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 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, just so they could make a fatter profit.
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 percent, maize by 90 percent, and rice by 320 percent. 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 over 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, called it "a silent mass murder", entirely due to "man-made actions."
Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis like they were hit by a tsunami. "It was very painful," a woman my age called Abeba Getaneh, told me. "My children stopped growing. I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died."
Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either. We were told the swelling Chinese and Indian middle classes were pushing it up, but as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand from those countries for them actually fell by 3 percent over this period.
There are some smaller explanations that account for some of the price rise, but not all. It's true the growing demand for biofuels was gobbling up much-needed agricultural land - but that was a gradual process that wouldn't explain a violent spike. It's true that oil prices increased, driving up the cost of growing and distributing food - but the evidence increasingly shows that wasn't the biggest factor.
To understand the biggest cause, you have to plough through some concepts that will make your head ache - but not half as much as they made the poor world's stomachs ache.
For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer and the global price is high, he'll lose some cash, but if there's a lousy summer or the price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked well.
Then, through the 1990s, Goldman Sachs and others lobbied hard and the regulations were abolished. Suddenly, these contracts were turned into 'derivatives' that could be bought and sold among traders who had nothing to do with agriculture. A market in "food speculation" was born.
So Farmer Giles still agrees to sell his crop in advance to a trader for £10,000. But now, that contract can be sold on to financial speculators, who treat the contract itself as an object of potential wealth. Goldman Sachs can buy it and sell it on for £20,000 to Deutschebank, who sell it on for £30,000 to Merryl Lynch - and on, and on, provided they think the price can be jacked up, until it seems to bear almost no relationship to Farmer Giles' crop at all.
If this seems mystifying, it is. John Lanchester, in his superb guide to the world of finance, 'Whoops! Why Everybody Owes Everyone and No One Can Pay', explains: "Finance, like other forms of human behaviour, underwent a change in the twentieth century, a shift equivalent to the emergence of modernism in the arts - a break with common sense, a turn towards self-referentiality and abstraction and notions that couldn't be explained in workaday English."
Poetry found its break broke with straightforward representation of reality when T.S. Eliot wrote 'The Wasteland.' Finance found its Wasteland moment in the 1970s, when it began to be dominated by complex financial instruments that even the people selling them didn't fully understand. As Lanchester puts it: "With derivatives... there is a profound break between the language of finance and that of common sense."
So what has this got to do with the bread on Abiba's plate? How could this parallel universe of speculation affect her? Until deregulation, the price for food was set by the forces of supply and demand for food itself. (This was itself deeply imperfect: it left a billion people hungry.) But after deregulation, it was no longer just a market in food. It became, at the same time, a market in contracts that were speculating on theoretical food that would be grown in the future - and the speculators drove the price through the roof.
Here's how it happened. In 2006, financial speculators like Goldman's pulled out of the collapsing US real estate market, and they were looking for somewhere else to make their stash of cash swell. They started to buy massive amounts of derivatives based on food: they reckoned that food prices would stay steady or rise while the rest of the economy tanked. Suddenly, the world's frightened investors stampeded onto this ground and decided to buy, buy, buy.
So while the supply and demand of food stayed pretty much the same, the supply and demand for contracts based on food massively rose - which meant the all-rolled-into-one price for food on people's plates massively rose. The starvation began.
The food price was now being set by speculation, rather than by real food. The hedge fund manager Michael Masters estimated that even on the regulated exchanges in the US - which take up a small part of the business - 64 percent of all wheat contracts were held by speculators with no interest whatever in real wheat. They owned it solely to inflate the price and sell it on. Even George Soros said this was "just like secretly hoarding food during a hunger crisis in order to make profits from increasing prices." The bubble only burst in March 2008 when the situation got so bad in the US that the speculators had to slash their spending to cover their losses back home.
When I asked them to comment on the charge of causing mass hunger, Merrill Lynch's spokesman said: "Huh. I didn't know about that." He later emailed to say: "I am going to decline comment." Deutsche Bank also refused to comment. Goldman Sachs were a little more detailed in their response: they said "serious analyses... have concluded index funds did not cause a bubble in commodity futures prices", offering as evidence a single statement by the OECD.
How do we know this is wrong? As Professor Ghosh points out, some vital crops are not traded on the futures markets, including millet, cassava, and potatoes. Their price rose a little during this period - but only a fraction as much as the ones affected by speculation. Her research shows this speculation was "the main cause" of the rise.
So it has come to this. The world's wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation, and won. This is what happens when you follow the claim that unregulated markets know best to the end of the line. The finance sector's Wasteland moment created a real wasteland. What does it say about our political and economic system that we can so casually inflict such misery, and barely even notice?
If we don't re-regulate, it is only a matter of time before this all happens again. How long would it last then? How many people would it kill next time? The moves to restore the pre-1990s rules on commodities trading have been stunningly sluggish. In the US, the House has passed some regulation, but there are fears the Senate - drenched in speculator-donations - may dilute it into meaninglessness. The EU is lagging far behind even this, while in Britain, where most of this "trade" takes place, advocacy groups are worried David Cameron's government will block reform entirely to please his own friends and donors in the City.
