Jeff Byrne

    THERE will be awards scattered like confetti in the year ahead, earned or not. Among these may be an award for Barclays Bank, which has been nominated for the 2012 Public Eye “shame award” by the British-based World Development Movement (WMD) for promoting hunger and poverty.

    It has been estimated by the WMD that Barclays made up to 340 million pounds (US$524 million) a year speculating in futures markets for food staples. Research has shown that spiralling speculation in food markets is driving up the cost of food out of reach of the world’s impoverished.

    WMD says that speculation on food by finance corporations almost doubled between 2006 and 2011.

    Futures trading was first introduced in the late 1800s when farmers could set a price for future harvests with grain merchants. If the harvest failed, the farmer was often the winner, if it was a bumper harvest, the merchant was in front. It all seemed to balance out and everyone was happy.

    This changed in the early 1900s when speculators started buying and selling futures contracts even though they were not in any way involved in producing, processing or selling food. This resulted in a volatile market and, after the 1929 Wall Street crash, forced the U.S. administration of Franklin D. Roosevelt to implement regulations to clamp down on rampant irresponsible speculation.

    It was not until the 1990s that Wall Street smarties realized they were losing. Food was being served and they weren’t receiving anything. Then came intense lobbying, with the investment of millions of dollars to “persuade” the U.S. Government through the Commodity Futures Trading Commission, to change its ways. It succeeded, slowly, but surely. In the year 2000, the U.S. Congress passed the Commodity Futures Modernization Act. Readers can interpret “modernization” any way they like.

    Leading the charge was Goldman Sachs, that darling of weapons of financial mass destruction, which resulted in the exemption of many commodity speculators from the 1930s regulations restricting speculation. Between 2002 and mid-2008, derivatives contracts increased in numbers by more than 500 percent. The WDM has estimated that Goldman Sachs made US$1 billion in profit in 2009 alone, from speculating on food staples.

    From early 2007 to mid-2008, the price of wheat on world markets rose by 80 percent taking with it the price of maize which soared by nearly 90 percent.

    But it doesn’t stop there. These masters of commerce are buying up farming land wherever they can, depriving traditional farmers of their livelihoods. They are also buying into fertilizer production and grain elevators, the infrastructure of farming, essentially cornering the food market.

    When I was a child, my father grew vegetables in the backyard. They were food for the table and he was able to sell some for a little extra income.

    In sub-Saharan African, including Zambia and Mozambique, state-owned land, formerly farmed by local people, is being bought by foreign corporations and NGOs to grow crops but, not for the locals. These people are now being forced to buy the food they once grew for themselves. Few of those who are able to grow meager crops are able to sell any. In many places, it has reached the point where the people can afford only one meal a day.

    Research shows that the poor in developing countries are spending between 50 percent and 90 percent of their income on food while the average in a developed country is 15 percent or less. This leaves the poor without the means to buy nutritious food such as dairy products, fruit and vegetables. Health care and education are out of reach.

    According to varying estimates, the number of those living in poverty has increased by between 100 and 200 million in recent years.

    Early last year, London’s director of the WDM was reported as saying: “People die from hunger while the banks make a killing from betting on food.”

    The former European Commissioner for the internal market, Michael Barnier, told the European Parliament: “Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world. We have to look at derivatives. Speculation is linked to derivatives which are linked to raw materials. That is something we want to regulate very carefully to tackle speculation in raw materials.”

    Whenever we hear the words “banks,” “derivatives” and “speculation,” we should be very afraid.

    Water will be next.

    (The author is a former Shenzhen Daily senior copy editor and writer.)