One would think that the reason for world hunger is simply a lack of food, but the real reason can be traced to a simpler human emotion: greed. And nowhere is greed more prevalent than in the financial world of Wall Street.
Wall Street is a lot like the tin man in the wizard of Oz, but unlike the tin man Wall Street is not only content to live without a heart it prefers it that way.
We were witness to the damage they caused in the housing market which led to the economic crash of 2008. We are still paying for that and will be for a long time to come. And yet where was the contrition? It never came. Wall Street executives are still drawing large bonuses. Still carrying on business as usual.
In the area of world hunger business as usual has displayed the extreme of heartlessness. These same financial institutions that proved to be so greedy have hit an all time low. They are now directly responsible for world hunger, especially the starvation in the Horn of Africa.
In the wealthy, developed countries of the world the effect of rising food prices is taken as a given. The price of milk or coffee goes up in the supermarkets and consumers grumble, perhaps cutback, but they still buy and life goes on.
In countries like Ethiopia, Somalia, and many other poor countries in the Horn of Africa, the increases in food prices are devastating. Considering that most people in these countries earn very little and that most of their money goes towards food it is easy to see the repercussions when food prices escalate. As food becomes unaffordable hunger increase along with malnutrition. Savings are used and increased debt occurs to an already poor people. Healthcare and schooling are sacrificed so that more of a household’s budget can go to food thus causing long term damage to health and education.
The cause of the world’s starvation and particularly to poverty in Africa can be attributed to three factors: Wall Street, Futures, Derivatives. In reality there is only one factor: Wall Street, with two subdivisions: Futures. Derivatives.
The story can be traced to 2006 when food prices across the world began to rise rapidly. By 2007 the price of wheat and maize rose almost 100%. The price of rice rose over 300%. In the process 200 million people suffered from malnutrition, starvation and death. Suddenly, in 2008, prices fell to previous levels. Mysterious, some might think. In reality the main cause of the rise and fall of food prices is the futures market.
A simple explanation of the futures market is necessary to understand what is happening. Dealing in futures concerns the process where farmers in wealthy countries protect themselves in bad years, or when there is a risk. Let’s say a farmer in the winter of Idaho feels the summer season will be dry and not productive. He will go to a trader and offer his crop at harvest, no matter what happens, for a fixed price. If things go well he may lose, but if there is a problem with the weather or if some incident in the world affects prices he does well, since the price is already fixed. When regulations were in place and only companies in the agriculture industry could get involved the process worked. But, up through the 1990s and early 2000s Wall Street firms used their extensive lobbying powers to abolish regulations. At that point the futures contracts became derivatives and could be bought and sold by any trader, whether in the agricultural industry or not. This opened up a new world of food speculation.
The farmer in Idaho can still sell his crops on the futures market, but now that contract can be sold to anyone. Merrill Lynch can buy it and sell it to Goldman Sachs, Deutsche Bank can buy it from Goldman Sachs and sell it to JP Morgan, and so on. The price continues to rise and now the people in places like the Horn of Africa can no longer afford to buy food. Starvation begins.
Deregulation changed the market from one based on supply and demand to one based on food contracts. Speculators now control the rise and fall of prices. In effect Wall Street is investing in starvation. The investment has paid off for them. It was estimated that in 2010 Goldman Sachs made $1 billion in profits from food speculation.
The situation can be summed up by what Pope Benedict said to a United Nations Food Conference on July 1, 2011. “Poverty, underdevelopment and hunger are often the result of selfish attitudes which, coming from the heart of man, show themselves in social behavior and economic exchange. How can we ignore the fact that food has become an object of speculation or is connected to movements in a financial market that, lacking in clear rules and moral principles, seems anchored on the sole objective of profit?”