Blog Action Day and Occupations
I want to encourage you to do something about the fact that there are thousands of people dying from a famine in East Africa. But I’m not going to talk about better seeds, training for farmers, and access to markets. Undoubtedly these things these things could help farmers increase production to offset the damage done by protracted doubt.
Instead I think we should all be talking about fincial market reforms.
I’m writing this today because it is Blog Action Day 2011, a day when anyone with a blog tries to sway readers to get involved in a topic of urgent importance to the world, and this year’s theme is food. But it is also the day of ongoing protests and occupations - with people around the world occupying ground near the world’s largest financial centres to protest the way financial institutions have managed to manipulate the global economy for the benefit of a very few at the cost of the majority (the 99%).
Picture from the protest today at Occupy London:
Here is why I think these occupations - which I hope result in reforms and regulations on financial markets - have the potential to help feed the hungry of the world.
First, let’s start at looking at why deregulated commodities markets do for the price and supply of a good.
Our example will be the energy market in California in 2000-2001. You can get the full run down from Wikipedia, but long story short: the market was deregulated and companies were allowed to trade energy in order to maximise profit, where previously they supplied to meet demand to the cost of some potential profits. The result was that companies like Enron created an artificial short fall in energy supply in order to increase prices. There were rolling blackouts across the state, and people were paying more than ever for their electricity.
Obviously this is a bad thing. Deregulated markets work really well for supplying things that people don’t need - not everyone needs to see movies, and theatres are able to charge a ticket price that maximises their profit. But for things that everyone needs, like electricity to keep warm in the winter or food, markets need to be regulated in such a way as to ensure that every consumer is having at least some of their demand met. There is still room for some profits from those people who demand steak for dinner or want to leave the TV on all day, but for the most basic of needs need to be met no matter someone’s ability to pay.
What we’re seeing right now in the food commodities market is like what Enron did to California and what movie theatres do for ticket prices. Traders and speculators are working to maximise profits, but the result is that some people don’t have their basic need met. The result is that some of the world’s poorest people are starving to death as they can’t afford to pay the prices that maximise commodities trader’s profits.
After the global financial meltdown in 2008, I hoped that for reforms on the financial sector to ensure that profit maximisation wouldn’t kill people. But this hasn’t happened, so along with the other changes the occupiers hope to achieve, I hope that we’ll see market regulations that ensure that no one is allowed to profit from driving up prices to a point that it denies some people of their basic needs.