Original Article can be read at thecomingdepression.net
According to the National Catholic reporter, while progress has been made in achieving the United Nations’ Millennium Development Goals on reducing extreme poverty and providing access to clean drinking water by 2015, the goals related to child mortality and mothers is “significantly off-track,” according to a report issued April 20.
The result, economists say, is that neither of those two particular goals can be met by 2015, the year the UN set for achieving all of the eight goals, which include ending extreme poverty and hunger in the world.
“According to our projections, an estimated 1.02 billion people will still be living in extreme poverty in 2015,” said Jos Verbeek, the lead economist at the World Bank and the principal author of the study, called the Global Monitoring Report 2012, which is available here.
Usually the food riots occurred in those countries that only relied on rice, or on corn, and the local price rose too quickly. Often those were the same countries where the local price was subsidized (i.e the price paid for imports widened to the price at which grain was ‘sold’ locally).
Food export bans had to negative consequences. One they balkanized global grain markets that reduced the tradeable surplus, and therefore exacerbated food shortages as importing countries had to pay more to guarantee enough supply. Ironically, as they were also spending foreign exchange reserves to also pay higher prices for imported fuel at the same time. Clearly a strain on developing nation budgets.
The second negative consequence is that the countriesthat imposed export bans had enough food, but they artificially capped their own farmer’s incomes who could not take advantage of higher world prices. So they were penalized as fuel & fertilizer prices rose, but they were unable to sell their grain at the market price.
Perversely this meant that these farmers had less income to spend on fuel & fertilizer and would have resulted in less grain being planted & harvested despite higher world prices.
Countries like Argentina actually encouraged production and exports, but then taxed those exports for government revenue, so again the farmer took home less income, and had less incentive to produce more grain. They did have more incentive to feed the grain locally to livestock and thus avoid export taxes, but this shrunk the global tradeable surplus of grain further.
Never tell us that government interference in the market cannot make a problem worse.
According to America’s Program, commodity markets for goods like corn, wheat, soybeans, crude oil, natural gas, copper, and aluminum had worked fairly well since 1936 when Congress passed the Commodity Exchange Act. The Act established well-structured commodity futures markets with common-sense rules that allowed producers and consumers of commodities (like farmers, mills, oil dealers, etc.) to “hedge their risk”, or establish an agreed-upon price for a future sale.
This meant that farmers and businesses could plan ahead without worrying about sudden changes in prices. The markets also allowed a limited role for speculators so that they could help the markets run more smoothly. These markets functioned well for many decades.
Deregulation of the commodities markets in the 1990s and especially through the Commodity Futures Modernization Act of 2000 (passed by Congress after midnight of the last day of work) removed many of the common-sense laws established in 1936. The limits on speculation were lifted, allowing massive inflows of speculative money into the relatively small commodity markets. Speculation, per se, is not bad, but when speculators dominate the market instead of businesses hedging for legitimate business purposes, the excessive speculation damages the underlying purpose of the market.
After investors lost money in the stock bubble in 2000 and real estate bubble in 2005/6, many decided to shift part of their investments into commodities. They were encouraged by an AIG-sponsored study that said commodities were a good long-term investment to help diversify an investment portfolio.’