The trading frenzy that sent prices soaring

Iain Macwhirter on why the price of basic foodstuffs rocketed, from London to Haiti

Four people were killed in food riots in Haiti. From Bolivia to Uzbekistan there have been violent protests against the doubling of food prices. In Italy, mothers are marching against the price of pasta. The World Food Programme has seized up and the World Bank on 13 April forecast that 100 million people face starvation. It should not have come as a surprise.

Conventional explanations for the food crisis range from climate change to dietary change in China, from global overpopulation to the switch of agricultural production to biofuels. These long-term factors are important but they are not the real reasons why food prices have doubled or why India is rationing rice or why British farmers are killing pigs for which they can't afford feedstocks. It's the credit crisis.

This latest food emergency has developed in an incredibly short space of time - essentially over the past 18 months. The reason for food "shortages" is speculation in commodity futures following the collapse of the financial derivatives markets. Desperate for quick returns, dealers are taking trillions of dollars out of equities and mortgage bonds and ploughing them into food and raw materials. It's called the "commodities super-cycle" on Wall Street, and it is likely to cause starvation on an epic scale.

The rocketing price of wheat, soybeans, sugar, coffee - you name it - is a direct result of debt defaults that have caused financial panic in the west and encouraged investors to seek "stores of value". These range from gold and oil at one end to corn, cocoa and cattle at the other; speculators are even placing bets on water prices.

Just like the boom in house prices, commodity price inflation feeds on itself. The more prices rise, and big profits are made, the more others invest, hoping for big returns. Look at the financial websites: everyone and their mother is piling into commodities. It is the great bull market of the Noughties. The trouble is that if you are one of the 2.8 billion people, almost half the world's population, who live on less than $2 a day, you may pay for these profits with your life.

This speculation doesn't happen on its own, however. Commodities such as gold and oil are favourite "hedges" against falling currencies. But this time all manner of other commodities, such as wheat and rice, have been swept along in the inflationary slipstream.

Investment houses, pension funds, private equity groups and banks are driven by profit not morality, and they invest wherever they can see the biggest return. It is not a conspiracy, but it is a conscious strategy, backed by the central bankers of the west as they try to help Wall Street back on its feet. Put another way, the banks are exporting our debts to the developing world. The collapse of the dollar means that most international commodities are more expensive for poor people to buy. The dollar's decline is a direct result of the low interest rate policy of the US Federal Reserve and the Bank of England, which shockingly cut interest rates on 10 April even as inflation spiralled.

When interest rates are below the rate of inflation, investors have to keep moving their funds from sector to sector in search of higher returns. In the 1990s they piled into internet stocks. When that bubble burst in the 2000 stock-market crash, they shifted into property and complex collateralised debt dealing based on US "sub-prime" mortgages. Now, with the collapse of the property bubble - not just in the US but across the world - investors are on the move again, and the only place left is commodities. It's the third bubble and it's hitting the developing world hard.

There are other reasons for food shortages: the diversion to biofuels because of the depletion of oil reserves, the increasing population, changing eating habits in south-east Asia - all these are putting long-term pressure on agricultural resources. But the efforts of institutions such as the US Federal Reserve to revive the economy on the back of a commodities boom have dramatically speeded up global inflation.

Will it work? Will the new "asset bubble" restore the profits of the banks and revive the US economy? In the short term, possibly yes - but at terrible human cost. In the end, the US may be cutting its own throat. Once speculative prices get out of control, there is no knowing when they will stop. Oil is now more than $100 a barrel. Resource-rich countries such as Russia are suddenly world powers again. Hungry people are desperate people. This might be the bubble to end all bubbles.

This article first appeared in the 21 April 2008 issue of the New Statesman, Food crisis

RALPH STEADMAN
Show Hide image

The age of outrage

Why are we so quick to take offence? The Private Eye editor on Orwell, Trump and the death of debate in post-truth politics.

Anyone who thinks that “post-truth politics” is anything new needs to be reminded that George Orwell was writing about this phenomenon 70 years before Donald Trump.

Audiences listening to President-Elect Trump’s extraordinary disregard for anything resembling objective truth – and his astonishing ability to proclaim the absolute opposite today of what he said yesterday – will be forcibly reminded of the slogans that George Orwell gave to his political ­dictators: Black is White, War is Peace, ­Freedom is Slavery, Ignorance is Strength (the last of which turned out to be true in the US election). But any journalist trying to work out what the speeches actually mean, amidst the mad syntax and all the repetition (“gonna happen, gonna happen”), cannot help but fall back on Orwell’s contention that “political chaos is connected with the decay of language”. And the sight of Trump praising Secretary Clinton for her years of public service in his post-election victory speech while the crowd was still chanting his campaign catchphrase of “Lock her up” was surely a perfect example of Doublethink.

