by Johann Hari
2 July 2010
from TheIndependent Website
You're wrong. There's more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here's the rest.
This is the story of how some of the richest
people in the world - Goldman, Deutsche Bank, the traders at Merrill Lynch,
and more - have caused the starvation of some of the poorest people in
At the end of 2006, food prices across the world started to rise, suddenly and stratospherically.
Within a year, the price of wheat had shot up by 80%, maize by 90%, rice by 320%. In a global jolt of hunger, 200 million people - mostly children - couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown.
Then, in spring 2008, prices just as mysteriously fell back to their previous level.
Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it,
Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami.
Most of the explanations we were given at the time have turned out to be false.
It didn't happen because supply fell: the
International Grain Council says global production of wheat actually
increased during that period, for example. It isn't because demand grew
either: as Professor Jayati Ghosh of the Centre for Economic Studies
in New Delhi has shown, demand actually fell by 3 per cent. Other factors -
like the rise of biofuels, and the spike in the oil price - made a
contribution, but they aren't enough on their own to explain such a violent
When this process was tightly regulated and only
companies with a direct interest in the field could get involved, it worked.
A market in "food speculation" was born.
John Lanchester, in his superb guide to the world of finance, Whoops! Why Everybody Owes Everyone and No One Can Pay, explains:
Poetry found its break with realism when T.S. Eliot wrote "The Wasteland".
Finance found its Wasteland moment in the 1970s,
when it began to be dominated by complex financial instruments that even the
people selling them didn't fully understand.
Until deregulation, the price for food was set
by the forces of supply and demand for food itself. (This was already deeply
imperfect: it left a billion people hungry.) But after deregulation,
it was no longer just a market in food. It became, at the same time, a
market in food contracts based on theoretical future crops - and the
speculators drove the price through the roof.
In 2006, financial speculators like Goldmans
pulled out of the collapsing US real estate market. They reckoned food
prices would stay steady or rise while the rest of the economy tanked, so
they switched their funds there. Suddenly, the world's frightened investors
stampeded on to this ground.
He later emailed to say:
Deutsche Bank also refused to comment.
Goldman Sachs were more detailed, saying they sold their index in early 2007 and pointing out that,
How do we know this is wrong?
As Professor Ghosh points out, some vital crops
are not traded on the futures markets, including millet, cassava, and
potatoes. Their price rose a little during this period - but only a fraction
as much as the ones affected by speculation. Her research shows that
speculation was "the main cause" of the rise.
What does it say about our political and
economic system that we can so casually inflict so much pain?
The EU is lagging far behind even this, while in
Britain, where most of this "trade" takes place, advocacy groups are worried
that David Cameron's government will block reform entirely to please his own
friends and donors in the City.