Tag Archives: WTO

Greg Palast on the other “Summers memo” and the decriminalisation of rogue banking

‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]?

wrote Larry Summers when he was Chief Economist at the World Bank. The words are contained in a memo to Brazil’s then-Secretary of the Environment Jose Lutzenberger on December 12th 1991 that became known as the “Summers memo”.

This memo (which was apparently ghost-written by Lant Pritchett who worked under Summers, and signed by Summers himself) then went on to suggest three reasons why dumping toxic waste in the poorest regions of the world is a great idea; reasons that are summarised below:

1) “…a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages… I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.”

2) “I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.”

3) “The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity… Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.”

Summers adding that:

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

You can read more about the “Summers memo” here.

Lutzenberger later wrote a response to Summers as follows (although I believe that his reply came after the memo itself had been leaked):

“Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in… If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said… the best thing that could happen would be for the Bank to disappear.”

You can read this alongside the Summers memo at the satirical website whirledbank.org

If this first leaked memo was, well let’s just say more than a little embarrassing for the World Bank and Larry Summers, then what turned up recently looks altogether more incriminating again. This second memo – a document that fell into the hands of investigative reporter Greg Palast and who says he expended great efforts to affirm its authenticity – “confirmed”, as Palast put it in his recent article for Vice Magazine, “every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet.”

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn’t believe it. […]

The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.

Since Palast wrote his piece, it transpires that Summers will not be replacing Ben Bernanke as Fed Chairman, but instead the job looks likely to go to Timothy Geithner1 – Geithner being the author of this latest memo, which (to quote Palast again) “begins with Summers’ flunky, Timothy Geithner, reminding his boss to call the then most powerful CEOs on the planet and get them to order their lobbyist armies to march”:

“As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the CEOs….”

So just what was this “end-game” that Tim Geithner is referring to in his memo sent in late November 1997? Well, it’s complicated but here’s Palast again picking up the story:

It’s not the little cabal of confabs held by Summers and the banksters that’s so troubling. The horror is in the purpose of the “end game” itself.

Let me explain:

The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.

Second, the banks wanted the right to play a new high-risk game: “derivatives trading.” JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets.”

Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.

But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?

The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet in one single move. It was as brilliant as it was insanely dangerous.

How could they pull off this mad caper? The bankers’ and Summers’ game was to use the Financial Services Agreement, an abstruse and benign addendum to the international trade agreements policed by the World Trade Organization.

Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives.

Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”

And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.

The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.

After further background surrounding the nature of the “WTO financial services negotiations” Geithner is alluding to in his memo to Summers, Palast then adds:

Does all this evil and pain flow from a single memo? Of course not: the evil was The Game itself, as played by the banker clique. The memo only revealed their game-plan for checkmate. 2

Click here to read Greg Palast’s full article entitled “Larry Summers and the secret ‘End-Game’ Memo”, which was published on August 22nd 2013.

You can also watch an interview with Palast on Tuesday’s [Sept 17th] Keiser Report in which he talks more about the “End-Game” memo:

Going back to the original “Summers memo” and we discover that in their defence both Lant Pritchett (the self-confessed author) and Summers himself said later that their suggestion for dumping toxic waste in third world countries was just meant sarcastically – so in other words just a great big insider joke, ha, ha, ha… stop me because my sides are splitting!

Presumably then, this more recently discovered “End-Game” memo will turn out to be just another example of the boys at the US Treasury, the WTO and the heads of the major banks larking around. Playing at being mobsters with a wink and a nudge – you know, like Bugsy Malone or something. Destroying the global economy with toxic derivative “products”, ha, ha, ha… like that could ever happen!

1 From an article entitled “Federal Reserve:Who will replace Ben Bernanke?” published by BBC news on September 16, 2013:

“There are three candidates being discussed as possible replacements to Ben Bernanke, chairman of the Federal Reserve, the US central bank. They are vice-chair of the Federal Reserve Janet Yellen, previous vice-chair Donald Kohn and former Treasury Secretary Timothy Geithner.” […]

The 52-year-old was heralded by watchers of the Fed as the man to replace Ben Bernanke. He is a confidante of Mr Obama, and a White House favourite. But he has ruled himself out of the race.

Chris Orndorrf, senior portfolio manager at Western Asset Management, told the BBC he thought Mr Obama would try to persuade Mr Geithner to take the job.

“He [Mr Geithner] said he doesn’t want it but stranger things have happened in Washington. I would say maybe a 25% chance,” Mr Orndorrf said.

There is no doubt that Mr Summers had been Mr Obama’s preferred choice to lead the post. ”

http://www.bbc.co.uk/news/business-24105985

2 From an article entitled “Larry Summers and the Secret ‘End-Game’ Memo” written by Greg Palast, published by Vice Magazine on August 22, 2013. http://www.vice.com/en_uk/read/larry-summers-and-the-secret-end-game-memo

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Chantilly, Virginia, 31 May–3 June: move along please – nothing to see here…

At this very moment, Kenneth Clarke is meeting in secret with Peter Mandelson. The de facto head honchos of our two main political parties are rubbing shoulders right alongside Richard Perle, Robert Rubin, Henry Kissinger, and Garry Kasparov… yes, that’s right, the Russian chess grandmaster. They are also putting their heads together with chiefs from many of the world’s corporate giants including BP, Royal Dutch Shell, Fiat, Airbus, Dow Chemicals, Unilever, AXA, Barclays, Siemens, Citigroup, Microsoft, Google, Vodaphone, to name but a few, and not forgetting, Peter Sutherland, the Chairman of Goldman Sachs — no meeting being complete these days without the man from Goldman Sachs!

Also at this meeting, a meeting that has now entered its fourth and final day, are Pascal Lamy, the Director-General of the WTO; Robert Zoellick, President of the World Bank; Neelie Kroes, Vice President of the European Commission; and Josette Sheeran, Vice Chairman of the World Economic Forum – not ‘Davos Man’ but, as the Guardian‘s Charlie Skelton put it, perhaps their “ice-queen”:

In terms of power structures, Josette is number 2 at Davos, and Davos is about number 10 behind Bilderberg.1

Bilderberg…? What’s that, I hear some mumbles. Well, it’s this meeting I’ve been talking about. The meeting between Ken Clarke and Pete Mandelson and the hundred or so other hangers-on such as H.R.H Prince Philippe of Belgium and H.M. the Queen of the Netherlands.

Look, if this strikes you as odd then please be assured that it isn’t. A Bilderberg meeting takes place in a different five-star hotel every year around this time. It’s like clockwork, and has been happening now for more than half a century. Although if you’d never before heard about these Bilderberg meetings, then it’s in part because the heads of the global media outlets have also been in regular attendance – this year’s crop including representatives from Le Monde, El País, Die Zeit, The Wall Street Journal, Washington Post, The Financial Times, The Economist, as well as talkshow host Charlie Rose. Rest assured none will be spilling the beans later – they didn’t go in order to report on the meeting!

Of course, it might interest the people of Ireland that their own Minister for Finance, Michael Noonan is one of those on the guest list. Likewise, those worried about their futures in Spain might be interested to hear that their Deputy Prime Minister, Soraya Sáenz de Santamaría Antón, is another of the elite gaggle. The Dutch may also be surprised to learn that their Prime Minister, Mark Rutte, has a booking in this year’s hotel. And what would the Chinese make of the reappearance of their Vice Minister of Foreign Affairs, Ying Fu, who also attended last year when the meeting was held in St Moritz. And finally, what are any of us to make of the attendance of Bassma Kodmani, Head of Foreign Affairs for the Syrian National Council? Just what is it that they don’t want the rest of us to hear them all talking about? Unfortunately, the mainstream media (with honourable exception given to our own Guardian newspaper) show no interest in any actual journalism, but remain intent only on maintaining the bluff that “there’s nothing to see here…”

Precisely what’s being discussed right now, out of sight beyond the fences and high security cordons, is therefore hard to know for sure. Issues involving power and money evidently. And, in a word, a push towards ever-greater globalisation – Bilderberg being a meeting organised by self-confessed globalists. But just what precisely is globalisation – what is its overarching agenda?

To bring the world together under a unified corporate governance. Ultimately, although step by step, a world government of technocratic cronies running things for the sole benefit of a small oligarchical elite. This is certainly how it appears, not only to me, but also to the increasing number who have turned out to protest each successive meeting. This year’s protest even managing to ally forces from the Tea Party with others in the Occupy movement to form into Occupy Bilderberg.

Which is perhaps the silver lining to what’s happening right now in Chantilly. That the anti-globalisation movement which fizzled out about a decade ago through lack of focus, and then briefly reignited last year in encampments on Wall Street and elsewhere, has momentarily found alliance with unlikely compadres. Bilderberg being apolitical, at least in the sense that it operates outside of the acknowledged left-right paradigm, having brought together protesters who are likewise catholic in terms of their usual party political persuasions. Occupy Bilderberg therefore points to a way ahead and for the possible emergence of a more cohesive popular movement of dissent. Anti-globalisation 2.0 — if you like.  Here is Ryan Devereaux, also reporting for the Guardian:

The gathering outside the Westfield Marriott hotel in Chantilly included Ron Paul supporters, Occupy veterans, members of the 9/11 truth movement and Oath Keepers, a Tea Party-affiliated group comprised of military and law enforcement officers.

Carrying signs with messages such as “Humanity is winning” and “Warning to secret societies: you are pissing off American patriots. We have machine guns also,” the 200 or so protesters could only be there for one event: Bilderberg.2

Click here to read more of Charlie Skelton and Ryan Devereaux’s excellent reports on the Guardian Bilderblog.

The chasm that exists between those in power and those in the streets could hardly be more in your face than in Chantilly during the last few days. Such a stench of power and money that it really should be getting up all our noses.

Yes, there’s plenty to see in Chantilly today – so don’t move along! Protest and spread the word of what you are seeing and hearing. Like a great many others around the world, in spirit I too stand with all of you protesting outside the gates of Bilderberg.

*

Here’s an interesting example of the kind of debate taking place in Chantilly – Adam Kokesh interviewing Webster Tarpley:

Click here to read the official 2012 Bilderberg attendance list.

Click here to watch a live stream of the protests produced by Luke Rudkowski of We Are Change.

1 From an article entitled “Bilderberg 2012: bring on the Bilderbabes: Protestors at Bilderberg up their game: ‘What do they want? Hegelian dialectics! When do they want it? Now!’” written by Charlie Skelton, published in the Guardian on June 1, 2012. http://www.guardian.co.uk/world/us-news-blog/2012/jun/01/bilderberg-2012-chantilly-occupy1

2 From an article entitled “Protest groups converge to denounce secretive Bilderberg conference: Annual off-the-record finance gathering attracts protesters from disparate groups, but they often have a similar goal in mind”, written by Ryan Devereaux, published by the Guardian on June 1, 2012. http://www.guardian.co.uk/world/2012/jun/01/protesters-gather-secretive-bilderberg-conference?intcmp=239

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ACTA is a treaty drawn up by pirates and for pirates

With SOPA and PIPA kicked into the long grass, another attempt to close down free speech on the internet is now coming under scrutiny. ACTA, the “Anti-Counterfeiting Trade Agreement”, is yet another draft of legislation that is ostensibly for the purpose of enforcing intellectual property rights, although unlike SOPA and PIPA, ACTA is an international treaty. (And apologies for such an obfuscation of acronyms — I presume that’s the correct collective noun).

ACTA, which establishes its own governing body outside existing international institutions such as the WTO, the World Intellectual Property Organization (WIPO) or even the United Nations, was originally signed by countries including Australia, Canada, Japan, and the United States back on October 1st 2011.

When, last Thursday [Jan 26th], twenty-two of the European Union member states including the UK also signed the agreement, French Member of the European Parliament, Kader Arif, was so angered by “manoeuvres” used to get the bill approved, that he immediately resigned in protest from his position as rapporteur:

Negotiations over a controversial anti-piracy agreement have been described as a “masquerade” by a key Euro MP.

Kader Arif, the European Parliament’s rapporteur for the Anti-Counterfeiting Trade Agreement (Acta), resigned over the issue on Friday.

He said he had witnessed “never-before-seen manoeuvres” by officials preparing the treaty.1

And Kader Arif made the following statement:

“I condemn the whole process which led to the signature of this agreement: no consultation of the civil society, lack of transparency since the beginning of negotiations, repeated delays of the signature of the text without any explanation given, reject of Parliament’s recommendations as given in several resolutions of our assembly.”

Click here to read the full BBC news article.

In Poland, tens of thousands of demonstrators also voiced opposition to their own government’s signature to the ACTA agreement:

Crowds of mostly young people held banners with slogans such as “no to censorship” and “a free internet”.

