When Giants Fall

Expedient Alignments

Even though it's becoming clear that the U.S. won't be able to dictate the global agenda in the way that it has during much of the postwar era, that doesn't mean our country will be totally marginalized, at least in the short run.

In the kind of world I see immediately ahead, where no one nation rules the roost, I expect that many will find it expedient to remain or become aligned with America for some period of time, until the eoplitical dust settles or a new pecking order is firmly in place.

Already we are seeing evidence of that, as the New York Times reveals in "China’s Fast Rise Leads Neighbors to Join Forces":

HANOI, Vietnam — China’s military expansion and assertive trade policies have set off jitters across Asia, prompting many of its neighbors to rekindle old alliances and cultivate new ones to better defend their interests against the rising superpower.

A whirl of deal-making and diplomacy, from Tokyo to New Delhi, is giving the United States an opportunity to reassert itself in a region where its eclipse by China has been viewed as inevitable.

...

The deals and alliances are not intended to contain China. But they suggest a palpable shift in the diplomatic landscape, on vivid display as leaders from 18 countries gathered this weekend under the wavelike roof of Hanoi’s futuristic convention center, not far from Ho Chi Minh’s mausoleum, for a meeting suffused by tensions between China and its neighbors.

...

Most Asian countries, even as they argue that China will inevitably replace the United States as the top regional power, have grown concerned at how quickly that shift is occurring, and what China the superpower may look like.

China’s big trading partners are complaining more loudly that it intervenes too aggressively to keep its currency undervalued. Its recent restrictions on exports of crucial rare earths minerals, first to Japan and then to the United States and Europe, raised the prospect that it may use its dominant positions in some industries as a diplomatic and political weapon.

And its rapid naval expansion, combined with a more strident defense of its claims to disputed territories far off its shores, has persuaded Japan, South Korea, Vietnam and Singapore to reaffirm their enthusiasm for the American security umbrella.

A Notable Shift

Many people believe that global population increases are the key driver when it comes to the issue of resource constraints. But changes in rates of per capita consumption are just as -- or more -- important. In fast-growing and heavily-populated countries like China and India, the urge to emulate the West and enjoy the fruits of increased wealth is boosting demand for goods and services that require incrementally greater resources to produce. As a result, writes U.S. Global Investors CEO Frank Holmes in a post at his Frank Talk blog, "Chart of the Week — Shifting Energy Demand," the world is seeing a notable shift in the pattern of global energy consumption.

Global energy consumption fell for the first time in nearly three decades last year as slowed manufacturing and idled factories drove consumption lower. Overall, global energy consumption fell 1.1 percent in 2009, the largest decline since Ronald Reagan’s inauguration.

Contracting consumption in the developed world was the largest driver of the decline.

This week’s chart breaks down share of global energy consumption by developed markets—the U.S., Western Europe, Japan and others represented by the Organization for Economic Co-Operation and Development (OECD)—and the rest of the world. You can see that the OECD’s share of global energy consumption has tumbled from nearly 70 percent in 1965 to well below 50 percent last year.

 

Meanwhile, the lights are shining bright in emerging markets. Emerging markets’ share of global energy consumption has more than doubled since the 1960s. More importantly, the speed of advance by emerging markets has accelerated the past few years, stealing away more than a 10 percent share of the total since 2003.

Credit Suisse expects oil demand to grow 9.3 percent in China, 4 percent in Latin America and 4.4 percent in the Middle East in 2010. In contrast, it expects oil demand to contract by nearly 2 percent in Western Europe and manage only meager growth in North America.

The global recession has allowed emerging markets to gain ground as activity in the developed world slowed to a crawl, but the long-term trend is a significant one and will likely continue. Improving economic conditions in the developing world means more people have more money to spend on personal cars and electricity for their homes. Also, a wealthier population consumes more goods and electronics which leads to more manufacturing activity and increased energy demand.

No Surprise at All

Transparency International is out with its 2010 Corruption Perceptions Index, which ranks countries around the world "according to the perception of corruption in the public sector."

To those who have been paying attention, the fact that the U.S. ranking has slipped once again, falling three places to 22nd on the list, should be no surprise at all.

Not So Black-and-White

When it comes to politics or geopolitics, people find it easy to see things in two dimensions. Republican or Democrat, right-wing or left-wing, ally or adversary -- there's only one side or the other. It is through such a prism that many have viewed the challenge taking shape between the current global leader, the United States, and its Asian rival, China. But others don't necessarily buy into this black-or-white perspective. As Risk Watchdog notes in "China And Turkey: A Partnership To Reshape The World?" the final outcome may well entail a dramatically different arrangement.

Chinese Premier Wen Jiabao’s visit to Turkey earlier this month resulted in a ‘strategic partnership’ being signed, which is expected to lead to bilateral trade trebling to US$50bn by 2015, and to US$100bn by 2020. Although the trade relationship is benefiting China more right now, with Turkey running a US$11bn deficit in 2009, Chinese companies are already investing heavily in upgrading Turkey’s rail network, and rising numbers of Chinese tourists should further boost the Turkish economy.

Perhaps more interesting are the geopolitical implications of a Sino-Turkish partnership. Chinese fighter planes recently took part in air force exercises with Turkey in what was the first time that a NATO member had hosted Chinese jets. The annual Anatolian Eagle exercises are usually a NATO affair with Israel in participation, but this year Ankara chose Beijing as its partner. None of this means that Turkey is about to quit NATO, expel the US from its base at Incirlik, and abandon its plans to join the EU. What it does mean is that Turkey is diversifying its geopolitical vectors, having already developed close ties with Russia and Iran. Essentially, Ankara is seeking to become an independent global power, and thus needs to cultivate new allies.

 

China and Turkey – Geopolitical Influence Vectors

By now you’ll be familiar with the notion that the rise of emerging markets (EMs) is allowing such countries to diversify their economic relationships away from the West (i.e. US and Europe). Well, the same is also true geopolitically. China offers one potential anchor, and the BRIC countries have already held two summits (albeit of limited impact), but we will also see more groups such as VIRUS (Venezuela-Iran-Russia) emerge.

It will be interesting to see how far Sino-Turkish strategic cooperation evolves. In my flash-forward I can see a time 20 or 30 years from now when China has developed a formal alliance with Turkey that includes Iran, Afghanistan, and Pakistan, spanning the entire length of southern Eurasia (essentially restoring the now defunct CENTO, but guided by China instead of the US/UK). Such an alliance would be in a position to exert decisive influence in the Middle East, Central Asia, South Asia, and perhaps East and South East Asia. In other words, it could become the most powerful force in the known universe.

No Longer Relevant?

A post at Business Insider's Money Game notes that Washington may soon find itself in a spot of bother:

The volume of US debt that will roll over in the next two years is about to spike considerably, as this chart from Nomura's Rates Radar Weekly shows.

 

In blogger Joe Weisenthal's view, this means Fed Chairman Ben Bernanke will do "everything in his power to keep the cost of that rollover low."

But those efforts might still prove futile. Why? Because it won't just be the federal government with its hand out. Various reports have chronicled the myriad debts coming due in the immediate years ahead in the U.S. commercial real estate, U.S. corporate, and European banking sectors, among others, which raises the prospect of a sudden "supply shock" that sends bond prices reeling -- and forces lenders to rethink their commitment to one of the world's biggest borrowers. Once that happens, the actions of Bernanke & Co. will no longer be relevant.

Boringly Mainstream?

Although some have characterized my predictions about the future as alarmist and extreme, the latest monthly commentary from the chairman of one of the world's largest currency hedge funds is making me feel boringly mainstream:

"After the Phoney War, Things Really Got Nasty"

Not too many traders remember ‘the phoney war,’ or the Sitzkrieg, as it happened 71 years ago. After Hitler invaded Poland on the first day of September 1939, Poland’s European allies France and England declared war on Germany, but nothing significant happened on that front until the following May when the German Army rolled through Luxembourg, the Netherlands, and Belgium and into France. Although the horror started in Poland in the fall of 1939, for a few months, the rest of Europe was spared that horror, which eventually lasted through the next five years. Strangely, this past September (2010), the US equity market rose by about 8.8%, its best return for that month, since that same September (1939). To me the parallels are ominous. What were those people thinking back in 1939? Could a coming world war have that positive an impact on the economy and on markets? They must have been crazy – of course equities gave up their gains and were cratered in May 1940 when Germany invaded the west. But, what are we thinking of now? A war has just begun.

Didn’t Bernanke and the Fed announce in late August at Jackson Hole (and multiple times since then) that the US was going to enter QE2 and debase its currency setting off a currency war. Bernanke, like Hitler seven decades ago, had been warning everyone who would listen for years. On November 21, 2002 he said that he would debase the US dollar if the American economy looked as though it would go through the same lost decades that the Japanese have recently endured. Now, it is clear that he has been true to his word and the currency war has begun.

….

Capital controls are likely to spring up in Asia and in other attractive economies during the next few months, but the really destructive war begins when tariffs appear. This should happen next year – maybe in May, mirroring 1940 – because by then the next recession should be in full force in both the US and in Europe, forcing many millions more out of work. The political pressure for raising tariffs in the US is intensifying and the new Tea Party supported Congressman will help tip the political scales in that direction. This war will not be fought for territory, but for markets and wealth, and when tariff walls are raised the destruction of livelihoods and property will be almost as dramatic as in the old fashioned shooting wars.

(Hat tip to FT Alphaville)

In the Numbers

A post at Econompic, "The Importance of the Emerging World," offers another reason -- aside from booming economic growth -- why the relative influence of developing nations keeps increasing: it's in the numbers.

I think the chart below clearly illustrates the importance of the emerging world and relative decline in the importance of the developed world. Not only are they growing faster, but they are a much larger (and growing) percent of the world's population.

Source: Eurostat

Looking East

That's the thing about being a fading empire: your friends and enemies start thinking about the benefits of being in relationships that don't include you. In "At Deauville, Europe Embraces Russia," the New York Times reports on one regional U.S. ally that is clearly warming to the idea that they no longer need to look West for strategic guidance:

PARIS — President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany have had their differences over the years, but on one thing they appear to agree: if Europe wants to remain relevant in the world and maintain peace in its own backyard, it needs Russia.

On Monday, as the French and German leaders began two days of talks with their Russian counterpart on the Normandy coast, diplomats and foreign policy observers said conditions might now be in place for a closer, if informal strategic dialogue between Europe and Moscow.

Before heading to the resort town of Deauville, President Dmitri A. Medvedev of Russia said he wanted a “worthy global response” to his idea of a new European security architecture. French diplomats said that Washington’s separate efforts at a reset of relations with Russia had diffused some of the tensions between Russia and the West, while German diplomats pointed to a softening by some ex-Soviet satellite countries toward Moscow in recent months.

“The stars are aligned,” Mark Leonard of the European Council on Foreign Relations said. “Only three years ago, we saw almost unbridgeable gulfs between several E.U. member states and Russia. That has changed. President Obama’s reset has led to really big rethinks in Poland and the Baltic states.”

More Challenging With Each Passing Day

In When Giants Fall, I argued that the end of the long-running global boom and the blow-back from decades of policies that benefited the "haves" at the expense of the "have-nots" would leave U.S. businesses, especially larger multinationals, with an operating environment that grows more challenging with each passing day:

The kinds of concerns that were seen even before globalization took hold will...come into play. After years of ever-growing profits, easing regulations, and a yawning gap between the incomes of workers and those at the top, political and social pressures will force the pendulum back the other way. The result will be increasing taxes on businesses and their overseers, restrictive legislation and political interference, tougher rules on governance and executive compensation, and pressure for payoffs and handouts. Businesses may be offered incentives to expand domestic hiring; those that try to stick with their offshoring ways will almost certainly be penalized. Firms will also face intense grassroots pressure to boost local hiring and rescue communities from the yoke of hard times.

With that in mind, I expect we will see a lot more efforts like this (a great many of which will ultimately be successful):

"Obama: End Tax Breaks to Stop Overseas Hiring" (Associated Press)

End tax breaks that reward some U.S. companies with overseas subsidiaries and encourage those businesses to create jobs in other countries, President Barack Obama is telling Congress.

Yet it's an idea that has raised concerns even among some lawmakers in the president's own party.

At issue is a bill, now stalled in the Senate, that would do away with some tax credits and deferrals for U.S. companies for operations abroad.

"There is no reason why our tax code should actively reward them for creating jobs overseas," Obama said in his weekly radio and Internet address Saturday. "Instead, we should be using our tax dollars to reward companies that create jobs and businesses within our borders."

Though Obama singled out Republican opposition, the bill also failed to get support from some Democrats, including the chairman of the Senate Finance Committee, Sen. Max Baucus, D-Mont. He has expressed concern that the change would put the U.S. at a competitive disadvantage.

The ending of the tax provisions has run into opposition from business groups, including the National Association of Manufacturers.

Obama said that while companies that conduct business internationally do make an important contribution to the U.S. economy, it doesn't make sense to grant them tax breaks when companies at home are struggling to rebound from the economic crisis. 

Hard Not To Be Sympathetic

It's a good bet that extremists, trouble-makers, and political opportunists with their own agendas are stoking xenophobia and rallying behind efforts in Arizona aimed at driving out illegal (and, perhaps, legal) immigrants from south of the border.

That said, when you read reports like the one that follows from The Arizona Republic, "Memo Warned of Drug Cartels Targeting Rivals with Assassins," it's hard not to be sympathetic to those state residents who feel they have been dragged into a conflict that is not of their own making.

Mexican cartels planned to send armed assassins into Arizona this spring to eradicate bandits who were stealing drugs from smugglers, according to a Department of Homeland Security intelligence report disclosed Friday by the Pinal County Sheriff's Office.

The intelligence email, sent May 13, warned law enforcement agencies that rival cartels had agreed to the plan after a meeting in Rocky Point, Mexico. "Once the bandits have been identified, the sicarios (assassins) will take out the bandits," says the memo.

DHS spokesman Matthew Chandler on Friday responded that the intelligence report "proved to be inaccurate."

"At this time," he said, "DHS does not have any specific, credible information on intra-cartel violence taking place in Arizona."

The Sheriff's news release includes a copy of the alert which was deemed "law enforcement sensitive," and which credits the information to a "proven, credible, confidential source."

According to the intelligence email, cartel leaders in Mexico agreed to send "a group of 15 very well equipped and armed sicarios complete with bullet-proof vests into the Vekol Valley," an area of intense smuggling activity southwest of Casa Grande.

The memo says members of the hit squad planned to establish positions in the valley, then send in backpackers pretending to haul loads of marijuana through the desert to lure armed thieves, known as bajadores, who prowl the area.

Crash-and-Burn

It's not an uncommon sight in financial markets: price trends that gradually accelerate until they go "parabolic." Of course, not all of the moves are to the upside. Sometimes, it's less of a "moon shot" than a crash-and-burn. Does that describe the trajectory of the United States standing in the world? Based on the following article by Salon.com's Glenn Greenwald, "Collapsing Empire Watch," it's hard not to draw that conclusion.

It's easy to say and easy to document, but quite difficult to really internalize, that the United States is in the process of imperial collapse. Every now and then, however, one encounters certain facts which compellingly and viscerally highlight how real that is. Here's the latest such fact, from a new study in Health Affairs by Columbia Health Policy Professors Peter A. Muennig and Sherry A. Glied (h/t):

In 1950, the United States was fifth among the leading industrialized nations with respect to female life expectancy at birth, surpassed only by Sweden, Norway, Australia, and the Netherlands. The last available measure of female life expectancy had the United States ranked at forty-sixth in the world. As of September 23, 2010, the United States ranked forty-ninth for both male and female life expectancy combined.

Just to underscore the rapidity of the decline, as recently as 1999, the U.S. was ranked by the World Health Organization as 24th in life expectancy. It's now 49th. There are other similarly potent indicators. In 2009, the National Center for Health Statistics ranked the U.S. in 30th place in global infant mortality rates. Out of 20 "rich countries" measured by UNICEF, the U.S. ranks 19th in "child well-being." Out of 33 nations measured by the OECD, the U.S. ranks 27th for student math literacy and 22nd for student science literacy. In 2009, the World Economic Forum ranked 133 nations in terms of "soundness" of their banks, and the U.S. was ranked in 108th place, just behind Tanzania and just ahead of Venezuela.

There is, however, some good news: the U.S. is now in fifth place in total number of executions, behind only China, Iran, Iraq and Saudi Arabia, and comfortably ahead of Yemen and Sudan, while there are two categories in which the U.S. has been and remains the undisputed champion of the world -- this one and this one. And, of course, the U.S. is not just objectively the greatest country on the planet, but the greatest country ever to exist in all of human history -- as Dave Roberts put it in response to these life expectancy numbers: "but we're No. 1 in bestness!" -- so we're every bit as exceptional as ever.

Water: 'A Key Component of National Security'

In recent years, the focus in commodity markets has been on those resources that are actively traded by individuals, businesses, and governments.

During 2008, energy was the star performer (until it wasn't). Last year, copper was a speculative favorite. So far this year, precious metals and, more recently, grains and other agricultural products have been leading the charge.

That said, there is one vital resource that doesn't seem to have attracted the same attentions as the others, but whose value continues to rise by the day. In "Water Crisis Threatens Asia's Rise," the New York Times discusses the supply-demand realities of a resource that will, eventually, be the biggest commodity play of all.

JINGHONG, CHINA — Framed by banana and eucalyptus trees, the caramel-colored Mekong River rolls through this lush corner of Yunnan Province in southwestern China with an unerring rhythm that is reassuring in its seeming timelessness.

Yet as recently as April, a fearsome drought had shriveled the Mekong to its narrowest width in 50 years. Water levels were so low that at Guanlei, a river town not far from here, dozens of boats were laid up for more than three months.

Alarmed at the drying up of the world’s largest inland fishery, the four members of the Mekong River Commission — Thailand, Laos, Cambodia and Vietnam — called a special summit meeting.

“Without good and careful management of the Mekong River as well as its natural resources, this great river will not survive,” Prime Minister Abhisit Vejjajiva of Thailand warned.

The commission’s political leaders suspected that China was hoarding water behind dams it has built on the Mekong, exacerbating the effects of the drought.

China presented data to allay these fears. Finally, the rains returned and the tensions dissipated.

But the incident highlighted the strains that are being generated as the unslakable Asian thirst for water collides with the reality of a supply that is limited and, if climate change projections are borne out, may shrink sharply.

The Asian Development Bank speaks of a looming crisis that threatens access to water and sanitation needs for millions of households and industries.

The bank is holding a high-level conference at its headquarters in Manila this week to chart solutions and canvass greater regional cooperation.

“In the next 5 to 10 years, if the initiatives to secure greater efficiencies in water are not put in place, you really are at risk,” said Arjun Thapan, the bank’s special senior adviser for infrastructure and water.

Projections last year by the Water Resources Group, a consortium of private-sector companies formed to tackle water scarcity, point to a global gap of 40 percent between the supply and demand for water by 2030 under a business-as-usual scenario.

The imbalance is particularly daunting in India, where the trend toward a middle-class diet will increase demand for meat, sugar and wheat, which require a lot of water to produce.

Agriculture uses almost 90 percent of India’s water.

By 2030, demand will grow to almost 1.5 trillion cubic meters, or 53 trillion cubic feet, compared with the current supply of about 740 billion cubic meters, according to a report for the Water Resources Group by the consultant firm McKinsey.

As a result, in the absence of concerted action, most Indian river basins could face a severe water deficit by 2030.

The probable water deficit for China is more manageable on paper — a shortfall of 200 billion cubic meters — but 21 percent of the country’s surface water resources are unfit even for farming, which consumes about 70 percent of the country’s water.

What makes such forecasts even more daunting is evidence that global warming is already eroding the Himalayan glaciers covering the Tibetan plateau, which feed China’s neighbors, including India and Pakistan, as well as China itself.

More than 80 percent of the glaciers in western China are in retreat, according to a study by a group of mainly Chinese climate change scientists in the September issue of Nature.

Over all, 5 percent to 27 percent of China’s glacial area is forecast to disappear by 2050, the study said.

“Even though the exact timing and magnitude of the ‘tipping point’ of each glacier is still uncertain, the projected long-term exhaustion of glacial water supply should have a considerable impact on the availability of water for both agricultural and human consumption,” the scientists wrote.

Because 60 percent of the runoff from China glaciers flows out of the country, this can spell only trouble.

China’s plans for more dams on the Mekong and on other major rivers that tumble down from the Tibetan plateau already have its southern neighbors on edge.

“As far as transboundary management of water is concerned, I think certainly the Himalayas are likely to be a flash point,” said Mr. Thapan of the Asian Development Bank.

The risk of conflict over water rights is magnified because China and India are home to more than a third of the world’s population yet have to make do with less than 10 percent of its water.

“Although both nations are seeking to become the superpowers of the 21st century, their weak point is water,” according to Yoichi Funabashi, a prominent foreign-affairs commentator and editor in chief of the Asahi Shimbun, a Japanese newspaper.

India and Pakistan are another potential point of friction.

The Indus Waters Treaty, which parceled out river-use rights after India’s partition in 1947, has survived three wars between the two neighbors since it was signed in 1960. But the pact is under strain from Indian plans for more upstream dams and water diversion.

So what is to be done? Given that agriculture accounts for almost 70 percent of global water use, it will be critical to increase “crop per drop” through improved irrigation techniques and by growing food that needs less water.

In the words of the Water Resources Group, “While the gap between supply and demand WILL be closed, the question is HOW.”

As Mr. Funabashi puts it, oil can ultimately be replaced by other resources, but the same is not true for water. Water is also closely tied to food, energy and climate change.

“In that sense, water is a key component of national security,” Mr. Funabashi wrote last month.

“If the 20th century witnessed the rise and fall of nations over oil, the 21st century could be one in which the rise and fall of nations is determined by water,” he added.

The Newest Emerging Market

Fund My Mutual Fund has highlighted a discussion on CNBC that probably would have been dismissed as farcical only a few short years ago: whether the U.S. should now be classified as an emerging market for investment purposes. As Mark "Trader Mark" Smith notes, "the country is exhibiting many of the risk factors traditionally correlated with developing markets," including: 

1. Out of control debts
2. Crony capitalism socialism whatever-ism
3. Decision making at the government level dominates all facts of economy & markets
4. Dysfunctional government
5. Growing chasm between rich and poor
6. Dysfunctional financing - a Treasury which issues debt, and a central bank which buys it

Although he left out some other notable examples, including the fact that many of those in-charge no longer feel hamstrung by the rule of law, it's nonetheless hard to argue with his contention that if you spelled out those risk factors to the man on the street and asked which country they applied to, most would say it was an emerging market.

Welcome to the new America.

Not What It Was

The Commonwealth Fund, a private foundation which "supports independent research on health policy reform and a high performance health system," is out with a new study on the state of U.S. health care.

As with earlier research that found the U.S. system to be of lower quality, less efficient, and less equitable than that of other developed nations, the results detailed in "Americans' Life Expectancy Continues to Fall Behind Other Countries'" lend further weight to the notion that our country is not what it was.

Obesity, smoking, traffic fatalities, and homicide ruled out as causes of failure of US to keep up with gains in life expectancy in other countries

New York, NY, October 7, 2010—The United States continues to lag behind other nations when it comes to gains in life expectancy, and commonly cited causes for our poor performance—obesity, smoking, traffic fatalities, and homicide—are not to blame, according to a Commonwealth Fund-supported study published today as a Health Affairs Web First. The study, by Peter Muennig and Sherry Glied at Columbia University, looked at health spending; behavioral risk factors like obesity and smoking; and 15-year survival rates for men and women ages 45 and 65 in the U.S. and 12 other nations (Australia, Austria, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom).

While the U.S. has achieved gains in 15-year survival rates decade by decade between 1975 and 2005, the researchers discovered that other countries have experienced even greater gains, leading the U.S. to slip in country ranking, even as per capita health care spending in the U.S. increased at more than twice the rate of the comparison countries. Fifteen-year survival rates for men and women ages 45 and 65 in the US have fallen relative to the other 12 countries over the past 30 years. Forty-five year old U.S. white women fared the worst—by 2005 their 15-year survival rates were lower than that of all the other countries. Moreover, the survival rates of this group in 2005 had not even surpassed the 1975 15-year survival rates for Swiss, Swedish, Dutch or Japanese women. The U.S. ranking for 15-year life expectancy for 45-year-old men also declined, falling from 3rd in 1975 to 12th in 2005, according to the study, "What Changes in Survival Rates Tell Us About U.S. Health Care."

From Bad to Worse

If things are as bad as the United Nations says they are, according to the following Associated Press story, "UN Report: 22 Nations Face Protracted Food Crises," what's it going to be like when the next leg of the economic downturn unfolds, governments are forced to scale back social safety nets, and global trade frictions intensify? Pretty ugly, I'd say.

ROME — U.N. food agencies said Wednesday that 166 million people in 22 countries suffer chronic hunger or difficulty finding enough to eat as a result of what they called protracted food crises.

Wars, natural disasters and poor government institutions have contributed to a continuous state of undernourishment in some 22 nations, including Afghanistan, Haiti, Iraq, Somalia and Sudan, the Food and Agriculture Operation and the World Food Program said in a new report.

A country that reports a food crisis for at least eight years and receives more than 10 percent of its foreign assistance as humanitarian relief is considered to be in a protracted food crisis, the two agencies said — offering the first definition of the term in hopes of improving aid response to these nations.

"Protracted crises can become a self-perpetuating vicious cycle," said a report by the two agencies. "Recovery may become progressively more difficult over time."