Popular financial illiteracy is more than a cover under which enormous crimes are committed against whole populations, then denied, forgotten and repeated. Left unaddressed even as the world has become radically smaller, financial illiteracy has become a mass health risk. To remain ignorant of the potential for unregulated market activity to lead to mass deaths and misery is a unique and growing risk shared by everyone who breathes air.
Or eats food.
Let’s roll back a small portion of that illiteracy and take a look at a recent deadly disaster caused by business-as-usual in the financial world.
The subject is food, and futures contracts in food. What is a futures contract?
When a farmer plants a crop, he takes a risk. Between the planting and the harvesting and sale, a lot can go wrong for him. The world price for that crop could fall, leaving him with silos full of grain he can’t move.
So to get rid of that risk, he cuts a deal with a trader now to sell the crop in the future for a set price. That’s all a futures contract is. To food producers (farmers) and food consumers (food makers, such as, oh, Doritos who buy lots of the farmer’s corn and do the same thing with futures contracts) it settles the matter of a future price now – making buying and selling of crops far less of a gamble for both.
So far, so good. This is not a crime, this is not a problem. This is a market, not hurting anybody. A libertarian or a conservative’s heart would swell with pride and each would busy themselves with accolades and attaboys before rolling over and going to sleep, to dream of an ideal world where markets operated everywhere.
The problem with market worshippers, to paraphrase H.L. Mencken, is that they notice a rose smells better than a cabbage, and so conclude that it would also make better soup.
In the case of food futures markets, producers and consumers offloading risk to traders works well and hurts nobody as long as the traders involved are in the food business. And that is how the trading of futures contracts in the US was done for over a century: by government regulations limiting involvement in trading of food futures contracts to those who serve the marketplace for food – as opposed to serving some abstracted global marketplace with no borders, no delineations and no responsibilities. As opposed to turning the market for food into a casino.
But those regulations are exactly what were dismantled by the US Congress – a body that had by the 1990s become so thoroughly captured by corporate interests and dependent upon industry lobbyist dollars for reelection that it never found a market it couldn’t deregulate as long as people looking to expand that market sent enough suitcases stuffed with cash to Capitol Hill.
The result of letting the market-worshippers have their way and abstracting/expanding/casino-izing the food futures market? As Johann Hari writes, nothing less than mass starvations around the world.
By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You’re wrong. There’s more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here’s the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.
It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn’t afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it “a silent mass murder”, entirely due to “man-made actions.”