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Heller Ain't No Bad Place to Be
Second Amendment hero Alan Gura continues the legal fight for gun rights
Brian DohertyLast week was the first anniversary of the District of Columbia v. Heller, where the Supreme Court for the first time declared that the Second Amendment indeed protects an individual right to own guns in the home for self-defense. It was a great victory for individual rights, but by no means a final one.
The lawyer who successfully argued that case, Alan Gura, has remained a dedicated opponent of all sorts of gun regulations that still stand post-Heller. Senior Editor Brian Doherty talked to Gura by phone earlier this week about the various legal challenges Gura is fighting against state and local gun laws. (The Second Amendment Foundation is backing all of the challenges where Gura is serving as counsel.)
Reason: One of your post-Heller cases has already been petitioned to the Supreme Court, McDonald v. Chicago. What's that case about, and what's happened with it so far?
Alan Gura: The city of Chicago has a handgun ban identical to the one D.C. had until Heller. Chicago requires registration of all guns and does not register handguns. We were challenging that and other provisions of Chicago law, like requiring re-registration annually. They make guns unregisterable forever if you forget to renew. But the lower courts rejected our case, believing that, or at least asserting that, they were bound by ancient 19th-century precedent that held that the Second Amendment was not directly applied to states.
Now, the 14th Amendment has been interpreted for over a century as meaning that states do have to obey most of those rights [in the Bill of Rights], that they have been incorporated through the 14th. The Supreme Court advised in Heller quite specifically that ancient cases [about the Second Amendment's application to the states] may not have much value now, that they did not contain the sort of analysis required by courts now.
But lower courts [in McDonald] did not engage in any of the required analysis. They just fell back on old law without applying the century of precedent [changing the way the 14th Amendment is now typically interpreted]. The courts cited cases from an era when nothing was incorporated. The cases relied on by lower courts also said that the First Amendment doesn't bind states, that the Fifth Amendment doesn't, that the Fourth Amendment doesn't. That is clearly not the legal environment we have been in for the last 100 years. The lower courts claimed they were being faithful to the Supreme Court; I disagree. I think that is not true. They clearly did not apply and ignored the required incorporation analysis [of the 14th Amendment] in effect for quite some time, and I believe the Supreme Court will reverse.
I feel confident they will take the case, as there is now a circuit split [on the question of Second Amendment incorporation] and it's a very important issue and a very compelling case. When the Supreme Court reconvenes in October they will consider various petitions, including ours, and I expect sometime in early October they will grant certiorari.
Reason: Another of your recent cases, Hanson v. D.C., already succeeded in making D.C. further adjust its gun laws, right?
Gura: That is correct. Even after Heller, Washington D.C.'s city council in their incredible hostility to Second Amendment rights went around looking for things to do to gun owners and found this California regulation that D.C. adopted as its own. It's a list of "approved" weapons, listing all those that are going to be allowed for sale and banning guns that aren't on the list.
Unfortunately for D.C. we have a Second Amendment in our Constitution, and the Supreme Court told us in Heller what the test for inclusion on any "list of approved guns" should be. It's any gun a law-abiding citizen wants that is in common use that they use for law-abiding purposes. Any such gun can't be banned entirely. California's list has arbitrary requirements applied so they lead to absurd results. So when D.C. adopted that list for itself, we filed a lawsuit challenging that as unconstitutional.
Tracey Hanson [one of the original plaintiffs in the Heller case] wanted to register a gun in D.C. and was denied because it was in the wrong color! The same identical gun is on California's list in other colors, but it could not be submitted to the list in a bi-tone version that Tracey had because by the time that color came out California was demanding that guns have certain features that gun didn't have.
Gillian St. Lawrence [another plaintiff on the case, and another original Heller plaintiff] wanted to register a handgun that California had determined was safe and fine for people to use, but the gun manufacturer stopped paying the annual listing fee [that California requires to keep a gun on its list] since the model was discontinued. Now, there's no allegation that there's anything wrong with the gun. It was a purely bureaucratic removal. I don't think that it's appropriate to deny people access to a gun just because the manufacturer hasn't paid a fee.
Paul St. Lawrence, Gillian's husband, tried to register the same kind of handgun at issue in the Heller case. This handgun being somewhat old, not manufactured anymore, so no one pays to get it listed, so it can't be put on the list. The same gun the Supreme Court ordered D.C. to have registered wound up being banned in D.C. five months later.
The city realized they could not defend this crazy law. They expanded the list in such a way that it pretty much is all inclusive. They invented a new D.C. list which included everything on the California list, everything similar to ones on the California list, everything on or similar to things on similar lists in Massachusetts and Maryland, and all guns made before 1985.
D.C.'s changing its laws had the effect of mooting our case. When D.C. first proposed these laws they made all these declarations that of course [the list] is constitutional and perfectly fine. As soon as our lawsuit was filed and they had to consider its impact and what it did in real life, they realized it was indefensible. They would not have rolled over if they thought they could defend it. They did not change out of the goodness of their heart. They did it because they knew they would lose.
Reason: What other legal challenges regarding the Second Amendment are you pursuing?
Gura: We are also challenging the California list in California, where the 9th circuit recently held [in the case Nordyke v. King] that the Second Amendment does bind the states. The state might be filing its response in early July. It's called Pena v. Cid.
