Last weekend 15 people were detained while protesting at Goldman Sachs. One of the participants in the demonstration, author and journalist, Chris Hedges, was arrested. Before being taken away by police, he delivered an impassioned speech which, among other things, touched upon the rise in the price of food. He laid blame squarely on Goldman Sachs whose “commodities index is the most heavily traded in the world.” He added that, “those who trade it have, by buying up and hoarding commodities futures, doubled and tripled the costs of wheat, rice and corn.” The result of these trades, he said, are that they leave, “hundreds of millions of poor across the globe…hungry to feed this mania for profit.” Hedges finished his declaration with a criticism of Universities which he claims fail in their duty to explain what is really taking place by speaking in “technical jargon” that “effectively masks the reality of what is happening—murder.”
When I read Hedges’ words, I was a bit startled. It wasn’t that I didn’t believe him. It was more that I didn’t want to. After all, who wants to believe that Wall Street would be artificially driving up the price of food for their own profit in spite of the misery it would cause? The shock of this thought lead to consternation. I didn’t bother to read into it. However, after hearing about the increase in the price of peanut butter and pecans, I decided that this issue required my attention.
The story that I heard on my local news station attributed the rise in food prices to a rise in demand and not to market speculation. After hearing that pecans would reach over $11 per pound, I distrusted this explanation. I decided to research. In so doing, I stumbled upon an excellent article in Mother Jones by Tom Philpott that challenges the prevailing explanation of food price hikes. In it, he alerts us that according to a UN FAO report, food prices are “hovering at all time highs,” and have increased by 26 percent in the last year. More alarming, food prices have tripled since 2004. While demand for food has increased, due to a growing world population, a rising of a middle class in China and India, and government-backed biofuel programs, Philpott argues that it has been speculation that has caused the increase.
A report by none other than the UN Special Rapporteur on the Right to Food, Olivier de Schutter, confirms this when he writes,
Certainly, supply and demand fundamentals played an
important role in the creation of the food crisis. However,
closer examination reveals that the abovementioned
arguments of supply and demand are insufficient to explain
the full extent of the increases and volatility in food prices
Instead,
...the changes in food prices
reflected not so much movements in the supply and/or demand
of food, but were driven to a significant extent by speculation
that greatly exceeded the liquidity needs of commodity
markets to execute the trades of commodity users, such as
food processors and agricultural commodity importers.
To back up his argument, the Rapporteur mentions a study by Lehman Brothers that tracked the increase in the volume of index fund speculation increased by 1,900% from 2003-2008 and that holdings in commodity index funds jumped from $13 to $317 billion during that time.
The results of such increases in food prices are very real. When they reached their height in 2008, nearly 150 million people were forced into extreme poverty and roughly 40 million were driven to what the UN organization refers to as “chronically hungry.” Worst hit have been countries in the Global South where a combination of American, British, and Middle Eastern investors are buying up farmlands. This has been most prevalent in the Latin American and African countries.
In light of these facts, Hedges’ words do not seem shocking, but believable. This is yet another example of Wall Street’s rapacious dealings that ravage farmlands and starve millions worldwide. We have yet to see the scale of damage that current speculation will wrought. However, if the 2008 food crisis is any indicator, we’re in for a rough haul. This is especially worrying in the US, considering that a census bureau report recently showed that roughly 45 million Americans survive on food stamps. This reflects an increase of 74% on food assistance since 2007.
Fortunately, there are solutions on offer. The UN special rapporteur names five, which include regulating derivatives, setting up regulatory commissions, banning access to commodities futures markets, strengthening spot markets, and creating physical grain reserves. These are reasonable solutions but raise other questions, to which I believe Hedges offers the best answer in his speech, namely the rejection of the “unequivocal acceptance of ruling principles such as unregulated capitalism and globalization as a kind of natural law.” Yet our political leaders do not seem to get it. In tonight’s nationalized Republican debate, specifically focused on the economy, the rise in food prices went unmentioned. Instead, we heard endless sermonizing about how the government needs to get out of the business of regulating our markets.
This is an issue that transcends politics and ideology. It is about time we had a national discussion about it. But if you are waiting on the Establishment to lead the way, I hope you’re not holding your breath.