No wonder Trump is an admirer of Vladimir Putin, who is an admirer of the Soviet strongmen whom Orwell satirised so well. These echoes from the past are very strong in America at present but there are plenty of them reverberating through British and European politics as well. Our Foreign Secretary managed to accuse other European leaders of a “whinge-o-rama” when they issued qualified statements of congratulation to the new president-elect, even though he himself had previously accused Trump of being “nuts”. Black is White, Remain is Leave, a Wall is a Fence, two plus two equals five: but Brexit means Brexit.

You may find this reassuring, in that we have been here before and survived – or distressing to think that we are regressing to a grimmer Orwellian age. But one of the worrying developments attached to these “post-truth” political figures is the increasing intolerance in public debate of dissent – or even disagreement – about what objective truth might be.

A great deal has been written recently about the influence of social media in helping people to become trapped in their own echo chambers, talking only to those who reinforce their views and dismissing not only other opinions, but also facts offered by those who disagree with them. When confronted by a dissenting voice, people get offended and then angry. They do not want to argue, they want the debate to be shut down. Trump supporters are furious with anyone who expresses reservations about their candidate. Pro-Brexit supporters are furious with anyone who expresses doubts about the way the process of leaving the European Union is going.

I edit the magazine Private Eye, which I sometimes think Orwell would have dismissed as “a tuppeny boys’ fortnightly”, and after the recent legal challenge to the government about Article 50 being put before parliament, we published the cover reproduced on page 25.

It was a fairly obvious joke, a variant of the “wheels coming off” gag. But it led to a large postbag of complaints, including a letter from a man who said he thought the cover was “repulsive”. He also said he wanted to come around and smash up the office and then shove our smug opinions so far up our arses that we choked our guts out.

There was one from a vicar, too, who told me that it was time to accept the victory of the majority of the people and to stop complaining. Acceptance was a virtue, he said. I wrote back and told him that this argument was a bit much, coming from a church that had begun with a minority of 12. (Or, on Good Friday, a minority of one.)

This has become a trend in those who complain: the magazine should be shouted down or, better still, closed down. In the light of this it was interesting to read again what Orwell said in his diary long before internet trolls had been invented:

 

We are all drowning in filth. When I talk to anyone or read the writings of anyone who has any axe to grind, I feel that intellectual honesty and balanced judgement have simply disappeared from the face of the earth. Everyone’s thought is forensic, everyone is simply putting a “case” with deliberate suppression of his opponent’s point of view, and, what is more, with complete insensitiveness to any sufferings except those of himself and his friends.

 

This was in 1942, when the arguments were about war and peace, life and death, and there were real fascists and Stalinists around rather than, say, people who disagree with you about the possibility of reconciling freedom of movement with access to the single European market.

Orwell also made clear, in an essay called “As I Please” in Tribune in 1944, that what we think of as the new online tendency to call everyone who disagrees with you a fascist is nothing new. He wrote then:

 

It will be seen that, as used, the word “Fascism” is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting, bull-fighting, the 1922 Committee [a Tory group], the 1941 Committee [a left-liberal group], Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley’s broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else.

 

When Orwell writes like this about the level of public debate, one is unsure whether to feel relieved at the sense of déjà vu or worried about the possibility of history repeating itself, not as farce, but as tragedy again.

The mood and tone of public opinion is an important force in the way our society and our media function. Orwell wrote about this in an essay called “Freedom of the Park”, published in Tribune in December 1945. Five people had been arrested outside Hyde Park for selling pacifist and anarchist publications. Orwell was worried that, though they had been allowed to publish and sell these periodicals throughout the entire Second World War, there had been a shift in public opinion that meant that the police felt confident to arrest these people for “obstruction” and no one seemed to mind this curtailment of freedom of speech except him. He wrote:

 

The relative freedom which we enjoy depends on public opinion. The law is no protection. Governments make laws, but whether they are carried out, and how the police behave, depends on the general temper in the country. If large numbers of people are interested in freedom of speech, there will be freedom of speech, even if the law forbids it; if public opinion is sluggish, inconvenient minorities will be persecuted, even if laws exist to protect them.

 

This is certainly true for the press today, whose reputation in the past few years has swung violently between the lows of phone-hacking and the highs of exposing MPs’ expenses. In 2011 I remember at one point a football crowd shouting out the name of Ryan Giggs, who had a so-called superinjunction in place forbidding anyone to mention that he was cheating on his wife and also forbidding anyone to mention the fact that he had taken out a superinjunction. He was named on Twitter 75,000 times. It seemed clear that public opinion had decided that his private life should be made public. The freedom of the press was briefly popular. Later the same year it was revealed that the murdered schoolgirl Milly Dowler’s phone had been hacked by the News of the World, along with those of a number of high-profile celebrities, and the public decided that actually journalists were all scumbags and the government should get Lord Leveson to sort them out. Those who maintained that the problem was that the existing laws (on trespass, contempt, etc) were not enforced because of an unhealthy relationship between the police, the press and the politicians were not given much credence.

In a proposed preface to his 1945 novel, Animal Farm, Orwell wrote: “If liberty means anything at all, it means the right to tell people what they do not want to hear.”

This is the quotation that will accompany the new statue of Orwell that has now been commissioned by the BBC and which will stand as a sort of rebuke to the corporation whenever it fails to live up to it. The BBC show on which I appear regularly, Have I Got News for You, has been described simultaneously in the online comments section as “overprivileged, right-wing Tory boys sneering at the working class ” and “lefty, metropolitan liberal elite having a Labour luvvie whinge-fest”. Disturbing numbers of complainants feel that making jokes about the new president-elect should not be allowed, since he has won the election. Humour is not meant to be political, assert the would-be censors – unless it attacks the people who lost the vote: then it is impartial and neutral. This role for comedy would have surprised Orwell, who was keen on jokes. He wrote of Charles Dickens:

 

A joke worth laughing at always has an idea behind it, and usually a subversive idea. Dickens is able to go on being funny because he is in revolt against authority, and authority is always there to be laughed at. There is always room for one more custard pie.

 

I think there is also room for a custard pie or two to be thrown against those who claim to be outsiders, against authority and “the system”, and use this as a way to take power. The American billionaire property developer who is the champion of those dispossessed by global capitalism seems a reasonable target for a joke. Just like his British friend, the ex-public-school boy City trader-turned-critic of the Home Counties elite.

The emblematic quotation on liberty is from a preface that was not published until 1972 in the Times Literary Supplement. A preface about freedom of speech that was censored? It is almost too neatly Orwellian to be true, and in fact no one seems to know exactly why it did not appear. Suffice to say that it is fascinating to read Orwell complaining that a novel which we all now assume to be a masterpiece – accurate about the nature of revolution and dictatorship and perfect for teaching to children in schools – was once considered to be unacceptably, offensively satirical.

The target of the satire was deemed to be our wartime allies the Russians. It is difficult to imagine a time, pre-Putin, pre-Cold War, when they were not seen as the enemy. But of course the Trump presidency may change all that. Oceania may not be at war with Eurasia any more. Or it may always have been at war with Eastasia. It is difficult to guess, but in those days the prevailing opinion was that it was “not done” to be rude about the Russians.

Interestingly there is now a significant faction on the British left, allied with the current leader of the Labour Party, who share this view.

 

The right to tell people what they do not want to hear is still the basis of freedom of expression. If that sounds like I am stating the obvious – I am. But, in my defence, Orwell once wrote in a review of a book by Bertrand Russell published in the Adelphi magazine in January 1939:

 

. . . we have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.

 

Orwell himself managed to come round to a position of accepting that an author could write well and truthfully about a subject even if one disapproved of the author’s politics: both Kipling and Swift were allowed to be right even though they were not left enough. So I am hoping that we can allow Orwell to be right about the principles of freedom of expression.

In the unpublished preface to Animal Farm he writes:

 

The issue involved here is quite a simple one: Is every opinion, however unpopular – however foolish, even – entitled to a hearing? Put it in that form and nearly any English intellectual will feel that he ought to say “Yes”. But give it a concrete shape, and ask, “How about an attack on Stalin? Is that entitled to a hearing?”, and the answer more often than not will be “No”. In that case the current orthodoxy happens to be challenged, and so the principle of free speech lapses.

 

One can test oneself by substituting contemporary names for Stalin and seeing how you feel. Putin? Assange? Mandela? Obama? Snowden? Hillary Clinton? Angela Merkel? Prince Harry? Mother Teresa? Camila Batmanghelidjh? The Pope? David Bowie? Martin Luther King? The Queen?

Orwell was always confident that the populist response would be in favour of everyone being allowed their own views. That might be different now. If you were to substitute the name “Trump” or “Farage” and ask the question, you might not get such a liberal response. You might get a version of: “Get over it! Suck it up! You lost the vote! What bit of ‘democracy’ do you not understand?”

Orwell quotes from Voltaire (the attribution is now contested): “I detest what you say; I will defend to the death your right to say it.” Most of us would agree with the sentiment, but there is a worrying trend in universities that is filtering through into the media and the rest of society. Wanting a “safe space” in which you do not have to hear views that might upset you and demanding trigger warnings about works of art that might display attitudes which you find offensive are both part of an attempt to redefine as complex and negotiable what Orwell thought was simple and non-negotiable. And this creates problems.

Cartoon: "Voltaire goes to uni", by Russell and originally published in Private Eye.

We ran a guide in Private Eye as to what a formal debate in future universities might look like.

 

The proposer puts forward a motion to the House.

The opposer agrees with the proposer’s motion.

The proposer wholeheartedly agrees that the opposer was right to support the motion.

The opposer agrees that the proposer couldn’t be more right about agreeing that they were both right to support the motion.

When the debate is opened up to the floor, the audience puts it to the proposer and the opposer that it isn’t really a debate if everyone is just agreeing with each other.

The proposer and the opposer immediately agree to call security and have the audience ejected from the debating hall.

And so it goes on, until the motion is carried unanimously.

 

This was dismissed as “sneering” and, inevitably, “fascist” by a number of student commentators. Yet it was only a restatement of something that Orwell wrote in the unpublished preface:

 

. . . everyone shall have the right to say and to print what he believes to be the truth, provided only that it does not harm the rest of the community in some quite unmistakable way. Both capitalist democracy and the western versions of socialism have till recently taken that principle for granted. Our Government, as I have already pointed out, still makes some show of respecting it.

 

This is not always the case nowadays. It is always worth a comparison with the attitudes of other countries that we do not wish to emulate. The EU’s failure to confront President Erdogan’s closure of newspapers and arrests of journalists in Turkey because it wants his help to solve the refugee crisis is one such obvious example. An old German law to prosecute those making fun of foreign leaders was invoked by Erdogan and backed by Mrs Merkel. This led Private Eye to run a competition for Turkish jokes. My favourites were:

 

“Knock knock!”

“Who’s there.”

“The secret police.”

 

What do you call a satirist in Turkey?

An ambulance.

 

As Orwell wrote in even more dangerous times, again in the proposed preface:

 

. . . the chief danger to freedom of thought and speech at this moment is not the direct interference of the [Ministry of Information] or any official body. If publishers and editors exert themselves to keep certain topics out of print, it is not because they are frightened of prosecution but because they are frightened of public opinion.

 

I return to stating the obvious, because it seems to be less and less obvious to some of the current generation. This is particularly true for those who have recently become politically engaged for the first time. Voters energised by Ukip and the EU referendum debate, or by the emergence of Jeremy Corbyn as leader of the Labour Party, or by the resurgence of Scottish nationalism or by the triumph of Trump, have the zeal of the newly converted. This is all very admirable, and a wake-up call to their opponents – the Tartan Tories and the Remoaners and the NeoBlairites and the Washington Liberal Elite – but it is not admirable when it is accompanied by an overpowering desire to silence any criticism of their ideas, policies and leading personalities. Perhaps the supporters of the mainstream parties have simply become accustomed to the idea over the decades, but I have found in Private Eye that there is not much fury from the Tory, New Labour or Liberal camps when their leaders or policies are criticised, often in much harsher ways than the newer, populist movements.

 

 

So, when Private Eye suggested that some of the claims that the Scottish National Party was making for the future of an independent Scotland might be exaggerated, there were one or two readers who quoted Orwell’s distinction between patriotism being the love of one’s country and nationalism being the hatred of others – but on the whole it was mostly: “When if ever will you ignorant pricks on the Eye be sharp enough to burst your smug London bubble?”

Those who disagreed with the SNP were beneath contempt if English and traitors if Scottish. This was matched by the sheer fury of the Corbyn loyalists at coverage of his problems with opposition in his own party. When we suggested that there might be something a bit fishy about his video on the lack of seats on the train to Newcastle, responses included: “I had hoped Private Eye was outside the media matrix. Have you handed over control to Rupert Murdoch?”

Their anger was a match for that of the Ukippers when we briefly ran a strip called At Home With the Ukippers and then made a few jokes about their leader Mr Farage: “Leave it out, will you? Just how much of grant/top up/dole payment do you lot get from the EU anyway? Are you even a British publication?”

In 1948, in an essay in the Socialist Leader, Orwell wrote:

 

Threats to freedom of speech, writing and action, though often trivial in isolation, are cumulative in their effect and, unless checked, lead to a general disrespect for the rights of the citizen.

 

In other words, the defence of freedom of speech and expression is not just special pleading by journalists, writers, commentators and satirists, but a more widespread conviction that it protects “the intellectual liberty which without a doubt has been one of the distinguishing marks of Western civilisation”.

In gloomy times, there was one letter to Private Eye that I found offered some cheer – a willingness to accept opposing viewpoints and some confirmation of a belief in the common sense of Orwell’s common man or woman. In response to the cartoon below, our correspondent wrote:

 

Dear sir,

I suffer from a bipolar condition and when I saw your cartoon I was absolutely disgusted. I looked at it a few days later and thought it was hilarious.

 

Ian Hislop is the editor of Private Eye. This is an edited version of his 2016 Orwell Lecture. For more details, visit: theorwellprize.co.uk

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage