Napoleon and world sugar overproduction

By Umberto Mazzei

Geneva, 04/10/2014

This week there was the annual meeting of the Group of Coppet, under the theme “Getting out of the Empire” regarding the collapse of the Napoleon’s Empire, in 1814. This group is one of those were people meet to read each other their scholarly thoughts about dusty documents, related to old celebrities whose acts usually do not transcend up to us. Coppet is a place, near Geneva, in whose château, once owned by the banker Jacques Necker, gathered, among others, three persons of high relevance two centuries ago:

Madame de Staël, daughter of Genevan banker, Jacques Necker, who was married to Baron de Staël, Swedish Ambassador to Paris. She was an intelligent lady, wrote in an acute and elegant style, was emancipated, well educated and of liberal sentiments. During her life she had to deal with recovering two millions livres that her father, then Finance Minister of Louis XVI, had lent to the French Crown, just before the French Revolution.

Benjamin Constant de Rebecque, great polemist in politics and religion, born in Lausanne, but educated in Edinburgh, he admired the English model that emerged from the 1688 revolution and it’s economic model based on international trade. In politics he was critical of the French Revolution and the Empire and in religion was a Hugenot Calvinist. In literature he adquired a reputation with Adolphe, an autobiographical novel of psychological and social content.

Jean Charles Sismond de Sismondi, acute historian and economist of socio-political wisdom, who first explained the need for a more equitable distribution of wealth and also the benefits to production from inovations from science and technology. He criticized the ideas of David Ricardo in his New Principles of Political Economy, an economic analysis which Marx later used, even after calling him “Petit Bourgeois” Socialist. His ideas were seen as the explanation of the recurring crises of the capitalist system, by authors as diverse as Rosa Luxemburg, Mihail Bakunin or Joseph Schumpeter.

Trafalgar and sugar beet

Some erudite rapports read during the event made me think of a link between the Empire, Sismondi and the present Common Agricultural Policy of the European Union, although it was not mentioned at the meeting.

In 1805, the British, commanded by Admiral Nelson, destroyed the French-Spanish fleet off Cape Trafalgar. This had great historical significance, favourable to the British and then American imperialisms, but the immediate effect was to leave France and Spain without access to trade with their colonies. It also helped to start the Continental Blocade policy of 1806. Among the colonial goods that stopped reaching Europe was sugar, from sugarcane.

As sugar is an industrial input of the utmost importance, the Imperial Government promoted cultivation of beet, a low efficiency sugar alternative, which had been only a laboratory curiosity discovered since the sixteenth century. The process of industrial scale production began at Passy, close to Paris, through work directed by Benjamin Delessert, in January 1812. When Napoleon knew about it, he thought it so important that he went immediately to visit the factory, and with the very same Légion d’ Honneur medal he wore on his chest, he decorated Delessert.

A few days later, Napoleon ordered the planting of 100,000 hectares of beet and the founding of five schools to learn the new sugar making process. Since then, in Europe, sugar has been part of a war economy, even in peacetime. Some 200 years later, in 2012, in France, 4, 6 million tons were produced. Total production in Europe was 25 million tons, of which the EU produced 17 tons, at a cost to taxpayers close to € 900 million in subsidies, that go mainly to big processing and distribution groups.

In the 1012 – 2013 campaign, world production reached 176 million tons and consumption was 164 million tons. This shows an excess of production of 12 million MT, which will be added to a 257 million tons stocks. With a world average price of $ 430 in 2014, a subsidy of $ 47 per ton is implied. The distortion caused by subsidies and by European tariffs and other trade barriers became so great, that, until 2006, although its inefficient way to produce sugar at taxpayers expense, Europe was the world’s largest sugar exporter.

Source : Central America Business Intelligence [CABI].

Over-production in Sismondi’s polemic with Ricardo.

The criticisms and recommendations of Sismondi to the economic system of his time are still valid and still new, because the system has not changed and its defects have worsened. Just remember that the main subject of his New Principles of Political Economy is wealth distribution amongst the population. Two hundred years later there are now many protesting the concentration of wealth in 1% of the world population.

His criticism of the over-production that David Ricardo supported, applies to European sugar over-production. Ricardo said that “the demand for products is only limited by production.” Sismondi disagrees: “With such a principle it is absolutely impossible to explain the most historically proven trade fact; the saturation of markets “…” in rich nations production tends to be determined not by needs but by the abundance of capital, and then, when it soon exceeds consumption, there comes cruel misery.”

Sismondi adds: “Society should always wish that the work done conforms to demand, so that sales have universal nature, and that no producer suffers,” … “The government, far from pushing production without discernment, should moderate such blind zeal, which turns against their fellow citizens, or at least, against other men. In the first case, it is contrary to national policies; in the second, it is contrary to humanity.”

This seems to be an adequate description of the damage caused by global over-production of sugar. The inhabitants of tropical developing countries should expect to benefit from the advantage of growing sugarcane, which is more performing on producing sugar at a lower cost. Sugar is one of the few tropical agricultural export goods that is not perishable, allowing storage and stable supply to meet world demand. However, the United States and Europe manage their imports with a quota system and subsidise their inefficient production .

The United States produces corn sugar, which is also an inefficient source, but because of receiving $ 5,000 million in subsidies, there is an overproduction of corn and sugar that stimulates an internal over-consumption and pushes exports to countries within the US net of free trade agreements. Those exports damage Mexican and Central American rural economies and are a cause of migration.

The European Union was exporting about 6 million tons until 2006, when it amended its policy and imposed production quotas; it reduced EU exports to 1.6 million and increased its imports from the ACP countries (former colonies). Still, EU production remains close to the global surplus.

Perhaps, the despair that drives rural African migration to Europe could decrease if European sugar was produced in Africa, following a policy line pointed out by Sismondi in his wrtttings against slavery. Any how, it is about time that a war economy sugar policy inherited from Napoleon, two hundred years ago, was abandoned.

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