In our previous posting on this key world issue, we noted we
would post a solution to the coming Chocolate Apocalypse. First, of course, we reminded our readers
that a true world shortage of cocoa is not really likely — possible, of course,
but not likely . . . if we get to work now to make the world safe for
chocolate. This was essential, because a
number of the comments we received on FaceBook indicated that some people
intended to kill themselves if chocolate disappeared.
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| Tea for breakfast? What's the world coming to? |
Maybe that’s an exaggeration, but we can’t take that
risk. Besides, if chocolate disappears,
we won’t have anything to drink for breakfast except tea and coffee. And Postum.
Did you know they still make that?
And miso soup. Willow bark tea,
anyone?
Seriously, the cocoa infrastructure needs to be
rebuilt. If 40% of the cocoa trees in
Cote d’Ivoire, the single largest producer of cocoa in the world, are no longer
productive, then something obviously has to be done, and better management of
resources and improved farming techniques are clearly in order.
That in turn means massive education in those areas, and massive
investment in new trees. We covered this in the last posting. The question is how to structure it — and how
to pay for it. We’ll look first at the
structure.
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| Processing, marketing, and distribution are profit centers, too. |
One of the first things to do is tie the producers in to the
processing and marketing chain of cocoa.
Frankly, it is a grave injustice that, although “the farmer is the one
who feeds them all,” he or she usually gets the least return. In a global economy in which cocoa is one of
the few commodities that is increasing in price, growers are realizing less and
less profit from their crops.
Part of this is the fact that (at least in Cote d’Ivoire)
the government sets the price. Thus —
directly contrary to the laws of supply and demand — at a time when supplies
are down and demand is up, the price paid to farmers remains the same per unit
price they were getting before, and the farmers end up with less money as
production goes down.
In a purely rational market, and all things being equal, the
same demand and a lower supply would mean that producers would make the same amount of money because they would
get a higher price for fewer units of production. With world demand increasing as at present,
producers should be getting more money.
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| Make the pie bigger to give everyone a piece. |
If producers got a cut of the higher world price, they could
still take a reasonable price for their cocoa, but also get a share of the
value added by the processors and the services of middlemen. Details would need to be worked out, but
there are ways of granting ownership stakes in the processing, marketing, and
distribution to the producers, e.g.,
Coops and ESOPs.
There also needs to be some way of coordinating education,
maintenance, and reinvestment. If what
we learned about cocoa production is accurate (some of which admittedly came
from watching the video on cocoa at the Wilbur Chocolate Factory Museum), it’s
ideal for small producers. Small
operations are easier to manage, and are probably better to ensure that farmers
pay greater attention to things — such as pruning, weeding, culling, and
keeping an eye open for disease.
There should therefore be some kind of coordinating/cooperative
agency in which the producers have an ownership stake. An ownership stake in the coordinating agency
means that a farmer wouldn’t suffer too much because an overall plan has him or
her producing less for some reason, or there is a localized crop failure.
Thus, something like a Citizens Land Bank or Citizens Land
Cooperative — which would manage all land, natural resources, and
infrastructure — would (if each and every individual had a single, voting,
non-transferable, no-cost, dividend-paying share in the CLB/CLC) be able to
optimize both sustainable development and
profits in which everyone would participate.
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| Citizens Land Bank Schemata |
The CLB/CLC would own all the land, natural resources, and
infrastructure (just as the State does now in many places), but the citizens
would own the CLC/CLC as a cooperative or joint stock company — something not
possible when the State owns “on their behalf.”
Instead of leasing land from the State, farmers would lease it from the
CLB/CLC, meaning from themselves.
This could also make the leasehold virtually the equivalent
of a traditional freehold. That’s
because private companies have to keep to the terms of contracts or the State will
step in to enforce them. In contrast, if
the State is a party to a contract, it can (and often does) change the terms at
will. Keynesian economics and Modern
Monetary Theory, in fact, are based on the ability of the State to thumb its
nose at other parties to contracts and enforce such changes at the point of a
gun.
All this, however, is just common sense. The big question is where the money is to
come from to pay for education, new capital, and supplies (such as adequate
fertilizer) — and how to ensure that the money is used for the intended
purpose.
Believe it or not, that is the easiest question to answer —
in two parts. With respect to the second
part (ensuring that money is used for the intended purpose), having a central
agency solves that. The CLB/CLC, not the individual farmers. would
borrow from outside lending sources. This would not only allow the CLB/CLC with
its better bargaining position to obtain better terms, it would be more secure
for the lenders.
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| Cocoa growing and harvesting |
Farmers would requisition new capital and supplies directly
from the CLB/CLC, which (again) would be able to negotiate better prices than
the individual farmers. These would, of
course, be charged to the farmers’ accounts, and repaid when a crop is sold,
but it would largely eliminate the problem of farmers borrowing money for one
purpose and spending it on other things.
Farmers who resold supplies or capital would have to be
penalized in some way, perhaps by building it into the terms of the lease that
they could be evicted for egregious misuse or theft. Problems of this sort would come to light
during periodic audits — good management would require that all farms be
audited frequently to make certain that the operation is being run properly,
and to keep tabs on production levels and general conditions. This would, naturally, also reveal if someone
had received capital and supplies and resold them instead of using them.
The money itself is the easiest problem to solve. Commercial and central banking were invented
to ensure that there would always be enough money for industrial, commercial,
and (of course) agricultural purposes.
As Dr. Harold G. Moulton demonstrated in his classic refutation of
Keynesian monetary theory, The
Formation of Capital (1935), the present value of future increases in
production can be turned into money, and that money can be used to finance the
new capital that will generate the future increases in production.
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| Creating money for productive purposes |
In this way, credit for productive purposes becomes
“self-liquidating.” Since this doesn’t
require existing accumulations of wealth, anybody can finance new capital in
this way. If the lending institution
requires additional collateral (which shouldn’t be necessary for a CLB/CLC,
since it would own all the land to serve as collateral and thus automatically
be considered “credit worthy”), the CLB/CLC could take out a “capital credit
insurance policy” that would pay off only if the CLB/CLC couldn’t repay the
loans.
This would benefit a country as a whole as well, for it
would begin the shift from a currency backed with government debt (as most
countries have today) to a currency backed with the value of the land, capital,
and productive capacity of the country.
It wouldn’t be too long before the government would realize that
creating new money only for productive purposes would enable everybody in the
country to become productive, either with their labor or with new capital that
they purchase on credit and pay for out of future profits.
Where could this be done?
In Cote d’Ivoire, most certainly — and almost immediately, as soon as
enabling legislation could be passed. That
sort of restructuring is what companies like Equity Expansion International, Inc.,
were established to guide.
What about other countries in the same region? The Republic of Guinea, for instance, has a
new administration that is very interested in introducing new crops and doing it in a way that benefits
everybody involved, not just a few rich foreigners.
The possible World Chocopalypse need never come to
pass. All it takes is the application of
a little common sense and the Just Third Way.
#30#