The No-Nonsense Guide to World Health
When I first sat down to write The No-Nonsense Guide to World Health, I knew that Big Business had a lot to answer for. I didn’t expect though, that with each passing chapter, so many roads would lead to its doorstep. I wrote the book before the world was shaken by the economic tsunami that resulted in a global recession. Banks and investors played with fire and the whole world got burnt. You would think that faith in the unfettered free market would be shattered. But for many, state regulation remains a dirty word. The rule is to have no rules (unless to protect the rich) or at the most, weak ones. Food speculation is a case in point. The growing role of banks, hedge and pension funds in the commodities markets, with risky and secretive financial bets on food prices is increasing world hunger. Other factors contribute to volatile prices and it is clear that excessive speculation is responsible in part of drastic price swings in staple foods.
The World Bank’s Food Price Index, which measures global prices, is 36% above its level a year earlier. Key increases include maize (74%), wheat (69%) and soybeans (36%). In many countries, vegetables, meats, fruits and cooking oil are also on the increase.
Gambling on food prices in the financial market has devastating effects. The maths is simple – less food equals poor health, disease and even death. Malnutrition increases as people spend more on staple food and have less to spend on other essentials for a balanced diet such as dairy, meat, fruit and vegetables. People sell precious assets to stave off hunger. There is less money to spend on health and education. The knock on effect on health and development is paid for in this generation and in generations to come.
According to the World Development Movement (WDM), it works like this: ‘“Futures contracts” were created in US financial markets to help farmers deal with the uncertainty of growing crops (such as unforeseen weather conditions). A futures contract enables farmers to sell their crops at a future date at a guaranteed price. However, these contracts can also be bought and sold by bankers who have little or no involvement in the actual food being traded, but bet on food prices to make money. During the 1990s and early 2000s, aggressive lobbying by bankers led to weaker regulations over food speculation. New and complicated financial products were created to allow more ways to make money from betting on food. Banks such as Goldman Sachs created special index funds to help financial companies make money from food prices, just like they do from share prices.’
The net gain is to the wealthy few. Inflation increases, squeezing consumers in richer countries but for the world’s poorest people even basic foods become unaffordable.
Goldman Sachs has dismissed their claims as ludicrous, but the WDM has used figures in Goldman Sachs’ own annual report to calculate that the bank made a profit of $1bn (£650m) through speculating on food last year.
The Dodd Frank Financial Reform Act, passed in the US last year, includes rules to tackle excessive food speculation, but there is still huge opposition to meaningful change. Street lobbyists are targeting the Commodities Futures Trading Commission (CFTC), the body that will decide how the Act is implemented, to water down the rules.
Banks argue that financial market derivatives are an important mechanism to allow farmers to hedge their risks so that consumers get the benefit of greater price stability. But according to the Fairtrade Foundation, ‘such markets do not allow smaller farmers to hedge. Rather, the price swings harm them because they are often net buyers of food yet cannot take advantage of short-term price spikes in products they are growing for sale.’
While the rich continue to oppose meaningful regulation of commodities futures markets, time is running out for the world to meet its commitments to the Millennium Development Goals (MDGs). Goal 1 is to eradicate ‘extreme poverty and hunger’. The actual target set is ‘to reduce by half the proportion of people who suffer from hunger.’
According to The World Bank’s recently released Food Price Watch, 44 million people were driven into poverty since last June as a result of food spikes. It maintains that a further 10% increase in global prices could drive an additional 10 million people below the $1.25 extreme poverty line. A 30% price hike could lead to 34 million more poor. Currently 1.2 billion people are living below the poverty line of US $1.25 a day.
As the world struggles to reach the MDGs and is set to readjust the goal posts of time, we need to ask ourselves when do we start to put the majority of people and their health before profit for the world’s richest few? The world almost hit rock bottom through reckless gambling on the world markets. When will we wake up and start to take our medicine?
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