GMO Corn Wars

SUBHEAD: The farm-by-farm fight between China and the United States to dominate the global food supply.

By Ted Genoways on 16 August 2015 for the New Republic -
(http://www.newrepublic.com/article/122441/corn-wars)

http://www.islandbreath.org/2015Year/08/150828cornwarsbig.jpg
Image above: Illustration of "Corn Wars" by Brian Stauffer. From original article.

On September 30, 2012, agents from the FBI contacted U.S. Customs and Border Protection at O’Hare International Airport in Chicago with an urgent request. They wanted bags from two passengers on an outbound flight to Beijing pulled for immediate inspection.

The passengers didn’t track as dangerous criminals: Li Shaoming, president of Beijing Kings Nower Seed Science & Technology, a large Chinese agricultural company that develops corn, rice, cotton, and canola seeds, and Ye Jian, the company’s crop research manager.

In Li’s luggage, agents found two large Pop Weaver microwave popcorn boxes. Buried under the bags of unpopped snack kernels were roughly 300 tiny manila envelopes, all cryptically numbered—2155, 2403, 20362. Inside each envelope was a single corn seed.

In Ye’s luggage, agents found more corn seeds hidden amid his clothes, each one individually wrapped in napkins from a Subway restaurant. Customs officers were dispatched to the gate area for the Beijing flight, where they found the two men and conducted body searches. Still more corn seeds, also folded into napkins, were discovered in Ye’s pockets.

Meanwhile, at a different gate, Wang Hongwei, another Chinese national believed to be in the employ of Kings Nower (agents never learned if he worked for the company or was related to someone who did), boarded a separate flight for Burlington, Vermont, where he had a car waiting for him to drive to Canada.

FBI agents were there to follow him—though Wang, after leaving the airport parking garage, made a series of abrupt turns and managed to give his surveillance team the slip. It didn’t matter.

Border patrol officers were waiting when Wang pulled up to the Highgate Springs port of entry along the U.S.-Canadian border. He was selected out for a search, which turned up 44 bags of corn seeds under his seat and in his suitcases, as well as a notebook filled with GPS coordinates and a digital camera containing hundreds of pictures of cornfields.

 Questioned by agents, Wang would say only that he had purchased the seeds from a man named Mo Hailong, the director of international business at the Beijing Dabeinong Technology Group (DBN Group), the parent company of Kings Nower Seed.

Not wanting to alert Mo, agents allowed all three men to leave the country, but their corn seeds were confiscated. Special Agent Mark E. Betten, a 16-year veteran of the FBI specializing in the investigation of intellectual property theft, had the seeds sent to an independent bio-diagnostic testing laboratory, which confirmed that they were proprietary, genetically modified hybrids.

Eventually, their genetic sequencing was matched to seeds under development by Monsanto, DuPont Pioneer, and LG Seeds, which, including LG’s parent company, Groupe Limagrain, comprise three of the four largest seed companies in the world. The GPS coordinates were found to correspond with farms in Iowa and Illinois, where those companies were testing the performance of new hybrids.

In December 2013, after collecting this evidence, U.S. marshals arrived at Mo’s home in Boca Raton, Florida. He was taken into custody and extradited to Iowa, where he has been under house arrest in Des Moines ever since.

The FBI also brought charges against five alleged co-conspirators, all Chinese, who remain at large, including the three men stopped by customs agents, and eventually against Mo’s sister, Mo Yun, as well. Mo and his sister are scheduled to stand trial before a federal court in Iowa in September on charges of conspiracy to steal trade secrets. If convicted, they face up to ten years in prison and a $5 million fine.

This may seem like a lot of post-September 11 cloak-and-dagger for a few corn seeds, but the U.S. government believes that something much larger is going on. This theft, they argue, stems from an undeniable and dangerous fact: Despite its remarkable landmass, China simply can’t grow enough food to feed itself, particularly now that the country’s burgeoning middle class has acquired an appetite for meat. (Most corn in China is used as feed for livestock.)

Water shortages and lack of arable terrain have forced their government to buy between two and five million metric tons of American corn annually, approximately 94 percent of all corn imported into China each year.

If China hopes to feed (and pacify) its growing population while also loosening the very real stranglehold that America has on its national food supply, its farmers have to start producing a lot more corn—not just enough to meet their domestic demand in good years but enough to maintain a stockpile to offset their global market impact during bad ones.

For decades, China has increased corn yields by putting more acres into production, but they’re running out of arable land, and the USDA now estimates that Chinese corn consumption will rise by 41 percent by 2023, far outpacing production increases.

The only tenable way for China to meet its own demand, then, is by planting high-performance hybrids, which can single-handedly double or potentially even triple per-acre corn production.

Chinese scientists haven’t developed a significant corn hybrid in years. But Monsanto and DuPont Pioneer, the two American seed giants, have produced so many successful hybrids that they now control 45 percent of all the seed sold in the world.

The Department of Justice maintains that China is quietly permitting and even encouraging companies to steal American agricultural secrets right out of the ground. Acquiring the technology behind these next-generation hybrids could save companies like DBN Group—and the country—as much as a decade, and many millions of dollars, in research.

nd, plant geneticists familiar with the case told me, the very fact that Kings Nower Seed has brought to market—and intended to bring more—products with stolen genetics hints that the Chinese government is complicit. The theft is not hard to detect or prove; the only way that DBN Group could hope to get away with this scheme is if China were pushing such spying as a matter of policy.

In fact, a 2011 report prepared by the Office of the National Counterintelligence Executive, which advises the president on intelligence matters related to national security, listed “agricultural technology” among the targets “likely to be of greatest interest” to spies from Russia and China.

“Surging prices for food,” the report stated, “may increase the value of and interest in collecting U.S. technologies related to crop production, such as genetic engineering, improved seeds, and fertilizer.”

Since that report, the Department of Justice has cracked down, successfully prosecuting Chinese national Kexue Huang for stealing secrets related to organic fertilizer production and an unidentified “new food product” while he was employed at both Dow AgroSciences and Cargill, as well as Weiqiang Zhang, for theft of genetically engineered rice seeds from Colorado-based Ventria Bioscience.

What makes the case against Mo Hailong stand out is that the FBI openly acknowledges that each step of its operation, each escalation of surveillance, was approved by a federal judge under the Foreign Intelligence Surveillance Act (FISA), which requires that the investigating agency provide evidence that wiretapping is “necessary, or relevant, to the ability of the United States to protect against foreign threats to national security, such as attack, sabotage, terrorism, or clandestine intelligence activities.”

The federal government, thereby, has implicitly acknowledged that it considers agricultural products both an asset and a weapon in a long-range geopolitical chess match with China, a resource of near-military value and importance, one that must be protected by all available means.

By that logic, those Chinese nationals stealing corn are spies, no different—and, indeed, perhaps more important—than those who swipe plans for a new weapons system.

This may, at first glance, appear melodramatic—like Homeland in the heartland—but it is striking that the Department of Justice did not invoke FISA measures (at least not openly) in carrying out similar investigations into Dongfan Chung, a former Boeing engineer who stole trade secrets related to the Delta IV rocket and the Air Force’s C-17 aircraft, or Qing Li, who conspired to procure 30 military accelerometers, which, according to the government, “have applications in smart bombs, missiles, and calibrating g-forces of nuclear explosions.”

When asked about the extraordinary use of FISA in this case, Nick Klinefeldt, U.S. attorney for the Southern District of Iowa, who is prosecuting Mo, chose his words carefully. “The agriculture industry is important,” he said. “It’s important not just to the state of Iowa but to the United States.”

In announcing the charges against Mo last July, Thomas R. Metz, special agent in charge of the Omaha Division of the FBI, went still further, saying that “identifying and deterring those focused on stealing trade secrets, propriety [sic] and confidential information, or national security information is the number two priority for the FBI, second only to terrorism.”

Think about that: The U.S. Department of Justice and the FBI now contend, in effect, that the theft of genetically modified corn technology is as credible a threat to national security as the spread to nation-states of the technology necessary to deliver and detonate nuclear warheads.

Disturbingly, they may be right. As the global population continues to climb and climate change makes arable soil and water for irrigation ever more scarce, the world’s next superpower will be determined not just by which country has the most military might but also, and more importantly, by its mastery of the technology required to produce large quantities of food.

The bureau’s investigation of Mo Hailong began only after Mo made a stunning blunder. It was early May 2011, and Mo and Wang Lei, vice chairman of Kings Nower Seed at the time, were driving country roads in Tama County, Iowa, allegedly searching for a DuPont Pioneer test field.

But apparently uncertain if he was in the right place or unsure of what kind of seed DuPont Pioneer was testing, Mo had Wang pull to the edge of a field, so they could question a farmer in the midst of spring planting. Mo and Wang told the farmer they had been attending an international agricultural conference at Iowa State and wanted to see someone planting a real cornfield. The farmer was dubious.

Ames was nearly an hour away with nothing but expanses of cornfields in between, all at the peak of planting season. How had these two men chanced upon his field on the very day that he happened to be planting an experimental and top-secret seed under development by DuPont Pioneer?

The next day, a DuPont Pioneer field manager spotted the same car. He watched Mo scramble up the ditch bank, and then kneel down in the dirt and begin digging corn seeds out of the ground.

When confronted by the field manager, Mo grew flustered and red-faced. He now claimed to be a researcher from the University of Iowa—not Iowa State—on his way to a conference.

But before the field manager could question him further, Mo fled. He jumped into the waiting car, and Wang took off, swerving through the grassy ditch before fishtailing onto the gravel road and speeding away.

A few weeks later, agents from the Iowa office of the FBI sat down with DuPont Pioneer representatives for a standing meeting (which itself says something about the importance our law enforcement officials place on our corn) at their corporate headquarters in Johnston, Iowa, a northern suburb of Des Moines.

A DuPont Pioneer executive mentioned the incident and explained that the company enters into exclusive contracts with farmers to grow proprietary and often genetically engineered seeds. The exact genetic sequence of successful seeds is a tightly held secret, worth many millions of dollars.

The DuPont Pioneer field manager had written down the license plate number and handed it over to company security.

Multinational food conglomerates like DuPont Pioneer and Monsanto have sizable security forces and highly efficient investigatory networks. They traced the plates back to a rental car company at the Kansas City airport. Representatives there said the car had been rented by Mo Hailong.

According to court documents, an unnamed vice president and general manager from DuPont Pioneer’s Chinese subsidiary told the FBI he already had reason to believe that Kings Nower Seed was somehow stealing the company’s experimental seeds in order to raise clones for sale to Chinese farmers.

DuPont Pioneer had recently discovered that one of DBN Group’s best-selling corn seed products in China shared genetic sequencing with a male parent line that the company had genetically engineered.

The executive had confronted a DBN Group executive, sarcastically congratulating him on the success of their product. The Chinese executive had allegedly cracked a knowing smile and nodded, which the DuPont executive had taken as a tacit admission. The FBI agreed to investigate.

Four months later, while the FBI was still looking into the Tama incident, a call came into the sheriff’s office in Polk County, Iowa, with a report of three Asian males walking around a cornfield in Bondurant, just outside of Des Moines.

Despite the strangeness of such a call, the responding deputy hurried to the field, approached the men, and took down their names: Mo Hailong Robert (Mo occasionally used the alias Robert Mo), Wang Lei, and Li Shaoming, the CEO of Kings Nower Seed.

The men acknowledged that they were Chinese seed growers but claimed they were there to offer advice to the owner of the farm. When the FBI learned of the report—and recognized Mo’s name—they dispatched an agent from the Omaha field office to interview the farmer. He had never heard of the three men, much less sought their advice. He told the agent he didn’t even know what kind of corn he was growing, other than to say he was under contract to Monsanto.

Soon after, a Monsanto field representative confirmed that this, too, was a test site for a new parent seed the company had under development.

With an emerging picture of what Mo was up to, the FBI began tracking his movements—and soon discovered that he and Wang were intending to travel together to Des Moines for events held in connection with the World Food Prize.

The morning after their arrival, on February 15, 2012, the security team at DuPont Pioneer called the FBI to report “they were confident” (in the words of the subsequent report) that Mo, using an alias and fake corporate affiliation, had joined a delegation visiting their headquarters.

The FBI collected the surveillance video of the tour inside DuPont Pioneer’s research lab and also identified Mo on corresponding security footage from the delegation’s tour of a Monsanto research facility in Ankeny later in the day. That night, agents tracked Mo to a state dinner hosted by Iowa Governor Terry Branstad in honor of Xi Jinping, then the vice president of China and now the president.

The next day, Mo and Wang went together to a sports bar near the hotel where they were staying in the Des Moines suburbs. They met up with Xaoming Bao, a Chinese seed executive and former DuPont Pioneer employee whose wife was employed by the company as a corn-genetics researcher.

FBI investigators could now demonstrate that Mo had, on two separate occasions, sought to obtain experimental seeds by collecting them from secret test sites, and furthermore, it appeared he had gained the information about how to find those locations by working with corporate insiders.

The FBI also discovered that while he was in Iowa, Mo had shipped hundreds of pounds of packages from a West Des Moines UPS location to his home in Boca Raton. The contents listed on the tracking sheet: “corn samples.”


Image above: Drought-resistant corn hybrids on display at a DuPont Pioneer sales center near Cairo, Nebraska. From original article.

The theft of high-performing corn seeds from a competitor’s fields is as old as the cultivation of corn. “They say that a good plant breeder always had lots of pockets,” said Donald J. Lee, a professor and plant geneticist in the department of agronomy and horticulture at the University of Nebraska–Lincoln. “And when he would go visit his neighbor’s plant breeding fields, they always came back full.”

Until recently, farmers were their own seed providers. Lee told me his grandfather, a farmer in Iowa a century ago, would select ears from each harvest to provide the seed for planting the next year. He recorded the quality of his yield, slowly identifying a set of seed characteristics that seemed to produce the best crop. In those days, it was not unusual for family and friends to share seed stock.

 “Maybe a neighbor would say, ‘Hey, I really did good with this seed that I got from a cousin in eastern Iowa. You should try a little of this,’” Lee said. “But they were all open-pollinated populations, so those seeds were not genetically identical. In fact, probably every seed was genetically distinct.”

So much genetic variability meant that farmers like Lee’s grandfather would cross two varieties and get large, robust ears one year, only to find that the same two varieties produced scraggly cobs with missing kernels and dead tips the next. “So if you take a look at the historic yields of corn in Iowa and Nebraska during the teens, the twenties, the thirties—it’s flat,” he said.

That all changed with the arrival of Henry A. Wallace, the founder of Pioneer Hi-Bred Seeds, who Lee described as “the Bill Gates of the seed industry.”

Wallace, the son of the longtime president of the Cornbelt Meat Producers, first encountered the problem of genetic variation while studying corn breeding at Iowa State Agricultural College.

Rediscovering Gregor Mendel’s groundbreaking research on pea pods, Wallace had the key insight that the only solution to producing hearty corn hybrids was to first create genetically pure inbred varieties that could be used as “parents” year after year.

Wallace initially worried that such an approach “was probably impractical because of the difficulty of doing the hand-pollinating work,” but he was won over by a paper published in 1918 by Donald Jones, a chemist at the Connecticut Agricultural Station’s experimental farm. Jones had successfully inbred two separate varieties of corn and then crossed them to produce a durable, high-performing hybrid.

Wallace recognized that this was the key to creating seed corn with consistently higher yields, but the old problem remained: Producing these hybrids would be far too complex for the average farmer to undertake alone.

Wallace began to envision an organized way of breeding and distributing high-performing corn seed to farmers across the Midwest. A man of unusual commitment to the common good, he wrote a friend that he did not consider himself a corn breeder but rather “a searcher for methods of bringing the ‘inner light’ to outward manifestation.”

So Wallace at first conceived of a nonprofit organization, potentially run with government cooperation and even public funding. In 1921, his father, Henry C. Wallace, was appointed secretary of agriculture and might have helped spearhead such an effort.

But after his father died unexpectedly at age 58 and Calvin Coolidge settled into the laissez-faire years of his presidency, Wallace saw little chance of an ambitious national program gaining traction. He decided instead, in May 1926, to start the Hi-Bred Corn Company—the world’s first hybrid seed producer.

To interest farmers, Roswell Garst, Wallace’s lead salesman, who later became a major seed producer in his own right, went from one farm to the next, across 16 counties in western Iowa, giving away enough eight-pound sample bags of Hi-Bred seeds for farmers to plant half their fields.

Whatever additional yield the hybrid corn produced, Pioneer would split fifty-fifty with the farmer. After several years, farmers realized that they would see greater profits by simply buying the bags of seeds, instead of sharing the surplus yield with the company.

Those shared harvests produced something even more valuable than profit for the young company: information about how the seeds performed under different growing conditions. Wallace directed a sizable chunk of his revenue back into research, hiring a team of new corn breeders to devise still more hybrids.

In the early 1930s, Perry Collins, one of Wallace’s researchers, developed Hybrid 307—the first corn specifically developed and marketed for drought-resistance, hitting seed dealerships just as the country spiraled into the Dust Bowl.

And when Wallace was, like his father, appointed secretary of agriculture, by Franklin Roosevelt in 1933, he finally had the resources to nationally evangelize for hybrid seed, which he believed had the potential to rescue the nation from the Great Depression.

The transformation that followed was staggering. When Wallace joined Roosevelt’s cabinet, less than 1 percent of America’s corn came from hybrid seeds. A decade later, more than three-quarters of all corn was grown from hybrids—nearly doubling the national per-acre yield over the next 20 years.

To keep this record output from depressing corn prices, Wallace created the “ever-normal granary,” under which the federal government would establish a federal grain reserve.

In years of high production, the Department of Agriculture would buy corn and store it to keep prices up. In years of crop loss, the government would release the reserve to keep prices down. Wallace’s plan was hugely popular, stabilizing American food prices—and winning him a spot as FDR’s running mate in 1940.

But Wallace’s remarkable Hi-Bred Corn had one significant drawback: It consumed far more nitrogen compounds from the soil than ordinary corn—more, in fact, than almost any other crop. During the war years, the government solved the problem by simply putting more acres into production, but after World War II, the Department of Agriculture found a different solution.

Giant chemical manufacturers, like DuPont and Monsanto, had secured wartime defense contracts to produce ammonia nitrate and anhydrous ammonia to make bombs and other munitions. They had developed an herbicide known as 2,4-D as a potential destroyer of German crops and manufactured the insecticide DDT to prevent the spread of typhus-carrying lice among GIs.

As soon as the war was over, DuPont turned to marketing those same chemicals for lawn and garden use as fertilizer, weed killer, and DuPont 5% DDT Insect Spray. Company advertisements from the period touted their products as “Better Things for Better Living … Through Chemistry.”

But gardens were just the tip of the iceberg. DuPont, along with other giant chemical manufacturers like Dow and Monsanto, teamed up with the grain cartels, including Cargill and Archer Daniels Midland, to lobby for congressional support for producing these compounds as large-scale agri-chemicals.

In 1953, the industry found its greatest ally, when Ezra Taft Benson took over as President Dwight D. Eisenhower’s Secretary of Agriculture. (Wallace, by then, had retired from public life. He was briefly the editor of the New Republic before making a failed bid for the presidency in 1948.)

Benson, a high-ranking member of the Mormon Church and a fanatical Red Scare Republican, immediately informed Eisenhower that he was philosophically opposed to the government price supports developed by Wallace, because, to his mind, they were tantamount to socialism. He publicly referred to small farmers as “irresponsible feeders at the public trough.”

Foreshadowing today’s aggressive, pro-corporate agricultural policies, Benson argued that the only way to outcompete the collective farms of the Soviet Union and Red China was to use our superior corn and chemical technology to the fullest.

The United States could, if it chose, overproduce corn to drive down international prices, and it could use the surplus as a tool of diplomatic leverage in the form of foreign aid. Instead of guns, the United States began to give our allies grain—transforming, for the first time, a food product into a weapon in the national arsenal. The only problem was that by effectively militarizing American agriculture, Benson made agri-tech a target for foreign spying.

In April 2012, Mo flew from his home in Florida to O’Hare International Airport and rented a car. An FBI surveillance team followed him as he drove along back roads through rural Illinois and northern Indiana. After about a week of this, Mo stopped one day at a farm near Monee, Illinois, advertising DuPont Pioneer seeds for sale.

The farmer there later told the FBI that Mo had asked about what types of corn and soybeans he could buy, explaining that he had purchased 40 acres nearby and was planning to plant the property. The surveillance team followed Mo to a farm about 15 minutes west of Monee, where, a review of property records soon revealed, Kings Nower Seed had purchased a parcel for $600,000 only the month before.

As agents watched Mo crisscross the Midwest, stopping at seed stores to inquire about different products, they began to suspect that he planned to plant the Illinois acreage by hand. Donald J. Lee, the University of Nebraska professor, compares stealing parent seeds to obtaining programming code without knowing what application it is intended for or what operating system it’s meant to run on.

Likewise, knowing the genetic structure of a corn seed is just one part of the problem. “You don’t know the importance of those genes, unless you have yield data,” said Lee. “When did the plant mature? What’s its development profile? How did it respond to such-and-such disease?” This is what Mo appeared to be doing: setting up his own covert test farm, one that he could oversee personally.
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FBI surveillance teams followed Mo to Crossroads Ag, a DuPont Pioneer seed dealer in Dallas Center, Iowa, and observed him loading bags of seeds into his trunk. When investigators questioned the owner, he said Mo paid in cash—more than $1,500—for six bags of Pioneer Hi-Bred corn seeds.

He said Mo had been purchasing seed there for two years, always asking for DuPont Pioneer’s “latest products,” but this year he had arrived with a detailed list.

The owner had told Mo that he wasn’t supposed to sell him some of the specific products he was asking for, unless he had a contract agreement with DuPont Pioneer, which the owner knew he didn’t.

The next day, FBI surveillance watched Mo repeat the process, buying six bags of DeKalb brand seed corn, a Monsanto product, at MFA Agri Services in Pattonsburg, Missouri.

Finally, the team followed Mo back to Adel, Iowa, where Mo unloaded some of the seed bags at a storage facility before driving on to the farm in Illinois where the remaining bags were unloaded and, the FBI believes, seeds may have been planted.

About one out of every 200 seeds in a bag of hybrid corn seed is a parent, which can be identified by planting the bag and then collecting kernels from whichever plants look different from the rest.

Investigators believe Mo may have been collecting some parent seeds this way.

Later, when Mo and two DBN Group employees attempted to FedEx the remaining corn seeds to an associate in Hong Kong, the FBI intercepted the packages and conducted a search of the five boxes. Each contained eight or nine gallon-sized baggies filled with seed corn, along with a handwritten numerical code identifying each hybrid.

The FBI has not revealed exactly when they applied to a FISA court for more broad-ranging investigatory powers, but the FBI’s court filings show that their information on Mo and his associates became much more detailed after meetings with DuPont Pioneer executives over the summer.

Top executives told agents that “the loss of an inbred line of seed would result in losing approximately five to eight years of research and a minimum of $30 to $40 million dollars, potentially much more.”

After that, the FBI tapped the men’s mobile phones and tracked Mo’s bank records. They collected their email from Yahoo, Google, and Hotmail, corporate documents from DropBox, and thousands of files from Mo’s Apple iCloud account. The FBI used Mo’s mobile phone to track his movements, bugged his rental cars to eavesdrop on his conversations, and installed a video camera outside the storage unit in Adel.

To exercise such investigatory power, the FBI had to argue that Mo was an “agent of a foreign power”—or, in other words, to persuade a judge that Mo might be acting on behalf not just of DBN Group but at the direction of the People’s Republic of China.

With that, the FBI had the authority to treat Mo as if he were the leader of a state-sponsored Chinese spy ring. (Klinefeldt, the U.S. attorney prosecuting the case, was evasive about whether that suspicion proved substantive. “When you start an investigation,” he said, “you don’t know exactly where it will lead.”)

FBI investigators soon got the explicit evidence they needed to make arrests. Over a listening device installed in an Enterprise rental car, the surveillance team recorded a bizarre and inept conversation between two of Mo’s associates from DBN Group, Lin Yong and Ye Jian.

In the translated transcript, submitted as part of the government’s case, the two men are consumed by worry that they are being followed and about the charges they could face if caught. So, as they drive around rural Illinois looking for DuPont Pioneer and Monsanto test fields from which to steal, they begin making a list of the crimes they have committed.

After some back and forth, they come up with trespassing for every time they have slipped onto private property, larceny for the seeds and ears they have been stealing from the fields, and multiple violations of intellectual property protections.

“These are actually very serious offenses,” Lin says.

“They could treat us as spies!” Ye interjects.

Lin, exasperated, responds: “That is what we’ve been doing!”

Soon after, with the harvest season nearly complete, Mo seems to have decided it was time to send to China what corn he and his associates had collected. The group drove back to the secret Illinois farm and began discussing how they would divvy up the seeds.

Some would go into checked bags bound for Beijing, others would be carried to a car and driven across the border from Vermont into Canada, and some would go with Mo back to Florida, where he would ship them to China. With tickets booked for departure the following morning, the five men readied their caches of seeds—Li deciding to stash his under packets of Pop Weaver microwave popcorn.

The whole group then piled into a white minivan and drove into Monee to eat at the local Subway. On their way out, one of the men, perhaps Ye, must have stuffed his pockets full of napkins.

When Soviet premier Nikita Khrushchev visited the United States at President Eisenhower’s invitation in 1959, he specifically requested to see only one man: Roswell Garst, the former Pioneer seed salesman for Henry A. Wallace, who was then head of Garst and Thomas Hi-Bred Corn Company. Khrushchev had met Garst once before, when he visited the Soviet Union, and had become obsessed by the potential of hybrid corn. Khrushchev and his wife spent a day at Garst’s farm near Coon Rapids, Iowa.

In his memoirs, Khrushchev later wrote, “Garst gave me an entire lecture on agriculture,” in which he earnestly explained that American farmers had stopped worrying about crop rotation. “Science today considers that approach outdated. And I think so, too,” Garst told the Soviet leader. In past years, planting the same crop repeatedly would have attracted pests and depleted the soil of nitrogen.

“Now there is no such problem. We have herbicides and other such chemical substances that make it possible to combat pests,” Garst said. And there was no longer any need to plant clover or alfalfa to accumulate nitrogen. “It is more profitable for me to buy nitrogen, potassium, phosphorus, in mix form, and add this fertilizer.”

On that same official visit, Ezra Taft Benson led Khrushchev on a tour of the U.S. Agricultural Research Center in Beltsville, Maryland. Benson, in his official remarks, said that there was a “constant give-and-take of information between government scientists and those in private industry,” adding that “we are all working together within the framework of our capitalistic free-enterprise society to benefit our farmers, all our citizens, and people throughout the world.”

He listed hybrid corn first among the achievements of such cooperative efforts and introduced white-coated lab researchers who extolled the virtues of 2,4-D and chemical fertilizers. Khrushchev was unimpressed by a visit he made to a farm owned by President Eisenhower, dismissing it as “not on a scale such as we have at our collective farms and state farms.”

