Foodprints of feudalism

Over the ages, food and agriculture have always left indelible impacts on politics, cultures and even the ecosystems. As we are about to enter a new age of fractured living, a look back at the age of feudalism can help us prepare for the bleak days ahead. In the days prior to the Agricultural Revolution, which was a precursor to the Industrial Revolution, upwards of 80% of the population had been engaged in food production, specifically in agriculture. So a knowledge of past food production would provide us with the ability to understand why political systems or cultures evolved the way they did.

A major impact of food production on the environment, as detected by the anomalous increase in CO2, began way back 8,000 years ago when humans began clearing European forests on a large scale for agriculture. This was followed by an increase in methane 3,000 years later when the Chinese grew wetland rice. Fast forward another 2,500 years, Ancient Athens ushered in democracy, not in a small way a consequence of its smallholding farmlands. Their owners, with important stakes in the wealth generation and accumulation of the economy, esteemed freedom and property rights. In the same vein, Ancient Rome had started off as a democratic republic, only gradually turning into an emperorship after its small farmlands were acquired by the big land owners who consolidated them into latifundia.

On the opposite extreme of the Eurasia land mass, the need to cultivate rice in a cooperative manner but under the direction of a strongman has resulted till today in the prevalence of social constraints in the East Asian societies though each with its own unique character. The Chinese valued a strong central authority while the Japanese, decentralised authority residing in a few chiefs, a carryover from the daimyō of its feudal days. South Korea has the added twist of regional factionalism reflective of its rule under the Three Kingdoms that lasted around 600 years while its sibling North has always been under strong authoritarian rule bolstered by pervasive neighbour-on-neighbour snooping. In all cases, the people rally around personalities rather than issues. Till today you can observe these in their respective politics despite the veneer of democracy slapped on some of them. For the West to preach its version of democracy reflects a poor understanding of regional history.

The Athens and Greek models involving individual farming led to the increasing concentration of wealth by a minority few. It is not a recent phenomenon; it's a pattern that always unfolds towards the end cycle of an economic wave. Ancient Rome could sustain itself for so long despite the skewing wealth accumulation was due to its continual conquests. And of course, events in the ancient era moved at a snail's pace.

However to link Ancient Athens and Rome with the democracy prevailing in the western world is a bit far-fetched. Democracy was resurrected in the western world because it had early exposure to the Industrial Revolution. The link between the democracies of the ancients and the moderns only exists in the figment of those have always wanted to imagine it so since more than 1,900 years had passed before democracy made a comeback.

The collapse of the Western Roman empire greatly devastated Western Europe that it took more than three centuries before Charlemagne ascended the throne in AD 768 and began the task of reconsolidating the region. The interregnum was aptly known as the Dark Ages. No much literature exists to document the agriculture of this period.

Much of what is known about this period is that agriculture gave in to reforestation. The fall in agricultural yields was attributed to the cold period lasting from AD 300 to AD 700 (we should be careful with what we wish for with regards to global warming.) What was left of agriculture was just subsistence level farming. Rural life replaced urban life. Trade disappeared and Roman roads fell into disuse. Invasions from the Germanic tribes destroyed trade routes and town centres. With the absence of a hegemonic power and the existence of many barbarian kingdoms, violence was endemic (now you know why we still need a superpower regardless of which side it is on.) Simple artifacts of civilisation, such as bricks, glass and pottery stopped being produced.

It is hard to tell which is the root cause but the most plausible would have been the cold period with agriculture in a strong supporting role. As agriculture yields fell, it became difficult for the formation of a strong government, which always needed surpluses from agriculture to support itself. Also there was no necessity for trade without surpluses. So overland trade routes, which needed funds for upkeep, were left to decay. Even sea trade was minimal as evidenced by the small number of shipwrecks dated around this period. Cities, which had always depended on the countryside to supply them food and migrants up until the 18th century, fell into ruin when their lifeline stopped.

Almost as the final nail in the coffin, a bubonic plague struck Europe, North Africa, Persia and Arabia in 542, raging intermittently for 200 years. About half of the population in the affected regions perished. In that vacuum, Islam rose at the most opportune time. In time, it has become one of the most powerful religions but the literature on the military strategies and political and economic administration of the Prophet and his successors has been woefully lacking in the details in contrast to those of the western leaders. Whatever has been written does not do justice since it does not square with the spread of Islam in so short a time and so large an area.