Only one force can stop another speculation-starvation-bubble from swelling, probably soon. The decent people in developed countries need to shout louder than the lobbyists from Goldman Sachs. In the UK, the World Development Movement is launching a week of action this summer as crucial decisions on this are taken: text WDM to 82055 for your marching orders. In the US, click here to find out what you can do. The last time I spoke to her, Abiba said: "We can't go through that another time. Please - do anything you can to make sure they never, never do that to us again."
Johann Hari is a writer for the Independent. To read more of his articles, click here or here.
You can follow Johann at www.twitter.com/johannhari101 or email him at j.hari [at] independent.co.uk
To read his latest article for Slate, click here
Follow Johann Hari on Twitter: www.twitter.com/johannhari101
http://www.imdb.com/title/tt0295596/
Quote from a review: "In this film the concentration process of the worldwide wheat production (and especially the American production), the influence of big companies and the reactions of the powerless farmers were analyzed. it is quite old now, but still worth a look, the thematic was never more important than today, since the wto begins to affect all life on earth."
So there - this has been before financial derivates and Goldman-Sachs' playing a major part.
It's a whole system, the abuse of financial instruments that are appropriate for farmers and buyers by those who only want to make money to make more money. Bringing just a few guys into jail doesn't change the system.
To all those who point at others: It's also about eating too much meat, every single one of us, taking crops away from those who rely on that for food.
be done about it now? i'm getting a little tired of typing out THE B#$%%DS! every time their
name comes up. and don't tell me about what we can do to prevent it in the future. i want to
know how we can put these slim balls in jail NOW! GET THEIR ILL GOTTEN GAINS BACK
NOW! i want their wives in a welfare line. their kids on food stamps!
Adam Smith never foresaw the kind of abject greed we have today.
To quote:(see part two)
"On the distribution of wealth…
What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable."
The Wealth Of Nations, Book I Chapter VIII, p.96, para. 36.
http://www.therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5271&updaterx=2010-06-16+14:21:16
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5068
The rich elite certainly believe it -- they work to protect themselves and their various investment streams regardless how unethical or immoral the mechanisms to do so. Why they don't feel a middle class is necessary to preserve themselves (as in, if there are only few rich and many poor, eventually the poor will consume the rich) boggles my mind.
Goldman sold $250M in BP stock just before the spill. Because the dispersants there are now toxic rains killing crops in the south, and by the time the spill is done, there will be no more seafood from the gulf. They are now gambling on starvation in the US.
When all life in the Gulf of Mexico is dead and the food shortage starts to hit home, Obama will tell us all it's our fault because we use too much oil. He'll push for a carbon tax and trot out the global warming hoax. And who would be running the new multi-trillion dollar carbon market? Goldman Sachs, of course.
WHY the planet is warming up is an entirely different thing altogether, but denying reality certainly doesn't help...at all...!!!
otherwise, i'm with you on the gist of your comment...!!! :)
http://www.youtube.com/watch?v=dKoUwttE0BA
Here's a start.
End the Fraud of the Corporate collective entity and that puts the sociopathic acts back on the humans behind the Corporate Fascist Veil.
Ban all contributions to Politicians from Corporate Entities period and silence them as the Church is Silenced over Political Campaigns.
Public financing of Campaigns within 90 days of the elections is a great solution that will end this non-stop campaigning and right v left, Republican v Democrat meme of lies, fraud and theivery.
Our political system is broken. Beyond repair. We can't unravel a corporate owned Congress and Executive Branch when our judicial system is also owned by corporations. Worst example being the completely corrupt Corporate Supreme Court.
The rightwing is so perfectly organized they will turn that collective anger into a November Tea Party.
We can't fight in the streets. They have all the guns. And our own sons and daughters in uniform will shoot us down like dogs in the gutter.
But there is a power we have. Not as citizens. But as consumers.
If we can finally put together real boycotts of corporations we can start taking back power.
Look, for the last dozen or so years, different groups have tried to organize a boycott of Exxon, after the Valdez disaster. It failed.
Too many lazy citizens wouldn't cross the road to go to a different pump.
Maybe we can try again with BP. They've just unleashed the biggest environmental disaster of our lifetimes. We can try again.
If we can somehow pull together a successfully boycott of any corporation, we can scare them. The only thing these guys fear is losing money.
Because, right now, given our joke of a democracy, they are laughing at us.
I know... I'm dreaming.
rulers? It can't happen here? Why not?
The time for talk is over, this is a major criminal offence that needs to be stopped. UNITE UNITE UNITE and stop this abuse!
And I'm telling you massive consumer boycotts is passive resistance 2.0
Yeah, we could try storming the Bastille, but I think we'd be quickly crushed.
How about a devilishly effective assault. Pick a product. Charmin toilet paper.
Nobody buy it. Work our way up from there.
Once people saw what they could do the floodgates would open.
People are pissed at BP right now. Really pissed. Lets go after them.
Yeah, we hate Exxon and Shell, but we can't take down all the oil companies at once.
But just one...