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.