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Global Power Project, Part 9: Banking on Influence With Morgan Stanley
By: Andrew Gavin Marshall
Originally published at Occupy.com
Morgan Stanley, one of the largest banks in the United States, reported a 66% increase in earnings in July over the same period last year. Morgan Stanley had taken more than $107 billion of U.S. taxpayer money through the bailout programs in the wake of the financial crisis that it helped to create, making it the largest U.S. recipient of bailout funds.
Like the other big banks, Morgan Stanley had been busy paying settlements for the massive criminal fraud conspiracies it engaged in, particularly related to the housing crisis. In 2011, the banks came to a $40 million settlement with the state of Nevada over mortgage fraud.
In 2012, Morgan Stanley paid a settlement of $4.8 million regarding electricity price-fixing charges leveled against the bank in New York State, costing consumers roughly $300 million, after generating $22 million in revenue for the bank. In a settlement over foreclosure fraud in 2013, the bank along with Goldman Sachs agreed to pay $557 million to more than 200,000 homeowners who had been foreclosed on.
A former real estate executive for Morgan Stanley pleaded guilty in 2012 to violating anti-corruption laws, and was “charged with secretly acquiring millions of dollars’ worth of property investments for himself and a Chinese government official.” In 2012, one Morgan Stanley executive was charged with a hate crime for using racial slurs and stabbing a cab driver of Egyptian descent, after having refused to pay the cab fare.
And yet it’s not simply enough for this financial behemoth to defraud the American public and profit from the economic crisis it helped create. It has also managed to profit from increasing hunger and land grabs across the so-called Third World. As big banks speculate on food prices, they drive the costs of food up, sparking food riots and increasing hunger across much of the world while making banks a nice profit in the process.
The three financial institutions most active in food speculation are Barclays, Goldman Sachs and Morgan Stanley. Thus, as millions more people get pushed into hunger, rest assured: Morgan Stanley will be there to swoop up the profits, as untold numbers of people get displaced and foreign investors purchase their lands at giveaway prices. In just one example, Morgan Stanley bought 40,000 hectares of land in Ukraine.
Thus, based on mortgage fraud, the housing crisis, bailouts, the food crisis and the great global land grabs, it’s fair to say that Morgan Stanley is a bank seeking profits at the expense of people, the environment and the world at large. The Global Power Project investigated 24 individuals on both the executive committee and board of directors of Morgan Stanley. The most highly represented institution shared by elites at Morgan Stanley is the Council on Foreign Relations, with six individual affiliations between the two organizations.
It is followed by four mutual affiliations with McKinsey & Co., and three affiliations each between the bank and the former Merrill Lynch (now owned by Bank of America), Columbia University, the Brookings Institution, and the Peterson Institute for International Economics. Further, the bank has two individual affiliations with each of the following: the World Economic Forum, the Business Council, Merck & Co., President Obama’s Economic Recovery Advisory Board, PricewaterhouseCoopers (PwC), the Conference Board, the Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Financial Group, Stanford University and Alcoa.
Meet the Elites
James P. Gorman is Chairman and CEO of Morgan Stanley, a former executive at Merrill Lynch, and a former Senior Partner at McKinsey & Co. He is a current member of the Board of Overseers of Columbia Business School, a member of the Business Council, the Partnership for New York City, the Financial Services Forum, the board of directors of the Institute of International Finance, and the International Advisory Panel of the Monetary Authority of Singapore.
Klaus Kleinfeld is on the board of directors of Morgan Stanley, and is Chairman and CEO of Alcoa, the world’s leading aluminum producer. Kleinfeld is also the former CEO of Siemens and a former director of Citigroup. He is a member of the Supervisory Board of Bayer AG, Chairman of the Board of the U.S.-Russia Business Council, a Trustee of the Conference Board, and a member of the Business Roundtable, the Board of Trustees of the Brookings Institution, the International Business Council of the World Economic Forum, the board of directors of the World Economic Forum USA, the board of directors of the U.S. Chamber of Commerce, and the Steering Committee of the Bilderberg Meetings.
Hutham S. Olayan is Senior Executive Director of the Olayan Group, President and CEO of Olayan America Corporation, and is a Trustee of the American University of Beirut. She is a member of the board of directors of the Peterson Institute for International Economics, a member of the International Board of the U.S.-Middle East Project, and a member of the International Advisory Council of the Brookings Institution. She is founding member of the Arab Bankers Association of North America, a member of the board of the MasterCard Foundation, a member of the International Advisory Board of the Blackstone Group, a member of the boards of Georgetown University and the Memorial Sloan-Kettering Cancer Center and is a Counselor of the Conference Board. Olayan is a member of the Advisory Council of the Carnegie Middle East Center and is a member of the Council on Foreign Relations.
James W. Owens is the former Chairman and CEO of Caterpillar, and a member of the board of directors of IBM, Alcoa and the Council on Foreign Relations. Owens is also Chairman of the Executive Committee of the Peterson Institute of International Economics, a Senior Advisor to Kohlberg Kravis Roberts & Co. (KKR), a former Chairman of the Executive Committee of the Business Council, and a former member of President Obama’s Economic Recovery Advisory Board. He is currently a member of the Board of Trustees of North Carolina State University.
Laura Tyson, who sits on the board of Morgan Stanley, is Professor of Global Management at the Walter A. Haas School of Business at the University of California Berkeley, and is former Dean of the London Business School and former Dean of Haas Business School. Tyson was the former National Economic Adviser to President Clinton from 1993 to 1996 and was a member of President Clinton’s National Security Council and Domestic Policy Council, as well as Chair of the White House Council of Economic Advisers. Tyson was director of the Council on Foreign Relations from 1997 to 2007, where she remains as a member, and is also a member of the MIT Corporation, as well as a former member of President Obama’s Economic Recovery Advisory Board. A Senior Advisor to McKinsey Global Institute, Credit Suisse Research Institute, The Rock Creek Group, and a Senior Fellow of the Center for American Progress, Tyson is currently a member of President Obama’s Council on Jobs and Competitiveness and has been a member of the Foreign Affairs Policy Board to the U.S. Secretary of State since 2011. She is also a member of the Advisory Council of the Brookings Institution Hamilton Project, a member of the board of AT&T, a former member of the board of Eastman Kodak Company from 1997 to 2011, and a member of the board of CB Richard Ellis and Silver Spring Network. Tyson is additionally a former director of New America Foundation, a former member of the board of the Peterson Institute of International Economics, and currently sits as a member of the Committee on Capital Markets Regulation, the Global Agenda Council of the World Economic Forum, the advisory board of Generation Investment Management and H&Q Asia Pacific, as well as a member of the National Academies’ Board on Science, Technology and Economic Policy and on the board of directors of the Committee for Responsible Federal Budget.
