13: Chapter Thirteen: Hawaii




13 Chapter 13 Hawaii

There are companies in the world that own and ‘hold’ massive amounts of land. Their business is making money from their holdings. These companies don’t just guess about the best way to deal with these lands. They hire professional researchers who study all of the options.

They then set up what we may call ‘test systems’ to see how the ideas of the researchers work in practice. If something researchers say should work in theory does not work in practice, they have learned something: people often learn more from failure as from success.

If a system works, but clearly doesn’t do everything they want done, they realize that they may have gotten the big issues right, but they made some mistakes in the details. They can ‘tinker’ with the systems, making minor adjustments to alter the way they work. (We will look at some of the things that can be ‘adjusted’ shortly.) They then test the new system to see how it works. If it works better than the system that started with, they know they are on the right track. If it works worse, they know that they are adjusting the right thing, they are just adjusting it the wrong direction.

This chapter deals with a system that is now in use in the United States state of Hawaii. The companies that are now operating in Hawaii have been doing this for more than 170 years.

They have done a lot of research.

They know what they are doing. They have systems in place that work as well as their researchers could make them work. Let’s look at the way these companies came to be in the position they are now in and then at exactly what they do.

The big five of Hawaii

If you have ever been to Hawaiiand talked to the people there, you know about something the locals there call the ‘Big Five.’

Five companies own the great bulk of the island chain. A group of investors formed these companies in the 1850s in Boston. The investors intended to all work together on a single project, but the project would require a lot of different tasks so they created five separate corporations to keep the tasks separate.

After they had created these businesses, they put together a very large lobby in Washington DC (which will be very important, as we will see). Then they got on a boat and took a long and dangerous trip around the tip of South America to a country called the ‘Kingdom of Hawaii.’

The history books tell us that these companies were motivated by love, not greed. The books tell us that the founders of the big five were mostly concerned with the souls of the Hawaiians. The Hawaiians had societies that worked the same as the primitive systems of North America (natural law societies). These societies didn’t have standard moral rules to keep people’s sexual desires in check and people were allowed to walk around naked if they wanted to do this. They took advantage of this right and the people from Boston felt this violated religious rules that the people in Boston took extremely seriously. The people of Hawaii didn’t accept ownership of property and shared the things the land produced, so they didn’t have incentives to work hard: they did enough to live comfortably and raise healthy children, but they didn’t work like people in ‘civilized’ countries do, devoting all their waking hours to toil for the benefit of some employers. They didn’t have any savings to speak of and, when hard times came, they suffered horribly; they didn’t haveany investments to enrich them; the didn’t have and didn’t feel they needed the modern conveniences of the time that people in Boston would never think about trying to live without. They didn’t devote one day a week to worship, build churches, or pay a tenth of their incomes to the support of the church mechanism.

The history books tell us that the people from Boston cared only about their souls: they wanted to teach them the way people are supposed to live, according to the Christian holy books so that they could gain salvation from the horrific sins they committed through ignorance and avoid eternity of torture in hell.

These corporations were incredibly successful. Today, all five of them still exist and together make billions of dollars in revenue. They own vast amounts of land, including about 90% of all land in Hawaii, and hundreds of millions of acres in various other parts of the world. The land they own is extremely productive and generates immense amounts of income each year.

You could say that a massive deluge of free money flows into the coffers of the big five. From there, this money flows to the descendents of the founders, who are now among the richest and most powerful people on earth. As they saying goes, the rich get richer and these people get richer and richer each day that passes, as the wealth that flows from the land of Hawaii flows through the corporations into their pockets.

The history books say they did it all for love and the money was just a happy coincidence. Cynical people might say that the history books, which were commissioned to be written to the specifications of the conquerors by the conquerors, were biased and are nothing but attempts to rationalize horrific and inhumane activities by claiming they were done out of love. Cynical people might say that it was about the money from day one.

If we had some sort of machine that would allow us to view the past as it happened, and to select a person on the view screen and then read that person’s interior thoughts, we might be able to set the machine to the early days and look at these people to see why they did the things they did. But we don’t have any tools that we can use to read the thoughts of people who lived in the past so all we can do is speculate about their interior thoughts. All we can tell for sure is what they did.

What Happened

You can find many articles on the conquest of Hawaii on the internet by looking up this search term. Most of them are very sad and are clearly designed to pull at your heart strings rather than give useful information. You can find as many as you want on the internet and in libraries; if you go there and talk to the native people, you will hear stories so sad it will give you chills.

Here, I just want to give some practical information so you can see how these companies got their land. When they arrived in Hawaii, they made friends with the Hawaiians and told them they were only there to bring religion. But they set up something they called ‘land registry offices’ on the major islands. They brought in surveyors to make extremely detailed maps of the islands. They then held meetings where they took these maps and drew lines on them to divide them into parcels. They then filed claims in their registry office on each parcel. By the end of 1892, they had filed claims on roughly 90% of the land on the island chain.

The Hawaiians were not involved in this. They had a natural law society. To them, land couldn’t be owned. What difference does it make if these haloes (the Hawaiian name for people of non-Hawaiian heritage) like to draw lines on maps and file documents at offices that serve no purpose? It doesn’t affect them.

At the time, Hawaii was an independent country. The companies didn’t want it to remain independent. They had lobbying organizations in Washington and these people did the things lobbyists do: they gained support in the congress for the aims of the companies. The lobbyists told people in government that Hawaii was strategically critical to the United States. Japan and Russia were both in a very active expansion phase. Russia had already taken Alaska and had enormous holdings in America. Its leaders had their eyes on California and, if they could take Hawaii, they had a good chance of taking it. Japan was moving in all directions, taking all islands in their path, and moving deeply into China. The majority of non-Hawaiian people in Hawaii were Japanese. If they could take the island chain, they could also use it to threaten the mainland. America needed the island chain to protect itself.

Trade across the vast Pacific was growing at a fantastic pace and whoever controlled the islands controlled this trade. The companies that these lobbyists represented wanted America to annex Hawaii and make it something called a ‘protectorate.’ It would operate under the protection of the United States and its people would have the rights the government of the United States wanted them to have. If they could get Hawaii annexed to the United States, they would then only have to show that they had properly claimed and registered land on the islands using the same standards that had been protected in the United States since its founding. The land would be theirs.

Unfortunately, they were facing a deadline.

Grover Cleveland, a democrat and fierce anti expansionist, would be taking over the presidency in March of 1893. The republicans (who actively and openly advocated expansion and annexation of land) would still be in power, but the analysts expected democrats (which were opposed to imperialism and believed in self-determination for other people) would take over control of the Congress. They would not let the annexation go through. The companies had to act quickly to make sure they could present their requests to a friendly government. They scheduled their coup for January 17, 1893.

The companies had secretly formed what they called a ‘provisional government’ under the leadership of Sanford B. Dole, a key figure in all five of the companies. Dole had connections in both the military and the United States government. He had arranged for the United States warship Boston to dock at Honolulu harbor and for soldiers to move in to take possession of key positions in the city.

Of course, this attracted the attention of the government. The United States had a treaty with Hawaii that guaranteed the sovereignty of the ‘legitimate government.’ (This is wording that the corporations would take advantage of.)

Dole sent a message to the queen. He requested a meeting at her office so he could explain what was happening. (She had no idea the companies were taking over the government.) When she arrived, armed men barricaded the door and Dole told her that, unfortunately, they would have to take her into protective custody. They were concerned with her safety and didn’t want her to risk getting hurt in the actions that were about to take place.

Dole told the queen that the companies had filed grievances with her government several times about the lack of adequate protection for the rights of land owners. Her government had not acted to protect them. (The native government of Hawaii not recognize the claims of the companies: Hawaii had a natural law society and didn’t accept ownability of land.) Dole told her that, since her government had ignored their complaints, they had no choice but to take control of the administration to protect themselves.

They intended to form a new government based on the model of the United States. The name of the country was no longer the ‘Kingdom of Hawaii’ it was ‘Republic of Hawaii.’ Dole told the queen that they would be holding elections as soon as practical to form the new government. In the meantime, the provisional government would take over the administrative apparatus to make sure there were no lapses in services for the people.

Dole had used his lobbyists and contacts in Washington to get the United States Department of State to grant official ‘recognition’ to the provisional government. This means it was now officially classified as the ‘legitimate government of Hawaii.’ Under its treaty, with the United States, the legitimate government of Hawaii had a right to request protection from the United States military. Dole had made this a request and the United States government had responded, sending the warship the USS Boston to protect the legitimate government of Hawaii from possible insurrection by the natives.

The Hawaiians had a peaceful society. They didn’t have anything that could be considered to be a military. Dole told the queen that what happened next depended on her. If she ordered her people to accept the change of administration and cooperate with the new government, and they complied, no one would have to be hurt. It would be a smooth and bloodless takeover. If there was resistance, the United States government controlled the largest military on earth. Hawaii would be helpless and its people would be slaughtered. She (reluctantly) issued a proclamation ordering her people to cooperate.

The provisional government’s first act was to ratify a constitution that Dole had written in advance. The constitution was modeled after many of the original state constitutions in the United States: it made land ownership a prerequisite of government office and only allowed land owners to vote. Only the haloes (non natives) had filed claims on in the registry offices, so this effectively meant that natives could not vote or hold office. In fact, the only people who could vote or hold office were the people in the provisional government and the electorate overwhelming approved of them in the elections.

The Congress of the United States had been prepared in advance. (This is what lobbyists do: they make sure they have support for their companies projects before the projects are started.) Laws were passed and Hawaii was given ‘protectorate’ status. Basically, this meant that the United States military would protect the new government against all enemies, domestic and foreign.

The action was condemned around the world. It was blatant racism and imperialism. In the United States, the democratic party made it a rallying cry for the election: if the voters put them into office, they would reverse it and give the Hawaiians back their country. The voters clearly got behind this and the democrats took control of the Congress (they already had the white house). But they were unable to reverse the legislation the republicans had passed. As the final decade of the 1800s wound down, the tides again shifted in Congress and the republicans took control again. They were openly expansionist. They had their eyes on Asia, particularly the enormous Spanish possessions in the Philippines. Hawaii was a key part of the plan: it would not be possible to take the Philippines from Spain without putting enormous military resources in Hawaii. Plans to restore the native government of Hawaii were forgotten.

When the new government took office, it began codifying the ownership laws. The corporations became the owners of about 90% of the island chain. They own this land still.

Castle and Cooke

Castle and Cooke was one of the big five of Hawaii. It had a horrible reputation for most of its history. The company brought in Japanese mercenaries to drive the natives from their land. They brought in coolies from China to work the land. The Hawaiians had to leave their homes and villages and move out to the inhospitable areas that the companies had not claimed. They couldn’t raise food and starvation and disease kills about ¾ of them. The companies weren’t satisfied with their enormous holdings in Hawaii. Central America had not yet been conquered (it still had native administrations) so they proceeded to conquer it, the same way they conquered Hawaii. There was more resistance in Central America (they knew what the gringos were capable of) and the company used horrific methods to put down the resistance.

They didn’t want to have to pay market rates for shipping so they formed their own shipping company (Matson), which quickly became one of the largest shipping companies in the world. The corporations controlled the Hawaii government so they gave Matson special rights there and had a near monopoly over trade between Asia and America. They made fantastic amounts of money but had a truly horrible reputation.

In World War Two, the government needed a place to send soldiers to recuperate and rest between battles. They chose Hawaii for this. The soldiers saw it as a kind of paradise: they would have a few days of heaven and then be sent back to hell. Enormous facilities were built for ‘R&R’ and a new model emerged. Hawaii was no longer important for agriculture. (It was too far away from markets to ship crops profitably.) But it was seen as the best place on earth to live. The big five, led by Castle and Cooke, began to change their focus.

In 1995, billionaire David Murdock saw the potential of this model. He paid cash for 100% of Castle and Cooke. He spun off its ill-reputed agricultural lands in Central America, its stake in Matson, and everything except its enormous holdings in Hawaii. He then went to elaborate lengths to clean up the image of the company. He turned Castle and Cooke into a premium brand focusing on high-end resorts and luxury housing. By the end of the 1900s, Hawaii had become a major destination for tourists and one of the most desirable places on earth for the world’s ultra-rich to live.

Castle and Cooke owned immense amounts of this land.

It would not sell freehold rights to its land. But it would allow people to buy rights to use the land and develop it, under the same model described in the previous chapter.

Ownership in Hawaii

If you want to move to Hawaii, you can.

If you want to live there, you can.

You can even buy in.

You can own a place there.

You start the same way you would start in other areas: call a real estate agent.

When you call, the agent will ask you what kind of property rights you want to buy:

Do you want a freehold or a leasehold?

Most people who are calling cold don’t understand the question.

A common answer would be:

‘I don’t know; which one is better?’

There were advantages and disadvantages to each. However, if you ask agents, they will tell you that almost everyone in Hawaii buys something called a ‘leasehold.’ If you go by the popularity, you would have to say that leaseholds are better.

But some people swear by freeholds.

They won’t consider any other options. To them, leasehold ownership is not true ownership, it is a kind of sham ownership where people don’t aren’t the true owners, they only own a document that is, to them, a lot like a rental agreement. To them, people who say that leasehold owners are owners are trying to scam them.

In order to really understand the difference, you have to understand that the big five owners never intend to sell the land itself. They got their land in 1893 (January 17, 1893, to be exact; see text box above). This was more than a century ago. They have no intention of selling it. They are, however, willing to take on partners who will be part owners. People can buy partial ownership rights to the land. The people who buy will be what we may call ‘operating partners.’ They will be the ones on the ground, making all decisions that owners normally make, controlling the money, and making all decisions about how the property is used and who benefits form its existence.

The other partner (one of the big five companies) will be what we may call a ‘silent partner.’ The company doesn’t interfere in day to day decisions on the land. It is only involved in the big picture. The companies own most of the island chain and have long-term plans for it. They know that a lot of people are willing to come to Hawaii and spend enormous amounts of money. People will spend a lot because they think of the island chain as the last place that might be considered to be paradise on earth. They want it to stay that way. To make sure this happens, they have certain rules that their operating partners must follow. The operating partners must protect the land and keep it healthy. They must build and live in accordance with certain rules designed to preserve the quality of life for those around them.

Freeholds and Leaseholds

Over history, kings and other conquerors have gained control of lots of land. Quite often, they needed enormous amounts of money very quickly after they got the land.

Usually, they needed this money because they had borrowed enormous sums to pay the armies and militaries to conquer the land. Generally speaking, after a conquest, military leaders have to keep going and attack more territory for strategic reasons: they need to know that the people who live in the areas they haven’t yet conquered are not going to be able to attack and take back the land they just took. They need to keep going and this requires money, often a large amount of money.

The fastest and easiest way to raise enormous amounts of money is to find people who have large amounts of money and ‘sell’ them land: turn over various parcels of land (together with a promise to use their military, if necessary, to protect the new owners). They give up land in exchange for a pile of money. They want the biggest pile of money they can get and they can get the largest pile by selling the maximum in rights, so they generally sell 100% of the rights to the land.

This kind of sale is called a ‘freehold sale.’

There are other names for it: Some people call it a ‘fee simple sale.’ (The term implies that the buyer gets the land for a on time ‘simple fee’ called the ‘price.’) It is also called ‘deeded land’ or ‘patented land.’ These terms imply that the seller is turning over all vested interests in the land.

The buyers become the owners of the land.

The kings and other military leaders that conquered the land have incentives to honor their agreements to the new owners. In practice, the conquerors could simply sell the land for money, use the money to build bigger armies, then kill the owners and take the land back. However, if they do this, it only works one time. Once word gets around that these people who run the governments aren’t going to let the owners keep the land, the rich people and companies that were buying the land will stop buying. If the kings and governments that take land can give more assurance to buyers and generate more trust, people will be willing to pay higher and higher prices for land. The most successful rulers were those that went to great lengths to protect land owners, setting up courts with the authority to make decisions to protect the owners that even the governments would be bound by and have to respect.

If kings and administrations of governments that conquer land can get a reputation among the wealthy people of the world that they will protect the owners, they can sell land for far higher prices than they would get without this reputation. (Many websites compare the prices that properties bring in different countries. You can see there is a very strong correlation between the market value of land rights and the protections the governments of the countries give to owners.)

Often, when vast amounts of land are taken over at once, the conquerors don’t have any practical ability to divide it into parcels and sell off the parcels individually. They often simply turn over everything to a group of people acting collectively for profit. In other words, they turn over the land to corporations.

Once corporations have land, they can take time to figure out the best way to make money from their land. Generally speaking, they can make more from the land over the long run by taking in ‘operating partners’ who will have ownership interests in the property. The operating partners make day to day decisions on the land, find ways to make the land create cash flows, and operate everything. The owning corporation is a silent partner that gets a share of the cash flows the land generates in exchange for letting the operating partner have the above rights.

These companies sell partial rights.

The common name for ‘the thing they are selling’ is a ‘leasehold.’

A leasehold is a document that gives the owner of the document the right to act as owner of the property for a stated period of time in exchange for a stated rent (payment made over time) and an agreement to follow certain rules that limit the things the leasehold owner can do. It is a kind of ‘temporary ownership, granted over time, in exchange for a fee, paid over time.

Basically, if you are the owner of a leasehold, you have rights to the property that are greater than the rights you would have if you were a renter, but less than the rights you would have if you were a full owner (freehold owner).

Leaseholds are sold under written agreements.

There are two parties to these agreements:

1.The buyer and owner of the leasehold.

2.The other party, generally called the ‘landlord.’

The written leasehold agreements explain exactly what rights the leasehold owner has and what rights will be kept by the other party (not sold to the leasehold owner.)

Leasehold owners have to pay both rents and a price for the property.

why would someone pay both a price and a rent?

This seems strange.

Don’t you pay either a price or rents?

Who would pay both?

In fact, there is a very logical reason for this. Let’s look at the farm in the last chapter as an example. The far produces operating profits of $2.45 million a year. There are people who would operate this farm for $50,000 a year. If you are one of these people, you could afford to pay $2.4 million a year in rent.

$2.4 million is the free cash flow. People who operate farms need to be paid for the things they do. They do not need to be paid for the things they do and get free cash. Landlords know that they can require the people who operate the land to collect the free cash the land produces and turn it over to them as rents. In other words, they can charge rent equal to the free cash flow, and will find people willing to pay it. Landlords want the highest rents they can get. The highest rents they can get are equal to the free cash flow.

The free cash flow is considered to be the ‘full rental value’ of the land.

Let’s say that you are willing to rent the farm for $2.4 million, but the landlord doesn’t offer it for this, she offers it for $1.8 million, which is ¾ of the free cash flow.

This seems like a wonderful deal. You are willing to rent for $2.4 million and she is willing to let it go for $1.8 million. But there is a catch. She isn’t going to rent it to you, at least not necessarily. There are a lot of people who want to rent it for this reduced rent. She is going to let them compete for the right to rent it. She is basically going to sell the right to get the control of this land for the reduced rent.

How much is she going to sell it for? In practice, she might just conduct an auction and sell it to the highest bidder. But lets say that, in this case, she decides to set a price of $12 million. She will sell the right to rent the farm for $600,000 less than the full rental value for a price of $12 million.

The buyer is going to be able to collect the $2.4 million in free cash flow and only pay out $1.8 million to the landlord. This leaves $600,000 a year for the owner of the ‘leasehold’ (the right to rent for the reduced rate). The buyer of this leasehold puts up $12 million of money and gets the $600,000 as a ‘return’ on the money. This works out to a 5% return on investment. Most of the time, a 5% return on money invested in a farm is considered a very good return. A lot of people who invest in farms are not getting this high of a return. They will look at this deal as a good deal: it gives them a higher return on their investment than they can get in other investments of similar risks.

Now you can see what is happening. The buyer is not paying for the rent to rent the farm. The buyer is paying for the right to get $600,000 a year in free cash.

If rates of return on money are 5%, the right to a $600,000 return is ‘worth’ $12 million. In other words, that is the amount you can sell it for in a market.

Some people who may want to run a farm may not have $12 million. (Not everyone has this much money.) They can still run this one, however, if they have good credit: they can borrow for 5% (assuming this is the market rate) and their interest will be $600,000. If you bought for this, you would run the farm and collect the $2.45 million in operating profits. You would then give $1.8 million of this to your landlord (as rents) and $600,000 of this to your lender (as interest.) Your payments would total $2.4 million so, after the payments, you would have $50,000 left over.

Why Would Anyone Want to Buy this Leasehold?

If you buy this leasehold, you get more than the $600,000 in free cash flow. You get the right to anything above the current amount the land produces. If you run it as well as it was run before, you can expect to end up with just $50,000 a year. If you run it better than it was run before, you get more.

If you were ‘just’ a renter, you might get the extra (due to your effort) but you might not. Your landlord will see that the land can produce more. She may take advantage of this to increase your rent, taking away all of the increase.

If you own the leasehold, you are an owner. You own the rights to the increase. The agreement you signed when you bought states what rights you have. It should be obvious that no one would ever sell a leasehold like this if other partner could just jack up the rents to any level she wants after the deal is done. You paid $12 million. If she jacks up the rent to an unaffordable level, you won’t be able to pay and she will get her land back, and be able to keep the $12 million

If land holding companies want people to buy their leaseholds, they need to protect the leasehold owner from this kind of action.

The landlord can change the rent.

But, unlike a rental, the landlord can’t just change it to anything she wants. The leasehold agreement stipulates exactly how often the rent may be changed. It also explains exactly how the rent will change when it is adjusted.

Remember, both parties benefit from this agreement. Leasehold owners get a part ownership interest in the property and rights that can make them very rich, if they are good at what they do, efficient, honest, innovative, and work hard. (We will look at some examples shortly.) The landlords get people who make day to day decisions on property that have extremely strong incentives (much stronger than the incentives of renters) to take the best possible care of the property, to make sure their rents are always paid, in full, on time, no matter what happens, to work hard to find new and better ways to make the property produce wealth and to invest money (often enormous amounts) to make this happen. This benefits the landlords because, after a short time lag (never longer than 25 years), the landlord’s income will go up and up.

In this case, the landlords are corporations with forever charters. They are going to be around a long time. (Castle and Cooke was chartered in 1851; it has already been around more than 170 years.) They are in it for the long haul and don’t need to get every penny out of the property they can immediately. They would rather let a partner keep all benefits for time (25 years is nothing compared to the time they will benefit from the improvement) and have constant improvements that drive up cash flows forever, than get a few pennies more each year but never have any improvements.

Our group in Pastland is in the same position.

We can take on partners. They can improve the world around us, at their own expense. (Of course, they have to follow the rules we set for this, which require they protect the land and their changes be sustainable.)

They can make all the money for what is, to them, a very long time. (To mortal humans, 25 years is a lot). They can pass rights down to their heirs who can benefit from their improvements forever. (When the rents are readjusted, they only go up in a way that takes 75% of the increase for the human race. The other 25% still goes to the owner.) The system built on this kind of land tenure has the same powerful forces pushing toward environment, social, and personal responsibility as natural law societies. We don’t have to be in a big rush to get as much as we can as quick as we can, because we are going to be around a very long time.

A leasehold Example

Annie used to work for Castle and Cooke in Hawaii before she took this trip. She went to work for the company right out of college. She started working in a cubicle reviewing documents, looking for mistakes that the people who had the documents before her may have made. She was good at her job and could process documents accurately in far less time than her coworkers. She was promoted and became an escrow officer. These people meet with people who are buying leaseholds and signing documents. They go over the documents with the buyers and explain each one, then get them all signed and check the signatures. She was given high ratings by her customers and was promoted again to management.

Managers may have complex job descriptions, but they are judged by their ability to make money for the shareholders. If they have ideas about new ways to do things, they can advance fairly quickly. In five years, she was running the entire leasehold ownership system for the Hawaii division.

Her job was to find profit-making opportunities that others in the company had missed. She reported directly to the board of directors and her pay depended on how impressed they were with her abilities. (She got a base salary but the bulk of her income came from her yearly bonus.) Sometimes, she went on inspection flights over the company’s lands by helicopter.

One day she was flying over a remote area that the company hasn’t used since the early 1900s. She sees a dilapidated building surrounding a marsh. She asks her pilot to drop down so they can take a look. She finds there is rice growing in the marsh.

This interests her because of a documentary that she had seen a few days earlier about genetically modified (GMO) rice. The documentary said that chemical companies had used trickery to get farmers around the world to switch to these varieties of rice. They did this because the GMO rice could not grow without massive applications of chemicals. That is how the chemical companies made money: the more chemicals they could sell, the more money they would make. If they could get farmers—or better yet entire countries—to switch to GMO, they would be assured of markets for their products for decades.

The chemical companies sent representatives to governments of third world countries. They said they cared about world hunger and wanted to increase the world food supply. They had put together a special program to provide free seeds to governments that would encourage farmers to switch to the new crops.

The GMO crops produced higher yields than organic. Yes, they would need chemicals. But the chemical companies had set aside billions of dollars to subsidize the chemicals for countries that participated in these programs. They were doing all out of love and the company wouldn’t make any money on this project. (This kind of argument works pretty well among young and idealistic newcomers to the government, who don’t really understand how the world works.) The governments get free seeds they can give their farmers; the farmers get higher yields, the country gets more food, food prices are lower, everyone wins.

After a few years, the companies said the source of the funds they used to subsidize the seeds and chemicals had dried up. They would have to charge full price. This made the GMO rice more expensive to grow than the organic rice. The farmers tried to switch back to organics, but they couldn’t. They had been tricked: the massive applications of chemicals needed for the GMO rice killed microorganisms that the organic rice needed to grow, and stripped the soil of nutrients. The organic rice seeds didn’t even sprout. They had no choice: if they wanted the land to grow anything at all, they had to buy the GMO rice and chemicals. They would have to pay whatever the companies wanted.

Governments all around the world (including the United States, where this trick was also used) sued the chemical companies and won some of the highest awards ever granted in history. The chemical companies paid happily: their customers were now hooked and had no choice. Although the awards were massive, they paled by comparison to the profits the companies would make from then until forever selling their products. At the trials, they said they didn’t know the chemicals would sterilize the land and force farmers to keep using their products. If they had known, they would have never even developed the dangerous products, let alone subsidize a global push away from organics. They are very unhappy that they now have no choice but to expand their chemical production—requiring massive investments which will require high costs to recover—to help their customers. But there is a light at the end of the tunnel: their inventors are working on new modifications of plant DNA that will create even better varieties of rice. As soon as these new varities are available, they will make them available for free…

The documentary said that the GMO rice basically turned nature into a factory. Rice is made with carbon, hydrogen, oxygen, and nitrogen. The chemical companies get carbon and hydrogen from fossil fuels. (Natural gas is CH4 meaning 4 hydrogen atoms and one carbon.) It turns them into a form the plants can take in very quickly and process into rice, according to the programming in its modified DNA. Essentially, the rice is now little more than processed fossil fuels. People who eat the rice are basically eating organically processed chemicals.

A lot of people stopped buying the GMO rice when they found out about this. The price of GMO rice collapses and the price of organic rice soared, as people made the switch. This changed the economics of rice farming a great deal. People who grew organic rice could make very high profits now, simply letting the land produce food naturally. It was a low-cost and low-effort kind of farming: spread the seeds by throwing them in the air, wait, and then harvest the rice when it is ready.

People who grew GMO rice were running rice factories. They needed truckloads of inputs coming in constantly, fleets of equipment to spread the chemicals, and armies of full time workers to operate the factories. Annie represented the largest land owner in Hawaii. Most of its money came from selling ‘quality of life’ for people who wanted to escape the industrial lifestyle in other areas and move to paradise. The GMO farms had no place in Hawaii and she didn’t want them. But a totally natural, totally organic rice farm was a different story.



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