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TechnoratiThe Bailout We Owe the Developing World
One outcome of the G-20 meeting (as I wrote yesterday) was an agreement to earmark as much as $1 trillion for developing countries, where the economic crisis is having a life-threatening impact. This figure is in line with what the United Nations estimates is needed to "buffer the blows of the global downturn on the most vulnerable."
In fact, $1 trillion is the least the rich countries owe to the poor, considering the chaos and suffering our own economic policies and practices have brought upon them. In part, the additional hardships now being experienced by the developing nations result from the recession trickling down in a way that wealth never seems to do. But there's more to the story than this.
Some of the heightened suffering in the developing world can be traced back to the Clinton and Bush administrations, when a series of legislative and regulatory changes paved the way for rampant speculation on the commodities market. What happened next is explained in a report by the Minneapolis-based Institute for Agriculture and Trade Policy (IATP), the most comprehensive source of information on this subject.
Wall Street went to work and bundled together groups of commodities futures-everything from oil to copper to basic staples like corn, wheat, rice, and soybeans-into commodity index funds, similar to what you find in the mutual fund business. The subsequent explosion of buying and selling by a handful of Wall Street firms (led by Goldman Sachs and AIG) ran the prices of different commodities up and down with little relation to any actual market or to the so-called laws of supply and demand. (James Galbraith describes the process in detail here.)
In the five years leading up to the recession, commodity index speculation increased by 1900 percent. In this way, Wall Street not only pushed the price of oil through the roof, but directly caused skyrocketing food prices and food shortages around the world. In short, the IATP report concludes:
U.S. government deregulatory steps opened the door for large financial services speculators to make huge "bets" that destabilized the structure of agriculture commodity markets. According to the United Nations, global food prices rose an estimated 85 percent between April 2007 and April 2008. Prices rose for wheat (60 percent), corn (30 percent) and soybeans (40 percent) beyond what could be explained by supply, demand and other fundamental factors, according to the report.
For people in the poorest countries, these changes sometimes meant the difference between subsistence and starvation: In 2007, according to the UN Food and Agricultural Organization (FAO), an "estimated 75 million people were added to the 850 million already defined as under-nourished and food insecure."
In view of all this, the United States and the other wealthy nations that dominate the world economy owe the developing world more than a bailout (which would in any case amount to a fraction of what we're giving to the very financial institutions that added to world hunger for the sake of profits). We also owe them a reformed global financial system that will prevent such travesties from happening again.
But it doesn't look like those reforms will be happening any time soon. Bills to regulate commodities exchanges have been floated in both houses of Congress, but according to the IATP, they are progressing slowly and leave a lot to be desired. President Obama's nominee to the Commodity Futures Trading Commission, Gary Gensler, is a former Goldman Sachs executive who, while working in Clinton's Treasury Department, backed the very deregulatory moves that allowed commodity speculation to run wild in the first place (as exposed in Mother Jones last year). Senator Bernie Sanders is seeking to block Gensler's nomination for this reason.
And on the international level, as IATP pointed out in the runup to the G-20, regulation of commodities exchanges was a subject conspicuously absent from the meeting's agenda-despite its potential life-and-death impact on food and energy security worldwide.
8 Comments so far
Show AllI'm not convinced we 'owe' anyone anything. The condition of the third world, for the most part, is self-inflicted. Why would we bear any responsibility to continue to attempt to alleviate conditions we had no hand in creating.
Why, that would be like giving someone who is so financially irresponsible that he should be renting a mortgage, and then expecting others to pay it for him when he defaults.
It would be almost as stupid as bailing out a company after the board of directors has run it into the ground.
Maybe next you would suggest the we just cease to secure our boarders and let anyone into the country who wants to stroll across?
Could they please stop dumping dollars on every problem? Do dollars solve anything? I think they are trying to drive us insane.
The imf owes the Global South a lot more than a trillion dollars. The North has been growing fat for 500 years feeding off the South, and also rich. how much is all that loot worth? all the gold, diamonds, oil, minerals, and a very long list. and it continues right now- our capitalists are still raiding the South for whatever plunder it can find. Talk about piracy!
oh yes- "compassion" (Why that moniker?) these people are starving- they need food first. And are you sure you are in a position to tell them to stop having babies? You are consuming 50 times as much earth resources as the average person in the poor part of the world. When you reduce your level of consumption to theirs, then you can come back and tell them about birth control
Developing countries have not shown any restraint in limiting their population.Aid should be directed toward education and aid in contraception and family planning else one is compounding the problem.
A bailout for the emerging world wouldn't be necessary if the developed world would stop trashing emerging market currencies.
MANDATE FOR REVERSING ENVIRONMENTAL NEGLECT
Americans have a mandated duty to assist the third world nations in their pursuit of ecological friendly development, while surviving the conditions resulting from the global warming and pollution for which we bear much responsibility.
By allowing further neglect and impediments of enviromnmental reform measures, such as that imposed under Bush, our international disdain and related threats from terrorism can only worsen.
Reading Mr Ridgeway's article, one would think that the trillion dollars for the developing world was earmarked aid. On the contrary, it is a refreshed commitment of IMF-directed loan funds that is sure to create more problems than it solves.
While the financial system works to the decided disadvantage of the developing world, it is merely the handmaiden of the trading system, which forces developing countries to sacrifice their resource sovereignty and, most important, their food security, for the sake of membership in the globalized trade regime.
The elites in these countries have been convinced by their counterparts in the West that this is the only path to "development". This is hardly surprising, as it is the emerging global elites that have the most to gain, as the insiders in this system. They have more in common, culturally and economically, with one another than they have with their "countrymen" (a term that is now totally devoid of meaning). The vast majority of the world's population, even in the developed world, would be much, much better served by regional economies predicated on the PRIMARY importance of basic material security derived from the preservation of common resources and honest productive activity.
And there is nothing new in all of this! The system was perfected by the British in colonial India in the last half of the nineteenth century, as they made a market for surplus English capital by developing the physical and financial infrastructure to export the food-producing capacity of that sorry nation to feed their own unsustainable population growth. Only problem was the 20 million odd Indians that died of famine in the process. Oops.
And just this week NPR is reporting that the Green Revolution has come a-cropper in the Punjab, and the farmers who traded indigenous, sustainable food production for wheat monoculture enabled by internationally-funded government credit and petrochemicals now face depleted soil and water resources and a bleak future. Surprise, surprise. But, hey, they have paved roads and satellite TV!
What a cock-up.
I highly recommend historian Mike Davis' "Late Victorian Holocausts: El Nino Famines and the Making of the Third World." If you don't get a sense of deja vu as you read it, then you're not paying attention.
"it is a refreshed commitment of IMF-directed loan funds that is sure to create more problems than it solves."
Thanks for pointing that out !! The IMF has been clearly discredited thanks to the enormous pressure it exerts on developing countries to 'liberalize' their economies and turn a profit at the expense of socio-economic development.