At Morgan Stanley, like elsewhere among the big Wall Street banks, an elite class of individuals connected through their institutional affiliations and social groups exert incredible influence over finance, corporations, the government, media, policy, educational institutions and global society at large. Regardless of the immense suffering that Morgan Stanley and its like institutions inflict on the world, so long as it is able to profit from that suffering, it considers itself safe and secure.
Too big to fail. Too big to jail. Too cancerous to care.
Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project, and hosts a weekly podcast show with BoilingFrogsPost.
The Financialization of Food and the Profitability of Poverty
By: Andrew Gavin Marshall
The following is a brief excerpt from a chapter of The People’s Book Project, covering issues related to food, water, land grabs, environmental destruction, hunger and poverty. This excerpt examines the global food crisis.
There are a few things upon which humanity is entirely dependent for survival: food, water, land and the environment. One of the central questions with which humanity currently has to address its part, past and present, is the ways in which we, as a species, interact with our environment. When it comes to environmental issues, the primary focus is placed upon the issue of climate change, and while this is indeed an important issue, it could be said that this focus almost misses the forest for the trees. Climatic change is here to stay, it is an inevitability, and it is a requirement for humanity to begin the process of adaptation. However, climate change is not “the problem,” it is a symptom of the problems associated with the environment. The source of the problem is how human society – specifically Western state-capitalist society – interacts with the environment at the local and global level. When examining this question, the issues and concerns raised go far beyond climatic changes, though they all interact.
One cannot separate our interaction with the environment from the interaction between power structures and people, whether we are discussing large states, banks, corporations, international organizations, etc. In a global system in which people are themselves treated as commodities, where more than half the world’s population lives in abject poverty, with hunger and starvation increasing, with imperial powers destabilizing countries, bombing communities, supporting coups and waging wars, oppressing, impoverishing, and destroying, environmental issues are inseparable from social, political, and economic issues.
One need only look at the issue of militarization and war to see a clear relationship between these issues: wars are mostly waged by large states – whether directly or indirectly through proxies – against poor populations in weak ‘Third World’ states. Aside from the obvious destruction the physical war takes – through bombs and bullets – a nation’s infrastructure is destroyed, its people impoverished and oppressed. The American military system – by far the largest in the world – through the maintenance of aircraft carriers, ships, jets, equipment, transportation, weapons, with roughly one thousand military bases around the world, foreign occupations and operations, make this single institution known as the Pentagon “the largest institutional user of petroleum products and energy” in the world. The United States wages wars to secure resources around the world, to dominate and oppress populations, and in doing so, exploits and plunders those very same resources, destroys the environment, spreads poverty, death, and destruction. Its purpose is to serve minute – yet powerful – interests. Yet, it is devastating for the world’s people and the environment.
If we are truly interested with answering the question of how we move forward as a species in dealing with environmental issues, we must ask the parallel questions of how we deal with issues of poverty, hunger, land, exploitation, oppression, war, empire, and power. It seemingly makes the task harder, but it also makes the answers more plausible, and, indeed, possible.
Again, looking at the issue of climate change, we have seen countless international conferences held by global plutocrats, governments, international organizations, banks and corporations and global NGOs and environmental organizations like the World Wildlife Fund and Conservation International, whose boards of directors are dominated by individuals from banks, corporations and oil conglomerates. And we phase surprise that nothing productive is done. The ‘solutions’ we are given for complex problems are based around ideas of carbon credits, carbon trading, carbon caps and carbon markets, effectively commodifying the entire atmosphere, turning pollution itself into a profitable enterprise, and thus, making the problems that much worse. We are told that there are ways to simply ‘Green’ the economy, to promote the interests of state-capitalism and the environment simultaneously. But in a system which has always subjugated the environment and the population at large to the powerful interests which dominate, we are fools to assume they have changed their interests.
A great deal of press was given to the 2009 Copenhagen Conference, and the fact that it ended in failure. The focus was on “who” screwed it up: it was China, it was America, it was Canada! Everyone was pointing the finger at one another. The reality, however, was far more revealing, not only of the failure of Copenhagen, but of the true intent and the result of pursuing environmental issues through the institutions of power which have created the environmental problems in the first place.
The Copenhagen conference was viewed by elites as a means to advancing their institutional power to a more global level, as internal UN documents revealed that the focus was on a “green economy,” noting: “moving towards a green economy would also provide an opportunity to re-examine national and global governance structures.” The document stated that “linkages between environmental sustainability and the economy will emerge as a key focus for public policymaking and a determinant of future market opportunities,” and one top official stated that the environmental, food, and economic “crises provide a unique opportunity for fundamental restructuring of economies so that they encourage and sustain green energy, green growth and green jobs.”
It sounds well enough, but its focus on “market opportunities” for the “green economy” ignores entirely the nature of “market opportunities” being one of the most significant factors in creating environmental crises in the first place. With a focus on advancing issues of “global governance” in order to address environmental issues, the role of dominant institutions in creating the environmental crisis is overlooked, and thus, the ‘solution’ is to enhance the power of those very same institutions to global levels, further removing power from populations and communities (where the real solutions to environmental issues lie). In short, if the issue of ‘power’ – and the global distribution of power between institutions and populations – is not addressed, the ‘solutions’ offered are, at best, little more than band-aids on broken arms.