Earlier in the week, hackers attacked several Polish government websites, including that of Prime Minister Donald Tusk.2

Russia Today reported that the Anonymous group had earlier sent out ‘a stern warning’ to the Polish authorities, issuing what was little short of a blackmail note:

“Polish government – we are more powerful than you. We have a lot of your files and personal information. We warn you to exercise caution” which was published on pastebin.com.

The scope of ACTA is more expansive than SOPA and PIPA, not merely geographically, but because it aims to establish and enforce global standards in many other areas. Here’s analysis of how the new legislation will affect the lives of people across the world, published in Forbes:

Worse, it appears to go much further than the internet, cracking down on generic drugs and making food patents even more radical than they are by enforcing a global standard on seed patents that threatens local farmers and food independence across the developed world.

Despite ACTA’s secrecy, criticism of the agreement has been widespread. Countries like India and Brazil have been vocal opponents of the agreement, claiming that it will do a great deal of harm to emerging economies.

I’ll have more on the agreement as it emerges. But to briefly sum up, according to critics of the agreement:

  • ACTA contains global IP provisions as restrictive or worse than anything contained in SOPA and PIPA.
  • ACTA spans virtually all of the developed world, threatening the freedom of the internet as well as access to medication and food. The threat is every bit as real for those countries not involved in the process as the signatories themselves.
  • ACTA has already been signed by many countries including the US, but requires ratification in the EU parliament.
  • ACTA was written and hammered out behind closed doors. While some of the provisions have been taken out of the final US draft, plenty of unknowns still exist. It’s not nearly clear enough how the agreement will affect US laws.3

Click here to read more details in Forbes.

With regards to the internet, the tightening of control on websites will automatically lead to the closer scrutiny of all internet users:

Under ACTA, internet service providers are virtually obliged to monitor all user activity for possible copyright violations. It also gives trademark owners and officers of the law great authority to violate privacy while investigating suspected infringements.4

Rick Falkvinge, the founder of the Swedish Pirate Party, told Russia Today that the ACTA copyright protection treaty is an “excellent example of abuse of power by the corporate industry”:

“This legislation about putting people in jail was negotiated by corporations and the lawmakers just got it in their lap,” he explained. “That is not how a democratic society should work, quite regardless of what this law says.”

Click here to read the full Russia Today article.

Jonathan Swift famously said that “laws are like cobwebs, which may catch small flies, but let wasps and hornets break through.” ACTA is a perfect example of Swift’s observation, drawn up in order to serve the interests of the biggest pirates of our economies. The pirates at the helm of the megabanks who continue to force whole nations to surrender their wealth to bail them out on the basis of threats from their pirate buddies at the credit rating agencies. And the multinational corporate pirates who refuse to pay up their modest contribution in taxes, preferring to bury their treasures in offshore havens.

We already have laws to bring many of the major pirates to justice, but these laws are rarely used for such purposes. Regulations that haven’t so far been axed are increasingly being ignored. Meanwhile, bills like SOPA, PIPA and ACTA have been drawn up to further choke opposition, opening the way for greater corporate control over our lives. All of this so-called ‘anti-piracy’ legislation is nothing but humbug, and poisonous humbug at that. The signing of ACTA, which is clearly designed to squeeze out the little guy and stifle the independent voice, represents just another miserable step towards a globalised corporate tyranny. In short, ACTA was written by the pirates and for the pirates.

1 From an article entitled “European Parliament rapporteur quits in Acta protest” written by Dave Lee, published by BBC news on January 27, 2012. http://www.bbc.co.uk/news/technology-16757142

2 From an article entitled “ACTA action: Poland signs up to ‘censorship’ as 20,000 rage”, published by Russia Today on January 26, 2012. http://rt.com/news/acta-poland-internet-government-745/

3 From an article entitled “If You Thought SOPA Was Bad, Just Wait Until You Meet ACTA”, written by E.D. Kain, published by Forbes on January 23, 2012. http://www.forbes.com/sites/erikkain/2012/01/23/if-you-thought-sopa-was-bad-just-wait-until-you-meet-acta/

4  http://rt.com/news/acta-poland-internet-government-745/

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how the markets make famine

The Food Crisis Strikes Again

Esther Vivas

The threat of a new food crisis is already a reality. The price of food began to rise to record levels again, according to the FAO Food Price Index of February, 2011, which does a monthly analysis of global prices of a basic food basket made up of grains, seed oils, dairy products, meat and sugar. The Index came to a new historic maximum, the highest since the FAO began to study food prices in 1990. In the past months, prices have leveled off but analysts predict more hikes in the coming months.

