Tax Food Speculators to Subsidize the Poor

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Tax food speculators, and use the money to subsidize the poor. That’s the conclusion of ‘Investors Punish the Poor’ in today’s The Australian. Raghbendra Jha of the Australian National University argues that the huge spike in rice prices over the last year is mostly due to speculation.

A steady upward trend in food prices is driven by the switch of cropland to biofuels and other structural factors (including the rising demand associated with growth in China, India and the other emerging economies). But the huge jump in prices from late 2007 accompanied the credit crunch in financial markets: hedge funds and others shifted from stocks and bonds into commodoties — which have relatively fixed supplies in the short term, and so prices take most of the (upward) adjustment).

The price spike hits the poor hard, and threatens the MDGs. Raghav concludes:

“This eruption of food prices represents the most regressive form of taxation…. This also represents a significant shift in the global distribution of income and calls for the taxation of speculative profits and the subsidisation of the poorest consumers”.

We agree. So how best to organize the tax? And how best to get the poor the help they need? Suggestions please.

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One Response to “Tax Food Speculators to Subsidize the Poor”

  1. Lauren Rock Says:

    This issue has taken a backseat due to the collapse of the world markets, but it is just another example of “ingenious” trading practices engaged in by those who have the bulk of the world’s capital to generate more for themselves at the expense of the poor. It goes without saying that most of the world’s population, and all of the world’s hungry peoples, do not have the capacity to ‘play’ the markets in the way that hedge funds and big investors do— but it is worth harping on the point because this itself is unjust when the ‘plaything’ is a basic need. It is a grave indication of the frenzied minute by minute market trading paradigm that has grown up around the hallowed international financial institutions run by the world’s richest and their interests that such a thing as food should be the source manipulated to yield profits for the world’s over-fed. At any other point in history this behaviour would be functionally inconceivable, but also, I would argue, ‘irrational’ and unjust.

    Sadly, this is also why is shall be inversely difficult to convince the major players that it is in fact unjust and impractical, and irrational. So far as they, and to some extent the rest of us, are completely value laiden within the paradigm of market deregulation, and deference to the financial wizards who devise such schemes as futures contracts in order to glean profits. But the evidence of last summer’s devastating food shortages in the most vulnerable regions of the world demands that the global community act to curtail the effects of speculators on the price and availability of food staples on the market. Most neo-liberal financial analysts take the view that the governments of developing countries are to blame, in their efforts to feed their people, for implementing price controls and export bans. In response, it can only be said that a measure taken to limit the damages stemming from another cause (the acts of the financial analysts themselves) can hardly be to blame, even if proximately they cause a small portion of the damage. And second, the analyst can reasonably be assumed to be speaking from the perspective of promoting the behaviour he or she benefits from, which is speculating on those very controlled prices, or the very foods subjected to export bans. It is obvious from their standpoint that they have forgotten that someone, somewhere, wants to actually eat the foods in question, rather than simply gorge on them for profits.

    What must be done is the setting in motion of an international effort to ban speculation on food staples. This would happen with the teamwork of the WTO, various stock exchanges by their monitoring of the listings and trade names of major producers, and in some cases the nationalization of food supplies in certain countries, and of course many more elements as well. The line between a helpful futures contract and a harmful speculative manipulation of the market is hard to draw, but it would not be hard to introduce rules that disallow the sale of food staples shortly after their purchase, or a financial transaction in which one party never possesses the goods. Simple common sense rules need to be enacted through treaties and conventions on the international level for their to be a real change in the inequality of the markets surrounding buying and selling of basic foods. It is merely a shameful lack of political will that these measures have not yet been taken, and the public should not be deluded about the scope of ramifications in the (relatively) distant future should we not act soon.

    A final point ought to be made about the growing trend in some affluent communities to eat foods grown close to home. This is certainly a luxury that the poorer citizens of the global community do not have, nor even contemplate. In the long term, however, it does have a major role to play in a more fair and sustainable world food distribution scheme, and therefore should not be forgotten as an aspect of the preferred scheme going froward. It’s time to call these unfair and inhumane practices what they really are: non-future, and then make sure the practices themselves have a non-future.

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