Also in California we filed Sykes v. McGinness, challenging the practices in two California counties denying people the right to bear arms. California is a "may issue" state when it comes to carry permits. They leave it up to local authorities to determine if they will issue carry licenses. Some jurisdictions are fairly respectful of the Constitution and give permits to people who are law-abiding, and some jurisdictions don't.
So we are suing Sacramento and Yolo counties to get their carry policies overturned. The Heller opinion makes it quite clear that "right to bear arms" includes the right to carry. The court said there will be limits on time, place, and manner on this right to bear arms. For example, you cannot carry a gun into a "sensitive place." We're still not sure what a "sensitive place" is, but if there are some sensitive places we can't carry guns into, that also means there are some non-sensitive places.
I'm litigating another case in D.C., on an obscure provision of federal law that prevents expatriate Americans from acquiring guns in the U.S. The grounds of the challenge are the Second Amendment, and also the right to travel. American citizens are allowed to keep the guns they acquired prior to leaving the U.S. and setting up residence elsewhere. But if you have residence overseas, for some reason the government restricts access to firearms when visiting the U.S. That doesn't make sense.
I can't even imagine what the safety rationale of the law is. If you already had a gun [and leave the country] you can leave it with family or friends, leave it in storage, do whatever you want with that gun, but you can't buy a new one.
Reason: Where did this law come from? What was the official rationale?
Gura: It was snuck into the crime bill revision in 1994. I have not located any extensive debate about why this was thought necessary. You try to explain it, and people scratch their heads. Most gun laws have a rationale, even if it's a bad one that we don't agree with; but they try to make the case we need this law because of this, or handguns are too dangerous—OK, that's a reason. It's not a good reason but...The government is claiming we have no standing, not even addressing it on the merits, as far as I can see. This is in U.S. District Court in D.C. We filed this case earlier in various states these individuals were traveling and the government beat us on venue grounds, claiming the only venue is Washington, D.C. So there we are.
Reason: In order to win the Chicago case if it makes it to the Supreme Court, you have to win the 14th Amendment incorporation argument. How do you go about that?
Gura: The traditional selective incorporation argument, that some rights are incorporated against states through the Due Process Clause if they have certain qualifications, and the Second Amendment meets those standards. If you read Heller, it described the nature of the Second Amendment right such that it should be incorporated under modern analysis.
What I would like the Court to do is incorporate under the 14th Amendment's Privileges or Immunities Clause. To do that would require overruling the Slaughterhouse Cases from 1873, which held that the phrase "privileges or immunities" essentially doesn't mean anything. This is an opportunity to take a whack at Slaughterhouse. We don't have many opportunities in which to get the Court to revisit what this language means, and it's important they do so.
The Slaughterhouse Cases declared pretty much that the only privileges and immunities protected by the 14th Amendment are those of national citizenship, rights that accrue out of the existence of the federal government, like the right to a passport or right to travel the waterways of the U.S. or to petition Congress.
That is wrong; that is a ridiculous analysis. We didn't fight the Civil War to guarantee the right to diplomatic protection abroad. Everyone understood at the time of the 14th Amendment's ratification that it was meant to incorporate the entire Bill of Rights plus other innumerable undefined ones; that's not an exhaustive list of rights in the Constitution. But to get that correct reading of the language to prevail, we have to get the Court to overrule the Slaughterhouse Cases.
Reason: What sort of arguments did your opponents in McDonald make that won for them in the lower courts?
Gura: Besides relying on those 19th-century precedents to claim the Second Amendment doesn't apply to them, the defendants made a host of arguments that basically were ignoring Heller. It's like they just didn't believe Heller really came out the way it did and is the law of the land. They are in complete denial of that opinion, all their arguments are contradicted by something in Heller. I understand they don't like it and disagree with it and it's their right to do so. But they need to accept it is the decision of the Supreme Court. They are not required to like it, but they are required to obey it.
Senior Editor Brian Doherty is author of This is Burning Man (BenBella), Radicals for Capitalism (PublicAffairs), and Gun Control on Trial (Cato Institute).
Obama's Russia Trip
How should the president approach Medvedev and Putin?
Cathy YoungAs Barack Obama's trip to Moscow next week draws near, there is much talk of a fresh start—or, as Vice President Joseph Biden put it earlier this year, "pushing the reset button"—between the United States and Russia. But "reset" to what? A partnership based on shared democratic values, as many hoped in the 1990s? A pragmatic collaboration based on common interests such as combating terrorism, with issues of freedom and human rights sidelined? There are strong voices arguing for each viewpoint. But for the foreseeable future, neither approach is likely to yield much progress in relations with Russia, since both arguments reflect a high degree of wishful thinking.
This is not a left-versus-right issue. The pragmatic "realists" include left-of-center liberals and conservatives of the Nixonian and old-school isolationist kind; the "idealists" who champion the battered cause of Russian democracy are found across the political spectrum.
To realist pundits such as New America Foundation fellow and National Interest columnist Anatol Lieven, the democracy promoters are dangerously naïve, their zeal easily translating into reckless interventionism—or, at least, into a Cold War mindset needlessly hostile to the Kremlin. The Russian neo-authoritarianism that emerged under Vladimir Putin, realists argue, is not Soviet communism: it is not based on a totalitarian ideology that confronts the West with a rival political and economic system and predicts its own global victory. It is simply a repressive regime, the kind we have befriended before.
But, the inglorious record of such "friendships" aside, there is a major difference between Putin's Russia and Pinochet's Chile or modern-day Saudi Arabia: "classic" authoritarian regimes do not see themselves as our global rivals.
