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

Show Hide image

An English hero for the ages: Ian Botham at 60

Botham blends his sportsmanship and deep-seated passion for cricket with a lust for life.

Begging W H Auden’s pardon, it is possible both to honour and to value the vertical man, and in the case of Ian Botham, who turned 60 on 24 November, it is our bounden duty. No sportsman has given Britons so much to enjoy in the past half-century and no sportsman is loved more. Two decades after he retired from first-class cricket, his reputation as one of life’s champions remains unassailable.

No mere cricketer is he, either. Botham is a philanthropist, having raised more than £12m for various charities, notably Leukaemia and Lymphoma Research. In December, 30 years after his first walk from John o’Groats to Land’s End, he will set off again, in South Africa, where England are on tour. And he really does walk, too, not amble. As somebody who accompanied him on one of his dozen walks said: “You can’t keep up with him. The man is a phenomenon.”

Of all postwar sportsmen, only Bobby Charlton and, at a pinch, Henry Cooper come close to matching Botham’s enduring popularity. But Charlton, a shy man who was scarred by the Munich plane crash of 1958 (and may never have recovered from its emotional effects), has never comfortably occupied a public stage; and Cooper, being a boxer, had a solitary role. Botham, by contrast, spoke for England. Whenever he picked up his bat, or had a ball in his hand, he left spectators in no doubt.

Others have also spoken for England. Bobby Moore and Martin Johnson, captains respectively of England’s World Cup-winning football and rugby teams, were great players but did not reach out to people as naturally as Botham. Nick Faldo, Lester Piggott, Sebastian Coe and, to bring us up to date, Lewis Hamilton have beaten the best in the world, but they lacked those qualities that Botham displayed so freely. That is not to mark them down. They were, and are, champions. But Botham was born under a different star.

It was John Arlott, the great cricket commentator, who first spotted his uniqueness. Covering a match at Taunton in 1974, he asked the young colt to carry his bags up the rickety staircase to the press box, where Arlott, wearing his oenophile’s hat, pulled out a bottle of red wine and invited Botham to drink. Forty years later Botham is a discriminating wine drinker – and maker. Along with his friend and fellow England great Bob Willis, and their Australian wine­making pal Geoff Merrill, he has put his name to a notable Shiraz, “BMW”.

Arlott, with his nose for talent and good company, saw something in the young Botham that Brian Close, his captain at Somerset, was beginning to bring out. Later, Mike Brearley, as England captain, drew out something even more remarkable. As Rodgers and Hammerstein wrote, you’ve got to be carefully taught. And Botham, a fine team man as well as a supreme individual performer, has never withheld praise from those who enabled him to find his voice.

If sport reveals character, then cricket is the game that reveals it most clearly. In no other sport is the individual performance rooted so firmly in a team context. Every over brings a contest of skill and intelligence between batsman and bowler but only a team can win the match. “A cricketer,” as Arlott said, “is showing you something of himself all the time.”

Cricket also reveals national character more than any other sport. Football may be the most popular game in the world but cricket, and cricketers, tell us far more about England and Englishness. It is instructive, in this regard, to hear what Philippe Auclair, a French journalist and author long resident in London, has to say about Botham: “He is essentially an 18th-century Englishman.” In one! It’s not difficult to sense a kinship with Tom Jones, Fielding’s embodiment of 18th-century life, who began his journey, as readers may recall, in Somerset.

A country boy who played for Worcestershire after leaving Somerset, and who lives by choice in North Yorkshire, Botham is an old-fashioned Englishman. Although nobody has yet found him listening to the parson’s sermon, he is conservative with a small and upper-case C, a robust monarchist, handy with rod and gun, and happiest with a beaker in front of him. He represents (though he would never claim to be a representative) all those people who understand instinctively what England means, not in a narrow way, but through something that is in the blood.

Above all, he will be remembered for ever as the hero of 1981. Even now it takes some believing that Botham bowled and batted with such striking success that the Australians, who were one up after two Tests, were crushed. Some of us who were actually at Headingley for the famous third Test – thousands who claim to have been there were not – recall the odds of 500-1 on an England victory going up on the electronic scoreboard that Saturday evening.

Botham made 149 not out as England, following on, beat the Aussies by 18 runs. For three hours the country seemed to stop. In the next Test, at Edgbaston, Botham took five wickets for one run as Australia fell under his spell. Then, at Old Trafford, on a dank Saturday afternoon, he played the most memorable innings of his life and one of the greatest innings ever played by an Englishman: 118 magnificent, joyful runs. Joy: that’s the word. Botham brought joy into people’s lives.

Yet it was the final Test at the Oval, which ended in a draw, that brought from him a performance no less remarkable than those from before. He bowled 89 overs in that match, flat out, continuing to run in when others withdrew with injury. That was the team man coming to the fore. Little wonder his comrades thought the world of him.

Modest, loyal, respectful to opponents, grateful to all who have lent him a hand, and supported throughout a turbulent life by Kath, his rock of a wife, and their three children, this is a cricketing hero to rank with W G Grace, Jack Hobbs, Wally Hammond and Fred Trueman. A feature in the lives of all who saw him, and a very English hero. 

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State