China received a great deal of the blame for the failure of the Copenhagen talks, but there is more to this story. Perhaps the most significant factor was due to what was called the ‘Danish Text,’ a leaked Danish government document written in secret between the rich and powerful nations to serve as a framework for their actions and intentions at the conference. The agreement would have handed more power to the rich nations, and sideline the UN in any final agreement, as well as “setting unequal limits on per capita carbon emissions for developed and developing countries in 2050; meaning that people in rich countries would be permitted to emit nearly twice as much under the proposals.” In other words, with true Western cultural state-capitalist logic: find the problem, acknowledge the problem, then double the problem! The text was drafted by a select coterie of representatives from Denmark, the U.K. and the United States, and the draft “hands effective control of climate change finance to the World Bank; would abandon the Kyoto protocol – the only legally binding treaty that the world has on emissions reductions; and would make any money to help poor countries adapt to climate change dependent on them taking a range of actions.”
Thus, one of the central institutions of world power – the World Bank – which has advanced the interests of Western banks and corporations across the ‘developing’ world, promoting privatization, deregulation, exploitation, resource extraction, and ultimately, environmental degradation, would then be given the responsibility of ‘solving’ the environmental crisis. And how would it do this? The World Bank would be given control over the dispersal of funds in the same way that it has handled the dispersal of loans in the past. Here’s a hint: it comes with “strings attached.”
A senior diplomat at the talks described the Danish Text as “a very dangerous document for developing countries.” Among the many points in the document were to “force developing countries to agree to specific emissions cuts and measures that were not part of the original UN agreement” and to “weaken the UN’s role in handling climate finance,” as well as aiming to “divide poor countries further.” Allowing for the rich countries to increase their emissions, while poor countries face severe restraints, overlooks the fact that the countries with most emissions already are those very same rich countries. Preventing poor countries from producing emissions would prevent them from developing their own resources as they see fit, instead allowing for the rich countries to move in and further dictate policies in their own interests. Ultimately, it was a draft agreement to advance imperial domination of the rich world over the poor world, using the issue of “climate change” as the excuse.
When the Danish text was leaked, representatives of poor nations were “furious that it is being promoted by rich countries without their knowledge and without discussion in the negotiations.” One diplomat noted: “It is being done in secret. Clearly the intention is to get Obama and the leaders of other rich countries to muscle it through when they arrive next week. It effectively is the end of the UN process.” Further, “It proposes a green fund to be run by a board but the big risk is that it will be run by the World Bank and the Global Environment Facility,” a partnership of ten agencies including the World Bank and UN Environment Programme, thus bypassing more democratically accountable and representative institutions, such as the UN itself. This, stated one diplomat, “would be a step backwards, and it tries to put constraints on developing countries when none were negotiated in earlier UN climate talks.” Since poor countries already suffer the greatest burden, not only of poverty, but of environmental devastation and climatic change (not to mention, war, imperialism, and oppression), the notion of the powerful countries exporting their responsibility to the poor and oppressed does not only fail to address the issues, but would inevitably make the problems much worse. We tend to call this “market logic.”
The release of the Danish text prompted the developing nations, represented by the G-77 (the vast majority of the world’s population) to suspend their participation in the negotiations. Days following the conclusion of the Copenhagen conference, the UN’s climate chief wrote in a confidential internal memo that it was the ‘Danish Text’ that led to the ultimate failure of the talks, stating that, “the text was clearly advantageous to the US and the west, would have steamrollered the developing countries, and was presented to a few countries a week before the meeting officially started.” Within days of the leaking of the ‘Danish Text’, developing nations were accusing the rich countries of engaging in “climate colonialism.” The Sudanese diplomat to the conference stated, “This is all based on the dominance and supremacy of developed countries. One could say the Empire has been doing this since the 16th Century, the Empire has always ruthlessly grabbed natural resources – the new resource is the global atmospheric space and carbon space.” One activist and participant called the deal an act of “carbon colonialism.”
The British delegation at Copenhagen further inflamed tensions and calls of colonialism when it suggested the creation of a “climate fund” by diverting western aid budgets from poverty reduction funds into climate change “adaptation.” Thus, “money earmarked for education or health would be diverted into projects such as solar panels and wind farms,” incurring anger from several developing nations. As one commentator with the Guardian explained, Copenhagen was “a disaster for Africa,” the continent that contributes the least amount of carbon emissions in the world, and will disproportionately suffer the consequences more than any other. Several African nations were coerced into signing the final deal, even though they had walked out of negotiations following the Danish Text, with industrial rich nations threatening to withdraw foreign aid if the deal was not signed.
Again, this is but one of many examples of how environmental issues are intimately related to those of poverty, economics, imperialism, and power, more generally. To address one with any substance, we must address all with perseverance. Or, we could just continue to push for international conferences met with the self-congratulations of global elites who pride themselves on having flown around the world on taxpayers’ dollars to stay in five-star hotels and eat gourmet meals while they discuss issues of poverty and environmental protection, amounting to little more than “agreements to agree” at some point in the future, while globally, business as usual, and more accurately, accelerated rates of exploitation and devastation, dominate the decisions and actions of the powerful.
The Financialization of Food and the Profitability of Poverty
The global food crisis hit international headlines in 2008, with “food riots” erupting in dozens of countries around the world, in Asia, Africa, and Latin America. By May of 2008, it was reported that food riots had hit roughly 37 countries, with some of the more dramatic taking place in Cameroon, Niger, Egypt, and Haiti. At that time, the Food and Agricultural Organization (FAO) warned: “Food is no longer the cheap commodity that it once was. Rising food prices are bound to worsen he already unacceptable level of food deprivation suffered by 854 million people… We are facing the risk that the number of hungry will increase by many more millions of people.”