While Russia under Putin (and his not-quite-elected successor, Dmitry Medvedev) eschews communism, it does have a semi-formal state ideology revolving around its self-image as a "great power." Realists such as Lieven and former Bush administration official Thomas Graham, who penned a recent Century Foundation report on U.S.-Russian relations, acknowledge this. Moreover, they admit that Moscow's "great power" ambitions dictate rivalry with the West and efforts to "constrain" the U.S. as well as dominate neighboring states on former Soviet turf. Yet they maintain that such nationalism can somehow be channeled into healthy avenues of cooperation with the U.S. and even democracy-building at home. Who's naïve now?
The realists have some valid points: for instance, that Russia has legitimate interests not always identical to American ones. But they often forget that those interests may not be identical to those of the current Kremlin clique, either. Thus, after years of an oil windfall, Russia's infrastructure is still a disaster zone while Putin and his cronies in the oil and gas industry have enriched themselves.
Abroad, Moscow's clumsy bullying has pushed away many allies, most recently Belarusian strongman Alexander Lukashenka, and dramatically diminished its real influence on "post-Soviet space." Last year's Georgia adventure and the acquisition of two money-draining, volatile protectorates, Abkhazia and South Ossetia, in an already unstable region probably brought Russia no benefits except an ego boost. The Kremlin's attempts to use energy resources as a weapon have given Europe powerful incentives to seek alternative suppliers. Indeed, another recent "realist" brief for a new détente—the report of the Commission on U.S. Policy Toward Russia, co-chaired by former senators Gary Hart and Chuck Hagel—admits that some of Moscow's behavior casts doubt on how "rational and competent" its leadership is.
The saga of the Manas Air Force base in Kyrgyzstan illustrates both the erratic nature of Russia's foreign policy and its unreliability as a partner. In February, Russia used a lucrative aid package as a bribe to get the Kyrgyz government to expel the base—essential to U.S. operations in Afghanistan—for no ostensible reason except to show up the Americans. Now, after an even better deal with the U.S., Kyrgyzstan is keeping the base (on slightly different terms). While the Kremlin has expressed approval, this is likely a face-saving gesture after being double-crossed on an informal, unenforceable agreement.
Pragmatic cooperation with such a regime is clearly not very realistic. Unfortunately, at present, the same can be said of democracy promotion efforts.
A few days ago, Russian opposition leader Boris Nemtsov said that Obama should shore up Medvedev against Putin to empower the Russian president to embark on liberal reforms. The trouble is, the authenticity Medvedev's liberalism is still a big question mark.
In foreign policy, Medvedev certainly hasn't departed from Putin's aggressive stance. At home, he shows far more respect than his mentor for liberal ideas and institutions, such as a free press and human rights groups—but it's hard to tell whether that means anything more than lip service. In April, Medvedev raised eyebrows by giving an interview to Novaya Gazeta, a newspaper harshly critical of the government; yet his answers amounted to a whitewash of Russia's undemocratic practices. Despite a few improvements—for instance, legal reform easing the bureaucratic hurdles faced by non-governmental organizations—the harassment of opposition activists has continued.
Nor is there a true grass-roots base for a liberal society in Russia today. Majorities of Russians may tell pollsters that they want more democracy and that they consider freedom of the press important—but surveys also show that the lack of political freedoms and rights is not a high priority for most. After decades of communist dictatorship followed by years of turmoil, apathy and cynicism reign.
What can, and should, Obama do in this situation? On the government-to-government level, the results of the summit will probably be limited to a new arms control treaty—an almost meaningless ritual in this age of worries about North Korean and Iranian nukes. Obama's speech in Moscow will probably strike a fine balance between talk of democratic values and talk of respect for Russian tradition; one also hopes that it will include a strong message of American support for the sovereignty of Russia's neighbors. His planned meeting with Russian human rights groups will send a positive signal as well.
In the long term, change in Russia has to come from within. The best thing an American administration can do is not prop up a regime that impedes such change, and not expect too much from any partnership with an authoritarian regime in the Kremlin.
Cathy Young is a Reason contributing editor and a columnist at RealClearPolitics. She blogs at cathyyoung.wordpress.com. This article originally appeared at RealClearPolitics.
US job losses worse than expected
 The unemployment rate is creeping towards 10% |
The number of jobs lost in the US last month came in at 467,000, which was much more than had been expected.
The jobless rate rose to 9.5% in June, from 9.4% in May, as the US economy continued to struggle.
Since the start of the recession in December 2007, the number of jobless people has risen by 7.2 million, the Department of Labor said.
The unemployment rate was slightly lower than had been expected, but was still the highest since August 1983.
The number of people losing their jobs can be higher than expected at the same time as the jobless rate is lower than expected, because they are measured in different ways.
The former is a measure of how many people are working, while the latter shows the number of people looking for work.
Not everybody who has lost a job will be looking for another one.
President Barack Obama said he was "deeply concerned" about the high level of unemployment and said more needed to be done to create jobs.
"We have successfully stabilised the financial markets," and "started to see some stabilization on housing," he told the Associated Press.
"But what we are still seeing is too many jobs lost," he added.
'Terrible' market
The non-farm payrolls number would usually be released on a Friday, but has been announced a day early because US markets will be closed on Friday.
The latest set of figures also included revisions to data for the two previous months, with the number of jobs lost in April rising 15,000 to 519,000 and the number lost in May falling 23,000 to 322,000.
Average hourly earnings were unchanged at $18.53 (£11.33).
A total of 14.7 million people were unemployed in June, the figures showed.
The job losses come despite recent signs of optimism from surveys.
"The job market is terrible. It's as bad as we've seen in our lifetime," said Keith Hembre, chief economist at FAF Advisors in Minneapolis.
"The light at the end of tunnel is that we see some stability in domestic demand and some demand overseas."
'Longer process'
In its separate weekly jobs report, the Department of Labor said that the number of newly laid-off workers applying for employment benefits last week fell to 614,000, while the number of people continuing to claim benefits unexpectedly fell to 6.7 million.
The average working week for production and non-supervisory workers fell 0.1 hour to 33.0 hours, which was the lowest since records began in 1964, suggesting that more people are working part-time.
The average working week for manufacturers rose 0.1 hour to 39.5 hours.
"I don't think it means that the story that the economy is bottoming out is wrong, I still think that is the right story," said Nigel Gault, chief US economist at IHS Global Insight.
"But it's evident that it's going to be a much longer process to bottom out in the labour market than it is to bottom out in the auto market or industrial production or GDP."
Top envoy in Honduras for talks
 Miguel Insulza says he faces a difficult task in the Central American state |
A top Latin American diplomat has arrived in Honduras to demand the restoration of the ousted president.
Miguel Insulza, secretary general of the Organization of American States, says he will do all he can to end the impasse in the Central American state.
But he earlier acknowledged that it would be difficult to persuade the interim government to take back ousted President Manuel Zelaya.
Mr Zelaya was removed from office on Sunday over constitutional reform.
He wanted to hold a referendum that could have led to an extension of his non-renewable four-year term.
Instead troops - backed by Congress and the courts - took him from the presidential palace and put him on a plane to Costa Rica.
The move has drawn widespread international criticism, but the interim government says it is standing firm and says Mr Zelaya will be arrested if he returns to Honduras.
'No coup'
Before arriving in Honduras, Mr Insulza said he would meet the heads of the institutions that approved Mr Zelaya's removal and ask them to review their actions.
"We are not going to Honduras to negotiate. We are going to Honduras to ask them to change what they have been doing," he said.
But he said that it would be "very hard to turn things around in a couple of days".
The interim government - led by Roberto Micheletti, previously the speaker of Congress - says it could bring elections forward from their scheduled date of 29 November.
But on Friday Mr Micheletti told thousands of supporters at a rally in Tegucigalpa that he was "the president of all Hondurans".
"We are asking Hondurans to communicate with their relatives throughout the world to tell them that no coup took place here."
Thousands of Zelaya supporters demonstrated at a separate rally across town.
The BBC's Stephen Gibbs, who is in Tegucigalpa, says the country is becoming dangerously polarised and a solution or compromise seems a long way off.
The OAS says it will suspend Honduras if Mr Zelaya is not reinstated by Saturday. Mr Zelaya himself says he remains the country's democratically elected leader.
Alaska Governor Palin to resign
 Mrs Palin's term of office was due to end in 2010 |
Former Republican vice-presidential candidate Sarah Palin has anounced she will resign as governor of Alaska on 26 July and not run for re-election.
Mrs Palin's term of office was due to end in 2010.
There has been speculation that Mrs Palin, who is very popular with the Republican Party base, might make a bid for the White House in 2012.
Her resignation means Alaska's Lieutenant Governor Sean Parnell will take over as state governor.
'New direction'
Polls indicated Mrs Palin was very popular in Alaska during the first few years of her governorship, and although her approval ratings have dipped somewhat since her vice-presidential run, she still enjoys widespread popularity in her home state.
Mrs Palin announced her decision in a statement from her home town of Wasilla, Alaska.
"I'm taking my fight for what's right in a new direction," she said, as her family looked on.
Mrs Palin did not reveal what she intended to do after leaving office, and did not give an explicit reason for her decision not to run for re-election.
But in a written statement, she made it clear that once she had decided not to run again, she did not want to hang on in office until her term expired.
"Once I decided not to run for re-election, I also felt that to embrace the conventional Lame Duck status in this particular climate would just be another dose of politics as usual, something I campaigned against and will always oppose," she said.
The coup in Honduras
Defying the outside world
Hondurans are pleased that an old-fashioned coup has installed a new president; the rest of Latin America is appalled
HE IS an unlikely figure to have become an international cause célèbre. Manuel Zelaya is a moustachioed timber magnate who won Honduras’s presidential election in 2005 as a law-and-order candidate for the mainstream Liberal Party only to alienate most of the country by allying himself with Hugo Chávez, Venezuela’s leftist president. His overthrow in a military coup on June 28th was followed by calls for his restoration of striking unanimity and vehemence, from Barack Obama, Mr Chávez, the Organisation of American States (OAS) and the United Nations General Assembly, among others.
The only people who don’t seem to want the president back in his job are Hondurans. On June 30th thousands of them filled the main square in Tegucigalpa, the capital, to show their support for Mr Zelaya’s removal and his replacement by Roberto Micheletti (pictured above, with microphone), the head of Congress. “We don’t want Mel! Out, Mel!” they screamed, using Mr Zelaya’s nickname. “It was legal! It wasn’t a coup!” The previous day only a few hundred pro-Zelaya protesters had taken to the streets, burning tyres and throwing stones at soldiers before being dispersed with tear gas.
