Once again, it is the irrational, capitalist, unregulated economy…And forgive me for the repetition. Capitalism is inherently irrational.
Last week, Foreign Policy published an article entitled ‘ How Goldman Sachs Created the Food Crisis ‘
The verdict (long overdue and not surprising): Wall Street is to blame for the rising food prices.
” Demand and supply certainly matter. But there’s another reason why food across the world has become so expensive: Wall Street greed. It took the brilliant minds of Goldman Sachs to realize the simple truth that nothing is more valuable than our daily bread. And where there’s value, there’s money to be made. In 1991, Goldman bankers, led by their prescient president Gary Cohn, came up with a new kind of investment product, a derivative that tracked 24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy, and wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation, to be known henceforth as the Goldman Sachs Commodity Index (GSCI).
… Hard red spring wheat, which usually trades in the $4 to $6 dollar range per 60-pound bushel, broke all previous records as the futures contract climbed into the teens and kept on going until it topped $25. And so, from 2005 to 2008, the worldwide price of food rose 80 percent — and has kept rising. …
The more the price of food commodities increases, the more money pours into the sector, and the higher prices rise. …
Today, bankers and traders sit at the top of the food chain — the carnivores of the system, devouring everyone and everything below. Near the bottom toils the farmer. For him, the rising price of grain should have been a windfall, but speculation has also created spikes in everything the farmer must buy to grow his grain — from seed to fertilizer to diesel fuel. At the very bottom lies the consumer “
It is an article worthy of being read in full.
A few years before that article was written, I co-authored a report on food security in the Arab World ( ‘Development Challenges in the Arab Countries: Food Security and Agriculture.’ Volume 2. December 2009. League of Arab States and UNDP.)
. We argued then: “that the following factors have impacted the food price crisis, but the extent to which each of these factors, independently, has impacted the crisis is subject to a heated international debate: