"Slow Money" is charity, not investing

"Slow Money" is branding itself as an alternative to traditional investment, but at the same time is not saying anyone will get back the money they put in.

The name is a take-off of the "slow food" movement and it has wrapped itself in all the same old "buy local" and locavore nonsense of creating a new world fed and clothed by low-impact, wealth-creating cottage industries and handmade products. See the "Buy Local" tag on this blog for many, many posts on why almost all of those claims are false and counterproductive.

This voiceless cartoon they made shows a woman putting her money in the bank and expressing concern that it is being invested in arms manufacturers, oil companies and cliche 18th century smoke-belching factories. The woman then gives her money to a local farmer, who puts the money in the ground and a big plant comes out, which eventually sprouts an identical amount of money that she put in. We then we see more plants grow more money, and eventually a farmers' market sprouts up.

This one minute, 45 second cartoon doesn't actually show the woman getting her money back, and people who participate shouldn't expect to either, but it's the closest thing to a coherent pitch the group has.

Slow Money is a network of ideologically-motivated investments clubs who give what they call "loans" to local food producers. Since local farms typically lose money, I imagine they have a high default rate. The Slow Money network has been around for four years and has given out $35 million. It's very telling that the proponents do not talk about how many borrowers pay back their loans. Instead, their website talks about their principals, which for some reason includes a quotation from a Hollywood actor,

I realize that Slow Money is trying to attract angel investors, people who are interested in the cause and the personality behind the business more than generating a profit, but for some reason they won't come out and flatly say it. I wouldn't have such a problem if the Slow Money people would just say that they deal in donations, instead of talking about "investments" and making vague references to building a new economy.

Why not just say that the money people give will not be returned to them, but instead will create things in the community they want to see? Why not just be straightforward with what they're doing, instead of presenting it as something akin to financial investments.

You have to dig deep, but their are times when the movement heavily implies that is the goal. To complete the checklist of a faux-intellectual movement, Slow Money leader Ari Derfel gave a TEDx talk in 2011. After dropping shallow buzzwords like "business 3.0", reading inspiring quotations and talking about someone's honest-to-god vision quest, he summed up what Slow Money is all about. Vaguely. In particular, he said:

What makes life worthwhile is not profit; it's relationships... We need to measure return on investment not simply by profit, but by things like soil fertility, by the jobs we make, the relationships we build, the ecology we restore.

Please note: He never said his "investors" won't make any interest, he just implied it. He never said one way or the other if they can expect to get their principal investment returned.

Before giving his brief summary, Derfel explained  that he would need "a whole TED Talk" just to explain what Slow Money is. Funny, the title of the video of his talk is "Slow Money." Was he really invited to speak about organic food in rich communities and cliche wise-Native-American stories? If an executive director of an organization can't sum up what they do in 15 minutes, they are either incompetent or dishonest.

He could have told us that Slow Money is an angel investment group-slash-charity that accepts the growth of small farms instead of fiscal profit? How hard was that?

Sadly, his vague summary is as close to straightforward as you will get from this movement. If you want to delight in seeing local farmers milling about your community, than you probably won't have a problem with not getting your principal investment back. You're already choosing to pay too much for food anyways. Just don't have any illusions that the money you give to this organization will eventually return to you. As in gambling, don't spend what you can't afford to lose.
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There's a reason they don't grow that here

Economist/serial letter writer Don Boudreaux has penned a column on the idea of using heated greenhouses to produce local food in area unsuited for growing that type of food.

Some lands and local environments are better suited than are other lands and local environments to growing particular kinds of crops. Obviously, South Florida is better suited to growing citrus than is Western Pennsylvania. This fact, however, doesn't mean that Pennsylvanians couldn't grow all of their own citrus. They could indeed do so if they were to build many huge hothouses. 

Yet not only would such hothouses divert land in Pennsylvania from other valuable uses, these hothouses would have to be heated — a very energy-intensive procedure. We can be reasonably certain that the fuel costs of heating such hothouses are greater than the fuel costs of shipping oranges from Florida to Pennsylvania. The reason for our certainty is that if the transportation costs were greater than the costs of heating the hothouses, Pennsylvania farmers could earn profits by growing citrus in hothouses. These farmers would be able to sell their crops to Pennsylvania supermarkets at prices lower than the prices that those supermarkets now pay to stock their shelves with citrus fruits from Florida. 

But in reality, no farmers in Pennsylvania grow citrus in hothouses — a pretty good sign that the amount of resources required to operate citrus hothouses there is greater than the amount of resources used to ship citrus to Pennsylvania from Florida. 

What's true for citrus is true for wheat, peas, beef, pork, you name it. The lowest-cost place for producing any particular type of food is seldom close to home.

Citrus is an extreme example and most locavores make that argument that while tropical fruit is out of the question, vegetables like green beans are not. What I like about this column is that is answers that in an easy-to-understand way. Simply put, we can tell it's not a good idea because mainstream farmers aren't already doing it.

Maine farmer's are willing to make large operations for potatoes and blueberries, but for some reason cabbage doesn't come up. That's a clue that there are better places to grow cabbage.

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Is the local food movement doomed?

The New York Times just ran an op-ed piece by sea-farmer Bren Smith lamenting that the small farm craze is terrible for the farmers.

The dirty secret of the food movement is that the much-celebrated small-scale farmer isn’t making a living. After the tools are put away, we head out to second and third jobs to keep our farms afloat. Ninety-one percent of all farm households rely on multiple sources of income. Health care, paying for our kids’ college, preparing for retirement? Not happening. With the overwhelming majority of American farmers operating at a loss — the median farm income was negative $1,453 in 2012 — farmers can barely keep the chickens fed and the lights on. 

Others of us rely almost entirely on Department of Agriculture or foundation grants, not retail sales, to generate farm income. And young farmers, unable to afford land, are increasingly forced into neo-feudal relationships, working the fields of wealthy landowners. Little wonder the median age for farmers and ranchers is now 56. 

My experience proves the trend. To make ends meet as a farmer over the last decade, I’ve hustled wooden crafts to tourists on the streets of New York, driven lumber trucks, and worked part time for any nonprofit that could stomach the stink of mud on my boots. Laden with college debt and only intermittently able to afford health care, my partner and I have acquired a favorite pastime in our house: dreaming about having kids. It’s cheaper than the real thing.

Combine this with Dan Barber's recent assessment that the local food system is failing because no one wants to eat the cover crops, and the ongoing problem of local producers dishonestly repackaging mass-produced goods to make ends meet, one wonders if this snobby food fad is going to burn out in the next few years. The "food miles" environmental argument has already been destroyed, and now with visible tears in the economic arguments the only thing left is aesthetics.

But, of course, right on cue Smith reaches for the big red button and demands a bailout to prop up luxury foods:

But now it’s time for farmers to shape our own agenda. We need to fight for loan forgiveness for college grads who pursue agriculture; programs to turn farmers from tenants into landowners; guaranteed affordable health care; and shifting subsidies from factory farms to family farms. We need to take the lead in shaping a new food economy by building our own production hubs and distribution systems. And we need to support workers up and down the supply chain who are fighting for better wages so that their families can afford to buy the food we grow.

Look, the problem with agricultural subsidies isn't that they are going to the wrong types of farms; the problem is that they exist in the first place. This is my big problems with the local food movement: They want their private indulgences paid with public money. Small farm artisan foods are luxury items and if patrons won't agree to higher prices the answer is to let the industry die, and not to shake down taxpayers for more subsidies, grants and tax breaks.

Interestingly enough, these tax breaks that Smith loves so much have introduced rent-seekers into the market, and they are driving down prices by increasing the supply of local foods. He writes:

Especially in urban areas, supporting your local farmer may actually mean buying produce from former hedge fund managers or tax lawyers who have quit the rat race to get some dirt under their fingernails. We call it hobby farming, where recreational “farms” are allowed to sell their products at the same farmers’ markets as commercial farms. It’s all about property taxes, not food production. As Forbes magazine suggested to its readers in its 2012 Investment Guide, now is the time to “farm like a billionaire,” because even a small amount of retail sales — as low as $500 a year in New Jersey — allows landowners to harvest more tax breaks than tomatoes.

It sounds like bailout farmers are being gored by their own ox.

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Will locovores consume these berries?

One of the neighboring towns from where I live has a large, struggling factory that makes the body for BlackBerry devices.

As most people are aware, BlackBerry dropped the ball on the smartphone battle and iPhones and Android devices crowded them out of the market. The company is practically dead.

However, BlackBerry is trying to hold on and win back a share of the market. It's not going well, as the iPhone is extremely popular and already had a loyal customer base.

Still, I can't help but notice the overlap between locovores and iPhone users. This brings me to my question:

Knowing that this factory, which is a major employer in the area, is at risk of shutting down because BlackBerry, its biggest client, has flagging sales, would locovores actually put their philosophy into practice and switch to BlackBerry?

It's one thing for spoiled hipsters to throw more of their plentiful dollars at a frowny farmer so they can feel better about themselves, but I doubt very many of them would purposely downgrade their smartphone. That's not the kind of sacrifice they are used to making.
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I, Nutella

That simple spread of hazelnut and cocoa that everyone loves has a cross-continental pedigree, as emphasized in a recent report by the Organisation for Economic Co-operation and Development.

Nutella combines vanilla flavoring from France, hazelnuts from Turkey, palm oil from Malaysia, sugar from Brazil and cocoa from Nigeria. The OECD used it as an example in a recent report to demonstrate global supply chains and it's gathered a lot of attention.

Nutella would not be possible without globalization. Like a famous essay said about the pencil, each jar contains the labor of thousands of people across the globe. There's no single location on earth that could ever make it without outside help.

Unlike other foods with a lot of ingredients, such as sour cream and salsa pork rinds, Nutella has a highborn reputation. It's artsy to like Nutella. The spread is borderline pretentious. That's very different from the low-status products that are usually associated with globalization like McDonald's food.

Globalization needs a new symbol that can engage people, and Nutella is a perfect choice. Globalization simply means the extension of human cooperation over international lines, instead of restricting it to the immediate area. Violent mobs and fringe speakers have given the word an unpleasant edge to the general public and not enough people name "globalization" as something they support.

Only a gullible fool would balk at spreading delicious Nutella across their bread. Nutella is the beautiful child of international cooperation, and people need to appreciate and understand that origin along with its captivating taste.
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Sadly, it wasn't true

Remember that Reddit post about sous chefs stealing from someones garden? That thing I said was probably a hoax?

The author admitted it was a hoax on a podcast. Before doing that, had gone on a local TV news station to reiterate the story, adding more artful, unlikely details like finding beard nets and recipe cards left behind. This thing is faker than a socialist utopia.

Rereading my post about it, I'm glad to see that every single line I wrote about it was skeptical. However, I still feel kind of sheepish that I didn't hit home a firm conclusion. In my defense, I didn't grasp that all of the items he accused them of stealing were weeds. I thought there was a garden somewhere in there too.

That being said, the idea of food snobs going out of their way to eat weeds is very real.
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Local Kleptocracy

Are locavores really so entitled that they will steal from local gardens. A recent Reddit post from Portland, Ore. claims they are.

Homeowners: How do you keep local sous chefs from harvesting urban edibles on your property?

I have tried posting signs, yet they still seem to find a way into my yard to harvest everything from nettles and catmint to borage and grape leaves. I even built a six-foot tall fence, but they are still managing to get in. I have called the offending restaurants to ask them to tell their sous chefs to stop trespassing, but so far they seem undeterred. I have also offered to let them onto my property with my supervision, but they mostly seem to come out while I'm at work so everything can be prepped for their dinner service. It was fine when they were just harvesting pineapple weed and mallow from the alley and the parking strip, although it was admittedly a little off-putting. I'm also totally cool with them picking the crab apples because some of the branches are in the public right of way. But yesterday my neighbor called to let me know she had to help a sous chef who got stuck on top of my fence holding a baggie full of chicory leaves. I get that part of living in inner SE is dealing with locavore sous chefs and all the problems that follow them, but it is frustrating and kind of scary knowing that they are constantly combing my yard for garnishes while I'm away.

I'm skeptical about the authenticity of this post. The caller somehow knows which restaurants to call. The repeated name-dropping of herbs seems like a literary device. Most quizzical of all, there are plenty of dishonest people that sell to locavores by lying about the origins of their ingredients, so why wouldn't they simply lie to people instead of taking such strange risks?
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Local solar is not a virtue in dark New England

Driving through Northampton, Massachusetts today I saw a banner that read "Keep Solar Local."

Solar pride is a common groan-inducing sight in the bay state. Massachusetts is filthy with solar panels, and not because this is a good place to make energy from the sun. In fact, it's a lousy place with long, dark winters. Bright deserts make great locations for solar arrays, but that assumes your goal is to produce energy. If you goal is to make a profit from government subsidies and you don't care how much energy you produce then Massachusetts is a great place to install them.

However, it turns out the "Keep Solar Local" campaign is really a campaign to do business with a single solar installer simply because it is "local." That company, Northeast Solar, is actually from Hatfield, a neighboring and therefore competing municipality, but they don't seem to care because it's more local than anyone else.

On its website Northeast Solar claims "We can provide competitive pricing today" but a recent article in the Daily Hampshire Gazette shows the company started this campaign when they couldn't compete in a fair bidding process:

Gregory Garrison, president of Northeast Solar in Hatfield, argues this is a short-sighted decision that does not help the state’s Clean Energy Center meet its self-described mandate to create high-quality jobs and economic growth through its renewable energy programs. 

He said these goals cannot be accomplished by selecting the lowest bidder within a Solarize community, whose intent is only to drive down costs and install as much solar as possible.

The emphasis was added by me, of course.

When a company can't compete with superior service or lower prices they resort to phony localist economic claims as a hail Mary play.
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Another knight for our round table

I just discovered the YouTube channel of Bailey Norwood, an agricultural economics professor at Oklahoma State University. He also takes in interest the economic arguments of the "Buy Local" movement

And man on man does he put them out to pasture.



I'm always interested in seeing what approach other people make when they tackle this issue. The "transfer of wealth" focus is a solid tactic, as a major trade fallacy is that wealth is being lost in exchange for nothing when people trade. In fact, the amount of wealth on average stays the same and it is the form of wealth that is exchanged.
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It doesn't work that way

Two years ago I wrote about attempted "food sovereignty" municipal ordinances in Maine. While I support their goal of deregulating food, even if it's only small-scale production, I said the approach was doomed for failure.

Well, the update is obvious. The courts reminded them that state and federal legislation trumps municipal ordinances.

A [Maine] Superior Court ruling against a Blue Hill farmer who has been selling unlabeled, unlicensed raw milk will have farmers in several Maine towns wondering about the future of local “food sovereignty” ordinances that seek to exempt them from state oversight.

Sorry kids, but a strong top-down federal government prevents natural experiments in local government. It's a shame, although an obvious one, as there was never a reason to believe this plan would work in the long term.
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A bright student

Agricultural development economist Marc F. Bellemare Agricultur shares this great paragraph from a promising student. They both "get it."

Not only do these alternative food networks [Note: Fair Trade, local, organic, etc. -- MFB.] often have high price barriers, they also give rise to a hierarchy among consumers. Those who can afford ethical products are at the top, and cash-strapped families with no other option but to buy generic, mass-produced groceries are seen as morally inferior. Not only can lower-income families not afford these higher quality goods for their personal use, they are also morally chastised for their purchases. Lower class incomes do not enable an expression of values orientated towards a sustainable, fair food production system, however few other forms of activism are available to these communities. Lower class families are victimized both economically and morally for “choices” that arise merely out of economic need. Such a hierarchy ignores questions of access and champions individuals who are already members of an elite, privileged community.

I just need to add: The issue becomes more absurd when one learns these expensive food products do not actually accomplish the ends the supporters have for them. In the case of organic and locally-produced food the elitist methods are counter productive, causing more environmental harm than conventional means.
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Buy Local myths at Skepticamp

My talk from last October at the New Hampshire Skepticamp event is now online.




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Protectionism and the hierarchy of needs

International trade is one of those subjects that people talk about with confidence when they really don't understand the basics. It seems like common sense. Of course we want to be the ones who produce cheap merchandise. Of course China is doing all of our manufacturing for us, as we can clearly demonstrate by looking at where cheap consumer goods are made. Of course the purpose of free trade is to increase our exports.

All three of those common sense ideas are wrong and they require looking at international trade the same way we look at the cola wars, where America and China compete with each other the way Pepsi and Coke compete for customers. Paul Krugman called this view pop internationalism.

Krugman said we should look at China and Japan as trading partners, not competitors. This is a hard sell to the public, and the ignorance of this perspective is what drives protectionism and pseudo economic fads like the "Buy Local" movement.

They tell us, of course the community benefits if you buy from within instead of afar. Of course we should produce our own food. Of course these methods will lead to a higher quality of life for people in our community.

To get into the proper mindset, let's look at providing for the community through the lens of Maslow's hierarchy of needs.

The community must have its basic needs met first. Your library won't do the public much good if everyone freezes to death, and good luck unraveling the mysteries of philosophy if everyone is dying of starvation. The bottom tier of the hierarchy includes things like food, shelter, water and air to breath.

Localists want to have communities feed themselves first, so they support local agriculture as a way to create jobs and keep the community self-sustained.

But remember, jobs are a cost, not a benefit. If you are tying up all your workers with inefficient food production than you will have fewer workers around to tackle the higher tiers of safety, love and belonging, esteem and self-actualization. Who will research cancer treatments, build cars or reinvent higher education if everyone is too busy feeding themselves? That's why the advancements from civilization has always been possible through trade and technology and protectionism is a source of harm for the local community.

With international trade, we put our trading partners to work satisfying some of those needs on the lower tiers so we can concentrate on the higher ones. When China makes our souvenir baseball caps, that frees up our workers to build airplanes.
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Local-washing in Kentucky

While I was queuing up some 80's rock music on YouTube this week an advertisement from Goldman Sachs started playing that brags about how they helped create local jobs in Louisville by financing a new NCAA arena. There was a lot of talk about putting local people back to work and revitalizing the downtown area, which were of course red flags that something is very wrong here.

The most obvious criticism is that this is an approach called local-washing where a large national company will try to piggybank onto the silly "Buy Local" fad by presenting itself as a savior of the local economy. Since most companies need workers to perform labor near their home, any company can argue it has a local impact on some community somewhere.

The second one is, what do I care about the local economy in Louisville? The local purchasing preference movement is all about putting your own community above all the others, so as a resident of Massachusetts shouldn't I be hostile to Goldman Sachs for helping one of our many rival communities?

The third is that arenas are a horrible use of taxpayer money. Sports economist Roger Noll said mixed-use arenas like this one will break even at best, as they mow down a lot of property that can no longer be used for other purposes, and that's if the arena sees constant use. This one doesn't.

The Goldman Sachs video never reveals the name of the arena, which is understandable as it has the unfortunate moniker of the KFC Yum! Center. Like clockwork observations started pouring out about how great the arena is for the city, but the financial figures tell a different story.

The official price tag was $238 million, but critics put it at $348 million by focusing on the municipal bonds the city had to take out to pay for it. The annual profits can't even clear $1 million a year, the city may have to kick in $9.8 million annually to help it makes its mortgages and the arena's managing authority just had its credit rating kicked down the stairs.

Sorry Goldman Sachs, but this Yum! center just made me lose my appetite.
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Pseudoeconomics starts early this year

Everyone likes to complain about Christmas breaking down the door the moment Thanksgiving is over, if not sooner. Well, the large retailers aren't the only ones trying to win over shoppers today - the localists are in full force with campaigns combining empty promises, guilt trips, nationalism and misinformation. The following Facebook image is a perfect example:

What's funny is that the tagline "people not profits" is used to justify an advertising scheme to increase profits to local businesses.

I wonder how option number 10, of using cash and not a credit card, is going to accomplish the goal of harming bank profits if the person ends up paying ATM fees.

Some people don't have a dozen hours to spend knitting a scarf or have skills that can produce gifts that anyone wants. Purchasing gifts is an old tradition, not a plot by capitalist overlords.
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