This increase in the cost of food, especially basic grains, has serious consequences for southern countries with low incomes and dependency on food imports, and for the millions of families in these countries that devote between 50 and 60 percent of their income to food—a figure that rises to 80 percent in the poorest countries. In these countries, the rise in the price of food products makes them inaccessible.

We are approaching a billion people—one out of every six on the planet—that today do not have access to adequate food. World Bank president, Robert Zoellick, affirmed that the current food crisis has increased the number of persons who suffer chronic hunger by 44 million. In 2009, this number was surpassed, reaching 1.023 billion people undernourished on the planet, a figure that went down slightly in 2010, but without returning to the levels before the food and economic crisis of 2008 and 2009.

The present crisis takes place in the context of an abundance of food. Food production has multiplied over the three decades since the sixties, while the world population has merely doubled since then. There’s plenty of food. Contrary to what international institutions like the FAO, World Bank and World Trade Organization say, it’s not a problem of production, but rather a problem of access to food. These organizations urge an increase in production through a new Green Revolution, which would only make the food, social and ecological crises worse.

Popular Rebellions

The popular rebellions in northern Africa and the Middle East had among the many catalysts the rise in food prices. In December of 2010, in Tunis, the poorest of the population occupied the frontline of the conflict, demanding, among other things, access to food.

In January of 2011, youth demonstrated in Algeria blocking highways, burning stores and attacking police stations to protest for the rise of prices in basic foods. Similar cases were seen in Jordan, Sudan and Yemen. Egypt is the largest importer of wheat in the world, and depends on food imports.

Evidently other factors came into play in the uprisings: high unemployment, lack of democratic freedoms, corruption, lack of housing and basic services, etc. In any case, the rise in food prices was one of the initial catalysts.

A Central Cause

What are the causes of the new spike in the cost of our meals? Although international institutions and experts have pointed to several elements such as meteorological phenomena that affect harvests in produce countries, the increase in the demand in emerging countries, financial speculation, the growing production of agrofuels, among others—various indices point to speculation with raw food materials as one of the main reasons for food price increases.

In 2007-2008 the world experienced a profound food crisis. Basic foods prices such as wheat, soy and rice rose by 130%, 87% and 74% respectively. Then, as now, several causes converged, but the most important were production of agrofuels and the growing speculative investment in the food futures markets. But this increase in the price of food leveled off in 2009, in part probably due to the economic crisis and a reduction in financial speculation.

By mid 2010, with international financial markets calmed down and huge sums of public money injected into the private banks, food speculating struck again and the price of foods began to rise. To “save the banks”, after the financial crisis of 2008-2009, it is estimated that the governments of rich countries gave a total of $20 trillion dollars to stabilize the banking system and lower interest rates.

With the influx of money, speculators saw incentives to acquire new loans and buy merchandise that predictably would rise rapidly in value. The same banks, high-risk funds, etc. that caused the subprime mortgage crisis are currently responsible for speculation in raw materials and the rise in the price of food, taking advantage of unregulated global commodity markets.

The food crisis is intimately linked to the economic crisis and the logic of a system that promotes, for example, plans to bail out Greece and Ireland while sacrificing their sovereignty to international institutions, just as it sacrifices food sovereignty of the peoples to the interests of the market.

A Grower’s Guarantee or a Speculator’s Bonanza?

There has always been some speculation in the price of foods and this is the logic behind futures markets. In their current form, futures markets date back to the mid-1900s when they began in the United States. These are legal standardized agreements to buy and sell physical merchandise in a previously established time period in the future and have been a mechanism to guarantee a minimum price to the producer faced with the oscillations of the market.

It works like this: Farmers sell their production to traders before harvest to protect themselves from uncertainties in the weather, for example, and to guarantee a future price. The trader also benefits. When the harvest is bad, the farmer still gets a good income and when the harvest is optimal, the trader benefits even more.

This same mechanism is used by speculators to make money off the deregulation of the raw materials markets that was spurred in the mid-nineties in the United States and Great Britain by banks, free-market politicians and high-risk funds in the context of the process of deregulation of the world economy. The contracts to buy and sell food became “derivatives” that could be traded independently of the real agricultural transactions. A new business was born—food speculation.

