HOUSING, FOOD, OIL – WHAT NEXT?

By Johan Galtung and - - Reprint | | Print |

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ALFAZ, SPAIN, Aug 11 2008 (IPS) - At the bottom of the world economy people die from hunger and preventable curable diseases while at the top, where enormous quantities of wealth are transported upwards, particularly into US hands, speculation is the twin of starvation, both offspring of the same morbid, and probably moribund, system, writes Johan Galtung, Professor of Peace Studies and founder of TRANSCEND, a global peace and development network. In this article, Galtung writes that in the history of speculation, Black Tulip fever in Amsterdam four centuries ago and gold-gold-gold topped the chart. But these were innocent compared to the speculation found now in housing, food, and oil, which are for buying-selling only, not for end consumption. Moreover, and much worse, housing, food, and oil are basic needs. Basic needs are ideal for speculation because demand to a large extent is inelastic, independent of price. Unbelievably brutal, capitalism not only exploits workers but also kills the consumers, in the name of the market. Next in line as speculation targets are health and medical services, and not only the pharmaceuticals. Watch out, the logic is clear. What is the solution? Remove basic needs from the commodity market, and criminalise speculation in them.

At the bottom of the world economy people die from hunger and preventable curable diseases with no cash to grow or buy food or medical services, and their countries lack money for simple preventive measures against, say, the malaria mosquito (DDT also pollutes crops for export, creating a choice between two evils – guess who wins).

At the top of a world economy, which is transporting enormous quantities of wealth upwards, particularly into US hands, speculation is the twin of starvation, both offspring of the same morbid, and probably moribund, system.

If the basic theme of the US is getting wealth to make more wealth, the speculators must feel right at home. They buy large quantities of something – including “buying futures in oil at USD 140, USD 150 or more per barrel, thinking they’ll make a killing if there’s is an attack [on Iran] and prices zoom over USD 200”. (Michael Klare, “Anatomy of a Price Surge”, The Nation, July 7, 2008) – and pocket the difference for next attack.

Buying big already drives prices up, others follow suit, prices skyrocket until the bubble bursts, partly because people see the gap between finance value and use value -alternatives may appear, for instance- and partly because they sell big. In housing, foreclosures compound the fall in prices.

Of course there is more to it. No doubt many wanted houses beyond their economic reach as prestige symbols. No doubt they preferred not to understand the moving interest rates. No doubt greedy banks had only one idea in mind, to sell as many mortgages as possible, and later when they started stinking, to sell the mortgages to the next institution down the chain, destroying any trust between banks and clients. Families went bankrupt and banks went bankrupt. The system put huge amounts of money into saving the latter where they might have controlled the whole mortgage industry and stepped in, retroactively, saving both families and banks by covering the mortgages, or at least many of them. People were accused of being irresponsible more often than the banks.

And the New York Stock Exchange closes for the day with the bell ringing and stupid hyena smiles, celebrating its achievements.

Now there is more to it for food, and for oil. The world has known for a long time that China managed a miracle that India never pulled off: bringing 400 million people from poverty into the middle class since the early 1990s. But there’s a catch: the middle class consumes more food and energy, and China is only one of many countries with a large poor population.

Those who define development as the less developed (LDCs) imitating the more developed (MDCs) supervised by Washington should answer this question: what will happen if this model is generalised throughout the world? Will the new middle classes just continue eating small bowls of rice to fuel their bicycling? Of course not. The failure to predict the outcome of this process is one more telling piece of evidence in the case against neo-classical economics, which is obsessed with system growth to the point that humans disappear from the picture entirely. Moreover, rather than focus on the demand for oil, it blames supply, while also blaming oil for global warming. Abysmal thinking.

And of course there is more to the food issue. As George Monbiot points out in his superb Guardian articles, there is an economy of scale in agriculture, but it is not large scale. The output per unit input is far higher on smaller farms. Big capital drives up the scale to create huge holdings and massive crops based on massive inputs of seed, water, and fertilizer. The products are super-marketed beyond the reach of those that live on less than 1-2 dollars a day. There is talk of a “green revolution”, which is good only for the farmers who can afford all the inputs, for consumers who can pay, and for the export of a surplus the starving masses cannot afford. The system invites speculators everywhere, including in the food-fuel competition.

In the history of speculation, Black Tulip fever in Amsterdam four centuries ago and gold-gold-gold top the chart. But these were innocent compared to the speculation found now in housing, food, and oil, which is for buying-selling only, not for end consumption. Moreover, and much worse, housing, food, and oil are basic needs.

Basic needs are ideal for speculation because demand to a large extent is inelastic, independent of price. They are a matter of survival. Unbelievably brutal, capitalism thus not only exploits workers but even kills the consumers, in the name of the market.

Next in line as speculation targets are health and medical services, and not only the pharmaceuticals. Watch out, the logic is clear.

What is the solution? Remove basic needs from the commodity market. They should be freely available, subsidized as part of a minimum living income, singly or combined, but sustainably so, not as charity. And basic needs speculation should be criminalised. (END/COPYRIGHT IPS)