By Dov Michaeli
You wouldn’t expect a moneymen or a Government bureaucrat to make a profound historical observation, would you. So here is the NYT (Sunday, 2/20/11) reporting on Treasury Secretary Tim Geithner at the G20 meeting this weekend: “One of the major factors fanning wide social unrest in the region, he and other said, were high food and commodity prices.
The International Monetary Fund estimates that commodity prices jumped 20-30 last year, a trend that Mr. Strauss-Kahn (IMF director) said was creating a lot of problems for low-income countries and vulnerable people.”
“Robert Zoellick, the president of the World Bank ( for perspective, he is one of the neocons and was number three in the Pentagon during the Bush administration -DM) said “We are reaching a danger point in these countries. He said he urged G20 officials to “put food first in 2011” even as they bicker over technical ways to measure imbalances in the world economy.”
How could food and commodity prices create such a sense of pending disaster in a Democrat and a conservative Republican? My guess is that reality has its own way of putting ideology to the test. Regardless whether you are a believer of not, here is the reality: unprecedented droughts in Australia, floods of biblical proportions in Tasmania, droughts in Argentina and northeast China, drought in the Middle East, unprecedented droughts and fires of gargantuan proportions in Russia, extreme weather in the U.S Midwest –all these regions being major producers of wheat, rice and corn. And all these climatic disasters happening exactly as the climate change scientists and their models have been predicting, only a lot sooner. It doesn’t take a genius to deduce that societies that have been teetering on the edge to begin with would be the first to suffer and erupt in protest. To wit: a few years ago, during the Bush administration no less, The CIA annual report to the president on the state of U.S security began to include, gasp, the effect of climate change on national security. They couldn’t foresee the fact that a poor street vendor in Tunisia would self-immolate and ignite a huge conflagration that is now consuming the whole region. But to their credit, they did foresee the potential consequences of climate change, ideology notwithstanding.
Those who don’t know their history…
The evolutionary and historical record of climate change is fascinating. You might say it is in our DNA, both physically and figuratively.
Consider the evolutionary effects that climate change on our very existence as Homo sapiens. In the article Climate and Human Evolution (Science, 4 February, p.540, vol.331, 2011) Peter deMenocal of Columbia University highlights some intriguing connections between large-scale shifts in climate and alteration in ecological structure and resource availability –and their selection pressures. There were two large-scale drying cycles in Africa that concern us here, each lasting tens of thousands of years. The first one occurred between 2.9 and 2.6 million years ago. At the onset of this period, about 2.9 million years ago Australopithecus afarensis (remember Lucy?) became extinct and, about 2.7 million years ago, a more robust form of Australopithecus (Paranthropus spp.) with large jaws and grinding teeth emerged –an adaptation to a vegetarian diet of grasses and seeds. About 100,000 years later (2.6 million years ago) evolution made its first attempt at the larger-brained Homo sp. However, that attempt ended up in failure after the drying cycle ended and a period of increased precipitation ensued.
The second drying cycle lasted from 1.8 to 1.6 million years ago. This period saw the emergence of Homo erectus, which later migrated out of Africa (see picture on the right), and gave rise to the Neanderthals in the Middle East and Europe about 300,000 years ago. These Homo species, and their adaptive mutations, allowed eventually the emergence of Homo sapiens, modern humans, during yet another dry cycle about 200,000 years ago. The dry cycles are important, because they caused the retreat of the dense jungle and its replacement with grassland. It also lowered the water level of the sea that separated Africa from the Middle East, allowing the migrations, first of H.erectus and later of H. sapiens, out of Africa.
- About 1660 B.C.E prolonged drought conditions forced the migration of Western Semitic people (Canaanites and Israelites) to the Nile delta. This coincides with the Biblical story of Joseph, and the later Exodus (around 1445 B.C.E).
- About 1600 B.C.E a volcano situated between Thera (today’s Santorini) and Crete erupted with tremendous force. The volume of the rock, lava and ash has been recently calculated to be 100km cube (24 cubic miles); this is 4 times the 1885 eruption of Krakatoa, which caused severe climatic changes. The Santorini eruption generated a 35 to 150 m (115 to 490 ft) high tsunami that devastated the north coast of Crete, 110 km (68 mi) away. We don’t have any written record of the event, but within a few years the Minoan culture that thrived in the Aegean islands collapsed and the islands were easily conquered by the mainland Greeks, the Mycenaeans. The ash cloud was carried eastward with the prevailing winds, and according Chinese records the collapse of Xia and the rise of the Shang dynasty, approximately dated to 1618 BCE, was accompanied by “‘yellow fog, a dim sun, then three suns, frost in July, famine, and the withering of all five cereals”.
