Why Barclays and Co “can’t get no satisfaction” from food speculation.

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For real contentment, basic needs need to be met. The obvious basic needs are food, water, shelter, warmth, and social contact with other human beings. There should be enough of all of this for every one of the seven billion people on this planet.

There are some who have this plentifully, yet who still are discontented. Indeed, such discontent exists within their psyche that they gamble, and gamble with other people’s lives. While some gamble with water, energy and house prices there are those who gamble with food.

This recipe is increasingly common for consumers in global food markets. Although unpalatable, it is gaining popularity with investment bankers and hedge fund managers.

Method:

1. Take a bunch of financial regulations, cut off the good parts and water them down.

2. Measure out several thousand tonnes of grain and other staple foods and add them to global markets.

3. Quickly pour in huge amounts of hot speculative capital from investment banks and hedge funds.

4. Watch as basic food prices rise.

5. Serve with fat profits and a large portion of widespread hunger, poverty and malnutrition for the world’s poorest people.

(World Development Movement)

Such a killing is to be made, they cannot help themselves. Their greed is such that though they have more than enough, they ask, “Can I have some more?”

These Dickensian words cannot help but remind us of the injustices of the Victorian days which those like Cameron and Osborne set out to recreate. (16)

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. Guardian

With plenty in their bellies, yet still dissatisfied from their lot, the rich speculate, ( gamble) regarding food and grain as commodities to be bought and sold, hopefully delivering them a nice fat profit. What they propose to do with profits when they already have enough is a revealing question. They embark on more and more speculation, so sinister like some global computer game to see who can harness the greatest score. They may use the word “investment”(ThinkLeft article) but gambling is a much better description of their activities. Such is the basis of capitalism.

Banks, hedge funds and pension funds are betting on food prices in financial markets, causing drastic price swings in staple foods such as wheat, maize and soy.

(World Development Movement)

These markets were originally developed for the benefit of those involved in the production of food, yet over the last 10 years they have changed almost beyond recognition. Deregulation has enabled speculators to dominate, causing drastic spikes and crashes in prices.

Effects of rising food prices

Massive food price increases are catastrophic for people in poverty in the global south, who spend most of their income on food. This results in:

  • Increased hunger as food becomes unaffordable.
  • Malnutrition as smaller quantities of expensive foods such as fruit and vegetables are eaten in order to afford staple foods
  • Increased burden on women to earn more money by taking up risky employment such as sex work or domestic work.
  • Households using up savings, going into debt or selling assets to pay for food.
  • Families unable to afford healthcare and education as more of their income is needed to buy basic food.

This is no computer game. The facts are that their activities have led directly to dramatic increases in global food prices depriving so many from their basic needs. So cruel when there is plenty, so sad when the prospectors already have enough. This is madness. The madness of capitalism which brings happiness to no one and ultimately global disaster to us all.

Indeed, the world’s largest commodities trading company, Glencore is so delighted at the prospect of a food crisis Chris Mohoney boasts (11) about “ the current global food crisis and soaring world prices as a “good” business opportunity.” Such a slip of the tongue led to some German banks (4) to withdraw their association from these activities. Cameron’s recent hunger summit (15) coinciding with the Olympic Games amounted to no more than a pretence, political opportunism to give the impression that he is actively opposing such activities. The same companies making a killing out of the Games make their profits at the expense of the cold and hungry.

The banks which are profiteering most from food speculation are the US Goldman Sachs and Morgan Stanley alongside UK High Street Bank, Barclays. Indeed, it has been revealed that Barclays have made Five Hundred Million pounds from the world’s hungry. (1)

The World Development Movement report estimates that Barclays made as much as £529m from its “food speculative activities” in 2010 and 2011. Barclays made up to £340m from food speculation in 2010, as the prices of agricultural commodities such as corn, wheat and soya were rising. The following year, the bank made a smaller sum – of up to £189m – as prices fell, WDM said.

The revenues that Barclays and other banks make from trading in everything from wheat and corn to coffee and cocoa, are expected to increase this year, with prices once again on the rise. Corn prices have risen by 45 per cent since the start of June, with wheat jumping by 30 per cent.

Independent

Barclays makes most of its “food-speculation” revenues by setting up and managing commodity funds that invest money from pension funds, insurance companies and wealthy individuals in a variety of agricultural products in return for fees and commissions. The bank claims not to invest its own money in such commodities.

Since deregulation allowed the creation of such funds in 2000, institutions such as Barclays have collectively channelled an astonishing $200bn (£126bn) of investment cash into agricultural commodities, according to the US Commodity Futures Trading Commission.

Barclays’ dominance in commodities trading is thanks to its former chief executive Bob Diamond, who was Britain’s best-paid banking boss until he was forced to resign last month following a £290m fine for attempting to manipulate the Libor interest rate. As boss of Barclays Capital he boosted trading in agricultural products.

This is something which is affecting us all. We may feel uncomfortable thinking of the hungry in Africa and India, only for the guilt to be dismissed as we rush round Tesco’s or Waitrose. The UK is not immune. The cost of living is rising, it’s going to start hurting the comfortable middle-classes who supported Clegg and Cameron. The number of people directly affected by bank speculators will be the majority.

As Yvonne Roberts writes in the Guardian: (2)

.. we ordinary mortals are facing the most sustained and savage attack on our standard of living for decades, with the poorest inevitably faring the worst. But it’s not just the poor. For the first time, even the once comfortable are experiencing the anxiety of how to pay the mortgage, fill the car, meet the supermarket bill.

Last Wednesday, five million households learned that their fuel bills will increase up to £100 a year because SSE, the UK’s second-largest energy group, announced that its tariffs would rise in October. More will follow SSE. Ofgem, the regulator, reports that the profit margins of power companies are due to increase by almost 14%.

On the same day, Santander, Britain’s second-biggest mortgage lender, announced a rise in its mortgage rate so repayments will jump by £300 a year on average from October, £700 on a £200,000 loan. Many borrowers can’t go elsewhere because they have little equity. Add to that stagnating wages; rail fare and council tax increases; private rents at a peak; the ever-climbing price of essentials such as food and clothing; and the cuts to benefits that include less help with childcare costs and the assault on our standard of living is unremitting.

Since the speculation depends on being fed by the majority, surely it is unsustainable if the majority are to suffer? What will then be the consequence?

Consider what drives a person to such greed, to accumulate meaningless wealth at the expense of his own species? It does not provide happiness or contentment. I believe it is because of deprivation of other needs; we also need friendship, respect, morality and self-esteem. Mankind evolved because of interdependence. (14) Global capitalism is relatively recent in our timescale. Many of us remember the words of Margaret Thatcher, “There is no such thing as society.” Those words may well have been a prophesy for our future. It is no exaggeration to state that unless change is made, mankind is doomed. We need each other.

What can you do?

  • TAKE ACTION AGAINST FOOD SPECULATION

(World Development Movement)

The European Commission and the French and US governments have all said they want to bring food speculation into the open and regulate it to stabilise prices. We need to you to help pressure the UK government to ensure that it backs proposals for regulation and not to take sides with the banks to block reform.

Email George Osborne at the Treasury, asking him to support strong and effective regulation to stop banks from betting on hunger.

The Treasury is the government department which decides whether the UK will support international regulation to rein in excessive speculation on food prices.

There are several banks on the High Street. If a bank is speculating in commodities which is fuelling the rise in food prices, then banking elsewhere may force the banks to change their course of action. Whose money are they speculating with? Who makes the profits? Use your influence.

Think Left: Is Cameron’s Hunger Summit just a Good Photo Opportunity?

Think Left: Unregulated Markets do not make People “Happy”

Think Left: Why Investment not Cuts is Key.

A Recipe for Hunger: How the world is failing on Food : Download Document

1. http://www.independent.co.uk/news/business/news/barclays-makes-500m-betting-on-food-crisis-8100011.html

2. http://www.independent.co.uk/news/world/politics/well-make-a-killing-out-of-food-crisis-glencore-trading-boss-chris-mahoney-boasts-8073806.html

3. Rising mortgages and food and fuel bills are bringing home the reality of Mr Osborne’s failing strategy: Yvonne Roberts, Guardian

4. German Bank drops agriculture from fund on food fears

5. http://www.independent.co.uk/news/world/politics/the-real-hunger-games-how-banks-gamble-on-food-prices–and-the-poor-lose-out-7606263.html

6. http://www.wdm.org.uk/food-speculation

7. http://www.guardian.co.uk/global-development/2011/jan/23/food-speculation-banks-hunger-poverty

8. http://www.barclayswealth.com/Images/US_Compass_February_2012.pdf

9. http://www.barclayswealth.com/Images/US_Compass_May_2012.pdf

10. http://www.theecologist.org/News/news_analysis/931513/a_guide_to_food_speculation_how_to_argue_with_a_banker.html

11.http://www.independent.co.uk/news/world/politics/well-make-a-killing-out-of-food-crisis-glencore-trading-boss-chris-mahoney-boasts-8073806.html

12. http://www.glencore.com/documents/Glencore-Fact_Sheet.pdf

13. http://www.ft.com/cms/s/0/6d36d9ea-e16e-11e1-9c72-00144feab49a.html#axzz24vkk3L2O

14 http://www.librarything.com/work/11663936/descriptions/77288845 Origins of Morality: an Evolutionary Account, Dennis Krebs

15. World Development Movement: Cameron’s Hunger Summit, Meddling or Medalling?

16. Conservative nostalgia for the Victorian era is dangerous, Timothy Stanley Guardian

17 World Development Movement Recipe for Financialised Food

Big finance and the great sell-off of ‘our’ natural assets.

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Last year, Zygmunt Bauman, the Polish Sociologist, wrote of Capitalism:

 “In the face of financial crisis, any hope that the parasite will die when it runs out of food is in vain…. I suspect that one of capitalism’s crucial assets derives from the fact [of]… its own inventiveness, the arbitrariness of its undertaking and the ruthlessness of the way in which it proceeds… one is entitled to surmise that in the offices of capitalism, hard labour is focused on constructing new “virgin lands” – though also burdened with the curse of fairly limited life expectancy, given the parasitic nature of capitalism. (1)

In summary, Bauman’s thesis is that rather than being fundamentally challenged, capitalism will inevitably shrug off contradictions, such as those posed by the financial crisis, and move on.  In fact, neoliberalism, as embodied in the giant transnational corporations, has hugely increased in wealth and power, since the collapse of Lehmans; in part because of governmental acceptance that certain financial corporations are ‘too big to fail’ (Crouch 2011). (2)

It is now clear that the corporate-financial-political nexus have found their new ‘virgin’ lands to parasitise … in the guise of ‘developing’ the ‘green economy’.

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Rio+20, the Earth Summit, sought to address global challenges such as climate warming, sustainability, governance, the devastation of biodiversity and the eradication of poverty, that still affects about one billion people worldwide.

United Nations Environment Programme, or UNEP argues that the investment of 1 percent of the world’s gross domestic product — approximately US$750 billion — in five key sectors would be enough to fund the Global Green New Deal and refocus the global economy to increase the supply of jobs and at the same time step up efforts against climate change and environmental degradation and in favor of poverty reduction. Energy-efficient buildings, renewable energy, sustainable transport, agriculture and freshwater are the key areas for structuring the green economy, according to UNEP. (3) 

 

But the outcome of Rio+20 was widely regarded by activists as an abject failure. George Monbiot writes:

‘The Earth’s living systems are collapsing, and the leaders of some of the most powerful nations – the United States, the UK, Germany, Russia – could not even be bothered to turn up and discuss it. Those who did attend the Earth summit in Rio last week solemnly agreed to keep stoking the destructive fires: sixteen times in their text they pledged to pursue “sustained growth“, the primary cause of the biosphere’s losses.  The efforts of governments are concentrated not on defending the living Earth from destruction, but on defending the machine that is destroying it.(4)

However, whilst many political leaders failed to attend Rio+20, over 1000 different businesses and corporations joined the delegates and NGOs.

‘Peter Bakker, the president of the World Business Council for Sustainable Business (WBCSD), believes that the corporate sector currently offers the best opportunity for saving the world.’

However…‘What Bakker does not mention directly is the other side of the equation, that if the City does not put a value on sustainability, CEOs … could be brought down if they have two quarters in a row of poor performance, with city figures likely to blame him for paying too much attention to saving the world rather than driving profits.’  (5)

 

World Development Movement report that Nick Clegg attended Rio+20 in order to lobby on behalf of this false green economy.

‘Multinational companies and banks, with the support of the UK government, are using the summit to push for new markets to be created in biodiversity and ecosystems… This could mean, for example, financial speculators betting on whether species become extinct or not.’ (6)

Chillingly, William Buiter, chief economist at Citibank even proposes that water itself (rather than water utilities) must be privatised.

‘I expect to see a globally integrated market for fresh water within 25 to 30 years… Once the spot markets for water are integrated, future markets and other derivative water-based financial instruments – puts, calls, swaps – both exchange-traded and OTC will follow.’ (6)

This threat to natural resources, and the confiscation of water/land/forests from local people, who have no formal ownership deeds, is from corporate interests seeking to promote the financialisation agenda – a 21st century global version of the 19th century Land Inclosure Acts – which includes removing the previously existing rights of local people to carry out activities necessary for their livelihoods on ‘common land’, such as cultivation, cutting hay, grazing animals or using other resources such as small timber, fish, and turf.

Risibly, it is argued by the corporates, that the environment is being destroyed because it does not have a price tag, and is, therefore, not valued. Their answer is to assign it an economic value, by bringing the resources into the market! 

 

In similar, spurious fashion to the rationale for the privatization of public services, the financial crisis is cited as necessitating corporate involvement.

Like other business leaders at Rio, [Peter Bakker] recognises that global solutions are unlikely in times of economic and financial crises, and the best alternative is to build coalitions at a more local level, with individual countries and cities, or as he and many others refer to them as “the coalitions of the willing.” (5)

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This is a new and more insidious level of commodification… the control of the financial sector, reformulating the fundamentals of the real economy, affecting people’s control over their food, water, energy and air.

We have already seen the result of involvement of the financial sector in food markets.  Millions of people across the world have suffered from hunger and malnutrition because of food speculation leading to high and volatile prices… and food riots.

In the initial stages of capitalist history, the primary appropriation and commodification of nature, was through human labour.  For example, by farming, low level mining or hunting.

However, capitalism has the intrinsic tendency for concentration and centralization of wealth into the hands of the richest capitalists. This is broadly the meaning of the term ‘accumulation’ which evolves and expands through a process of exchange or “trading up” but also through directly taking an asset or resource from someone else, without compensation. David Harvey calls this accumulation by dispossession.

Kees Van der Pijl, a Professor of International Relations, writes:

‘Capital is in constant quest for unpaid labor in its social substratum, and once a major ‘deposit’ is found and incorporated, it seeks to raise the rate of exploitation in the actual labor process; until at some point the social and natural substratum upon which capital accumulation feeds, which it penetrates and transforms, begins to show signs of exhaustion.’  Transnational Classes and International Relations. (7)

Exhaustion and destruction of the biosphere… so-called ‘ecocidal neoliberalism (Elliott and Atkinson) – occurs in the end phase of this process, when ‘social norms and relationships have been shaped to meet the requirements of commodification and exploitation’.

By ‘shaping of social norms and relationships’, Van der Pijl means the creation of a class of workers/ consumers who are ‘groomed’ by education, the media and advertising, to be fully integrated into the capitalist economy. This is the false consciousness, created by such ‘strategies of control’ as described by Chomsky (8), and it is this false consciousness which must be confronted to stop the tide of deregulation and reverse it.

Examples of such ‘false consciousness’ include the untruths inherent in ‘There is no alternative’, ‘We can’t afford it’, the prevailing skepticism about man-made climate change; the discounting of the ‘limits to growth’, negative attitudes towards renewable energy, the absence of insight into the inherent contradictions of sustainable ‘green capitalism’, the acquiescence in high levels of unemployment, and more.

The Left needs to understand that neoliberal capitalism is not only parasitic on human workers and the non-capitalist social world, but also destructive and exploitative of the finite non-human world, upon which we all depend for survival.

‘Ecology can be seen as one of the contemporary conjuctures with which all political-economic projects have necessarily to deal, in transforming the conditions for state intervention.’ (9)

This is an imperative because as Herman Daly, the ecological economist suggests, when ‘manmade capital’ reaches a tipping point of absorbing the finite resource of ‘natural capital’, it is inevitable that the capitalist system enters a series of ever-more-severe crises. (7)  We are already at that point,  with ecological crises such as global warming, oil-dependency; the on-going financial crises; and with increasingly polarized, political crises, which can be seen in the rise of the far right and the various revolts against neoliberalism (mostly evident in Europe and South America).

In 1944, the Hungarian historian, Karl Polanyi wrote about the ‘utopian’ idea of the self-regulating market:

To allow the market mechanism to be the sole director of the fate of human beings and their natural environment would result in the demolition of society… Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as victims of acute social dislocation through vice, perversion, crime and starvation.  Nature would be reduced to its elements, neighbourhoods, and landscapes defiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed. (10)

The slogan of the Sandinistas of Nicaragua was that there could be ‘no revolution without the women’.  Similarly, the global Left needs to understand that there can be no removal of the ‘huge institutional blockages of neoliberal capitalism’ (11) without also incorporating the protection of our natural environment from unsustainable exploitation.

Addendum:

Needless to say, lack of finance is not the reason for the financialisation and commodification of natural resources.

As mentioned above, the giant corporations, the financial sector and the super-rich are richer than ever.

For example, the combined wealth of 1000 richest persons in Britain is now estimated at more than £414bn. (12)  But more staggeringly, the net worth of America’s 400 wealthiest individuals exceeds the net worth of half of all American households, their combined wealth being $1.5 trillion (£959 billion in sterling). (13)

Hence, the entire UNEP programme, costing £482 billion, (3) could be implemented with just half of the combined wealth of America’s 400 richest citizens.

 

(1) http://www.guardian.co.uk/commentisfree/2011/oct/18/capitalism-parasite-hosts

(2) Colin Crouch  (2011)  ‘The strange non-death of neoliberalism.’  Polity Press, 65 Bridge Street Cambridge C2 1UR, UK

(3) http://lapress.org/articles.asp?art=6653

(4)  http://www.guardian.co.uk/commentisfree/2012/jun/25/rio-governments-will-not-save-planet

(5)  http://www.guardian.co.uk/sustainable-business/rio-20-business-sustainable-development?intcmp=239

(6) www.wdm.org.uk/greeneconomy

(7)  http://www.dailykos.com/story/2006/12/03/277290/-capitalist-discipline-and-ecological-discipline-or-van-der-Pijl-for-beginners

(8) http://www.chomsky.info/articles/199710–.htm

(9)  Ecology, Political Economy and New Labour. http://www.essex.ac.uk/ecpr/events/jointsessions/paperarchive/grenoble/ws6/barry_paterson.pdf

(10) Thomas Frank (2012) ‘Pity the Billionaire.  The hard-times swindle and the unlikely comeback of the right.’ P.184  Publisher Harville Secker London  ISBN 97818446556029

(11) http://www.michaelmeacher.info/weblog/2011/04/blue-labour-no-thanks/#more-2264

(12) http://www.michaelmeacher.info/weblog/2012/04/britains-1000-richest-persons-made-gains-of-155bn-in-last-3-years/

(13) http://www.politifact.com/wisconsin/statements/2011/mar/10/michael-moore/michael-moore-says-400-americans-have-more-wealth-/

Related post:

Peak Oil, NeoLiberalism and Think Left ( Think Left: A socialist Britain in a greener world)