NO ADVERTISING, GOVERNMENT OR CORPORATE FUNDING

  • Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Global food bubble on the way?


    Jayati Ghosh: Food prices set to surge due to Wall Street speculation -   May 5, 2010
    Members don't see ads. If you are a member, and you're seeing this appeal, click here

    Audio

      Share to Twitter
    Share to Facebook




    I support The Real News Network because it is one of the few remaining political voices of the people. - David Pear
    Log in and tell us why you support TRNN

    Bio

    Dr. Jayati Ghosh is Professor of Economics and currently also Chairperson at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi. Educated at Delhi University, Jawaharlal Nehru University and the University of Cambridge, England, her research interests include globalization, international trade and finance, employment patterns in developing countries, macroeconomic policy, and issues related to gender and development.

    Among other books, she has co-authored (with Prof. C.P. Chandrasekhar) Crisis as a Conquest: Learning from East Asia, The Market that Failed: A Decade of Neoliberal Economic Reforms in India and Work and Well-being in the Age of Finance. In addition to numerous academic articles, she is a regular columnist for Frontline magazine and Businessline financial daily, as well as a weekly columnist for several newspapers.

    She is one of the founders of the Economic Research Foundation in New Delhi and is on the board of various other social research organizations. Since 2002 she has been the Executive Secretary of International Development Economics Associates (IDEAS), an international network of heterodox development economists www.networkideas.org. She was the Chairperson of the Commission on Farmers’ Welfare in 2004 constituted by Andhra Pradesh Government. She continues to be closely involved in working with progressive organizations and social movements.

    Transcript

    Global food bubble on the way?Jayati Ghosh Interview (1 of 2)

    PAUL JAY, SENIOR EDITOR, TRNN: Hi. Welcome back to The Real News Network. I'm Paul Jay in Washington. From 2007 to 2008 the price of maize in Ethiopia went up 141 percent, retail wheat flour in Peshawar, Pakistan, went up 82 percent, rice in Thailand up 73 percent, and so it went throughout the world. Our guest believes we're at the start of another surge in global food prices, and has little to do with supply and demand and much more to do with speculation by global finance companies—and, what a surprise, that includes Goldman Sachs. We're now joined by Jayati Ghosh. She's a professor of economics at the Centre for Economic Studies and Planning at the School of Social Sciences at the JNU in New Delhi. Her recent book is titled After Crisis. And she joins us from the PERI institute in Amherst, Massachusetts. Thanks for joining us, Jayati.

    JAYATI GHOSH: Thank you. Hello.

    JAY:So what is the indication we're at the beginning of another global surge in food prices?

    GHOSH: Well, actually, globally the world trade prices of food have been rising since about April 2009, and all the indications are that they're rising for the same reasons that they rose way back in 2007-2008, which is to say that it's not driven so much by global supply and demand factors, but it's driven by financial involvement in the commodity futures markets.

    JAY: Now, I've read some of the background material, and in your writing you point out that production is up. Demand has not risen significantly, yet prices are way up. That seems to be a disconnect from what normally governs such things.

    GHOSH: That's right. And I want to first break one of the very common myths. There is this perception that world food prices are rising because China and India are eating too much, basically that, you know, there is new prosperity in these countries, and that is leading to a rise in food demand. In fact, when you look at it, aggregate food consumption in both China and India and food grain consumption is down, it's not up, and this has been happening for the last decade, really. So it reflects income distribution in these countries, it reflects changing patterns of consumption, but it's simply not true that it's because the Chinese and the Indians are eating more. It's not just per capita food grain consumption that is coming down; it's the total food grain consumption of these countries that has been coming down.

    JAY:So how does this work? Demand's going down and prices are going up.

    GHOSH: Well, yes, but essentially what's happening is that it's not that demand is going down. Global demand is kind of stable when you talk about utilization. And global supply is volatile, but it's volatile around a stable trend as well. In fact, over the last year, supply has risen faster than utilization, and stockholding has gone up. Now, normally people would say, okay, this is a time when prices should come down. But prices haven't come down. Prices have actually gone up from April 2009. This is really driven by financial speculation in the commodity futures markets. This is exactly what was happening from January 2007 till about June 2008, which is when you had the entry of what are called index traders, who were basically entering the futures market, holding long positions, and recycling them to actually gain from the advantage of rising prices. And this was intimately related to financial deregulation. In 2000, the United States government passed the Commodity Futures Modernization Act, which allowed a whole range of non-grain players to enter the grain markets, the futures markets. There's something called a swap-dealer loophole. I won't go into the details, but it basically allows companies that do not deal in grain trade to hold these kinds of contracts, and that included pension funds, hedge funds, you know, you name it, and banks, investment banks—everybody enters this market.

    JAY: Now, just to back up a bit, when you say stockholdings, is that also sometimes called hoarding?

    GHOSH: No, this is really talking about government stockholding and reserves. Hoarding is when individuals or small shopkeepers, or even companies, are holding it in anticipation of the price rise, and this used to be how people speculated in grain. But you have to hold the commodity. What's happened now, what's happened, really, in this decade, is that the possibility of speculation in food grain has been delinked from the physical holding of the commodity: you don't need to hold a commodity anymore; you can hold pieces of paper, which are contracts on the price for the future.

    JAY: So why does that drive prices up, though?

    GHOSH: Well, really what happened—. Okay, let me first explain that there is an underlying perception that globally there will be an imbalance. And I think that perception is correct, because there isn't an imbalance today in terms of real demand and supply, but that's because we are underfeeding a large part of our global population in Sub-Saharan Africa, in South Asia, and we are not investing enough in terms of improving food supply, we're not doing enough in terms of public investment in agriculture, in terms of making farming viable, in terms of new research and extension. So there is an underlying problem, and I think markets sense that underlying problem, although it's not an actual problem today. But what tends to happen now is that when you look at the pattern of investment in these grain markets in terms of the futures markets, there's been more and more involvement of the non-grain dealers in what is called over-the-counter trade, OTC trade, and that was something that was allowed through this 2000 deregulation. From about late 2006, a lot of financial firms—banks and hedge funds and others—realized that there was really no more profit to be made in US housing market, and they were looking for new avenues of investment. Commodities became one of the big ones—food, minerals, gold, oil. And so you had more and more of this financial activity entering these activities, and you find that the price then starts rising. And once, of course, the price starts rising a little bit, then it becomes more and more profitable for others to enter. So what was a trickle in late 2006 becomes a flood from early 2007.

    JAY: So is this another bubble that's being deliberately created by finance?

    GHOSH: Yes, absolutely. There is no other way to put it. You have a massive expansion. It sounds incredible, but world rice prices increased by 320 percent between January 2007 and June 2008. So in just 18 months you have tripling of world rice prices. World wheat prices go up by 240 percent, maize prices by 218 percent. Crazy increases in these trade prices of these commodities.

    JAY: And is this a bubble that at some point burst? I mean, in a sense there's endless demand for food. The only reason there isn't more demand is people can't afford it.

    GHOSH: Absolutely. And, in fact, that bubble—but we are talking about world trade prices, okay? This bubble also burst. This bubble burst in June 2008. And it could have burst earlier or later, but the reason it burst then is because that was when already banks had to move their profits back to the US to cover their losses in the subprime market. So you have the movement of some funds back to the US, and that creates another flood in the opposite direction—all the herd behavior goes the other way. So between June 2008 and February 2009, prices crashed in world trade. World trade prices crashed almost back to where they were two years ago.

    JAY: But you're saying this is almost an anomaly. They cashed in in order to take out their losses or deal with the losses in the subprime mortgage crisis.

    GHOSH: That's right.

    JAY: So your basic point is we're at the beginning of a whole new bubble.

    GHOSH: Absolutely, because what you find from about March/April 2009 is that the prices have started rising again, and more and more of these investors, index investors, as they're called, have now started entering and buying OTC contracts in the forward market. And this is because there is really no reason for them not to do that, because they're getting very cheap interest, they've got a huge moral hazard because they know they'll get bailed out if there's a crisis, and this is a very profitable avenue of investment at the moment.

    JAY: Yeah, that's an important point I read in your material, that because interest rates are so low, and the downside of failure doesn't actually seem to be much of a downside because the various governments come and bail out the big financial institutions, it promotes an even bigger appetite for risk-taking. And now the risk-taking's about food.

    GHOSH: Exactly. So, you know, what is really scary about all this is that the food market, the world trade market in food, has started behaving like any other financial market: it's full of information asymmetry; it's full of moral hazard; it's full of, you know, herd behavior of the players. So it's—.

    JAY: By "information asymmetry", you mean farmers have actually no idea what the heck their crops are going to be worth.

    GHOSH: Absolutely. And, you know, you get all the misleading and wrong price signals. So farmers think, "Well, wow, the price of sugarcane is really high," and they go out there and cultivate lots of sugarcane. By the time their crop is harvested, the price has collapsed. So you get all kinds of misleading price signals. Farmers don't gain. Meanwhile, consumers don't gain, consumers lose out, because what has been very strange, especially in the developing world, is that when world trade prices were rising, prices rose everywhere in the developing countries. When world trade prices were falling, prices haven't fallen. Consumer prices for food haven't fallen to the same extent.

    JAY: It's kind of a perfect storm for ordinary people, because if another food surge price bubble begins, it's taking place at a time of terribly high unemployment and, a lot of people think, a lot worse unemployment still to come. In the next segment of our interview, let's talk about what we can do about all this. Please join us with Jayati Ghosh on The Real News Network.

    END OF TRANSCRIPT

    DISCLAIMER:

    Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Comments

    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

    Comments


    Latest Stories


    Affirmative Action Ruling Will Further Racial Inequality
    Evidence For Russian Involvement In East Ukraine Based On Shoddy Journalism
    Ivy League Study Says The General Public Has Virtually No Influence On Policy
    The Modern History of Venezuela and Popular Democracy - Edgardo Lander on RAI (9/9)
    An Asia "Pivot" Should Mean Cooperating with China to Solve the Global Environmental Crisis
    Assessing the U.S. Environmental Movement
    Intimidation and Political Interference Goes Unpunished in UAW Case
    Exclusive Investigation Uncovers How BP Uses Bribes To Do Business
    The Modern History of Venezuela, The Protests and Democracy - Edgardo Lander on RAI (8/9)
    Greek Politics 4 Years After The Financial Crisis
    CBO Report Confirms U.S. Deficit Back to Normal Level
    Israel Uses Refugees as "Currency" in Arms Trade with Africa
    Who Will Pay for Climate Change Disaster?
    Canada Shifts to Right Under Harper, Mimicking the United States
    The Savings and Loan Crisis Demonstrates the Importance of Glass-Steagall
    South African Platinum Miner's Struggle Challenges ANC Leadership
    TRNN Original Report: Manning Determined to Fight Back After Army Upholds 35- Year Sentence
    Hundredth Anniversary of the Ludlow Massacre
    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7)

    RealNewsNetwork.com, Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting