environment & politics

Food Speculation

Raj Patel’s Stuffed and Starved, which I read late last year, demonstrated convincingly how famines are rarely caused by a shortage of food, instead it is the fact that people cannot afford to buy it. (For example, there is evidence to suggest that during the great Ethiopian famines in the 80s, their farmers were busy shipping grain back to Europe to be stuffed down the throat of livestock, as opposed to the food going to the local, starving population – though the issue of course had more complications. Throw in huge farm subsidies to US and EU farmers; plus the WTO forcing smaller farmers into debt, and you get the picture.)

A major factor in food prices is food speculation, one of those quirks of the deregulated market (and which no doubt is dismissed as an externality by those free marketeers who happily stand by idly as people die as a result).

This article in the Guardian is a wonderful eye-opener on the nature of food speculation, and is well worth a read.

But a new theory is emerging among traders and economists. The same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate. The charge against them is that by taking advantage of the deregulation of global commodity markets they are making billions from speculating on food and causing misery around the world.

As food prices soar again to beyond 2008 levels, it becomes clear that everyone is now being affected. Food prices are now rising by up to 10% a year in Britain and Europe. What is more, says the UN, prices can be expected to rise at least 40% in the next decade.

Food prices will affect everyone in the coming years – notably the poorest first.

EDIT: I just read this, from Olivier de Schutter, the UN special rapporteur on the right to food:

Chronic underinvestment in agriculture over the last 20 years combined with trade liberalisation has trapped many developing countries in a vicious cycle of low agricultural productivity and dependence on cheap food imports, he argues. The one exacerbates the other as local farmers struggle, and fail, to get a decent price for their produce in competition with imports, which have often benefited from government subsidies.

Local farming goes into steep decline leading to migration to the cities. This is a serious market failure.

By Mark Newton

Born in 1981, live in the UK. I write about strange things.