Speculators today have more weight in the futures markets, even though these transactions have nothing to do with real supply and demand. Mike Masters, manager of Masters Capital Management, points out that in 1998 speculative financial investment in the agricultural sectors was around 25% and today it is close to 75%. These transactions are carried out in the markets, the most important of which on the world level is the commodities market in Chicago, while in Europe food and raw materials are traded in the futures markets of London, Paris, Amsterdam and Frankfurt.

A “100% Natural Deposit”

In 2006/2007, following the fall in the high-risk mortgage loan market in the United States, institutional investors like banks, insurance companies and investment funds sought safer and higher yield places to invest their money. Food and raw materials became a popular alternative. As the price of food soared, investments in the food futures markets rose, pushing the price of grains up and worsening inflation in food prices.

In Germany, the Deutsche Bank announced easy earnings if invested in rising agricultural products. And similar business deals were promoted by the major European bank BNP Paribas. Catalunya Caixa urged its clients in January 2011 to invest in raw materials under the slogan a “100% natural deposit”.

What did they offer? A guarantee of 100% of capital with the possibility of obtaining profits of up to 7% annually. How? According to the ads, based on “the evolution of yields in three food products: sugar, coffee and corn”. To assure such high yields, the ads pointed out that prices of these three products had increased at 61%, 34% and 38% respectively over the past months due to “growing demand that is increasing above the rate of production”, because of the increase in world population, and agrofuels production.

Catalunya Caixa left out important information, however: food speculation that provided such handsome profits increases the price of food, makes it inaccessible to large parts of the population in the global South and condemns thousands of people to hunger, poverty and death in these countries.

Oil Dependency

Another element that exacerbated the food crisis is the heavy dependency on oil of the current model of food production and distribution. The rise in the price of oil had a direct impact on the similar rise in the cost of basic foods. In 2007 and 2008 the price of oil and the price of foods reached record levels. Between July of 2007 and June of 2008, crude oil went from 75 dollars a barrel to 140 dollars, while the price of basic foods went from 160 dollars to 225, according to the FAO Food Index.

Food and agriculture have become heavily dependent on oil. Following the Second World War and with the Green Revolution in the sixties and seventies, and with the supposed increase in production, an intensive and industrial model of agriculture was adopted. In the current system, our food travels thousands of kilometers before it arrives on our tables; production requires the intensive use of farm machinery, chemicals pesticides, herbicides and fertilizers. This model could not exist without oil.

The rise in the price of oil and the strategy of governments to combat climate change has led to a growing investment in the production of alternative fuels, agrofuels, such as biodiesel and bioethanol, made from sugar, corn and other crops. But this production has entered into direct competition with food production for consumption and is now another cause of the rise in food prices.

The World Bank recognizes that when the price of oil goes over fifty dollars a barrel, a 1% increase causes a 0.9% increase in the price of corn, since “for every dollar that the price of oil rises the profitability of ethanol rises and consequently the demand for corn grows.”

Since 2004, two-thirds of the rise in world production of corn was destined to satisfy the North American demand for agrofuels. In 2010, 35% of the corn harvest in the United States, which is 14% of world production, was used to produce ethanol. And the tendency is on the rise.

But beyond the causes such as food speculation and the rise in oil prices that has an impact on the growing investment in agrofuels, leading to competition among grain production for consumption and for transportation, the food and agriculture system is profoundly vulnerable and in the hands of the market. The growing liberalization of the sector in the last decades, the privatization of natural resources (water, land, seed), the imposition of a international model of trade at the service of private interests, etc., has led to the current crisis.

As long as agriculture and food continue to be considered merchandise in the hands of the highest bidder, and business interests prevail over food needs and the limits of the planet, our food security and the welfare of the earth are far from assured.

*Esther Vivas is a member of the Center for the Study of Social movements (Centro de Estudios sobre Movimientos Sociales) in the Universidad Pompeu Fabra (Barcelona). She is the author of “En pie contra la deuda externa” (El Viejo Topo, 2008) among other publictions, and a contributor to the CIP Americas Program www.cipamericas.org.

I would like to thank Esther Vivas for allowing me to reproduce this article.

+info: http://esthervivas.wordpress.com/english

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Filed under Egypt, Esther Vivas, financial derivatives, Middle East, neo-liberalism, Sub-Saharan Africa, Tunisia, Uncategorized