Governments and repressive regimes around the world were under threat from the rising tide of food price rebellions (commonly referred to as “food riots”), with the rapidly accelerating costs of life’s necessities driving people to desperation, and even pushing governments to the brink of collapse. A UN adviser and economist, Jeffrey Sachs, noted, “It’s the worst crisis of its kind in more than 30 years… It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come.” El Salvador’s president, Elias Antonio Saca, told the World Economic Forum that it “is a perfect storm… How long can we withstand the situation? We have to feed our people, and commodities are becoming scarce. This scandalous storm might become a hurricane that could upset not only our economies but also the stability of our countries.” A former adviser to the Ministry of Agriculture in Indonesia added that “[t]he biggest concern is food riots… It has happened in the past and can happen again.” In Haiti, where roughly 75% of the population earn less than $2 per day, with one in five children chronically malnourished, hunger had become so extreme that one “booming” commodity had become “the selling of patties made of mud, oil and sugar, typically consumed only by the most destitute.”
In Haiti, as protesters approached the presidential palace, United Nations “peacekeepers” fired rubber bullets on the hungry and starving, as well as using tear gas, and several protesters were reported to have been killed in the chaos. Food prices rose by an average of 40% since the middle of 2007, and with the price increases, came increased instability and social unrest. An adviser to the Haitian president commented: “I compare this situation to having a bucket full of gasoline and having some people around with a box of matches… As long as the two have a possibility to meet, you’re going to have trouble.”
The American government scrambled to increase “food aid” to countries around the world, fearful for the stability of its protectorates and puppet governments. A U.S. Senator, Richard Durbin, noted: “This is the worst global food crisis in more than 30 years… It threatens not only the health and survival of millions of people around the world, many of them children, but it also is a threat to global security,” with over 36 countries “now facing food crises [and] requiring help from abroad.”
An analyst at a major risk management agency told the Financial Times in November of 2008 that there had been “food protests in 25 countries in the past year,” adding: “In Indonesia the price of rice is directly correlated to the number of strikes or riots… A sharp increase in prices could cause production problems if there are strikes by workers and civil unrest could damage vital infrastructure like roads or telecoms or the government could impose a political crackdown.” The analyst provided advice for global corporations: “What global companies need to do is to avoid being seen as contributing to or being complicit with an issue. Some governments will blame rising food prices on the west, for example.” An analyst at an insurance conglomerate agreed: “Companies need to be aware of how they are perceived and seek to win hearts and minds.” In other words, what is needed is an excellent public relations campaign to ensure that western corporations do not get their deserved share of the blame for rising food prices. The advice was not to avoid contributing to the crisis, but to “avoid being seen as contributing,” after all.
In the span of a year between 2007 and 2008, the global price of wheat rose by 130%, the price of rice – the staple food for the majority of the world’s population – rose by 74%, going up by more than 10% in one day alone. While rising food prices were causing riots, social unrest, and the instability of governments across the ‘Third World,’ the prices were noticeably increasing within the industrial nations themselves, though by no means to the same degree, or with the same dramatic and devastating effects. The FAO estimated that food prices were likely to remain high for at least a decade. Global droughts, climate change, environmental destruction, massive farm subsidies in the west, population growth, and the development of biofuels (food for fuel), have all contributed to the rising costs of food. Of course, a number of other important factors were involved, such as the liberalization of food production and global markets, largely a staple of the neoliberal era, from the mid-1970s onward, and of enormous importance, the role of financial speculation, with banks, hedge funds, and investors speculating on food costs increasing, and thus, driving up the costs of food.
According to a confidential report by the World Bank in 2008 which was leaked to the Guardian, biofuels forced global food prices up by roughly 75%, contradicting the claims of the U.S. government, the main promoter and developer of biofuels, that their production led to a 3% price rise in the cost of food. Robert Bailey, a policy adviser at Oxfam stated: “Political leaders seem intent on suppressing and ignoring the strong evidence that biofuels are a major factor in recent food price rises… It is imperative that we have the full picture. While politicians concentrate on keeping industry lobbies happy, people in poor countries cannot afford enough to eat.” The World Bank estimated that the rising food prices pushed 100 million people worldwide below the poverty line, with government ministers at the G8 conference in Japan describing the food crisis as “the first real economic crisis of globalization.”
The World Bank report contested that: “Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.” The major droughts in Australia and elsewhere, according to the World Bank report, did not have a significant impact on food prices, with the biggest cause being the US and European drive for biofuels. The report noted: “Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate,” adding that the higher costs of energy and fertilizer contributed to a 15% increase of food costs. Use of biofuels has diverted grain production away from food and toward fuel, with over one-third of U.S. corn used to produce ethanol, and roughly half of vegetable oils in the European Union used to produce biodiesel. Further, farmers have been encouraged to put aside land for use in the production of biofuels instead of food. Finally, and perhaps most importantly, the production of biofuels has encouraged financial speculation in food markets, as prices were expected to increase, and thus speculators were set to make enormous amounts of money if and when prices go up. Speculation, of course, is a self-fulfilling prophecy, as speculators betting that prices will go up inevitably pushes the prices up.
The production of biofuels has been a major strategy by North American and European governments in order to reduce dependency on foreign oil and address climate change and environmental issues. A secret report conducted by the British government – the Gallagher Report – released in 2008, reported that the development of biofuels played a “significant” role in the food price increases. All petrol and diesel in Britain had to contain 2.5% of biofuels by 2008, and was aimed to meet a target of 5% by 2010, while the EU was itself contemplating a 10% target for 2020. Naturally, this would increase food prices accordingly, creating much larger and deeper food crises.
For all the contributory factors, not least of which was the development of biofuels, which collectively account for moderate increases in the cost of food, the primary driver of the food prices was financial speculation. This has been made exceedingly evident as the food crisis was not ended in 2008, but has continued to reach new heights, and the crisis has become almost permanent.
At an emergency meeting on food price inflation in 2010, the UN’s special rapporteur on food, Olivier De Schutter, released a paper in which the increase of food prices was blamed on a “speculative bubble” created by pension funds, hedge funds, sovereign wealth funds, and big banks that speculate on commodity markets. The paper noted that beginning in 2001, “food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors… The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the US housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behaviour of food commodities and other refuge values, such as gold.” De Schutter further wrote: “A significant contributory cause of the price spike [was] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”
As prices nearly doubled between 2007 and 2008, riots erupted in over 30 countries and 150 million more people were pushed into hunger, the majority of commodity prices in 2010 remained well over 50% of their pre-2007 figures, and were set to continue upwards: “Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds [were] witnessing significant price increases.” Gregory Barrow of the UN World Food Program noted: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.” Food prices were rising by roughly 15% per year in India, Nepal, Latin America and China. A British Green Party MP stated: “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organization.”
