Speculating on Food Can Starve the World's Poorest
July 23, 2010 In defending cocoa futures trading [1], Seth Freedman is an apologist for big bankers, the "mammon worshipping culture" he feigns to despise. He not only gets his facts wrong, he attacks the World Development Movement [2] (WDM) and a wider social movement who are on the right side of social justice. The WDM warriors - slings, arrows and all - have it right, and he's got it wrong.
Freedman naively takes Goldman Sachs's riposte to our research at face value. Any journalist worth their salt knows that where there's smoke, there's fire. And if there was nothing behind our accusations, they wouldn't be on the defensive. Goldman said that our estimates of their profits from commodity speculation were "ludicrously overstated", which is odd considering we based the figures on their annual report. In the report [3], they state confidently that commodities speculation produced "particularly strong results" (that's a cool $5bn in profits by the way) for the bank in 2009.
Goldman Sachs further claim that our report [4] is "horribly misinformed" on a number of fronts and that the "overwhelming majority" of their activities in commodity markets are on behalf of clients. This may be so, but it doesn't make it any more acceptable that they earn vast profits from an activity that affects the price of basic foods. Goldman Sachs is hardly a paragon of honest marketing to clients in the interests of the public good, as the recently imposed fines [5] on the company would suggest.
Freedman goes on to quote Goldman Sachs saying: "Research by respected international bodies like the OECD demonstrates clearly that long-term trends, including increased meat consumption by the growing middle class in the emerging markets and the increased use of biofuels in the developed markets, have created a backdrop for global food shortages. Our own research supports those findings."
Of course Goldman Sachs's research supports what makes Goldman Sachs's profits! If Freedman had read our report, he would have found that we acknowledge that these examples and the effects of climate change have been causing food prices to rise gradually. What they cannot explain are the sudden price spikes and falls, which mirror the entry and exit of speculative hot money, which has increased the price of commodities and seriously increased volatility. He thinks we're half-baked. Well then so is Gary Gensler, the chairman of the US commodity regulator, as well as the European commissioner responsible for financial markets [6], the UN's Food and Agriculture Organisation [7] and the United Nations Conference on Trade and Development. They also agree with our findings.
Goldman Sachs has also said they "support effective reform. Our lobbying effort is designed to achieve reform that will continue to allow producers to hedge their risks so that consumers get the benefit of greater price stability. To suggest otherwise is disingenuous and downright misleading."
But Goldman Sachs has consistently opposed any regulation with teeth at the European level, through its role in many of the "expert groups" convened by the commission to advise on financial regulation. Last week, an influential group of MEPs raised the red flag [8] concerned about their undue influence over writing rules that protects the bankers, but leaves the rest of us hanging out to dry.
The evidence categorically shows that these policies hurt people in developing countries, and the gap between the haves, the have-nots and the have-yachts continues to grow. People die from hunger while the banks make a killing from betting on food. If this isn't campaigning to challenge capitalism's worst excesses, I don't know what is.