The rise of Charlemagne coincided with the end of the Dark Ages Cold Period. That made possible Charlemagne's reconsolidation of Western Europe after a lapse of more than 300 years dating from the collapse of the Roman empire. Charlemagne was a brilliant statesman who understood the keys to running successful military campaigns as well as administering an empire. He was one of the rare few who grasped the essentials of the 4Cs of capacity, consumption, communication and currency. His legacies should have been required reading for the current crop of flustered euro leaders.

As regards the agricultural innovations during Charlemagne's reign, two worthy of note are the heavy mould-board plough and the use of the three-field rotating system, that is, in a year one field left fallow for every two planted. The plough was suitable for the northern Europe heavy wet clay and loam soils. By improving drainage, the plough enabled the farmers to reclaim previously unusable water-logged areas for farming. However the plough was expensive and pulling it required at least six oxen. It also required sufficient space for turning. So the farmers had to pool their resources together and cultivated in common.

The three-field rotation which replaced the Roman two-field rotation reduced the fallow period from a half to a third. Combined with increased fertility as a result of legume planting, productivity increased by 50%. The risk of crop failure was reduced as the two planted fields had different planting and harvesting seasons: wheat sown in fall and harvested in summer, and oat or barley interspersed with legumes sown in spring and harvested in fall.

After Charlemagne's death, his empire was split into three among his progeny. During his reign, Charlemagne had sown the seed of feudalism. He had rewarded his nobles with land grants. The nobles in turn redistributed them to knights under their keep so that they could generate the needed economic output to equip them with spare horses, attendants, trainee knights and iron armour. All in all, 500 people were required to support a knight. The knights on horsebacks were the key to Charlemagne's battlefield successes, they were the equivalent of modern day battletanks.

Charlemagne's successors couldn't hold the empire intact as Charlemagne hadn't relied heavily on taxes to finance his empire-building, instead depending on his substantial crown properties to generate his income. The lack of tax income combined with the splitting empire to produce weak rulers.

Knights took advantage of the weak power at the centre to create their own fiefdoms, living in well secured castles, in an arrangement known as feudalism. Power now was diffuse. It shouldn't have been a peaceful time as the absence of a central power meant that everybody was fair game for depredation. But it didn't happen. Instead the papacy launched the crusades against the Muslims in the Holy Land. One of the benefits of the the crusades was to divert the fighting inclinations of the knights to foreign lands. Western Europe also benefited from the medieval warming period from AD 900 to AD 1300 in which Europe produced larger harvests. The building of Europe's great cathedrals bore witness to the prosperity of this period.

Innovations in agriculture continued with the introduction of the nailed horseshoe, the necklace harness and the harnessing arrangement. The horseshoe minimised foot rot and wear and tear of the hooves. The necklace harness no longer restricted the horse's breathing when pulling a load. These two innovations enabled horses to replace oxen as draught animals. The new harnessing arrangement which changed from the side-by-side for ox-teams to one behind the other for horse-teams, amplified the pulling power of the horse-teams. A pair of horses could replace two pairs of ox-teams despite the fact that the horse's strength was less than that of the ox. In addition, the horse could perform the task with greater speed and endurance.

The horse however was one of the catalysts that would see to the end of feudalism. As horses became more prevalent, people became more mobile. So markets and towns expanded as peasants surplus to the manors' needs could find employment in towns. The agricultural surpluses enabled them to become specialised artisans, such as spinners, weavers, butchers, smiths, builders and so on. Improvements in transportation in the 12th century comprising moveable front axles for carts, four-wheel wagons, better brakes and the new harnessing as that used in agriculture sextupled the load that can be pulled by the horses.

The population of the medieval ages was also on the increase; from 1000 to 1340, Western Europe's population almost tripled, from 12 million to 35.5 million. Initially, the increase was absorbed by the expanding agricultural land. The crusades also absorbed part of the population increase. However it was the growth of town and cities that eventually accommodated the burgeoning population. From the 11th to the 13th century, the amount of agricultural land in northwest Europe more than doubled.