In December of 2010, food prices reached a new record high, surpassing the 2008 levels, entering what an FAO economist referred to as “a danger territory,” adding that there was “still room for prices to go up much higher.” As John Vidal wrote in the Guardian, “[t]he same banks, hedge funds and financiers whose speculation on the global money markets caused the sub-prime mortgage crisis are thought to be causing food prices to yo-yo and inflate,” as they have taken “advantage of the deregulation of global commodity markets” and are thus “making billions from speculating on food and causing misery around the world.” Food prices were even rising 10% per year in Britain and Europe, with the UN reporting that prices could be expected to rise at least another 40% within the following decade.
In the mid-1990s, “following heavy lobbying by banks, hedge funds and free market politicians in the US and Britain, the regulations on commodity markets were steadily abolished.” What had previously been “contracts” between farmers and traders turned into “derivatives” which were to be bought and sold on international markets between global investors, “who had nothing to do with agriculture.” Thus, a global market of “food speculation” had been born, noted Vidal: “Cocoa, fruit juices, sugar, staples, meat and coffee are all now global commodities, along with oil, gold and metals.” The same institutions which were responsible for creating the massive housing bubble which resulted in the economic crisis, with foreclosures on millions of homes, reacted to the bursting of that bubble by creating a new one in commodity markets, notably food. Except with this bubble, people don’t have to wait for it to burst in order to suffer, as people are driven deeper into poverty and hunger as it inflates, all the while the institutional “investors” make a killing, quite literally.
When banks and investors began moving billions out of the housing market and into new markets, food speculation became especially attractive. Mike Masters, the fund manager at Masters Capital Management testified in the US Senate in 2008 that, “We first became aware of this [food speculation] in 2006. It didn’t seem like a big factor then. But in 2007/08 it really spiked up… When you looked at the flows there was strong evidence. I know a lot of traders and they confirmed what was happening. Most of the business is now speculation – I would say 70-80%.” In other words, roughly 70-80% of the food price increases were determined by speculation, compared to the plethora of other given reasons, combined. Masters warned the Senate: “Let’s say news comes about bad crops and rain somewhere. Normally the price would rise about $1 [per bushel]. [However] when you have a 70-80% speculative market it goes up $2-3 to account for the extra costs. It adds to the volatility. It will end badly as all Wall Street fads do. It’s going to blow up.”
The president of Strategic Investment Group in New York warned that this speculative market has only increased in size, and that “speculative demand for commodity futures has increased since 2008 by 40-80% in agriculture futures.” In 2010, one London-based hedge fund purchased more than 7% of the world’s stocks of cocoa beans, which drove the price of chocolate to its highest price in 33 years. The UN rapporteur on food, Olivier De Schutter agreed: “Prices of wheat, maize and rice have increased very significantly but this is not linked to low stock levels or harvests, but rather to traders reacting to information and speculating on the markets.” Deborah Doane of the World Development Movement noted: “People die from hunger while the banks make a killing from betting on food.”
The World Development Movement (WDM) issued a report in the Summer of 2010 blaming the rising food prices on investors and speculators, just as cocoa spiked to its 33-year high after a London hedge fund purchased massive amounts of cocoa stock. The report noted that “risky and secretive” speculative bets on food prices were exacerbating the conditions of the world’s poor, as well as sparking social unrest. Deborah Doane, director of the WDM, noted: “Investment banks, like Goldman Sachs, are making huge profits by gambling on the price of everyday foods. But this is leaving people in the UK out of pocket, and risks the poorest people in the world starving.” She added: “Nobody benefits from this kind of reckless gambling except a few City [of London] wheeler-dealers. British consumers suffer because it pushes up inflation, because of unpredictable oil and raw material prices, and the world’s poorest people suffer because basic foods become unaffordable.” The WDM estimated that Goldman Sachs likely made a profit of $1 billion in 2009 through speculating on food prices, though Goldman Sachs stated that these profits from poverty and hunger were “ludicrously overstated.”
Even in the establishment journal, Foreign Policy, ever an apologist and advocate for American imperialism and global hegemony, the food price increases were blamed on “Wall Street greed.” Perhaps not surprisingly, it was bankers at Goldman Sachs in 1991 that developed a derivative (speculative bet) based upon 24 raw materials, from metals and energy, to coffee, cocoa, cattle, corn, wheat and soy, known as the Goldman Sachs Commodity Index (GSCI). In 1999, when futures markets were deregulated, “bankers could take as large a position on grains as they liked, an opportunity which had, since the Great Depression, only been available to those who actually had something to do with the production of our food.” Other banks followed the lead of Goldman Sachs, and found that they too could reap enormous profits from speculating on food prices (and thereby causing mass poverty, hunger, and starvation), including Barclays, Deutsche Bank, Pimco, JP Morgan Chase, AIG, Bear Stearns, and Lehman Brothers. As Frederick Kaufman wrote: “The result of Wall Street’s venture into grain and feed and livestock has been a shock to the global food production and delivery system. Not only does the world’s food supply have to contend with constricted supply and increased demand for real grain, but investment bankers have engineered an artificial upward pull on the price of grain futures.” Speculation thus resulted in a situation where “imaginary wheat dominates the price of real wheat,” as “bankers and traders sit at the top of the food chain – the carnivores of the system, devouring everyone and everything below.”
Alan Knuckman is an analyst with Agora Financials, a consulting firm specializing in commodity investments, which has Knuckman spending his time on the floor of the Chicago Board of Trade (CBOT), the world’s largest commodity futures exchange. Knuckman stated: “This is capitalism in its purest form… This is where millionaires are made.” One might add, however, that it’s also where millions more people in hunger are “made.” Knuckman explained: “I trade in anything you can get in and out of quickly… I’m here to make money.” And that’s what he does, and he does it well. Knuckman reflected the view of many in his field, stating: “I don’t believe in politics… I believe in the market, and the market is always right.” When asked if the soaring food prices were the result of financial speculation, something in which he is directly engaged, Knuckman replied: “I don’t see it.”
One is reminded of a bad joke: two fish meet, one asks the other, “how’s the water today?” to which the other replies, “what’s water?” When one is entirely submerged in a specific universe, it requires a great deal of effort to remove one’s perspective to see a wider world view, and their place within it. Alan Knuckman is quite obviously far removed from the everyday struggles of most people, in his own country, let alone the rest of the world. When questioned by Der Spiegel about the high cost of food, he explained: “The age of cheap food is over… Most Americans eat too much, anyway.” While Americans spend roughly 13% of their disposable income, on average, on food, the world’s poor spend roughly 70% of their budget on food, and thus, high food prices for this population, with one billion people on earth classified as living in hunger, and with food prices hitting new record highs almost every passing year, pushing tens of millions more into poverty and hunger, these price-hikes are “life-threatening.” So what did Knuckman have to say about this? He contended that it amounted to “undesirable side effects of the market,” but of course, as he earlier stated, “the market is always right,” and thus, with that logic of thinking, there is nothing “wrong” with one billion people going hungry, nor with more being pushed into poverty and hunger, which are amounted to mere “undesirable side effects.” As he earlier explained, “I’m here to make money,” and obviously, everything else is incidental.
The international food market, which “is always right,” is also incidentally dominated by major banking houses, and the speculative trade in food securities was created and inflated by the very same banks that created, inflated, and profited off of the housing boom in the United States, such as Goldman Sachs, Lehman Brothers, Bear Stearns, Morgan Stanley, and JP Morgan Chase. These banks, hedge funds, and other speculators are able to reap enormous profits as millions are pushed into hunger and poverty, and the brilliance of this scheme is that the investors don’t have to produce a single thing, and never even come into contact with the real food market, whether production or distribution. They trade in “futures,” betting that prices will go up (or possibly down) in the future, and the real prices of food follow the speculative increases and decreases, and when prices go up, the speculators make money. The World Bank estimated that an increase of 10% in worldwide food prices pushes roughly 10 million more people into poverty, and that while there is enough food to feed the world, “many die of hunger simply because they can no longer afford to pay for it.”
In 2011, the annual meeting for Barclays faced protests by anti-poverty campaigners who were raising awareness about the role of Barclays in driving up food prices and profiting off of hunger, as the UK’s largest participant in food commodity trading, and one of the top three banks involved globally, according to information from the World Development Movement (WDM). The other top two banks in global commodity trading are Goldman Sachs and Morgan Stanley. Deborah Doane of the WDM noted: “First, it was sub-prime mortgages, now it’s food commodities… The lack of transparency in these markets bears worrying resemblance to the behaviour that led to the 2008 financial crash. Like any irrational asset bubble, the investors pile their money in for short-term profits, in spite of the consequences.” Estimates from WDM put the profits Barclays accumulated from food speculation at 340 million pounds in 2010.
By 2012, it was reported that Barclays had made as much as half a billion pounds in two years from food speculation. An official at Oxfam noted: “The food market is becoming a playground for investors rather than a market place for farmers. The trend of big investors betting on food prices is transforming food into a financial asset while exacerbating the risk of price spikes that hit the poor hardest.”
In an early 2012 interview with Der Spiegel, the head of the United Nations Food and Agriculture Organization (FAO), José Graziano da Silva, stated that, “speculation is indeed an important cause of the heavily fluctuating and very high prices” of food, and “only benefits banks and hedge funds, but not producers, processors and buyers – and certainly not consumers.” Apart from placing “regulations” on food speculation, da Silva suggested that the rich industrial countries should end their agricultural subsidies, noting that when the U.S. ended its subsidies for corn-based biofuels in the summer of 2011, global prices of corn immediately dropped, which “had a direct and positive effect on the food situation.” The FAO is hardly a radical organization, firmly entrenched within global power structures, it continues to promote “market solutions” to problems of hunger and food, though is critical of market “excesses.” Da Silva noted, however, that “there is enough food for everybody, but for many people, especially the poor, it’s simply too expensive. They are going hungry, even with full shelves of food.” Thus, when asked if the food crisis was “really a financial problem,” da Silva replied, “Of course.”
In 2011, speculative investment in agricultural commodities amounted to 20 times the amount of money spent by all countries of the world on food and agricultural “aid.” The three biggest players in agricultural commodity speculation – Goldman Sachs, Morgan Stanley, and Barclays, respectively – have reaped hundreds of millions and billions in profits in this speculative assault against the world’s poorest billion people suffering from hunger. The UN rapporteur on food, Olivier De Schutter, noted: “What we are seeing now is that these financial markets have developed massively with the arrival of these new financial investors, who are purely interested in the short-term monetary gain and are not really interested in the physical thing – they never actually buy the ton of wheat or maize; they only buy a promise to buy or sell. The result of this financialisation of the commodities market is that the prices of the products respond increasingly to a purely speculative logic. That explains why in very short periods of time we see prices spiking or bubbles exploding, because prices are less and less determined by the real match between supply and demand.”
The UN World Food Programme referred to the 2008-2011 global spike in food prices as a “silent tsunami of hunger,” pushing 115 million more people into hunger and poverty since 2008. This, explained De Schutter, is “an absolute catastrophe” for the world’s poor. In Kenya, an unemployed single-mother looking after her eight-year-old daughter and 83-year old father explained that since the massive food price hikes: “We stopped eating lunch, and saved the little we had to eat for supper. We drank tea without sugar and sometimes we also missed breakfast. I had to travel so much to wash clothes to get money for food, but sometimes I was so weak I fell down. For supper, we had one or two cups of flour mixed with water and salt. Our life was so hard.” It is worth remembering – and reminding yourself continuously – that there is more than enough food in the world to feed the population of the world, yet, stories like this single mother’s are becoming increasingly common among billions of people. If ever there was a clear sign that something is fundamentally wrong with the global system – and “market solutions” – this is it.