These numbers may not tell the whole story. Behind the new government stands the army. After 200 soldiers arrested Mr Zelaya and deported him, armoured cars patrolled Tegucigalpa and fighter jets flew overhead. A private television channel that backed the president was silenced, while others have observed a news blackout. Some 60 people are reported to have been injured in clashes. Even so, there is no evidence of Hondurans clamouring for the president’s return with anything like the enthusiasm of outsiders.
That is because most have tired of his rule, and blame him for the constitutional crisis that preceded the coup. It was precipitated by his attempt to emulate Mr Chávez by organising a referendum to call a constituent assembly, which he seemed to hope would allow him to remain in power beyond January, when his four-year term ends. Under Honduras’s constitution, only Congress can call referendums and it was against one. Mr Zelaya went ahead anyway. When the head of the armed forces refused to carry out an order to distribute the ballot papers, the president sacked him. The Supreme Court reinstated the general, and the electoral tribunal ordered the ballots to be confiscated. In response, Mr Zelaya led a group of supporters to an air force base where they carted off the ballots. He instructed public employees to collect signatures for the constituent assembly. Hours before voting was to begin, the army seized the president.
The army said he was arrested for defying the Supreme Court, though no explanation has been given for why he was not brought before a Honduran judge. The legislature then voted almost unanimously to install Mr Micheletti, a Liberal rival of Mr Zelaya, as his successor. Congress has no constitutional power to remove the president. Mr Micheletti produced a curiously worded resignation letter which Mr Zelaya denies having written or signed.
These events took the region by surprise. Honduras, although poor and ravaged by corruption and violent gangs, had a seemingly stable democracy. But signs of strife were there. Mr Zelaya’s presidency has been marked by a rise in crime, corruption scandals and economic populism. He pushed through big wage increases for teachers and government workers. When money ran short, he turned to Mr Chávez for petrodollars. Despite more than $100m in Venezuelan aid, the government has stopped paying some suppliers.
In opinion polls, Mr Zelaya’s approval rating sank to 30%. Mr Chávez is unpopular in a conservative country with close ties to the United States, its main trade partner. Honduras’s media are full of allegations of infiltration by communist agents and drug traffickers from Venezuela and Nicaragua. But Mr Chávez’s attempts to link the United States to the coup were undercut by Mr Zelaya himself. In an interview with El País, a Spanish newspaper, hours before he was ousted, he thanked the United States for opposing the army’s plans for a coup.
No country in the Americas has recognised Mr Micheletti. All Latin American countries and Spain (although not the United States) have withdrawn their ambassadors pending Mr Zelaya’s reinstatement. But how might that come about? Mr Chávez has threatened insurrection (and even invasion). In Venezuela in 2002 he was restored to power after a brief coup faltered. But Venezuela’s army and its opposition were divided, and the chavistas well-organised. In Honduras the army and all the main political parties are united in opposing Mr Zelaya, whose only backers are trade unions, leftist social movements and some among the poor.
On July 1st the OAS gave Honduras three days to restore constitutional order or risk suspension from the organisation. A solution may require lengthy negotiations. Having initially vowed to fly home later this week, Mr Zelaya desisted, after officials in Tegucigalpa said he would be arrested for treason. He has already said that if reinstated he would drop all plans for another term and leave in January.
Honduras’s neighbours have closed its borders to trade for two days. The World Bank has suspended aid; having initially said they would not, American officials mulled doing the same. Honduras’s economy depends on exports (of coffee, bananas and textiles), tourism and remittances from workers in the United States. All would be imperilled if its government remains a pariah. But Mr Micheletti will not find it easy to cede his job to a man who is abhorred by most of his people and all of the powers that be in his country.
World food prices
Whatever happened to the food crisis?
It crept back
MULUALEM TEGEGN bought a donkey last year. As a hard-working Ethiopian farmer, aged 58, he saw the purchase of the beast as a return to better times after several seasons in which drought and high prices had forced him to sell his livestock and take his grandchildren out of school to work on the farm. This year, he will have enough grain left to buy a goat or two, and the donkey will help the children make the long trek again to school. This is how things are supposed to be.
World food prices soared in 2007-08, pushing hundreds of millions into poverty. But—said people at the time—there was a silver lining: high prices would be good for farmers, especially smallholders in poor countries such as Mr Tegegn. Higher returns would suck money into farming, leading to higher yields, bigger harvests and stable or falling food prices. Eventually, the argument ran, farmers and consumers would all be better off.
This happy state of affairs seemed to be coming to pass in the second half of 2008. Ethiopia reported a record cereals harvest this January, up 10% on the previous year. Across the world, the picture was similar. After the price spike in the first half of 2008, farmers harvested 2.3 billion tonnes of cereals in 2008/09, the biggest crop ever seen. Big exporters began lifting the trade bans they had imposed to keep local prices from rising, so more food became available to world markets. The sharp fall in the price of oil, which occurred at the same time, increased food supplies further because, by making oil cheaper than ethanol, it encouraged farmers to sell for feed the maize they would otherwise have turned into biofuels. As food supplies surged (and demand, hit by the global recession, stagnated), prices plummeted. Between its peak in July and a trough in December 2008, The Economist’s index of food prices fell by 40%.
All that seems fairly rational and hopeful. But this year’s changes have been more puzzling. Between December and mid-June, the food index rebounded by a third, even though this year’s total cereals crop is expected to be another bumper (2.2 billion tonnes, says the Food and Agriculture Organisation, second only to 2008/09, see chart left). Meanwhile, soyabean and sugar prices have risen by nearly half from trough to peak—see chart below—and the index of “non-food agriculturals” (plants such as cotton or rubber) also rose by a quarter between December and mid-June. Prices have been increasing at a time of plenty.
It’s not meant to go this way
If this was happening during a boom, it might be understandable. But recession would normally dampen down price rises. So what explains the return of food-price inflation? And does it mean that the so-called world food crisis is returning?
There are two clusters of explanation: cyclical factors—features of the farm cycle and world economy that fluctuate from season to season—and secular, long-term factors. Cyclical influences include re-stocking: cereal stocks were run down as prices spiked and need to be replenished. In 2006 and 2007, stocks fell below 450m tonnes, about 20% of consumption; now they are back up over 520m, or 23%. That is one source of new demand. Another comes from ethanol. As oil prices rise, ethanol starts to be competitive again (as a rule of thumb, ethanol is profitable when petrol costs $3 a gallon in America, a level it has just reached in California). The fall in the dollar and in freight rates has also kept the local-currency costs of importing a tonne of cereals lower than dollar-denominated world prices. This has encouraged many countries to buy more.
Lastly, it is possible that the widespread hunger brought about by soaring prices—the FAO says a billion people will go hungry this year—may have reached a peak and the poor may be back in the market for grain again. This may sound unlikely, as traditionally poor consumers have had little influence over world food prices, but economic growth has continued in the largest emerging markets (notably China and India) and governments in much of the developing world have been expanding aid programmes for the poor, such as conditional cash-transfer schemes. That may be boosting demand; it would explain why prices of grain, which everyone eats, have been rising this year while prices of meat—the food of the rich and aspiring middle classes—have continued to fall.
Snakes in the grass
But the world food crisis of 2007-08 showed that food prices are not influenced solely, or even mainly, by cyclical factors. They soared in large part because of slow, irreversible trends: population growth; urbanisation; shifting appetites from grain to meat in developing countries. There is no sign that these trends are abating.
At the moment, the world’s population is 6.7 billion and 750m people are born each year. Though the rate of increase is declining, inertia means the total will go on rising until 2050, when the population will reach 9 billion. In Ethiopia, for example, 18m children are born every year, rising to 24m a year by 2040. That will double its headcount from 80m to 160m.
The FAO reckons that, to keep pace, the amount of food available in developing countries will have to double by 2050, equivalent to a 70% rise in world food production. If that does not happen, fears Joachim von Braun, the head of the International Food Policy Research Institute in Washington, DC, there could be a return to the food conflicts of 2007-08 which caused riots in more than 60 countries and set off a controversial worldwide land grab—a rush by rich food-importers to buy swathes of Africa and South-East Asia on which to grow food. Even if the rise in output comes about but in the “wrong” way, there could be problems, since water in some areas is growing scarce and increasing food output will make it scarcer.
The right way, argues Alexander Mueller of the FAO, is for farmers in poor countries to boost their yields. This would be better for the countries themselves, since it would make them richer. And it would be better for the world, too, because the potential for higher yields should be greatest where they are now low, especially in Africa. At the moment, cereal yields in Africa are around one tonne per hectare, compared with three-to-four tonnes in Europe and rich Asia. It should be easier to get an extra tonne per hectare by increasing African yields to two tonnes a hectare than by boosting already-fecund European or north-east Asian yields even further (water is more abundant in parts of Africa, too). Hence the hope that high prices in 2007-08 would goad farmers in poor countries to respond by increasing yields. Alas, there is little sign of that happening so far.
Losing out both ways
Almost all the increase in cereals output in 2008 came from rich countries: the harvest in those nations increased 11%. In developing countries, the rise was a mere 1%; if you exclude China, India and Brazil, grain output in poor countries actually fell. So while the costs of the food crisis bore heavily upon the poor, the benefits accrued more to farmers in industrialised countries. And nowhere were there signs that yields (output per acre) were rising. Harvests increased because farmers took more land under the plough.
The European Union shelved a programme that had obliged farmers to leave 10% of their land fallow; China scrapped a scheme that had allowed marginal arable to return to woodland. Both these actions boosted the amount of farmland. This was not bad in itself, and it was the quickest way to boost output. But it is only a first step. World food production cannot be increased by 70% just by increasing acreage: there is simply not enough unused land to go around.
Off to a market that wobbles and wobblesThe failure of farmers in poor countries to respond to price signals does not mean they are deaf to them. Rather the signals they get are often scrambled or muted. Farmers were frequently not paid the full world price for their crops, because governments were determined to keep local prices low in order to relieve hard-pressed consumers. Some governments also banned food exports.
Even in rich countries, farmers are responding to many things other than food markets. Take oil prices, for example: these (and government subsidies) determine how much maize is planted for ethanol. That in turn influences how much land is planted to soyabeans, which for American farmers are interchangeable with maize. Growers are also responding to the flow of investment capital into farming as a result of the global financial meltdown. Food is recession-resistant, and farming has been one of the sectors least affected by the worldwide slump. The FAO’s Abdolreza Abbassian argues that increasing links between farming and other parts of the economy are making it more difficult for farmers to calculate in advance the profitability of any one crop, so the area they plant is tending to fluctuate more sharply from year to year. Farming—as the past two years have clearly demonstrated—is becoming a more volatile business, both in terms of price and area planted.