The trading of the surplus agriculture and craft production presupposed the availability of money. Prior to the rise of trade, life in a lord's manor did not require money, and not even barter. There simply was no trading within the manor. The serfs paid their dues to their lord in kind, wheat in the case of Western Europe, rice in the case of Japan. The lord used the surplus to trade for salt and iron. Otherwise the manor produced all the things that it needed. However, as trade grew, large silver strikes in Germany, Bohemia, Hungary and Sardinia in the 12th and 13th century provided the raw material for coin minting. But note that the silver content in the coins was never consistent. It wasn't the silver that provided the credence to money but the sovereign strength backing the coin.

Sovereign states were in ascendant with the growth of towns. Townsmen contributed tax monies to the king in return for guarantees of protection against the feudal lords. It was taxation that gave value to money. Some towns became prosperous on the back of trade fairs. To obviate the need to carry large sums of money, traders at the fairs exchanged letters of credit or bills of exchange. This then led to the imposition of usury in the 13th century. It was a logical progression. Interest, that is, the price of money, is needed to ensure that money is used profitably. Zero interest rate is self defeating as it encourages wasteful utilisation of fund.

Despite the prosperity experienced, dark clouds began to gather over the horizon. The crusades ended in the 13th century after the last Christian invaders had been evicted from the Holy Land. Western Europe had also reached the limits of population growth as no more new lands could be cleared for agriculture, and technological achievements in agriculture had reached saturation point. Overpopulation began to outstrip food production. The Little Ice Age, lasting from 1315 to 1720, reduced large areas of formerly fertile land. Again, like the affliction that struck Europe in the 6th century, the bubonic plague came back, this time leaving a third of Europe's population dead. Lacking manpower, the lords, faced with increasing labour costs rented out their lands to the serfs. The serfs, now able to sell their agricultural produce, had the financial incentive to produce more.

The knights were increasingly marginalised as more of the newly created wealth went to the merchants. Those that held out were eventually forced to give up their old ways with the coming of two new military technologies - the long bow and gunpowder - in the 15th century. The French sovereign, for example, towards the end of the 100-year war with the English king forced the submission of the occupants of 60 castles in northern France in four days with the help of cannons.

Meanwhile, in Japan, secure with the Sea of Japan as a natural barrier, feudalism continued until the second half of the 19th century. The growth of towns enticed the peasants from the lord's estate (han) and the growth of money economy shifted wealth to the merchants. Taxes paid to the imperial government enabled the restoration of the Meiji emperor and the downfall of the shogun. The coup de grâce was delivered in 1877 when the conscript army defeated a rebellion by the samurai, the Japanese equivalent of the medieval knights. Although Japan has modernised greatly since then, Japanese mindsets and social relations still bear traces of feudalism.

There are many useful lessons that we can glean from the feudalistic way of life. Authoritarian rulers who wish to maintain continuous rule must keep restricting the mobility of their subjects which also means that money supply must be limited. North Korea has managed this well while China which has transgressed this rule is likely to suffer from an extreme internal implosion. Once, the economy is liberalised, politics is at the beck and call of the economy. As it is, every successive wave of China's new leaders appears to be weaker and weaker compared to their predecessors. Of course, North Korea has been suffering from economic deprivation but their leaders are in a stronger position relative to those of China.

Second, innovations that affect the 4Cs, however innocuous they may appear initially, are destined to shake at the core of politics and economics. In the medieval ages, it took ages but in our current Kondratieff Wave, 60 years is the lifespan of one wave.

Third, in an era before the Age of Exploration, climate played a crucial role in determining the economic fortune of a nation-state, the more so because climate took hundreds of years before it reversed course. In fact climate qualifies to be a sub-component of the 4Cs capacity leg. Only in our post-Industrial Revolution age, was climate a non-issue because all the while we've been benefiting from the warming climate except from the 1980s onwards when Lady Thatcher began foisting the global warming scare on us.

The coming of age of nanotechnology and biotechnology in the Fifth Kondratieff Wave will see to the breakup of the US and most nation-states. As a major superpower collapses, tribes will start forming. Each tribe can attain self-sufficiency with the help of the two emergent technologies. Do we still need money when nation-states have ceased to exist? Probably not except for small sums for trifling exchange. Money without sovereign backing will not have the cachet that will stand it in good stead regardless of how much silver or gold backing it.

End This Delusion Now!

The signs of a capitulating economy are percolating. The Occupy movement is restarting its protest occupation. Professor Paul Krugman, who has recently criticised Ben Bernanke for not doing more to reinvigorate the economy, has just come out with his new book "End This Depression Now!"

