sake of ease, lets say the 1-month forward is $100 dollars and the 2-month forward is priced at $110 dollars a barrel, totaling $210 dollars.  Perhaps the most important and distinguishing feature to note about swaps, is that the total price is not simply divided up evenly according to the number of payment intervals.  In our example, the buyer would not simply pay the seller an even $105 dollars in month-1 and month-2 because the buyer would be overpaying by 5% in month-1 and then subsequently underpaying by 5% in month-2.  This would essentially amount to an interest free loan to the seller for thirty days.  Thus, each payment must be adjusted by the forward rate of interest in 1 and 2 months, making each payment between $100 and $105 dollars (we could run an exact calculation but I think that’s not only unnecessary but also incredibly boring).  

This swap/contract has no value until the buyer makes the first payment and the market price of oil or food commodities as well as the rate of interest subsequently change.  The seller, as part of his or her reason for entering a swap, is somewhat hedged because if the market price of oil declines, they are contractually guaranteed the higher price, essentially profiting on the difference between the swap price and the lower market price.  There is of course, a remaining risk that the buyer will default or ask to “unwind” the swap, which typically involves a dense series of equations used to calculate how much would the buyer would owe. 

Alternatively, while the seller locks in commodity prices at various intervals to protect against price declines, the buyer in this case is wagering that the spot (current market) price of oil will either remain flat or will increase.  Returning to our hypothetical, lets say the forward price of oil in month-2 increases to $115 dollars a barrel after the first payment in month-1 and before the closing of the swap after month-2.  The buyer, in this case, would become a seller and would create a new swap contract (swap 2) that would secure and sell oil at that higher spot price to a new third party, allowing them to pocket the difference, all without ever having to take delivery of the physical commodity.  

Now, take this very simplified example and scale it up, automate it and replace our 2 barrels of oil with 100,000 barrels, make the time intervals at which swaps are created and executed mere seconds instead of months and mark the price fluctuations in cents not dollars and you get a sense of the mind-warping scale and speed at which this market operates.  The manner in which swaps and other derivatives allow a single commodity to be hedged and bet on by several different parties simultaneously helps explain how these financial markets have become 30 times larger than the actual physical markets. 

While swaps have a legitimate purpose in price hedging they also allow investors to leverage scale purchases to take advantage of infinitesimal movements in commodities prices.  It is that small window of time in-between these pulses of light that execute trades where Wall Street meets your dinner table.  The basic idea of commodity swaps remains sound, but without regulation to limit the size of investor positions, you will by definition get more market volatility. 

The argument for regulation, based on this information, is that the massive influx of investment capital into commodities markets has made prices just as sensitive to changes in market sentiments or expectations, however unrealistic, than they are to actual fundamentals.  George Soros, the billionaire philanthropist, dubbed this phenomenon of financial markets affecting and influencing the fundamentals they are supposed to be reflecting, “reflexivity”.  I’ll leave that concept there as it would lead our discussion into a very old and on-going debate between Keynesian, Post-Keynesian and Chicago School economic thoughts on rationality and prices that is too off topic to address here. Suffice it to say that while prices have not become completely unmoored from market fundamentals, there is enough evidence to strongly suggest that complex and scaled financial investments in food and energy commodities have made these markets more unstable and susceptible to bandwagon effects. 

Sources Referenced:

Basu, Parantap & Gavin, William T.  “What explain the growth in Commodity Derivatives?” Review. Federal Reserve Bank of St. Louis January/February 2011. 

Buyuksahin, Bahattin.  “Role of Financial Players on Financialisation of Commodities”.  International Energy Agency.  OECD.  2011. 

Institute for Agriculture and Trade Policy.  Excessive Speculation in Agricultural Commodities: Selected Writings from 2008 to 2011.  April, 2011. 

Reuters. “Commodity Investment Grew $4.8 billion dollars in June – BarCap”.  July 20, 2012.  

 Suppan, Steve. “U.S. Judge thwarts commodity market reform”.  Institute for Agricultural and Trade Policy.  October 12, 2012. 

Tian, Yi.  “Commodity Assets Top $400 billion dollars in January Barclays Says”.  Bloomberg News, February 15, 2013. 

United Nations Conference on Trade and Development. “Don’t Blame Physical Markets: Financialization is the root cause of oil and commodity price volatility”.  Policy Brief Number 25.  September 2012.

United States Energy Information Administration.  “Derivatives and Risk Management in the Petroleum, Natural Gas, and Electricity Industries”.  Report #SR-SMG/2002-01.  October 2002.   

[somethingbitchyythiswaycomes]

Minimalist Batman Villains - Scarecrow by Eduardo Cortes Trujillo

[vulgareconomist]

While searching for images for this week's post (corn related), I stumbled across this gorgeous impressionistic take on the Scarecrow from Batman lore.  

[vulgareconomist]

Food Prices or how I learned to love ethanol.

  This week, I wanted to address a question I get quite often and that is why the price of groceries seems to be constantly going up.  After completing the research and sitting down to write this post, I realized that there were personal motivations, reasons I was not entirely conscious of, for researching and writing this post.  Anecdotally, it breaks my heart to go to the store and see people in my city, my neighbors, struggle to pay for food.  It happens with regularity, someone’s card doesn’t go through and they scramble to decide which items they really need and which can wait for another week.  This is not a new phenomenon, as this happens every day in this country, but I cannot remember a time in my life when it happened as often as it has since 2008.  This is however, more than mere anecdote.  According to a report on NPR that aired April 25, there are 47 million Americans currently using the Supplemental Nutrition Assistance Program. 

Former President Bill Clinton, at the 2012 Democratic National Convention delivered a riveting and heartfelt speech in support of President Obama’s re-election and in a way that only Clinton could, articulated the frustrations that others and I have regarding the slow pace of the economic recovery.  I do not want to paraphrase, so I will simply quote his speech:

Now, look. Here’s the challenge he [President Obama] faces and the challenge all of you who support him face. I get it. I know it. I’ve been there. A lot of Americans are still angry and frustrated about this economy. If you look at the numbers, you know employment is growing, banks are beginning to lend again. And in a lot of places, housing prices are even beginning to pick up.  But too many people do not feel it yet….

 Now — but he has — he has laid the foundation for a new,modern                      successful economy of shared prosperity. And if you will renew the    president’s contract, you will feel it. You will feel it.  

Former President Clinton said it better than I ever could, that there are indicators the American economy is growing but most people have yet to see much of a difference.  Quite frankly, people deserve better answers and explanations on this issue but the answers I found are not particularly optimistic. 

The Literature: Oil, financial markets, climate change and biofuels

The literature suggests there are four factors pushing up agricultural commodity prices: biofuel production, drought in the U.S. and Eastern Europe, climate change, high crude oil prices and non-commercial (financial) trading.  It would be too difficult to address all of these factors in a single post, so for this week, I will highlight the enormous changes that have occurred in the American and global biofuel industries that have permanently altered commodity markets. 

According to the World Bank’s Food Price Index, international food prices are currently only 9% off their all-time highs, which peaked during the summer of 2012.   Much of the gains have been concentrated in basic food items: cereals, oilseeds and dairy products which have experienced considerable volatility since 2007.  After more than twenty years of declining global food prices, agricultural commodity markets surged in 2006. Global prices for maize and soybeans for example, peaked at all time highs in June 2012 with the price of maize alone jumping 25% in less than 90 days between May and July.  Soybean prices increased 17% over the same period.

Biofuel production is widely understood by experts and non-experts alike, to be a central cause of rising commodity prices.  Though widely agreed upon it is difficult to convey the colossal size of America’s biofuel industry and just how quickly this industrial transformation took place.  Borrowing a phrase from Will Staley, one of my favorite writers, America’s ethanol industry involves, “hideously violent economies of scale” that, absent any corrective action, will continue to keep global commodity markets tight. 

12 years ago in 2001, as a baseline comparison, 50 million metric tons of corn was diverted from open markets to produce biofuel.  Approximately 6% of that year’s yield produced 1.7 billion barrels of ethanol.  Fast-forward four years to 2005 and the amount of corn diverted to ethanol production nearly tripled to 135 million metric tons.  A full 14% of all corn produced in the U.S. during that year was used to produce 4 billion barrels of ethanol. Five years later in 2010, American ethanol production multiplied another 2.5 times as 350 million metric tons of corn or 35% of total U.S. production, was diverted from other markets for ethanol.  According to the World Bank, 40% of American corn was used for ethanol last year, producing 13.3 billion barrels.  Putting these numbers into some perspective, the United States increased its ethanol production nearly 800% between 2001 and 2012 to the point where half our country's corn is devoted to ethanol.

As an aside, I attended a lecture in 2006 by Brad Delong, former Assistant Secretary of the U.S. Treasury and current Berkeley professor, on the successes and failures of NAFTA.  Delong, while speaking about American corn subsidies, took a jab at the dystopian economic thoughts of Robert Malthus and said (I’m paraphrasing), “Malthus couldn’t have possibly imagined that a nation could produce corn at the scale the United States does today”.  The United States is without question, the most prolific producer of corn the world has ever seen (in terms of scale).  Now, seven years since that lecture roughly half of this historically unprecedented agro-industrial capacity is dedicated to manufacturing ethanol.  That realization turned my mind inside out.  

The OECD predicts that global biofuel production will double by 2021, which is the most conservative estimate I’ve read so far.  There are similar projections for the other major biofuel commodities including sugarcane (34%), vegetable oil (16%) and coarse grains (14%).  In January 2007, maize was priced at $150 dollars per metric ton.  At its height in October 2012, maize was going for $320 dollars per metric ton, or 200% more than just five years prior.   

Exacerbating the demand pressure of biofuel production is the fact that the global supply of cereal stocks have been in gradual decline since the mid 90s, averaging 3.7% decline a year between 1995 and 2007.  Reserve stocks allow countries to mitigate small movements in commodity and food prices.  Low stock levels however, mean that cereal markets have little room to mitigate demands for biofuel production and consumers.  

Perhaps the most obvious way to illustrate how ethanol affects how much you pay at the grocery store is that 90% of American livestock feed grain, is corn.  U.S. livestock producers are now using more wheat to feed their livestock because corn is becoming too expensive, which is putting pressure on global wheat prices.  The documentary King Corn (2008) deconstructs your typical McDonald’s meal to illustrate the pervasiveness of corn in our food system.  According to the filmmakers every part of your meal has corn in it: the beef is corn fed, the hamburger buns are sweetened with high fructose corn syrup, the fries are prepared in corn oil, your coke obviously has high fructose corn syrup as does the ketchup you dip your fries into.  The amount of items in your average grocery store with corn or high fructose corn syrup would astound you (talcum powder, yogurt, milk, animal proteins, cereals, candy, crackers, oatmeal, ketchup, sodas, most types of bread).  The list of course, could go on.  If food is artificially sweetened and its cheap, chances are good it has corn in it.

Finally, according to researchers at the University of Illinois, the average corn farm price received has more than tripled between the 2000 and 2012.  Biofuel production can help explain the medium term increase in the price of some commodities, but given the stability of its mandates and its subsidies, that does not explain the volatility of commodities markets. 

Next time, I’ll tie this all together by discussing oil prices, exchange rates and global financial markets as the other major factors. 

Sources referenced:

Federal Reserve Bank of Dallas. Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District: Third Quarter 2011. 

Food and Agricultural Organization of the United Nations.  The State of Agricultural Commodity Markets: High Food Prices and the food crisis- experience and lessons learned.  2009. 

International Food Policy Research Institute.  2011 Global Hunger Index. The Challenges of Hunger: Taming Price Spikes and Excessive Food Price Volatility.  October 2011. 

International Food Policy Research Institute. 2012 Global Food Policy Report.  2013. 

Miranowsky, John A.  “Why do Food and other Agricultural Commodities Cost More?”  Conference on Agricultural Prices and Food Price Inflation.  Federal Reserve Bank of Chicago, October 8 2008.  

Npr.org/2013/04/25/179038260/signing-up-for-food-stamps 

Oppedahl, David B.  “Chicago Fed Letter: Agricultural Markets and Food Price Inflation – A Conference Summary”.  Federal Reserve Bank of Chicago.  January 2009.  

OECED – FAO. Agricultural Outlook 2012-2021.  www.agri-outlook.org 

University of Illinois: http://farmdoc.illinois.edu/manage/uspricehistory/USPrice.asp 

The World Bank: Poverty Reduction & Equity Group.  Food Price Watch. August 2012.  

The World Bank: Poverty Reduction & Equity Group.  Food Price Watch.  Volume 3, Issue 12, November 2012. 

[vulgareconomist]

Much love to Boston, its people, and especially to its men and women in uniform.  

[vulgareconomist]

After the terrorist acts in Boston over the past few days, this song is the only thing that comes to mind.