Wednesday, March 30, 2011

The speculation game

I recently watched The Colbert Report. On this particular episode, Stephen Colbert had Laurie Garret on, who is a member of the Council on Foreign Relations. The topic of the day: rising food prices. I'm sure we've all noticed that going to the grocery store has become increasingly expensive in the past few years and Laurie spoke about why this was happening.  I don't know about you guys but I had no idea what was going on globally causing the increase until I watched her interview.

Ms. Garret mentioned many reasons why food prices have increased:

  • Fires and floods (Pakistan, anyone?) wiped out crops
  • Foot & mouth disease is currently being battled in 14 countries, reducing amount of meat allowable for export
  • Gas prices have increased, increasing transportation costs for food
  • Speculation
It was this last reason that I was most interested in (as none of us can control natural disasters). Speculation? What is that? Speculation is the process by which investors around the world agree to buy X amount of a commodity at a later date. As I understand it, this is a problem because of the nature of supply and demand. Let's reach back far into our brains to the mandatory high school economics class we all had to take. Remember anything? When the supply of an item is low yet demand is high, the price goes up. The speculators reduce the supply of an item by buying it, putting it out of commission for say three months while demand increases, causing prices to increase. The problem is that this process is largely unregulated. Lobbyists (funded by large companies) and the companies themselves have thus far prevented regulation from being passed to regulate the whole process.

Both Ms. Barret and a special report published by the Institute for Agriculture and Trade Policy (IATP) cite high food prices as inciting factors in riots across the world. According to the IATP, developing nations across the world are now consuming less food, with 43% of people polled in these countries stating that they have cut back on food purchases. The undernourished demographic has increased because of this and continues to grow.

Think about it, if food is expensive and thus a nuisance to buy for us, think about the poor in developing countries. Not only do those people have to pay outrageous prices, there may not even be enough to go around as their governments cannot import enough. The effects of the rising prices go beyond nutrition to political unrest and unnecessary deaths caused by riots.

Once again, big business is holding the 'little' people down. And yet again, the solution is the same: regulate! Boy do I feel like a broken record writing these posts but really people, I know this is America, the land of the free and free enterprise but is it really a free life we're leading when businesses who do not have our interests at heart are underhandedly, secretively dealing to do what's best for them, not for us? I feel the answer is no.way.


Reflections on Global Food Crisis

- A

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