At last a figure of high regard in the economics profession now admits that we're about to enter a depression.  But Krugman himself still doesn't completely grasp the issue. With Bernanke still blind to the scary situation that's progressively unfolding, Krugman is the one-eyed man in the land of blind economists, meaning he gets only 50% right.

Krugman claims that Bernanke isn't aggresive enough while Bernanke counters that Krugman's inflation promoting suggestion is reckless. At the end of this civilised spat, both remain none the wiser simply because one is nebulous and the other clueless. At the root of the issue is the belief that there is a solution to the crisis. We had three Kondratieff Waves in the past, and their curtain calls were all marked by three depressions.

We might as well beseech God to put a stop to tsunami waves. When the calamity is inevitable, you don't attempt to find a solution; you adapt to the problem. If you knew when a tsunami would strike, you would have put the ships out to sea and moved the residents to higher grounds. Unfortunately, we have yet to discover the means for triggering advance warnings of tsunamis though we can roughly estimate their timing based on a 70- to 100-year cycle. This lack of tsunami early warning indicators is the main reason that many are always caught unprepared.

A Kondratieff Wave is different. We have all the past patterns needed to sense its timing. The symptoms are evident years before disaster strikes. The timing is almost perfectly regular. Now what should we be doing to minimise, mind you, not avert, the impact of the depression? First we need to identify the distinguishing features of an economic depression. Then we'll walk through the depression to see how it reaches its natural conclusion so that we can anticipate the succeeding moves. Our aim is to have minimal surprises. For this post, we'll focus on why the depression is unavoidable and why there's no solution, but only adaptation.

The problems of this depression are essentially two-fold: a drastic fall in money supply and a skewing of wealth distribution. These also happen to indirectly relate to the dual mandate of the Fed, that is, price stability and maximum employment. Contrary to received wisdom, the fall in money supply is merely a symptom, not a cause, of the depression. The true cause of the depression is however the maturing technology drivers of the Kondratieff Wave in which a few producers have cornered the productive capacity. Towards the end of the wave, wealth accumulation is highly skewed resulting in an extreme imbalance between creditors and debtors (see The Wall Street Journal chart above). Even if the first problem is resolved, it will recur as long as we are stuck in the same Kondratieff Wave.

In any case, the symptom must be addressed before all else in order to unfreeze the economy. Even this the policymakers can't even grasp. Tackling the symptom is easy, if only the policymakers had the authoritarian powers to bulldoze the corrective measures through. First they need to understand that the money supply has to fall. Any measures to prop it up will not last long, much like the Japanese sea-walls that were destroyed by the 13-metre sea waves. What we have now is the excess money created during the credit boom years trying to downsize itself so as to be commensurate with the size of the economy.

The intellectually bankrupt policymakers are preventing this fall by creating money in baby steps. With every step forward, they are taking two steps back. There are two solutions but both are unpalatable and therefore, without authoritarian powers, unimplementable. One is to quicken the pace of the money winding down by the forceful large scale write-off of debts. Those with financial savings will terribly suffer. The other is to increase the income level and asset prices superficially by unleashing inflation à outrance, not the 4% suggested by Krugman. With this the underwater loans will refloat and debts can be wiped out. Again the same group of people will suffer but the main beneficiaries in both cases will be the debtors. Without either of these two options, the suffering will be long and excruciating.

Both Bernanke's and Krugman's failing lies in their inability to apprehend the money supply. As money is 98%  credit, Bernanke cannot create money regardless of how much he prints. Bernanke only swaps one form of credit, deposits by the banks with the Fed, with another, treasury bonds and mortgage backed securities (MBS). Even if Bernanke were to print trillions worth of paper money for the banks and forbid them from placing it with the Fed, inflation would still be flat. Why? The banks will sit on the paper money and guard it with Fort Knox-like security. The cost is cheaper than losing money from lending in times of  low repayment prospects. No lending, so no new money, thus minimal inflation.

Bernanke doesn't want to print more money out of his misguided fear that this may lead to runaway inflation. And Krugman is accentuating the confusion by castigating Bernanke for being timid. The funny thing is that both believe high inflation will be the outcome of Krugman's suggestion. Are they teaching voodoo economics at Princeton?