In the summer of 2012, the United States experienced the worst draught in decades, contributing to increased speculation in food markets, driving prices up higher and inducing warnings of another major global food crisis on the brink. Chris Mahoney, the head of agriculture at Glencore, a major global commodity trader, let slip some industry honesty when he stated: “The U.S. weather starting mid-May… has been among the worst three or four years of the century, comparable to the dust bowl years of the mid-1930s… In terms of the outlook for the balance [profits] of the year, the environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage opportunities… I think we will both be able to provide the world with solutions, getting stuff to where it’s needed quickly and timely, and that should also be good for Glencore.” The CEO of Glencore, Ivan Glasenberg, referred to the volatile food market as “a time when industry fundamentals are the most positive they have been for some time.” Put simply, increased food prices, and thus, increased hunger, is “good for Glencore.” Tens of millions more people pushed into abject poverty and hunger? No need to be concerned, that only means that “industry fundamentals are the most positive they have been for some time.”
What can we conclude, therefore, from a global system of ‘markets’ in which poverty and starvation create massive profits for a few select institutions and individuals, at the expense of literally billions of human beings, and entire nations and societies? Does this really reflect, as one trader stated that, “the market is always right”? Or does it reveal a market which benefits few at the expense of many? The answer is, of course, self-evident: so then why is the issue not framed in such a manner? Instead of acknowledging global markets as inherently and structurally (not to mention ideologically) immoral and wrong, we talk about “reforming” and “regulating” these markets as if minor changes would rectify the fundamental problems. The truth – as hard as it may be for many to accept – is that global markets are fundamentally wrong and immoral.
We acknowledge this type of immorality on an individual level, say with the literary character of Ebenezer Scrooge who profited from the misery of others, but when it reaches global institutional and ideological proportions, we often justify and excuse it, or possibly acknowledge that it is “not perfect” and there are “undesirable side effects,” possibly warranting ‘reform.’ Perhaps the institutional ideology could be best summarized by Ebenezer Scrooge when he was asked to donate to a charity to help the poor and hungry who were at risk of dying, to which Scrooge replied, “If they would rather die… they had better do it, and decrease the surplus population.”
At what point is it acceptable to suggest that humanity is in need of an entirely new way of organization and function? In a world of seven billion people, when billions live in poverty, in slums, and with hunger, at what point do we begin to acknowledge that this system simply does not work? Sadly, it seems that people only often recognize this when they are among the poor, within the slums, and starving. By that point, however, their concerns become those of daily survival, not issues of reform or even activism and revolution. Their days are spent toiling and struggling for a meager dollar or two so that they could afford a meager meal, or if lucky, two meals. Looking after other family members, they do not have the luxury of education, information, and the ready capacity for organization and activism that we – who do not live in hunger and absolute poverty – have. If we continue to uphold a world system which has created and sustains and exacerbates the conditions and prevalence of global poverty, slums, and hunger, we doom others – and indeed ourselves – to that same fate.
Future samples from this chapter will focus on environmental degradation, poverty, and the global land grabs. If you found this excerpt of interest, please consider making a donation to The People’s Book Project to help the research and writing continue.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, with a focus on studying the ideas, institutions, and individuals of power and resistance across a wide spectrum of social, political, economic, and historical spheres. He has been published in AlterNet, CounterPunch, Occupy.com, Truth-Out, RoarMag, and a number of other alternative media groups, and regularly does radio, Internet, and television interviews with both alternative and mainstream news outlets. He is Project Manager of The People’s Book Project and has a weekly podcast show with BoilingFrogsPost.
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Corporate Culture and Global Empire: Food Crisis, Land Grabs, Poverty, Slums, Environmental Devastation and Resistance
Corporate Culture and Global Empire: Food Crisis, Land Grabs, Poverty, Slums, Environmental Devastation and Resistance
By: Andrew Gavin Marshall
Corporate power is immense. The world’s largest corporation is Royal Dutch Shell, surpassed in wealth only by the 24 largest countries on earth. Of the 150 largest economic entities in the world, 58% are corporations. Corporations are institutionally totalitarian, the result of power’s resistance to the democratic revolution, which was begrudgingly accepted in the political sphere, but denied the economic sphere, and thus was denied a truly democratic society. They are driven by a religion called “short-term profits.” Corporate society – a state-capitalist society – flourished in the United States, and managed the transition of American society in the early 20th century, just as Fascists and Communists were managing transitions across Europe. With each World War, American society – its political and economic power – grew in global influence, and with the end of World War II, that corporate society was exported globally.
This is empire. The American military, intelligence agencies, and national security apparatus operate with the intention of serving U.S. – and now increasingly global – state and corporate interests. Wars, coups, destabilization campaigns, support for dictators, tyrants, genocides and oppression are the products of Western interaction with the rest of the world.
In the same sense that “God made man in his own image,” corporations remade society in their own interest; and with equal arrogance. Corporations and banks created or took over think tanks, foundations, educational institutions, media, public relations, advertising, and other sectors of society. Through their control of other institutions, they extend their ideologies of power – and the variances between them – to the population, to other elites, the ‘educated’ class, middle class, the poor and working class. So long as the ideas expressed support power, it’s ‘acceptable.’ It can extend critiques, but institutional analysis is not permitted. Ideas which oppose institutional power are ‘ideological’, ‘idealist’, ‘utopian’, and ultimately, unacceptable.
Corporate culture dominates our society in the West. Being inherently totalitarian institutions, the culture – and its institutions – become increasingly totalitarian. This is the response by private economic power to undo the achievements in human history which came through increased democracy in the political sphere. Corporations and banks seek to control and consume all things, to dominate without end.
The only reason corporations were and are able to be the defining cultural institution of the 20th and now 21st century, is because of their economic power. This is derived from exploitation: of resources, the environment, labour, and consumers. It is enforced with repression: the job of the state in the state-capitalist society, along with massive subsidies and protectionist measures for corporate and financial interests. As corporate power extended around the world, the rapid destruction of the environment and resources accelerated, and Western powers ‘outsourced’ the environmental devastation our consumer societies ‘require’ to the so-called Third World. We consume, and they suffer; a marriage of inconvenience that we call “civilization.” Corporations and our state keep the rest of the world in a state of poverty and repression, eternally attempting to block the inevitable global revolution to create a human society that acts… humanely. We were busy buying things. Couldn’t be bothered.
Now what our societies have done to the people on whose land we now live, or everyone else in the world, is being done internally, to us. Everything is up for sale! Corporations make record profits, hoard billions and trillions in cash reserves, NOT being invested, but likely waiting until your standard of living is significantly reduced so that your labour and resources are cheaper, and thus, ultimately more profitable. This is called ‘austerity’ and ‘structural reform,’ political euphemisms for impoverishment and exploitation.
Corporations, banks and states have in recent years caused a massive global food crisis, driving food costs to record highs almost every subsequent year from 2007 onward. With billions of people in the world living on less than $2 per day, the majority of humanity spends most of their income on food. Price increases in food, caused primarily by financial speculation (big players include Goldman Sachs, Morgan Stanley, and Barclays), push tens of millions more people into poverty and hunger. Roughly one billion – 1/7th of the world’s population – live in slums. And they are growing rapidly. Massive urban slums were developed out of the imperialism Western states and corporations imposed upon the rest of the world, pushing people off the land and into the cities, whether induced by poverty or coerced by bombs and guns. All billed to the imperial Western state sponsors of terrorism. We supported (and support) ruthless and tiny elites in the countries we dominate[d] around the world, and now we are just beginning to realize the ruthless and tiny elite which rules over our own domestic lives. Their social function is that of a parasite: to suck the life blood out of all global society.
Food price increases have helped spur a massive global land grab, with Western (as well as Gulf and Asian powers) grabbing vast tracts of land – and water – around the world, for pennies on the dollar. This grab is most extensive in Africa, where in the past several years, mostly Western investors have grabbed land which amounts to an area roughly the size of Western Europe. The land not only contains extensive resource wealth, most importantly water (the Nile is up for sale!), but it is home to hundreds of millions of people, and globally, there are 2.5 billion poor people engaged in small-scale farming. This is primarily done through communal land ownership, something which Western society – with its ‘divine right’ of private property – does not understand. Thus, in international, state, and corporate law – which we designed – we deem communally owned and used land to be legally owned by the state. Our ‘investors’ – banks, hedge funds, pension funds, corporations and states – strike deals with corrupt states across the world to give us 40-100 year contracts for vast tracts of land, paying little or sometimes no rent. Then the “empty land” – as we call it – is cleared (of it’s “emptiness”, no doubt), evicting peoples who have been there for generations and beyond, who depend upon the land and the food it produces for their very lives. These people are being driven to cities, and ultimately, slums.
This is what we call “productive” use of land. So naturally, we then destroy it, eviscerate its environment, poison and pollute, extract, exploit, plunder and profit. Or we simply hold onto the land, not using it at all, just waiting until it goes up in profit. Even major American universities like Harvard are getting involved in the massive land grabs across Africa and elsewhere. This is the largest land grab in history since the late 19th century ‘Scramble for Africa’ where Europeans colonized almost the entire continent. When we do use the land for ‘productive use’, we say it will “help the climate” and “reduce hunger.” How? Because we will produce food and biofuels. And in doing so, we will use massive amounts of chemicals, pesticides, genetically modified organisms, deforestation, biodiversity destruction, highly mechanized and heavy fuel-use farming techniques. The food we produce – which is not much, we have more interest in things like biofuels, lumber, minerals, oil, cash-crops, etc. – is then exported to our countries, and away from the poor ones where hunger and poverty are so prevalent. They lose their land, gain more poverty, with the added bonus of extensive food insecurity, hunger, starvation, slum growth, increased mortality rates, disease, and violence. Poverty is violence.
This is how Western states, banks, corporations and international organizations address the issue of “hunger”: by creating more of it. And in a deeply disturbing irony, we call this moving towards “sustainability.” Little did we know that power interests have a different definition of “sustainability” than most people: they simply combined the words sustained and profitability, and called it “sustainability.” And coincidentally, that word already has a meaning to most people, so we simply misinterpreted the meaning. But there are people who take that concept seriously, those who experience the major costs of an unsustainable society.
We are witnessing a massive global resistance to these processes, largely driven by indigenous peoples – in Africa, Latin America, Asia, and now in North America. In Canada, the ‘Idle No More‘ movement began with four indigenous women in Saskatchewan deciding to meet up and discuss their concerns about Steven Harper’s “budget bill,” which, among other things, had reduced the amount of Canada’s protected rivers, lakes, and streams from roughly 2.5 million (as of Dec. 4, 2012) to somewhere around 62 (as of Dec. 5, 2012). Now a large, expanding, and increasingly international social movement led by indigenous peoples is taking place. Less than two months ago, it began with four women having a discussion.
Canada’s Indigenous peoples are showing Canadians – and others around the world – how to stand up against power. And they’ve had practice. For over 500 years, our societies have been oppressing and often eradicating indigenous populations at ‘home’ and abroad. Indigenous peoples, like other oppressed peoples, are at the front lines of the most oppressive nature of our society: they experience and have experienced exploitation, environmental devastation, domination and decimation. With the world’s Indigenous peoples speaking – not only in Canada, but across Latin America, Africa, and elsewhere – it is time that we in the West begin to listen. It is always important to listen to those who are most oppressed; the histories of our ‘victims’ are rarely written or known, at least not to us. Victims remember. And it matters that we begin to listen.
How can we expect to change – or know what and how to change – our societies if we do not listen and learn from those who have experienced the worst of our society? Indigenous people are now giving us a lesson in democratic struggle. If we continue on our current path, Indigenous communities will be completely wiped out; the powers that rule our society will have completed a 500-year genocide.
So we have to ask ourselves the question: should we now listen to, learn from, and join with these people in common struggle for justice and the idea of a humane society, or… are we still too busy buying things?
Perhaps it is time we all should be ‘Idle No More’.
The above was a short summary of roughly three separate chapters currently being researched and written as part of The People’s Book Project. To help the Project continue, please consider spreading the word, sharing articles, or donating.