International speculation on food
By Umberto Mazzei
Geneva, 27/01/2011
Henry Kissinger once said that whoever controls
food controls people. In other words, every one surrenders when he sees his
children starve. That is how the US Government subdued the American Indians defending
their lands: by exterminating the bison that provided them food and handing
them food on Reservations. Something similar to what the British government did
to subdue the Boer republics in South Africa: shut the Boer civilian population
into the first concentration camps ever and let them starve.
Global
food control is an aspiration of the international cartels, to make huge profit
from it. As it is now, there are six major
corporations that control the purchase and sale of agricultural products. Food
prices are set at stock exchanges in Chicago, New York and London. Some
countries shield their population from speculation by restricting the export of
their agricultural staples until domestic demand is satisfied. Is has a clear
and legitimate purpose: to stabilize domestic prices and ensure supply of its
own people. Those domestic prices are also an uncomfortable testimony of real
prices and hampers full market control.
This being the case, a few days ago, agriculture ministers
from 50 countries met, in Berlin, to examine the rise of international prices
of commodities during the second half of 2010. Before the assembly, the
indefatigable Pascal Lamy, WTOÕs Director, earn merits with the global food cartel by attacking export
restrictions. Hopefully, the
cartel may hire him when he loses his present job. His intervention attributed
the record high international prices of agricultural products to the export limits
that some countries apply[1]. It is a case of what in US is called "spin" which is
to distort the truth with a false arguments, a kind of sophistry.
" Export restrictions are a prime cause of current and recent surges in
global food prices, and countries should find other ways to secure domestic
suppliesÓ said on Saturday [22/01] the WTO
chief[2] . " Export restrictions lead to panic in markets when
different actors see prices rising at stellar speed," At least, he said panic rather than terror!
Mr. Lamy fails to
understand that a sudden rise of prices in agricultural products, as reported
three weeks ago by FAO (UN Food and Agriculture Organisation), can not be
attributed to controls that have always been there. Those controls, as he
acknowledges, are imposed to assure the supply to the population of the
producing countries and - although he did not say it- also to stabilize
national and, to an extent, international agricultural prices. This last point
is very annoying to the cartels that handle international trade.
Mr.Lamy proposals for a different approach to the
exporting countries need to assure their own supply are misleading. He says " global food production must be increased,
more social safety nets, more food aid and food supplies and Éhumanitarian aid
exempt from export restrictions."
Lets look at the increase in global food
production. Countries that now must import food, used to feed themselves until the
export subsidies of rich countries ruined their farmers. It must be noticed
that WTO allows subsidies to some countries and prohibits them to others. More
production in countries that subsidize exports would worsen the rural crisis in
the Third World. High prices will not in this case spur more production,
because they do not obey to an stable demand and the price increase does not
reach producers. Price manipulators are the only ones that profit from those
sudden rises. An increase in food production to stabilize prices, makes sense
only if it happens in those countries that lost their self sufficiency in
agriculture. For that, it is necessary to eliminate export subsidies and other
aids that distort agricultural prices.
Lets take a look at food aid. It is known as tool to
displace and destroy local production. There are cases in which food aid is an
imposed import quota, as in Guatemala, which must accept a share of
"help" it does not need. Another example is Honduras, which was self-sufficient
in rice before Hurricane Mish. The disaster opened the gates to thousands of
tons of American ÒaidÓ rice, subsidized at 80%. Prices tumbled and killed domestic
production. The case of Haiti is now notorious, because President Bill Clinton
acknowledged his guilt in the destruction of Haitian agriculture, when he
imposed American food aid "manu militari" and forced the Haitian government
to obey the prescription of the IMF to lower its rice tariff from 35 % to 3%.
All those experiences seem lost in Mr. Lamy.
Mr. Lamy said later ÒGlobally, what we would be
likely to see as a result of Doha [ Round] is more food being produced where
this can be done more efficientlyÓ. We would agree on that,
but do not think it likely. The Doha Round was accepted by developing countries
because of the mandate to eliminate subsidies that distort agricultural prices;
which would make efficient producers – which are mainly in developing
countries- the main actors in international trade. What happens now is that the
Doha Round is stuck because rich countries do not want to reduce subsidies, but
ask instead for more openness to their exports, more concessions in
intellectual property and services and to reduce the space for national
economic policies.
Food speculation
The IMF orders fiscal austerity to those European governments
which ruined themselves by paying the debts of private banks, but fails to
mention the subsidies of the European Common Agricultural Policy, CAP. Neither does
the new Republican majority in the U.S. Congress mention farm or export subsidies when they ask for public
spending cuts. There are many among privileged people who make money with them.
Austerity is focused on removing protections against poverty while there is a
vertical rise in food prices and a decline in employment.
There is a process of global impoverishment caused by
practices that enrich bankers and global stocks speculators. Mr. Lamy and the members
of the G-20, that accuse export restrictions for rising food prices, should take
a closer look at the possibility of speculation – they even omit to mention
it- and aim their attention to the means and tools to drive up prices.
Economic theory says that prices follow supply and demand.
While humans keep on having a single stomach, there can not be a sudden
increase in demand for food. Now, is it that we will listen again, as in 2008, the
tale that prices rose because of grain demand to produce ethanol?. It is a proven
lie. There was no increase in ethanol production and grain prices fell as fast
as they rose, all without an increase on agricultural activity. It is clear
that the starving and suffering of billions in 2008 was the work of greedy
price speculators.
The Establishment media tends to do little research and repeats
what ever comes out of lofty mouths. Droughts and floods are not the leading
cause of spikes in global food prices. Nor are export restrictions. The spikes
are the work of manipulation in commodity markets, where global prices are set.
The physical existence of a commodity is not even necessary to create a price,
because goods are not always bought or sold, or delivered, but their prices are
listed in mercantile exchanges.
Listings are typically based on the index commodity funds,
which are bets on the mercantile exchange performance of an specific
agricultural commodity. The handling is coordinated between institutional brokers,
financial institutions and global merchants. You bet on the rise or fall of a
specific product and then manipulate the price to win the bet. To make a profit
it is enough to sell options, without even ownership of an existing product
somewhere. You can also bet and make a profit when commodity prices collapse, by
the so-called "short selling.[3]"
From 2006 to 2008 commodity prices rose scandalously,
especially rice, wheat and corn. A tonne of rice rose from $ 600 in 2003 to $
1800 in 2008. After causing popular unrest in the world, prices fell as quickly
as they climbed. Further proof that the cause was not economic[4].
The last FAO report states that cereals price rose 32% in
the second half of 2010 and the composite price index of sugar, meat, milk,
cereals and oilseeds in December exceeded 2008 levels. If speculation is left
unchecked, this time there will be riots also in Europe.
The dollar's role
A fundamental cause of
price instability is the dollar increased weakness. A currency that has devalued
400% against gold and 60% against the Swiss franc, in only four years, can not
be the reference for commercial value. The dollar devaluation caused loss of
purchasing power to all wages, pensions and fixed incomes in the world, but
also the actual reduction of all dollar denominated debts. Therefore, it is not
admissible that the most indebted country in the world ensures the stability of
values in international trade or the stability of anything.
It is a situation that has gradually aggravated since
1971, when the United States defaulted on its debts and repudiated the gold
standard. The dollars and dollar denominated securities issued since then by
the Federal Reserve and by the financial institutions supported by the Fed,
largely surpasses the U.S. GDP and even the World Gross Product. It is a debt
that can not be paid, which, simply put, means that the United States went
bankrupt.
Conclusion
The only way to obtain
price stability and start a global economic recovery is to drop the dollar,
assume a more rational value for reference and discipline the operation of
financial and mercantile exchanges in London, New York and Chicago. That is
what the Davos gathering of international gathering should consider, but they
will not. They will focus, as always, in recipes for their most immediate and exclusive
prosperity.
[1] The most relevant ones are Argentina, China,
India and Russia
ÒExport
restrictions are a prime cause of current and recent surges in global food
prices, and countries should find other ways to secure domestic supplies, the
head of the World Trade Organization said on Saturday.Ó
[3] It is to lend stock or options from
a broker, sell it and pay it to the broker at market price when it goes down .
[4] On price speculation we reccomend
reading Michel Chossudovsky & Andrew Gabin Marshall, The Global Economic
Crisis, the Great Depression of
the XXI Century, Chapiter 7, Ed. Global Research, Montreal, 2010