| Summary: |
An item on the agenda in next G20 summit will be concerned with the effects of deregulation of financial, commodity and agricuytural markets on food price volatility. Food prices in world markets have gone up and down and up over the last two years, begging the important question about what should be done to reduce price volatility. Sitting behind that are questions about what is causing this price volatility. There is a major debate about the importance of financial speculation in this. The debate is complex.
First, there are clearly major ideological issues - for example one might set out four different perspectives on this sort of activty.
* markets are efficient and speculation (including 'gambling') helps with efficiency
* markets are efficient and speculation can help but can also harm
* there are major problems with much of the market ideology and we need to very carefully identify where and who markets and speculation help, and where and who they harm
* markets exclude, disempower and exploit the marginalised, the poor, the not yet born, the environment etc.
Second, the theoretical arguments and empirical evidence on the effects of speculation on food prices are highly contentious, even within those whose views fall broadly within the second bullet point above.
In this presentation, Andrew Dorward welcomes the G20's attention to food price instability, but argues that whatever the impacts of financial markets on food prices, the best thing to do is to make food prices less likely to rise and less subject to volatility, by raising production and the stock to utilisation ratio (low stock to utlisation ratios encourage volatility and speculation). Unfortunately the opposite trend is likely if we continue with 'business as usual'. Policy makers should therefore look for clear multiple wins (food security, poverty reduction, vulnerability reduction, growth, environmental protection, ...) by investing in agricultural production by/ for poor and marginalised people. Unlike measures against financial speculation in food markets, this should not be controversial, and it should be possible for rapid agreement on it. We should not be diverted from it by debates about the difficult and controversial tasks of coping with major food food price volatitily when we can and should be addressing some of its major fundamental causes.
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