On the face of things, markets last year were adjusting exactly as economic theory predicts they should: prices rose, drawing investment into farms; supplies then rose sharply, pushing prices down. But that was not the whole story. The price fluctuations of 2007-09 suggested that uncertainty in the world of agriculture was deepening under the influence both of oil prices and capital flows. The fact that prices are still well above their 2006 average, even in a recession, suggests that the spike of 2008 did not signal a mere bubble—but rather, a genuine mismatch of supply and demand. And this year’s price increase suggests that there is a long way to go before that underlying mismatch is eventually addressed. “I don’t see that anything has fundamentally changed,” says Mr Abbassian. “That means we cannot go back to where we were in 2007.”
America and Russia
Welcome to Moscow
Paranoid, mischievous and heading in the wrong direction, Russia is an awkward prospect for Barack Obama
THE last time Barack Obama was in Russia, he and Senator Dick Lugar were detained by border guards for several hours at an airport in the Urals, where they were looking at how American funds were helping to get rid of stocks of dangerous Soviet-era weapons. America’s president has every reason to hope things will go better this time, but that is not setting a very high hurdle for success. Of all the great power relationships Mr Obama inherited from George Bush, Russia is the most awkward—awkward not only because it has been getting ever harder to deal with but also because it cannot be ignored.
Over the past ten years, under Vladimir Putin’s leadership, Russia has become more nationalistic, corrupt and corporatist. Its economy, although much bigger than a decade ago, is even more dependent on oil and gas, an industry now controlled by a small group of kleptocratic courtiers and former spies. The decision by Ikea, a well-known Swedish furniture supplier once bullish about Russia, to suspend investment because of graft is an indictment of the dire commercial climate (see article). Its non-energy exports are smaller than Sweden’s.
Russia’s population is shrinking alarmingly, its death rate double that in most developed countries. Conflicts in its north Caucasus republics have flared again. Its armed forces are woefully ill-equipped and poorly trained. Mr Putin has kept control by unleashing a virulent brand of anti-Western “patriotism”—the latest textbooks are as tough on America as they are soft on Stalin—and thuggishly silencing the opposition. Last year in a pretence of democracy Mr Putin installed Dmitry Medvedev (Mr Obama’s supposed host) as president while he himself became prime minister.
In the long term Mr Putin’s refusal to modernise his country will weaken Russia. Yet the place Mr Obama has to deal with now is still a potent force. The largest country on earth, Russia stretches from Europe to China. It is the world’s biggest producer of oil and gas. It has a seat on the UN Security Council and of course that nuclear arsenal. Above all it has the capacity to do both great harm and some good (see article).
Vlad the invader
Recently, the harm has been more noticeable. Last year’s invasion of Georgia, followed by Russia’s decision to recognise South Ossetia and Abkhazia, was the clearest sign that Mr Putin has given up any hope of joining the West. Since then he has slammed the door on the World Trade Organisation, opting instead for a no-doubt-mighty customs union with Belarus and Kazakhstan. Russia has long criticised the Organisation for Security and Co-operation in Europe for daring to highlight election malpractice. Now Mr Medvedev is promoting a European security structure that would in effect give Russia a veto over any expansion of NATO. Countries such as Ukraine, in what Russia regards as its sphere of influence, are nervous. At the UN Russia has dragged its feet on sanctions against Iran and autocrats pretty much everywhere.
And yet Iran is also one of many examples of how Russian and American interests should coincide. Neither Mr Obama nor Mr Putin wants to see Iran emerge as a nuclear power, setting off a destabilising arms race in the Middle East. Both also want a stable Afghanistan, with al-Qaeda pushed out of sanctuaries there and in Pakistan: Russia has been a useful conduit for Western supplies and troops. Both have worked to safeguard nuclear and other weapons materials in the old Soviet Union and are co-operating usefully in other countries.
On not being a pushover
Mr Bush’s policy towards Russia was both confused and confusing. One moment he was looking into Mr Putin’s eyes and finding a man he could trust; the next he was preaching democracy while failing to lift cold-war economic restrictions. Mostly, though, he was not very interested in Russia—and it showed. Russia, self-esteem wounded, claimed that America was promoting democracy to further its geopolitical interests.
Mr Obama’s combination of calmness and humility could well help America deal with a country whose national pride is dangerously spiked with a sense of inferiority. But there are plenty of pitfalls ahead.
America’s president needs to resist the temptation to play on supposed differences between Mr Putin and the more “liberal” Mr Medvedev. These are more notional than real, as the farcical second show trial of Mikhail Khodorkovsky, a former oil boss and a Putin rival, which is taking place on Mr Medvedev’s watch, demonstrates.
Meanwhile, humility about some of America’s past mistakes should not leave Russia’s leaders with the impression that Mr Obama will be a pushover. Robustness is necessary because of the widening gap between the interests of the Russian people and those of its ruling elite (the people who stoke anti-Americanism even as they send their offspring to Western universities and buy up holiday homes in France). With the economy declining and social discontent rising, a stand-off with the West might be tempting for Mr Putin’s cabal—but ruinous for most Russians. It was not America’s fault that Russia failed to develop an independent judiciary, opting for corruption as the organising principle of its political system. Nor is it America’s fault that Russia wasted the years of high oil prices.
Most of all, Mr Obama needs to be firm over Russia’s ambitions to dominate the countries along its western and southern borders. Mr Bush’s attempt to hurry Georgia and Ukraine into NATO, ready or not (they weren’t, and won’t be for a long time) was a mistake. But both countries, like all others in Europe, have the right to choose their own friends. Mr Obama must make clear that he will not cut them adrift and will not tolerate attempts to destabilise their governments. Europeans could help too by diversifying their oil and gas supplies so that Russia is not tempted to turn off their taps either (see article).
Ironically, given Mr Obama’s difficulties in the Urals, the easiest place to start may be arms control. There is room to reduce further both sides’ warheads; it is also a subject that flatters Russia. But this is going to be an awkward relationship, one where the West’s expectations of success should be low.
The European Central Bank
Hard talk, soft policy
The ECB has run a looser monetary policy than some might think
THE global economy has stopped sinking and central bankers are pausing for breath. On Thursday July 2nd, the European Central Bank (ECB) kept its main “refi” interest rate unchanged, at 1%. The ECB’s rate-setting council has been chary of cutting rates closer to zero as policymakers elsewhere have done. Its reluctance to do more has attracted criticism, only some of it fair.
The focus on policy rates may put the ECB in a bad light but these are no longer a reliable guide to the overall monetary-policy stance. If you look at market rates the policy stance in the euro area is as loose as anywhere else, because of stimulus decisions taken at the height of the financial crisis. In October the ECB decided it would offer banks as much cash as they wanted, at a fixed interest rate (the refi rate) and against a wider range of security than usual, for up to six months. It also scheduled extra three-month and six-month refinancing operations, so that banks could come more often to the central-bank well.
In May the ECB council agreed to extend the offer of fixed-rate cash to one year. At the first 12-month refinancing operation on June 24th, euro-zone banks borrowed a staggering €442 billion ($620 billion). With so much cash splashing around, the charge that banks make for overnight loans has stayed well below the refi rate, with some occasional spikes (see chart). Since the €442 billion cash injection, overnight interest rates in the euro zone have fallen to a record low of 0.3%, below those in Britain and scarcely higher than in America. Indeed banks can now borrow more cheaply in euros than in pounds for either three, six or 12 months.
Before the crisis, the ECB would aim to keep overnight interest rates close to the refi rate. Since it moved to unlimited fixed-rate funding, the central bank has been content to allow the overnight rate to drift much lower than the policy rate. In effect, the bank now has a target range for short-term rates: the upper bound is the 1% refi rate and the lower bound is the rate the central bank pays on banks’ deposits with it, currently 0.25%. The deposit rate has been a better guide to the policy stance than the refi rate has. ECB-watchers and markets understand this, even though it has not been spelt out in so many words by Jean-Claude Trichet, the ECB’s president.
Why be so coy? One concern is that by playing up the fight against recession, the ECB could appear to have lost sight of inflation. Keeping the totemic refi rate above zero may be seen as necessary to prevent inflation expectations from drifting up. There may also be a reluctance to admit that such a gushing provision of liquidity has altered the policy stance. Since the start of the crisis in August 2007, the ECB has insisted the two are separate. “They are bold on liquidity because they don’t see it as mainstream monetary policy,” says Charles Wyplosz of the Graduate Institute in Geneva. Yet the terms of its refinancing for banks have clearly led to looser monetary conditions.
Another reason for obfuscation is to mask differences among rate-setters. Monetary-policy hawks can reassure themselves that the policy rate is not too low. Doves are happy that effective interest rates are nearer to zero. And Mr Trichet can claim there is a “consensus”. The terms of the truce make it easier to reverse policy when the time comes. By restricting its liquidity support, the ECB will be able to guide overnight interest rates towards 1% without having to alter its policy rate.
Because the ECB has had one eye on the exit since the start of the crisis it has earned plaudits from those who think the Federal Reserve has been incautious. That judgment is too kind to the ECB, which could afford to have scruples about the medium term because other central banks were taking more care of the present. It is also unfair on the Fed, which had to stand in place of America’s collapsed shadow-banking system. When the economy was in most danger, the ECB could have cut rates more quickly. “If the ECB had been more proactive, the recession would have been less bad,” says Marco Annunziata of UniCredit. The striving for consensus militated against bolder action.
Another criticism is that the ECB has not done more to ease credit conditions by buying government and corporate bonds outright, as the Bank of England and the Fed have done. Its scheme to purchase up to €60 billion of the safest bank bonds, launched this month, is modest by comparison. Mr Trichet believes that focus makes sense, as euro-zone businesses and homebuyers rely more on banks than capital markets for credit. In America, capital markets matter more, so the Fed had to get its hands dirtier by buying commercial paper and mortgage-backed securities.
The ECB is also loth to soil its hands with public debt, though banks flush with central-bank cash are keen buyers of such low-risk assets. If this is monetisation at a remove, so be it. The central bank keeps its independence from government and does not have to worry about selling bonds back into the market once the interest-rate cycle turns. “If you want to stay clean, the exit strategy is easier,” says Thomas Mayer of Deutsche Bank.
But offering ample liquidity support to banks gets you only so far. By buying assets, the Fed allows American banks to shed them, freeing scarce capital for fresh lending. As losses mount in the euro zone, capital may trump liquidity in determining credit growth. Lending to the private sector slowed to 1.8% in the year to May, an all-time low. Until credit starts to revive, the ECB cannot think about tightening policy. It may yet have to be bolder.
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