Speculating whit lives. How Global investors make money out of hunger

Posted on septiembre 25th, 2011 in Essays 1-7 by andogo

Due to the interference of the speculators and investors in the agricultural products has taken a increase in the prices of the food that in turn carry that million persons fall down on the poverty. But investors care little about the effects of their deals in the real world.

Here Alan Knuckman appears an analyst of a consulting signature of raw materials. Knuckman says phrases as: “I’m here to make money” and “I don’t believe in politics, I believe in the market, and the market is always right.”

Knuckman  indicate that this raise of prices cannot be so bad for the citizens of USA, apologizing heself to absurd phrases as: “The majority of the citizens of United States eat too much”. This comment refers to the population of United States, but the really affected are the poor persons of the world who meet obliged to spend 70 % his budgets in food. To the fact that the poorest of the poor can no longer pay for their food as “undesirable side effects of the market.” or what is the same «side effects»

There are many factors that they contribute to this food situation, but they are not causers of the increase of the prices.

  • Climate change, which leads to droughts, floods and storm, and thus to crop failures;
  • The rising price of oil, which makes it more expensive to produce and ship food products;
  • The global population, which is growing too fast for agricultural production to keep up;

Olivier Shutter, specialist of United Nations on the right to food, says that the excessive speculation is the primary cause of the prices increase.

Many experts like the UNCTAD say that the commodities market isn´t  working properly, due to  the prices should to form by supply and  demand. The majority of the investors involved in the business of raw materials, today have little knowledge of the current products.

The world of the finance did a series of adjustments that that turned the basic food of the humanity into an object of speculation. The market remained relatively stable during decades until it was discovered by the financial industry, it´s to say, farmers grew the food that distributors and retailers sold as food products.

In 1999 there was a change of regulation, when the United States Commodities Futures Trading Commission deregulated the raw materials markets. Now banks were permitted to hold large positions in commodities securities. This was extended in 2004, when a request of the banks was approved to extend the scope of the banks for this action, banks as Lehman Brothers, Morgan Stanley, Bear Stearns and JP Morgan. In this manner, the participation of the financial industry has thrown to the food market to a situation of out of balance.

Frederick Kaufman in April 2011 wrote an article titled “How Goldman Sachs Created the Food Crisis.” His conclusion is equally clear: “The more the price of food commodities increases, the more money pours into the sector, and the higher prices rise.” to this we refer with vicious circle.

In 2009, the US investment bank earned more than $5 billion in commodities speculation and while the market is not regulated  the number of speculators will continue to grow. This can be a destroyer since in according with the world bank an increase of only 10 % in the food prices carries that other 10 millions people fall down in the poverty.

The French presindente Nicolas Sarkozi of the conference of  G-20 of agriculture ministers in Paris argued more strict controls on the agricultural markets, saying the nature of a market to be regulated, or else it would be a jungle.

There is many resistance to the idea of regulating the financial transactions with the agricultural products, especially in the United States and Great Britain, which are concerned about the potential impact on the health of their financial markets.

In earling  May in New York in a World conference on opportunities of investment, they came: bankers, brokers, producers, merchants, managers, merchants and enclosed policemen and firemen,  they all wanted to know how best to use rising food prices to turn a profit. These financial investors surely have little interest in the effects of their investments on the countries involved, or in the social and environmental consequences.

A clear exemple is Ethiopia, a country whose name is associated with starvation for many people. Even though 5.7 million Ethiopians are dependent on international food aid, the government sells or leases large tracts of fertile land to foreign investors. They, in turn, export most of the food they produce to other countries.

A great problem is to invest in the wrong things. Investors do not believe it is their responsibility to produce affordable food. Their job is to turn a lot of money into even more money. A report published in the ONU about industrial agriculture concludes indicating that it is responsible in large part for climate change, species extinction, poisoning of the environment, water shortages, disease and poverty. Due to this  motive asks for a change  the  in agricultural mass production as well as an end to large-scale monocultures and the massive use of pesticides.

As conclusion we saids that an investment in funds of raw materials isn´t  the solution of the problem, but it´s  part of the problem.