January 2013        

What’s good for business . . .

We often hear it said that what’s good for business is good for the country. Indeed this has been the policy dictum of most governments, and certainly the European Union, for the last few decades.
     In an article last July, Socialist Voice looked at the top fifty companies in Ireland and concluded that only nineteen were Irish, and of these nineteen only six could be considered to be mainly involved in the domestic economy, dependent upon domestic demand. The rest are part of the monopoly capitalist system, with interests tied to international capital and speculation.
     Let’s look now at one industry in particular and ask the question, Is what’s good for those companies good for us?
     A recent report by the Institute for Agriculture and Trade Policies on speculation in agricultural commodities shows the massive growth of commodity speculation (importantly, agri-commodities and oil) and concludes that this has directly led to the increase of 83 per cent in food prices between 2005 and 2008, with prices for maize nearly tripling, for wheat increasing by 127 per cent and rice by 170 per cent between January 2005 and June 2008.
     The graph below tracks the spectacular rise of speculation in commodity futures pricing as it has tried to absorb the masses of accumulated capital that the wealthy possess.
Size of the commodities futures market (in billion dollars) v. Standard and Poor’s GSCI spot price index

Sources: Bloomberg, Goldman Sachs, CFTC Com­mit­ments of Traders Supplements, calculations based on CFTC COT/CIT report. Figures represent annual averages; figure for 2008 is an average up to 1 July 2008.
     The institute’s report sees this growth in speculation as a contributory cause of the more than thirty food riots in the world that took place in 2008, the increase in absolute numbers of people living in extreme poverty, and the increase to close to 1 billion in the number of people living in extreme hunger. (The full report can be read at politicaleconomy.ie .)
     But how is Ireland involved in this? you might ask. Well, a number of leading “Irish” companies—Kerry Group, Glanbia, and ABP Food Group—are heavily involved in these activities. So, as prices continue to rise and they continue to speculate and prices continue to rise in a continuous bubble, the effect this has on us is that the prices of staple foods go up. It becomes harder for us to feed our families.
     In the purchasing of their raw materials, these companies will pass on the increased costs to customers, resulting in inflation. With much of the world’s basic agri-commodities monopolised, markets can easily be manipulated to the benefit of speculators through the controlled release or withholding of the product.
     For example, three-quarters of the global grain market is controlled by the four “ABCD” firms—ADM, Bunge, Cargill, and Louis Dreyfus—with more mergers occurring.
     Drought is actually good for these companies, as it drives prices up, as seen by this quotation from an economic report: “After a doubling in quarterly profits helped by the impact of drought . . .”
     We have seen the massive increase in food prices before the crash, and since 2010 they have begun to climb again. So, the success of speculative activities—which will be celebrated as part of an Irish “recovery”—actually hurts working people in Ireland and globally, not to mention the effect that the monopoly production of agricultural produce is having on the environment.

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