Science in Society

No 42 Summer 2009
Edited by Mae-Wan Ho
Institute of Science in Society
ISSN: 1474-1547 (print)
ISSN: 1474-1814 (online)

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From the Editors - More than Banking Needs to Change
Freeing the World from GM
The Golden Rice Scandal Unfolds
Who Owns Life, Not Monsanto?
Corporate Monopoly of Science
Death by Multiple Poisoning, Glyphosate and Roundup
Acceptance of GM Crops Exaggerated
Call for Direct Witness Evidence of GM Hazards & Failures
Letters to the Editor
Sustainable World
Saline Agriculture to Feed and Fuel the World
Harvesting Waste Heat to Save the Climate
Reef to Replace Barrage to Tap the Tides?
An Urban Dream Farm for London?
Cooperative for Health, Food Security & Environment
Against the Credit Crunch
Technology Watch
‘Biologicals’, Wonder Drugs with Problems
Magnifection, Safe Pharming or Doomsday Device?
Malaria Vaccine Trials Raise Concerns over Risks to Infants
Epigenetics and Beyond
Epigenetic Inheritance through Sperm Cells, the Lamarckian Dimension in Evolution
Darwin’s Pangenesis, the Hidden History of Genetics, & the Dangers of GMOs
Intercommunication via Circulating Nucleic Acids
Health Watch
Super-Toxic Cocktails
Science in Scociety 42 cover

From the Editors - More than Banking Needs to Change

Banking for bankers and corporations

The events of the past year have led to many hard questions being asked about our financial and system and ‘free market economy’. Commentators are finally starting to challenge the assumption on which so much has depended, that the market is always right - the invisible hand will guide the economy to make the most effective use of resources – and if there is ever a deviation from this optimal state, the market will correct itself.  That is why the bankers and their allies insist governments must not interfere with the operation of the market. In practice, however, it means that all important decisions are taken by the people who run the banks and the big corporations. This is a very convenient theory for bankers, whose telephone number salaries are one of the things we are not to interfere with. But the theory is simply wrong.

To be sure, the market is generally able to correct small disturbances from the optimum. If there are too few pizza restaurants to satisfy the demand, more will open; if there are too many then some will go out of business. As a result, we should end up with about the right number. For that sort of thing, the market generally works a lot better than having some bureaucrat in charge.

Unfortunately, how a complex nonlinear system reacts to small perturbations is not in general a good indicator of how it will react to large ones, and that is certainly the case with economies. Markets frequently go to extremes and show no signs of returning to normal on their own, in complete contradiction of what the theory predicts. As George Soros points out in his book The Crash of 2008 and What it Means, in recent years alone governments have had to intervene in the international banking crisis in 1982, the bankruptcy of Continental Illinois in 1984, the emerging markets crisis of 1997, the failure of Long Term Capital Management in 1998, and more besides, including of course the current credit crunch. The same bankers who demand free rein when times are good are quick to run to the government for help when their excesses get them into trouble.

The first priority of governments is clearly to get the economy moving again and people back into work. Now that the myth of the market has been so obviously demolished, however, they should ignore what Soros calls the “market fundamentalists” and put in place measures designed to stop it going wrong in the first place. To a large extent, this would mean simply bringing back rules that were abolished in the 1980s and 1990s, when the neo-liberals dominated economics both in theory and in practice.

Light touch regulation failed to protect savings and pensions

It is now argued that there should be strict regulations governing what banks can do. They would not be obliged by law to comply, but those that did not could not expect to be bailed out by the taxpayer if they ran into trouble. We would also include a rule that because of the extra risk, pension funds and public bodies should not be permitted to invest in banks that have not signed up to the code. If we cannot prevent some people gambling, at least we can stop them doing it with our money.

As the advocates of laissez-faire keep reminding us, however, our whole economy, not just the financial sector, is based on the market. If there are lessons to be learned, they apply to other areas as well.

One of the chief causes of the crisis was the so-called light touch regulation that was begun by Reagan and Thatcher and continued by their successors. One by one, restrictions were lifted. Regulators have tended to take the banks’ word that all was well. They were not given the resources to do their job thoroughly, so that when a truckload of paper documents arrived, there was no way they could find the toxic needles hidden in the haystack of very ordinary material. The regulators were checking only the details of what the banks were doing, not their overall strategies, which turned out to be where the real dangers lay. The whole ethos of regulation was above all, not to kill the goose that was laying the golden eggs nor tempt it to fly away to a tax haven.

Light touch regulation fails to protect our health

Light touch regulation has also been the rule in other sectors, including the pharmaceutical and biotech industries. Regulators depend on the companies not only to carry out the tests but to analyse and interpret the results, and then take their word for it.

A revolving door policy means that regulators often come from industry and then go back once they have served their terms. Regulation is largely about details rather than the strategic issues: when an application is being discussed it is considered enough for the person with a connection to that firm to leave the room, even though other corporations’ nominees may be just as anxious as the applicant to see permission granted because of the precedent it will set. The UK government has given its regulators a very strong steer that they are to favour GM not because the farmers and consumers want it – they don’t – but because they see it as one of our industrial golden geese. Here, of course, they are blatantly ignoring the market, which even the most committed neo-liberals seem willing to do when it suits them.

The positive opinion given to Monsanto’s GM maize MON 863 by the European Food Safety Authority (EFSA) was a case in point. The EFSA not only allowed the company to claim commercial confidentiality for raw data; but also agreed with the company that significant results suggesting kidney and liver toxicities were not “biologically meaningful”. No wonder the EU Council of Ministers have unanimously agreed that the current legislation on GMOs requires a thorough revision with respect to risk assessment.

What this means for the whole world

Now that the neo-liberal model has been thoroughly discredited, the rich nations should stop imposing it on the rest of the world, which many commentators have blamed for creating poverty and global warming by encouraging over-exploitation of people and the planet (see Financing Poverty, SiS 40).

At the same time, the recent multi-stakeholder International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) (see GM-Free Organic Agriculture to Feed the World, SiS 38) has also declared industrial monoculture obsolete. Its major finding is that small farmers practicing agroecology are the way forward to feed the world, eradicate poverty and save the climate (see also Food Futures Now *Organic *Sustainable *Fossil Fuel Free , ISIS/TWN Report). 

The credit crunch occurred because governments took the advice of the bankers on how a banking system should be run. The result was a system specifically designed to make profits for the bankers rather than to play a useful role in the real economy. They should now learn from their mistake and pay heed to the words of Hans Herren, co-chair of the IAASTD: speaking at the 5th European Conference of GMO Free Regions in Lucerne, Switzerland:“It is for governments to implement the recommendations of the IAASTD, not following what Monsanto is telling them.”

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