Benson later remembered that Khrushchev bragged, “We won’t have to fight you. We’ll so weaken your economy until you fall like overripe fruit into our hands.” Benson vowed that American farms would outproduce the Soviets through superior chemistry.

By the end of the Eisenhower era, however, environmentalists began to raise concerns about the hundreds of commercial herbicides and pesticides being applied to American crops in quantities totaling hundreds of millions of pounds.

Benson admonished doubters that “abandoning the use of chemicals on farms and in the food industry would result in an immediate decline in the quantity and overall quality of our food supply and cause a rapid rise in food prices paid by the consumer.”

Even when Rachel Carson documented connections between DDT and 2,4-D and elevated incidence rates of rare forms of cancer in Silent Spring, Benson remained unmoved. He is said to have written to Eisenhower wondering “why a spinster with no children was so concerned with genetics,” and then, as if to answer his own question, offered that Carson was “probably a Communist.” (The Eisenhower Presidential Library, for what it’s worth, contains no record of this letter.)

Benson’s war on the “socialist” price supports and farm aid programs instituted by Henry A. Wallace stalled out during the liberal-minded 1960s. But at the advent of the new decade, President Richard Nixon appointed Earl Butz, Benson’s former assistant, to become the new secretary of agriculture.

Butz had grown up on a farm in Indiana and spent 30 years teaching agricultural economics at Purdue before becoming dean of the university’s College of Agriculture. Many small farmers hated him, because he had been such a vocal advocate for turning family farming into big business during the Eisenhower administration. His refrain for those families, famously, was: “Get big or get out.”

Almost as soon as Butz won approval from Congress, he canceled payments for fallow land and urged farmers to “plant fencerow to fencerow,” promising to use the emerging global economy to buttress against low prices. If our supply threatened futures, we would simply go to the world market and use our size and economic might to meet the demand and forge foreign dependence on American food in the bargain. We would defeat the Communists by making them dependent on us to feed themselves.

In January 1972, Butz sold what amounted to our entire grain reserve to the Soviets. The following month, Nixon went to China and brokered a deal with Chairman Mao Zedong, allowing the importation of American corn and securing contracts for American companies to build 13 of the world’s largest ammonia-processing plants for producing fertilizer on Chinese soil.

America’s Communist foes regarded these moves as an agreement not to wage war through food. But Butz discussed these moves in terms of “agri-power,” and stated it plainly: “Food is a weapon.” To open a new front in the conflict, he supported maintaining American food superiority through yet another innovation: bioengineering feed, such as corn and soybeans.

Through the miracle of science, the United States would not only produce more crops than our rivals; we would produce better crops. By 1972, scientists had already developed the ability to cut and splice protein strands in the DNA sequences of bacteria. If they could do the same with plant cells, then they could chemically insert resistance to weeds and insects.

Less than five years later, a team from the University of Washington discovered that a bacterium that causes tumorlike growths on plants did so by inserting its own DNA into the cell nuclei of its host plant. What they had discovered was essentially a natural form of gene splicing. By the 1980s, researchers had devised techniques for removing the bacteria genes and inserting desirable DNA sequences.

The U.S. government recognized this as technology the Soviets and Chinese could not match. Monsanto was also quick to see the market opportunity. The company had grown with the production of 2,4-D and its descendant 2,4,5-T, which were then combined to produce Agent Orange to defoliate forest cover during the Vietnam War.

In 1970, in an effort to come up with an even stronger plant killer, Monsanto chemist John E. Franz hit upon an herbicide called glyphosate, which was marketed under the trade name Roundup and had seen unmatched growth in broadleaf weed control in the agricultural industry.

The only problem with Roundup: It was such an effective herbicide that farmers had to apply it carefully, spraying only early sprouting weeds, to avoid exterminating their crops.

Monsanto’s engineers set about searching for a gene that would allow crops to survive exposure to Roundup. They found it in the wastewater-treatment plant of one of their own glyphosate production plants in Louisiana, where workers had noticed a range of bacteria thriving despite exposure to Roundup—and one, under lab testing, displayed total immunity to glyphosate pesticides.

By 1996, Monsanto had commercially introduced soybeans that had been genetically modified to resist glyphosate—what the company termed “Roundup Ready.”

Next, researchers set to trying to find a genetic-engineering solution to the European corn borer, an insect that inflicted more than $1 billion in losses of corn production in the U.S. and Canada each year. Since the 1960s, endotoxins produced by Bacillus thuringiensis (Bt), a common bacteria found in the soil, had been sold as a commercial microbial insecticide to kill moth larvae.

If the specific DNA that produced Bt toxins could be isolated and spliced into corn genetic sequences, scientists believed they could create an ear of corn that would be lethal to the European corn borer. Soon, that hurdle had been cleared, and Monsanto began looking for a seed partner to market its pest-resistant corn. If it could marry its genetic modifications with Pioneer’s hybrid seeds, Monsanto believed it would have a corn seed with unmatched yield potential.

In the early 1990s, perhaps too eager to demonstrate the effectiveness of its new GMO crops, Monsanto allowed Pioneer to use its biotech to produce Roundup Ready soybeans and Bt corn—asking only for small usage fees and no royalties.

For less than $40 million, Pioneer suddenly had the technology and the sales muscle to move toward genetically modified feed crops, a growth market worth many billions of dollars. Rather than partner with Monsanto, Pioneer became its greatest competitor, entering into a joint venture with DuPont, called Optimum Quality Grains.

In response, Monsanto launched a series of bitter and protracted lawsuits, and eventually, in 1999, Pioneer sold its entire remaining stock to DuPont (thus changing the name to DuPont Pioneer). In 2002, all eleven lawsuits were settled at once—as DuPont Pioneer realized that it had more to gain by paying for Monsanto’s genetics and focusing on capturing the Chinese market.

In the years since, DuPont Pioneer has increased its share of the corn-seed market in China from less than a tenth of a percent to 12 percent. (Monsanto has a 1 percent market share.) DuPont Pioneer has told Chinese officials that they should Americanize their agriculture: consolidate land, plant GMO seed, apply industrial fertilizers, subsidize the sale of planting and harvest equipment.

This way, the company argues, China could dramatically increase its per-acre yield. William S. Niebur, who leads DuPont Pioneer’s operations in China, told the Des Moines Register last year that officials have listened to these recommendations with an “open ear.”

n March 2015, Mo Hailong’s attorneys filed a motion to suppress all evidence gathered from the secret recordings made of Mo and his associates, arguing that the authorization to gather those materials should never have been granted.

In order to legally justify the use of FISA, surveillance must target an “agent of a foreign power,” and the purpose of the surveillance must be to gather “foreign intelligence information.”

Mo’s attorneys argue there is no evidence that Mo is an agent of the Chinese government or that his company is backed by China, so for “the first time in the statute’s history (as far as our research reveals), the [U.S.] government used FISA to investigate a trade secret dispute between two privately owned companies.”

When it comes to the Chinese form of capitalism, the line is undeniably murky. The government has taken a strong hand in recent years in encouraging the growth of China’s agricultural sector.

In 2013, for example, China’s Shuanghui International entered an overvalue bid to buy Smithfield Foods, the world’s largest producer of pork. Under questioning by Congress, Smithfield insisted the purchase came without the urging or backing of the Chinese government.

But after the purchase received congressional approval, Nathan Halverson at the Center for Investigative Reporting discovered that the Bank of China, the state bank of the Chinese government, had approved the $4 billion loan for Shuanghui to purchase Smithfield in a single day—and in China, Shuanghui has touted the support the government is giving them.

In the wake of that purchase, the Chinese government has been actively consolidating the country’s seed companies, which currently number more than 5,000.

This consolidation would centralize research, improving China’s ability to develop its own hybrids to compete with giants like DuPont and Monsanto, and it would also allow China to mimic the field-to-slaughter vertical integration that has given meat producers like Smithfield and Cargill such an advantage in the United States. DBN Group is a notable example of a seed company that is booming thanks to consolidation and government assistance.

Founded in 1994 by seed-tech whiz kid Shao Genhuo, DBN Group has recently acquired more than 30 feed operations from the Chinese government, and the company runs China Farmer University jointly with the Chinese Academy of Agricultural Sciences.

By targeting Mo and his sister Mo Yun as the leaders of the spy ring, the FBI may hope to incriminate Shao (who is married to Mo Yun)—and, ultimately, implicate Chinese agriculture ministers.

But the U.S. government’s argument that the technology behind Roundup Ready soybeans and Bt corn constitutes not just trade secrets but national security secrets is a problematic one.

Companies like DuPont Pioneer and Monsanto like to maintain that they are striving only to feed a burgeoning global population.

Last year, Niebur, of DuPont Pioneer China, asked, “Without China’s food security, how can we ever imagine an effective, realistic, sustainable global food-security system?” But DuPont Pioneer’s goal, of course, is not global food security or feeding the Chinese people, but rather increasing market share and profit by keeping China as a customer.

And the Department of Justice has taken up the argument that such a goal is not only of importance to our economy but a matter of national security, an unsettling conflation of the interests of large corporations with that of the country itself.

Today, it’s estimated that 92 percent of American corn and 94 percent of American soybeans are GMOs, almost all of it produced by Monsanto or DuPont Pioneer, and again, nearly half of the seed sold globally.

Activists in both China and the United States have raised concerns about just two corporations having so much influence over the world food supply, with so little transparency. (Despite repeated requests, DuPont Pioneer declined to participate in this story.)

But these fears, while well founded, miss the larger point of what such companies represent: the intent of the U.S. government to use food as an ever-more powerful point of leverage to wield over large, increasingly hungry nations like China. The prosecution of Mo Hailong and his circle stands as a warning to the Chinese government, issued through its proxy companies.

The ears in the field, the seeds in the ground, even the pollen on the wind, are American-owned and American-protected.

They are available to the world as food only if you agree to our conditions and are willing to pay our price.

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Energy exec sees distributed power

SUBHEAD: Duke Energy Ex-CEO wants to power the world with local distributed clean alternative energy.

By Bill Loveless on on 23 August 2015 for USA Today -
(http://www.usatoday.com/story/money/columnist/2015/08/20/loveless-jim-rogers-duke-energy/32057613/)


Image above: Duke Energy's Oconee Nuclear Plant near Seneca N.C. Duke says a rate increase is needed cover $141 million for safety and security measures at its nuclear station near Seneca N.C. From (http://gsabusiness.com/news/47660/print).

Jim Rogers spent 25 years as the chief executive of electric and natural gas utilities in the U.S., the last seven as head of Duke Energy, the biggest electric power company in the country.

Now, in his retirement from the energy business, Rogers has taken on a new mission: Bringing electricity to the 1.2 billion people in the world who live without it.

In a new book, Lighting the World, Rogers calls for new steps by governments, financial institutions and entrepreneurs to bring light to remote areas in Africa and other regions where flickering candles and dangerous kerosene lamps are often the only options at night.

The book, which publisher St. Martin's Press plans to release Tuesday, lays out a vision that eschews the traditional approach to spreading electricity of constructing large coal, gas and nuclear power plants, and promotes instead a reliance on local production, small-scale connections and alternative forms of energy, such as solar panels, whose costs are coming down.

That may seem surprising coming from someone once responsible for developing and maintaining tens of billions of dollars in generating stations and transmission lines. But Rogers, who stepped down as Duke's CEO in 2013, says it shouldn't be.

"We can't bring electricity to the rural areas of the world using an old-fashioned industrial grid based on building more coal plants and running copper lines from timber pole to timber pole across Sub-Saharan Africa, or running cables underwater to connect the archipelago of Indonesia," Rogers writes. "The environment and financial impediments make that impossible.

Instead, we'll do it with modern technology: solar and other clean energy sources, new kinds of batteries, LED lights, efficient cook stoves and TVs, and plenty of innovations that now are surfacing."

Rogers and his co-author Stephen Williams, offer a number of examples of grass-roots efforts which are slowly introducing solar lamps and small solar-panel systems to villages and homes in Africa, India and other regions. Among them are Solar Sister, which trains women as sales agents for solar systems in Uganda, Tanzania and Nigeria, and Green Villages, which for small fees provides solar lamps in remote parts of India as well as local solar charging stations for cell phones.

Rogers himself is the co-founder of the Global BrightLight Foundation, a non-profit organization that has distributed more than 60,000 combination solar lanterns and phone chargers in eight countries including Rwanda, Uganda, Haiti and Guatemala.

But all of these efforts, while commendable, are insufficient, he says. To scale up the response, Rogers calls for governments in the low-income world to designate locally owned and operated franchises with exclusive rights to sell solar systems and other energy services within specified areas, a move he says would enable private companies to attract the capital necessary to bring electricity to the people.

"What is missing today is the political will to create these franchise areas alongside the state-owned utilities," he says. "As of now, the state-owned enterprises don't have the capital to expand into rural areas. These franchises will let private business raise those funds. There's enough money available in government aid programs, investment capital, and development finance to address the issue."

Rogers criticizes the World Bank, the Overseas Private Investment Corporation and the Obama administration for programs that aim to electrify poor nations, but focus primarily on massive central power stations controlled by state enterprises.

"Right now, the U.S. program, called Power Africa, is only using $1 billion of $7 billion allocated for the program for distributed, renewable generation in rural areas," Rogers says. "I think much more of this money should flow to those underserved areas. We have to convince government agencies that they'll get more bang for every dollar invested in distributed energy generation than from grid-based systems."

Ultimately, the U.S. and other Western nations may learn from electricity innovations in the Third World as they seek solutions to curbing carbon emissions that contribute to climate change, he adds. After all, it's easier to build a new sort of electricity network from the ground up than to overhaul an older, massive system.

"I try to keep the rural poor in mind when I think about power. First, I feel grateful for what we have here in the United States, which became nearly fully electrified back in the 1930s and 1940s, under the federal government's Rural Utilities Service. And second, I feel obligated to help bring electric power to those around the world who don't have it. But I hope to find a way to deliver it that doesn't involve the heavy pollution of power plants, or the complex grid of electrical wires,"

Rogers says;
"It's very clear to me that the system of electric power we have in North America and Europe, which is now being instituted in much of China and India and elsewhere, is not sustainable for the future of the planet. So we're going to have to figure out something else, and soon."

Read more here: http://www.miamiherald.com/opinion/letters-to-the-editor/article31697171.html#storylink=cpy

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WTO vs India's solar energy push

SUBHEAD: WTO ruling against India's solar energy push threatens climate and clean energy.

By Nadia Prupis on August 27 2015 for Common Dreams -
(http://www.commondreams.org/news/2015/08/27/wto-ruling-against-indias-solar-push-threatens-climate-clean-energy)


Image above: Indian woman walks in front of parabolic solar reflectors that can be used to heat water. Photo by Knut-Erik Helle at flickr/cc. From original article.

The U.S. should be applauding India’s efforts to scale up solar energy—not turning to the World Trade Organization (WTO) to strike the program down."

The WTO on Wednesday ruled against India over its national solar energy program in a case brought by the U.S. government, sparking outrage from labor and environmental advocates.

As power demands grow in India, the country's government put forth a plan to create 100,000 megawatts of energy from solar cells and modules, and included incentives to domestic manufacturers to use locally-developed equipment.

According to Indian news outlets, the WTO ruled that India had discriminated against American manufacturers by providing such incentives, which violates global trade rules, and struck down those policies—siding with the U.S. government in a case that the Sierra Club said demonstrates the environmentally and economically destructive power of pro-corporate deals like the Trans-Pacific Partnership (TPP).

"Today, we have more evidence of how free trade rules threaten the clean energy economy and undermine action to tackle the climate crisis," Ilana Solomon, director of the Sierra Club's Responsible Trade Program, said on Thursday. "The U.S. should be applauding India’s efforts to scale up solar energy—not turning to the WTO to strike the program down."

According to Indian media outlet Livemint, the U.S. government
has resorted to similar measures, specifying local content requirements and offering a range of subsidies for promoting its renewable energy sector at the federal, state, regional and local levels.
India spoke repeatedly against the US at WTO’s committee on subsidies and countervailing measures, stating that American subsidy schemes relating to local or domestic content requirements for its solar companies are inconsistent with its global trade obligations.
In addition, Livemint reports, the ruling "goes against the spirit of an agreement signed early this year.... [in which] the two sides agreed to promote clean energy and expand solar energy initiatives."
Regardless, Solomon said, the WTO "needs to get out of the business of hampering climate action in countries around the globe.

The outdated trade rules on the books now and under negotiation in trade pacts including the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership encourage trade in fossil fuels and discourage countries from developing local clean energy capacity."

"These rules simply do not reflect the urgency of solving the climate crisis and stand in the way of clean energy growth," Solomon said.

The Indian government will appeal the decision to the WTO's highest court, the appellate body. It is the second time that the WTO has ruled against India in a case with the U.S., which first brought legal action against the country's food security program in 2014.

The WTO ruled on that case in June, when it decided that the Indian ban on certain foods from the U.S. was "inconsistent with the global norms."


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Retrotopia: Dawn train from Pittsburgh

SUBHEAD: This is the first of a series of posts using the tools of narrative fiction to explore an alternative shape for the future.

By John Michael Greer on 27 August 2015 for the Archdruid Report -
(http://thearchdruidreport.blogspot.com/2015/08/retrotopia-dawn-train-from-pittsburgh.html)


Image above: The Midland Railway offers scenic train rides through Eastern Kansas farmland via vintage railway equipment. From (http://baldwincitychamber.com/midland-railroad).

[Author's note: This is the first of a series of posts using the tools of narrative fiction to explore an alternative shape for the future. A hint to readers who haven't been with The Archdruid Report for long: don't expect all your questions to be answered right away.]

I got to the Pittsburgh station early. It was a shabby remnant of what must once have been one of those grand old stations you see on history vids, nothing but a bleak little waiting room below and a stair rising alongside a long-defunct escalator to the platforms up top.

The waiting room had fresh paint on the walls and the vending machines were the sort of thing you’d find anywhere. Other than that, the whole place looked as though it had been locked up around the time the last Amtrak trains stopped running and sat there unused for forty years until the border opened up again.

The seats were fiberglass, and must have been something like three quarters of a century old. I found one that didn’t look too likely to break when I sat on it, settled down, got out my veepad and checked the schedule for the umpteenth time. The train I would be riding was listed as on time, arrival 5:10 am Pittsburgh station, departure 5:35 am, scheduled arrival in Toledo Central Station 11:12 am.

I tapped the veepad again, checked the news. The election was still all over the place—President Barfield’s concession speech, a flurry of op-ed pieces from various talking heads affiliated with the losing parties about how bad Ellen Montrose would be for the country. I snorted, paged on.

 Other stories competed for attention: updates on the wars in California and the Balkans, bad news about the hemorrhagic-fever epidemic in Latin America, and worse news from Antarctica, where yet another big ice sheet had just popped loose and was drifting north toward the shipping lanes.

While the news scrolled past, other passengers filed into the waiting room a few at a time. I could just make them out past the image field the veepad projected into my visual cortex. Two men and a woman in ordinary bioplastic businesswear came in and sat together, talking earnestly about some investment or other.

An elderly couple whose clothes made them look like they came straight out of a history vid sat down close to the stair and sat quietly. A little later, a family of four in clothing that looked even more old-fashioned—Mom had a bonnet on her head, and I swear I’m not making that up—came in with carpetbag luggage, and plopped down not far from me. I wasn’t too happy about that, kids being what they are these days, but these two sat down and, after a little bit of squirming, got out a book each and started reading quietly. I wondered if they’d been drugged.

A little later, another family of four came in, wearing the kind of cheap shabby clothes that might as well have the words “urban poor” stamped all over them, and hauling big plastic bags that looked as though everything they owned was stuffed inside.

They looked tense, scared, excited. They sat by themselves in a corner, the parents talking to each other in low voices, the kids watching everything with wide eyes and saying nothing. I wondered about them, shrugged mentally, went back to the news.

I’d finished the news and was starting through the day’s textmail, when the loudspeaker on the wall cleared its electronic throat with a hiss of static and said, “Train Twenty-One, service to Toledo via Steubenville, Canton and Sandusky, arriving at Platform One. Please have your tickets and passports ready. Train Twenty-One to Toledo, Platform One.”

I tapped the veepad to sleep, stuffed it in my pocket, got out of my seat with the others, climbed the stairs to the platform. The sky was just turning gray with the first hint of morning, and the air was cold; the whistle of the train sounded long and lonely in the middle distance. I turned to look.

I’d never been on a train before, and most of what I knew about them came from history vids and the research I’d done for this trip. Based on what I’d heard about my destination, I wondered if the locomotive would be a rattletrap antique with a big smokestack pumping coal smoke into the air.

What came around the bend into view wasn’t much like my momentary fantasy, though. It was the sort of locomotive you’d have found on any American railroad around 1950, a big diesel-electric machine with a blunt nose and a single big headlight shining down on the track. It whistled again, and then the roar of the engines rose to drown out everything else.

The locomotive roared past the platform, and the only thing that surprised me was the smell of french fries that came rushing past with it. Behind it was a long string of boxcars, and behind those, a baggage car and three passenger cars.

The train slowed to a walking pace and then stopped as the passenger cars came up to the platform. A conductor in a blue uniform and hat swung down from the last car. “Tickets and passports, please,” he said, and I got out my veepad, woke it, activated the flat screen and got both documents on it.

“Physical passport, please,” the conductor said when he got to me.

“Sorry.” I fumbled in my pocket, handed it to him. He checked it, smiled, said, “Thank you, Mr. Carr. You probably know this already, but you’ll need a paper ticket for the return trip.”

“I’ve got it, thanks.”

“Great.” He moved on to the family with the plastic bag luggage. The mother said something in a low voice, handed over tickets and something that didn’t look like a passport. “That’s fine,” said the conductor. “You’ll need to have your immigration papers out when we get to the border.”

The woman murmured something else, and the conductor went onto the elderly couple, leaving me to wonder about what I’d just heard. Immigration? That implied, first, that these people actually wanted to live in the Lakeland Republic, and second, that they were being allowed in. Neither of those seemed likely to me. I made a note on my veepad to ask about immigration once I got to Toledo, and to compare what they told me to what I could find out once I got back to Philadelphia.

The conductor finished taking tickets and checking passports, and called out, “All aboard!”

I went with the others to the first of the three passenger cars, climbed the stair, turned left. The interior was about what I’d expected, row after row of double seats facing forward, but everything looked clean and bright and there was a lot more leg room than I was used to. I went about halfway up, slung my suitcase in the overhead rack and settled in the window seat. We sat for a while, and then the car jolted once and began to roll forward.

We went through the western end of Pittsburgh first of all, past the big dark empty skyscrapers of the Golden Triangle, and then across the river and into the western suburbs. Those were shantytowns built out of the scraps of old housing developments and strip malls, the sort of thing you find around most cities these days when you don’t find worse, mixed in with old rundown housing developments that probably hadn’t seen a bucket of paint or a new roof since the United States came apart. Then the suburbs ended, and things got uglier.

The country west of Pittsburgh got hit hard during the Second Civil War, I knew, and harder still when the border was closed after Partition. I’d wondered, while planning the trip, how much it had recovered in the three years since the Treaty of Richmond. Looking out of the window as the sky turned gray behind us, I got my answer: not much.

There were some corporate farms that showed signs of life, but the small towns the train rolled through were bombed-out shells, and there were uncomfortable stretches where every house and barn I could see was a tumbledown ruin and young trees were rising in what had to have been fields and pastures a few decades back. After a while it was too depressing to keep looking out the window, and I pulled out my veepad again and spent a good long while answering textmails and noting down some questions I’d want to ask in Toledo.

I’d gotten caught up on mail when the door at the back end of the car slid open. “Ladies and gentlemen,” the conductor said, “we’ll be arriving at the border in about five minutes. You’ll need to have your passports ready, and immigrants should have their papers out as well. Thank you.”

We rolled on through a dense stand of trees, and then into open ground. Up ahead, a pair of roads cut straight north and south across country. Until three years ago, there’d been a tall razor-wire fence between them, soldiers patrolling our side, the other side pretty much a complete mystery.

The fence was gone now, and there were two buildings for border guards, one on each side of the line. The one on the eastern side was a modern concrete-and-steel item that looked like a skyscraper had stopped there, squatted, and laid an egg. As we got closer to it, I could see the border guards in digital-fleck camo, helmets, and flak vests, standing around with assault rifles.

Then we passed over into Lakeland Republic territory, and I got a good look at the building on the other side. It was a pleasant-looking brick structure that could have been a Carnegie-era public library or the old city hall of some midsized town, and the people who came out of the big arched doorways to meet the train as it slowed to a halt didn’t look like soldiers at all.

The door slid open again, and I turned around. One of the border guards, a middle-aged woman with coffee-colored skin, came into the car. She was wearing a white uniform blouse and blue pants, and the only heat she was carrying was a revolver tucked unobtrusively in a holster at her hip. She had a clipboard with her, and went up the aisle, checking everybody’s passports against a list.

I handed her mine when she reached me. “Mr. Carr,” she said with a broad smile. “We heard you’d be coming through this morning. Welcome to the Lakeland Republic.”

“Thank you,” I said. She handed me back the passport, and went on to the family with the plastic bag luggage. They handed her a sheaf of papers, and she went through them quickly, signed something halfway through, and then handed them back. “Okay, you’re good,” she said. “Welcome to the Lakeland Republic.”

“We’re in?” the mother of the family asked, as though she didn’t believe it.

“You’re in,” the border guard told her. “Legal as legal can be.”

“Oh my God. Thank you.” She burst into tears, and her husband hugged her and patted her on the back. The border guard gave him a grin and went on to the family in the old-fashioned clothing.

I thought about that while the border guard finished checking passports and left the car. Outside, two more guards with a dog finished going along the train, and gave a thumbs up to the conductor. A minute later, the train started rolling again. That’s it? I wondered. No metal detectors, no x-rays, nothing? Either they were very naive or very confident.

We passed the border zone and a screen of trees beyond it, and suddenly the train was rolling through a landscape that couldn’t have been more different from the one on the other side of the line. It was full of farms, but they weren’t the big corporate acreages I was used to.

I counted houses and barns as we passed, and guesstimated the farms were one to two hundred acres each; all of them were in mixed crops, not efficient monocropping. The harvest was mostly in, but I’d grown up in farm country and knew what a field looked like after it was put into corn, wheat, cabbages, turnips, industrial hemp, or what have you.

Every farm seemed to have all of those and more, not to mention cattle in the pasture, pigs in a pen, a garden and an orchard. I shook my head, baffled. It was a hopelessly inefficient way to run agribusiness, I knew that from my time in business school, and yet the briefing papers I’d read while getting ready for this trip said that the Lakeland Republic exported plenty of agricultural products and imported almost none. I wondered if the train would pass some real farms further in.

We passed more of the little mixed farms, and a couple of little towns that were about as far from being bombed-out shells as you care to imagine. There were homes with lights on and businesses that were pretty obviously getting ready to open for the day. All of them had little brick train stations, though we didn’t stop at any of those—I wondered if they had light rail or something.

Watching the farms and towns move past, I thought about the contrast with the landscape on the other side of the border, and winced, then stopped and reminded myself that the farms and towns had to be subsidized. Small towns weren’t any more economically viable than small farms, after all. Was all this some kind of Potemkin village setup, for the purpose of impressing visitors?

The door at the back of the car slid open, and the conductor came in. “Next stop, Steubenville,” he said. “Folks, we’ve got a bunch of people coming on in Steubenville, so please don’t take up any more seats than you have to.”

Steubenville had been part of the state of Ohio before Partition, I remembered. The name of the town stirred something else in my memory, though. I couldn’t quite get the recollection to surface, and decided to look it up. I pulled out my veepad, tapped it, and got a dark field and the words: no signal.

I tapped it again, got the same thing, opened the connectivity window and found out that the thing wasn’t kidding. There was no metanet signal anywhere within range. I stared at it, wondered how I was going to check the news or keep up with my textmail, and then wondered: how the plut am I going to buy anything, or pay my hotel bill?

The dark field didn’t have any answers. I decided I’d have to sort that out when I got to Toledo; I’d been invited, after all. Maybe they had connectivity in the big cities, or something. The story was that there wasn’t metanet anywhere in the Lakeland Republic, but I had my doubts about that—how can you manage anything this side of a bunch of mud huts without net connections?

No doubt, I decided, they had some kind of secure net or something. We’d talked about doing something of the same kind back in Philadelphia more than once, just for government use, so the next round of netwars didn’t trash our infrastructure the way the infrastructure of the old union got trashed by the Chinese in ‘21.

Still, the dark field and those two words upset me more than I wanted to admit. It had been more years than I wanted to think about since I’d been more than a click away from the metanet, and being cut off from it left me feeling adrift.

The sun cleared low clouds behind us, and the train rolled into what I guessed was East Steubenville. I’d expected the kind of suburbs I’d seen on the way out of Pittsburgh, dreary rundown housing interspersed with the shantytowns of the poor. What I saw instead left me shaken.

The train passed tree-lined streets full of houses that had bright paint on the walls and shingles on the roofs, little local business districts with shops and restaurants open for business, and a school that didn’t look like a medium-security prison.

The one thing that puzzled me was that there were no cars visible, just tracks down some of the streets and once, improbably, an old-fashioned streetcar that paced the train for a while and then veered off in a different direction. Most of the houses seemed to have gardens out back, and the train passed one big empty lot that was divided into garden plots and had signs around it saying “community garden.” I wondered if that meant food was scarce here.

A rattle and a bump, and the train was crossing the Ohio River on a big new railroad bridge. Ahead was Steubenville proper. That’s when I remembered the thing that tried to surface earlier: there was a battle at Steubenville, a big one, toward the end of the Second Civil War.

I remembered details from headlines I’d seen when I was a kid, and a history vid I’d watched a couple of years ago; a Federal army held the Ohio crossings against Alliance forces for most of two months before Anderson punched straight through the West Virginia front and made the whole thing moot.

I remembered photos of what Steubenville looked like after the fighting: a blackened landcape of ruins where every wall high enough to hide a soldier behind it had gotten hit by its own personal artillery shell.

That wasn’t what I saw spreading out ahead as the train crossed the Ohio, though. The Steubenville I saw was a pleasant-looking city with a downtown full of three- and four-story buildings, surrounded by neighborhoods of houses, some row houses and some detached.

There were streetcars on the west side of the river, too—I spotted two of them as we got close to the shore—and also a few cars, though not many of the latter. The trees that lined the streets were small enough that you could tell they’d been planted after the fighting was over. Other than that, Steubenville looked like a comfortable, established community.

I stared out the window as the train rolled off the bridge and into Steubenville, trying to make sense of what I was seeing. Back on the other side of the border, and everywhere else I’d been in what used to be the United States, you still saw wreckage from the war years all over the place. Between the debt crisis and the state of the world economy, the money that would have been needed to rebuild or even demolish the ruins was just too hard to come by.

Things should have been much worse here, since the Lakeland Republic had been shut out of world credit markets for thirty years after the default of ‘32—but they weren’t worse. They looked considerably better. I reached for my veepad, remembered that I couldn’t get a signal, and frowned. If they couldn’t even afford the infrastructure for the metanet, how the plut could they afford to rebuild their housing stock?

The cheerful brick buildings of Steubenville’s downtown didn’t offer me any answers. I sat back, frowning, as the train rattled through a switch and rolled into the Steubenville station. “Steubenville,” the conductor called out from the door behind me, and the train began to slow.

.

Deflationary Collapse Ahead?

SUBHEAD: We can’t say that no one warned us about the predicament we are facing. Instead, we chose not to listen.

By Gail Tverberg on 26 August 2015 for Our Finite World -
(http://ourfiniteworld.com/2015/08/26/deflationary-collapse-ahead/)


Image above: The photographer, Russell Lee, was on assignment from the Farm Security Administration to document rural life visited a community sharing a meal in Pie Town, New Mexico in the aftermath of the Depression in 1940. From (http://spenceralley.blogspot.com/2010/12/pie-town.html).

Both the stock market and oil prices have been plunging. Is this “just another cycle,” or is it something much worse? I think it is something much worse.

Back in January, I wrote a post called Oil and the Economy: Where are We Headed in 2015-16? In it, I said that persistent very low prices could be a sign that we are reaching limits of a finite world. In fact, the scenario that is playing out matches up with what I expected to happen in my January post. In that post, I said
Needless to say, stagnating wages together with rapidly rising costs of oil production leads to a mismatch between:
  • The amount consumers can afford for oil
  • The cost of oil, if oil price matches the cost of production
This mismatch between rising costs of oil production and stagnating wages is what has been happening. The unaffordability problem can be hidden by a rising amount of debt for a while (since adding cheap debt helps make unaffordable big items seem affordable), but this scheme cannot go on forever.

Eventually, even at near zero interest rates, the amount of debt becomes too high, relative to income. Governments become afraid of adding more debt. Young people find student loans so burdensome that they put off buying homes and cars.

The economic “pump” that used to result from rising wages and rising debt slows, slowing the growth of the world economy. With slow economic growth comes low demand for commodities that are used to make homes, cars, factories, and other goods. This slow economic growth is what brings the persistent trend toward low commodity prices experienced in recent years.

The price of oil dropped dramatically in the latter half of 2008, partly because of the adverse impact high oil prices had on the economy, and partly because of a contraction in debt amounts at that time. It was only when banks were bailed out and the United States began its first round of Quantitative Easing (QE) to get longer term interest rates down even further that energy prices began to rise.

 Furthermore, China ramped up its debt in this time period, using its additional debt to build new homes, roads, and factories. This also helped pump energy prices back up again.

The price of oil was trending slightly downward between 2011 and 2014, suggesting that even then, prices were subject to an underlying downward trend. In mid-2014, there was a big downdraft in prices, which coincided with the end of US QE3 and with slower growth in debt in China.

Prices rose for a time, but have recently dropped again, related to slowing Chinese, and thus world, economic growth. In part, China’s slowdown is occurring because it has reached limits regarding how many homes, roads and factories it needs.

I gave a list of likely changes to expect in my January post. These haven’t changed. I won’t repeat them all here. Instead, I will give an overview of what is going wrong and offer some thoughts regarding why others are not pointing out this same problem.

Overview of What is Going Wrong

  1. The big thing that is happening is that the world financial system is likely to collapse. Back in 2008, the world financial system almost collapsed. This time, our chances of avoiding collapse are very slim.

  2. Without the financial system, pretty much nothing else works: the oil extraction system, the electricity delivery system, the pension system, the ability of the stock market to hold its value. The change we are encountering is similar to losing the operating system on a computer, or unplugging a refrigerator from the wall.

  3. We don’t know how fast things will unravel, but things are likely to be quite different in as short a time as a year.
    World financial leaders are likely to “pull out the stops,” trying to keep things together. A big part of our problem is too much debt. This is hard to fix, because reducing debt reduces demand and makes commodity prices fall further. With low prices, production of commodities is likely to fall. For example, food production using fossil fuel inputs is likely to greatly decline over time, as is oil, gas, and coal production.

  4. The electricity system, as delivered by the grid, is likely to fail in approximately the same timeframe as our oil-based system.
    Nothing will fail overnight, but it seems highly unlikely that electricity will outlast oil by more than a year or two. All systems are dependent on the financial system. If the oil system cannot pay its workers and get replacement parts because of a collapse in the financial system, the same is likely to be true of the electrical grid system.

  5. Our economy is a self-organized networked system that continuously dissipates energy, known in physics as a dissipative structure
    Other examples of dissipative structures include all plants and animals (including humans) and hurricanes. All of these grow from small beginnings, gradually plateau in size, and eventually collapse and die. We know of a huge number of prior civilizations that have collapsed. This appears to have happened when the return on human labor has fallen too low.
    This is much like the after-tax wages of non-elite workers falling too low. Wages reflect not only the workers’ own energy (gained from eating food), but any supplemental energy used, such as from draft animals, wind-powered boats, or electricity. Falling median wages, especially of young people, are one of the indications that our economy is headed toward collapse, just like the other economies.