Prices are indeed falling but most people don't notice them because the CPI doesn't include asset prices, but only goods and services. If you factor in all prices, we're already in deflation mode because money is fast drying up. The flow of money is akin to the water cycle. Water in the ocean is not water in the meaningful sense. Only when it circulates through the water cycle, does it benefit the ecosystem. Likewise, money placed with the Fed or stashed under the pillow is dead money and shouldn't be counted towards the money supply. So you can have lots of money yet having zero impact on the economy. Now what do you need to get this money cycle moving?

Again the water cycle analogy helps. First we need to understand why the Sahara which is a desert today used to be a green region with large lakes about 10,000 years ago. William Ruddiman's book, Plows, Plagues & Petroleum, has a fascinating account of the climatic shifts that led to the radical change in the Saharan environment. The root causes of these climatic shifts are the main drivers of global warming and cooling. Fossil fuel is only a recent and to boot a very minor contributor to global warming. In fact, we should be grateful to fossil fuel for without it we would now probably still be in the Little Ice Age, which began as early as 1250 and lasted until 1900, although some would consider 1550-1850 as the real interval. Regardless, it came to an end with the industrial era warming. The coming Fifth Kondratieff Wave, which will yield cheap energy, will see us struggling to get carbon into the atmosphere in order to prevent earth's cooling.

How big the impact of fossil fuel, it's the variation in the sun radiation that actually contributes far more to global warming and cooling. The radiation varies as a result of three astronomical rhythms: the 22,000-year precession cycle, the 41,000-year tilt cycle and the 100,000-year orbital cycle. Precession is the change in the tilt direction of the earth's spin axis. It's like a spinning top, changing the direction in which it leans, progressively until it traces out a complete circle. Note that precession doesn't change the angle of the tilt, only the direction. The tilt cycle is where the earth's tilt angle changes from a maximum of 24.5° to a minimum of 22.2°. The orbital cycle is the cycle in which earth's orbital path changes from elliptical to cyclical. During its elliptical orbit, the earth's distance from the sun is shorter by 5 million kilometres from its average distance of 155 million kilometres.

Over the last 3 million years, the impact of these cycles has gradually resulted in the earth trending towards a more refrigerated state. Only the very recent greenhouse warming has arrested this progress. But of far more interest is the precession cycle since it's the one that has greatly influenced the Saharan environment. This cycle controls the solar radiation at tropical latitudes, which in turn drives the summer monsoons. The maximum radiation arising from this cycle occurred about 10,000 years ago. It so happened that that was when the Sahara desert was green with grasslands and dotted with lakes. Right now, we're at the minimum radiation state.

It seems strange that minimal radiation is associated with desertification whereas maximal radiation with greenery. But you need a strong Sun to heat the land and the overlying air. When the heated air rises, the low pressure left behind by the rising air is filled by moisture-bearing air from the ocean. This air is in turn also heated but this time the moisture condenses as it reaches the upper atmosphere. Clouds are formed, followed by rains in the afternoons and evenings. If the Sun is not strong, the region is devoid of low pressure and the air is dry, hence the present Sahara desert environment.

The man-made fossil fuel global warming is having a relatively small impact and would be easily reversed in the Fifth Kondratieff Wave driven by advances in nanotechnology and biotechnology. Our attempts to do so prematurely during the present Fourth Kondratieff Wave are costly and wasteful of economic resources.

The same goes for our efforts to subvert the downward phase of the Kondratieff Wave. The Sun equivalent for the Kondratieff Wave consists of the capacity and communication technology drivers which in the present wave are computers and the internet. As we are past the halfway mark, these technology drivers are unleashing capacity instead of driving investments. So fewer people are increasingly needed to produce a given level of output.

So a fall in money supply is to be expected. Instead of allowing money to finds its natural level, policymakers are flogging a dead horse by creating more money through government deficits. This slowing down of money contraction coupled with Bernanke's induced low interest rate environment attracted new house buyers, who thought that house prices had hit bottom, towards the end of 2010. Now these buyers are under water, creating more problems instead of solutions that the original stimulus intended.

To adapt to this depression, we need efforts on a collective scale to channel wealth from the well-off to the needy. That's where the consuming demand lies. We don't need more investment since we have more than enough capacity to meet the needs of the world. The spending from the consumption will flow back to the well-off and thus how the wealth cycle like the water cycle works. But as depression rears its ugly head, fear grips everyone's mind. Generosity takes a back seat to selfishness. And everyone will be the loser.