- Wet and warm summers occurred during periods of Roman and medieval prosperity. Increased climate variability from ~250 to 600 C.E. coincided with the demise of the Western Roman Empire and with the biggest central European historical crisis, the Migration Period (aka the Barbarian invasions) , a time marked by lasting political turmoil, cultural change, and socioeconomic instability. Distinct drying in the 3rd century paralleled a period of serious crisis in the Western Roman Empire marked by barbarian invasion, political turmoil, and economic dislocation in several provinces of Gaul( today’s France), including Belgica, Germania superior, and Rhaetia (today’s Switzerland/Tyrol/Germany south of the Danube). Precipitation increased during the recovery of the Western Roman Empire in the 300s under the dynasties of Constantine and Valentinian, while temperatures were below average. Precipitation surpassed early imperial levels during the demise of the Western Roman Empire in the 5th century before dropping sharply in the first half of the 6th century. At the same time, falling lake levels in Europe and Africa accompanied hemispheric-scale cooling that has been linked with an explosive near-equatorial volcanic eruption in 536 C.E., followed by the first pandemic of Justinian plague that spread from the eastern Mediterranean in 542–543 C.E. Rapid climate changes together with frequent epidemics had the overall capacity to disrupt the food production of agrarian societies (Science, 4 February, p.578-582, vol. 331, 2011).
- February 21, 2011. NYT: “Europe Focuses on Flow of Migrants”. Two days of meetings of European Union ministers meant to address broad themes of change in the Middle East were dominated by short-term issues, particularly the possibility of increased migration from North Africa if regional unrest grows… Italy’s foreign minister, Franco Frattini, warned that the crisis in Libya could set off an “unimaginable” movement of population because of the large number of non-Libyan citizens in the country, which has been a magnet for Africans looking for jobs and possibly a passage to Europe. “Those who spoke of hundreds of thousands” of people crossing into Europe “are not exaggerating,” Mr. Frattini said.
- February 23, 2011. As Deep Throat is alleged to have said, if you want to find the truth, follow the money. Here is today’s CNBC, the quintessential “show me the money” station, whose audience is the most affluent (and tends to vote Republican, no surprise there). Bear in mind, the people quoted here are not wild-eyed liberals; Ed Yardeni is a Wall Street economist; Tim Seymour is a hedge fund manager. They have to check their ideology at the door and call it as they see it in order to maintain their credibility on the Street.
“Middle East Mirrors Great Inflation Revolutions Since 1200 A.D.”, says the headline. ” Inflation has led to political revolutions since Medieval times and we may be witnessing the fifth such great price revolution in history unfolding in the Middle East and in our own country right now, said Dr. Ed Yardeni, president and chief investment strategist of Yardeni Research.
Yardeni cites the work of historian David Hackett Fischer, who described civilization’s first four major inflation cycles in his 1999 work The Great Wave: Price Revolutions and the Rhythm of History. The first price change wave was during Medieval times, culminating with The Black Death. The next three occurred in the 16th century, the 18th century and the turn of the last century. Each wave lasts about 100 years, according to Fischer’s work.
“During the past four price revolutions, food and fuel led the upward movement in prices, followed by manufactured goods and services,” said Yardeni, a widely-followed strategist on Wall Street who’s held positions with the Federal Reserve and the U.S. Treasury. “The relevance of the history of previous inflation waves to the present situation is downright eerie.”
Yardeni, referencing Fischer’s work, describes the waves as beginning with rising inflation and then followed by governments printing money. Changes in prices then begin to occur more rapidly in response, causing income inequality as the elite resist tax increases. The slighted, especially the younger generation, get desperate and angry, mobilizing in groups to spur a political revolution. The wave ends with tremendous financial volatility and ultimately a deep collapse in prices and interest rates.
Compare this to what’s happening today. Many commodity prices have more than doubled in less than a year. The political revolution is happening first to young Egyptians and Libyans because of their sky-high unemployment rates and lack of resources and freedom to do anything about it. The rising prices for basic sustenance give them no choice but to revolt. Their revolution is accelerating inflation for the globe by pushing oil prices over $100 on Wednesday.
“This feels a little like the fall of Communism,” said Tim Seymour, hedge fund manager and founder of Emergingmoney.com. “If you have a military transition and then uncertain leadership, elections and evolution, this will take months if not years.”
In our own country, Federal Reserve Chairman Ben Bernanke has kept interest rates in negative territory, theoretically, by lowering the central bank’s benchmark rate to zero and then buying Treasury bonds on top of that.
The stock market has doubled because of Bernanke’s actions, creating our own income inequality as the wealth of the top earners rebound and President Obama extends their tax cuts, while higher gasoline prices hit lower-income earners, notes Yardeni, in his financial blog. While on a smaller and less violent scale than the Middle East, the fight over union benefits in Wisconsin fits the description of social unrest because of these great price revolutions. The conditions could worsen in this country if the states aren’t able to fund themselves in the municipal bond market.
It begs the question. Why is this price revolution happening so quickly after one just ended in the 20th Century with the tech bubble burst?
“The rate at which this price revolution is taking place may be a byproduct of the global interconnected age we live in where price shocks travel faster,” said Yardeni. “I believe this is the fifth price revolution, but I’m not sure Fischer would agree or not.”
It would make sense that these revolutions would happen more rapidly in this technological age. After all, Facebook and Twitter seem to be facilitating these revolutions from region to region.”
We are witnessing upheavals on a historical scale. The cause, at least in part, is climate extremes that reduce crops around the world, causing food scarcity, starvation, epidemics, inflation –and uprisings. To ignore this chain of cause and effect is nothing but willful ignorance.