  6. The reason that collapse happens quickly has to do with debt and derivatives.
    Our networked economy requires debt in order to extract fossil fuels from the ground and to create renewable energy sources, for several reasons:

    (a) Producers don’t have to save up as much money in advance,
    (b) Middle-men making products that use energy products (such cars and refrigerators) can “finance” their factories, so they don’t have to save up as much,
    (c) Consumers can afford to buy “big-ticket” items like homes and cars, with the use of plans that allow monthly payments, so they don’t have to save up as much, and
    (d) Most importantly, debt helps raise the price of commodities of all sorts (including oil and electricity), because it allows more customers to afford products that use them. The problem as the economy slows, and as we add more and more debt, is that eventually debt collapses.

    This happens because the economy fails to grow enough to allow the economy to generate sufficient goods and services to keep the system going–that is, pay adequate wages, even to non-elite workers; pay growing government and corporate overhead; and repay debt with interest, all at the same time.
Where Did Modeling of Energy and the Economy Go Wrong?


Image above: Figure from M. King Hubbert’s 1956 paper, Nuclear Energy and the Fossil Fuels.The way nuclear energy operates seems to me to be pretty much equivalent to the output of a perpetual motion machine, adding an endless amount of cheap energy that can be substituted for fossil fuels. From original article.

A related source of optimism has to do with the shape of a curve that is created by the sum of curves of a given type. There is no reason to expect that the “total” curve will be of the same shape as the underlying curves, unless a perfect substitute (that is, having low price, unlimited quantity, and the ability to work directly in current devices) is available for what is being modeled–here fossil fuels. When the amount of extraction is determined by price, and price can quickly swing from high to low, there is good reason to believe that the shape of the sum curve will be quite pointed, rather than rounded.
    1. Today’s general level of understanding about how the economy works, and energy’s relationship to the economy, is dismally low.
      Economics has generally denied that energy has more than a very indirect relationship to the economy. Since 1800, world population has grown from 1 billion to more than 7 billion, thanks to the use of fossil fuels for increased food production and medicines, among other things. Yet environmentalists often believe that the world economy can somehow continue as today, without fossil fuels. There is a possibility that with a financial crash, we will need to start over, with new local economies based on the use of local resources. In such a scenario, it is doubtful that we can maintain a world population of even 1 billion.

    2. Economics modeling is based on observations of how the economy worked when we were far from limits of a finite world. 
      The indications from this modeling are not at all generalizable to the situation when we are reaching limits of a finite world. The expectation of economists, based on past situations, is that prices will rise when there is scarcity. This expectation is completely wrong when the basic problem is lack of adequate wages for non-elite workers. When the problem is a lack of wages, workers find it impossible to purchase high-priced goods like homes, cars, and refrigerators. All of these products are created using commodities, so a lack of adequate wages tends to “feed back” through the system as low commodity prices. This is exactly the opposite of what standard economic models predict.

    3. M. King Hubbert’s “peak oil” analysis provided a best-case scenario that was clearly unrealistic, but it was taken literally by his followers.
      One of Hubbert’s sources of optimism was to assume that another energy product, such as nuclear, would arise in huge quantity, prior to the time when a decline in fossil fuels would become a problem.

    4. The world economy operates on energy flows in a given year, even though most analysts today are accustomed to thinking on a discounted cash flow basis. 
      You and I eat food that was grown very recently. A model of food potentially available in the future is interesting, but it doesn’t satisfy our need for food when we are hungry. Similarly, our vehicles run on oil that has recently been extracted; our electrical system operates on electricity that has been produced, essentially simultaneously. The very close relationship in time between production and consumption of energy products is in sharp contrast to the way the financial system works. It makes promises, such as the availability of bank deposits, the amounts of pension payments, and the continuing value of corporate stocks, far out into the future. When these promises are made, there is no check made that goods and services will actually be available to repay these promises. We end up with a system that has promised very many more goods and services in the future than the real world will actually be able to produce. A break is inevitable; it looks like the break will be happening in the near future.

    5. Changes in the financial system have huge potential to disrupt the operation of the energy flow system.
      Demand in a given year comes from a combination of (wages and other income streams in a given year) plus the (change in debt in a given year). Historically, the (change in debt) has been positive. This has helped raise commodity prices. As soon as we start getting large defaults on debt, the (change in debt) component turns negative, and tends to bring down the price of commodities. (Note Point 6 in the previous section.) Once this happens, it is virtually impossible to keep prices up high enough to extract oil, coal and natural gas. This is a major reason why the system tends to crash.

    6. Researchers are expected to follow in the steps of researchers before them, rather than starting from a basic understudying of the whole problem.
      Trying to understand the whole problem, rather than simply trying to look at a small segment of a problem is difficult, especially if a researcher is expected to churn out a large number of peer reviewed academic articles each year. Unfortunately, there is a huge amount of research that might have seemed correct when it was written, but which is really wrong, if viewed through a broader lens. Churning out a high volume of articles based on past research tends to simply repeat past errors. This problem is hard to correct, because the field of energy and the economy cuts across many areas of study. It is hard for anyone to understand the full picture.

    7. In the area of energy and the economy, it is very tempting to tell people what they want to hear.
      If a researcher doesn’t understand how the system of energy and the economy works, and needs to guess, the guesses that are most likely to be favorably received when it comes time for publication are the ones that say, “All is well. Innovation will save the day.” Or, “Substitution will save the day.” This tends to bias research toward saying, “All is well.” The availability of financial grants on topics that appear hopeful adds to this effect.

    8. Energy Returned on Energy Investment (EROEI) analysis doesn’t really get to the point of today’s problems.
      Many people have high hopes for EROEI analysis, and indeed, it does make some progress in figuring out what is happening. But it misses many important points. One of them is that there are many different kinds of EROEI. The kind that matters, in terms of keeping the economy from collapsing, is the return on human labor. This type of EROEI is equivalent to after-tax wages of non-elite workers. This kind of return tends to drop too low if the total quantity of energy being used to leverage human labor is too low. We would expect a drop to occur in the quantity of energy used, if energy prices are too high, or if the quantity of energy products available is restricted.

    9. Instead of looking at wages of workers, most EROEI analyses consider returns on fossil fuel energy–something that is at least part of the puzzle, but is far from the whole picture.
      Returns on fossil fuel energy can be done either on a cash flow (energy flow) basis or on a “model” basis, similar to discounted cash flow. The two are not at all equivalent. What the economy needs is cash flow energy now, not modeled energy production in the future. Cash flow analyses probably need to be performed on an industry-wide basis; direct and indirect inputs in a given calendar year would be compared with energy outputs in the same calendar year. Man-made renewables will tend to do badly in such analyses, because considerable energy is used in making them, but the energy provided is primarily modeled future energy production, assuming that the current economy can continue to operate as today–something that seems increasingly unlikely.

    10. If we are headed for a near term sharp break in the economy, there is no point in trying to add man-made renewables to the electric grid.
      The whole point of adding man-made renewables is to try to keep what we have today longer. But if the system is collapsing, the whole plan is futile. We end up extracting more coal and oil today, in order to add wind or solar PV to what will soon become a useless grid electric system. The grid system will not last long, because we cannot pay workers and we cannot maintain the grid without a financial system. So if we add man-made renewables, most of what we get is their short-term disadvantages, with few of their hoped-for long-term advantages.
    Conclusion
    The analysis that comes closest to the situation we are reaching today is the 1972 analysis of limits of a finite world, published in the book “The Limits to Growth” by Donella Meadows and others. It models what can be expected to happen, if population and resource extraction grow as expected, gradually tapering off as diminishing returns are encountered. The base model seems to indicate that a collapse will happen about now.


    Image above: Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil”(http://www.esf.edu/efb/hall/2009-05Hall0327.pdf). Marker at current date 2015 shows many necessities peaking as resources diminish.

    The shape of the downturn is not likely to be correct in figure above.  One reason is that the model was put together based on physical quantities of goods and people, without considering the role the financial system, particularly debt, plays. I expect that debt would tend to make collapse quicker. From original article.

    Also, the modelers had no experience with interactions in a contracting world economy, so had no idea regarding what adjustments to make. The authors have even said that the shapes of the curves, after the initial downturn, cannot be relied on. So we end up with something like Figure 6, as about all that we can rely on.

    If we are indeed facing the downturn forecast by Limits to Growth modeling, we are facing  a predicament that doesn’t have a real solution. We can make the best of what we have today, and we can try to strengthen bonds with family and friends.

    We can try to diversify our financial resources, so if one bank encounters problems early on, it won’t be a huge problem. We can perhaps keep a little food and water on hand, to tide us over a temporary shortage. We can study our religious beliefs for guidance.

    Some people believe that it is possible for groups of survivalists to continue, given adequate preparation. This may or may not be true. The only kind of renewables that we can truly count on for the long term are those used by our forefathers, such as wood, draft animals, and wind-driven boats.

    Anyone who decides to use today’s technology, such as solar panels and a pump adapted for use with solar panels, needs to plan for the day when that technology fails. At that point, hard decisions will need to be made regarding how the group will live without the technology.

    We can’t say that no one warned us about the predicament we are facing. Instead, we chose not to listen. Public officials gave a further push in this direction, by channeling research funds toward distant theoretically solvable problems, instead of understanding the true nature of what we are up against.

    Too many people took what Hubbert said literally, without understanding that what he offered was a best-case scenario, if we could find something equivalent to a perpetual motion machine to help us out of our predicament.

    .