Is global capitalism causing world hunger?

Is global capitalism causing world hunger?

Capitalism is an economic system, which dominates in wealthy countries. The history of 20th century, has shown huge superiority of this conception, over the other ones, such as centrally managed economy in communist systems. However, world global capitalism is deeply imperfect. It is a core of social inequality, suffering an unbalance, as well as concentration of all 'economic power' in hands of the most important players.

The objective of this article is not to proof, that socialism is better, more efficient or more fair. Because it’s not. Socialism and communism were cruel systems, that were opening the door to totalitarian power and to oppression of society.

Even so, capitalist economy is also not able to deal with the most important issues of the modern world.

The global food market is the evident victim of capitalism. It is the small group of people that decides about an investment in poor countries, depending on benefits they could get (good business, control over land). Slogans about compassion and will to help are often a cliché, said to build a good image. Their egoistic interests are being put above everything else.

In 1999, strange things has started to happen within the food market. Goldman Sachs - American banking firm, has noticed that food could be a source of great income. Their analysts, responsible for multiplying the capital, has turned it into mathematical and economical term. They have chosen 18 the best selling products (pork, coffee, cocoa etc.), on which they have performed financial simulations. That's how they have generated Goldman Sachs Commodity Index, later used to create shares. New 'financial product' has appeared and the conception got popular. The prices went up. More people have invested in Goldman Sachs Commodity Index, what brought new shares. Food Trade, has started to be a way to make large amounts of money, through financial transactions.

The basic idea of Goldman Sachs, was that you can trade absolutely anything, but there are 'products' less and more attractive. Water, food and land, where decided to be the most attractive, as humans will always have to fulfil their most natural needs. They have prepared substantial capital to be invested in food market. But what next? The key was a fluctuation on the market. They needed price variations and perturbations. Food market for years has been unstable, but not in 20th century. Sadly, it was about to change as investors had a desire to MAKE MONEY.

Have they been interested in the fate of hungry people in Africa, and that’s why they decided to take care of food segment? Well, no. They wanted to turn stabile food market into variable financial mechanism. Steadiness of market has soon collapsed. Prices have increased and Goldman Sachs celebrated profits. That’s what they aimed for. Grain price have tripped and individuals made millions of dollars on financial manipulations.

Have Africa and Southern America been thought of? Did they consider that food will get too expensive out there? They didn’t. It has led to death of many. Did anyone cared on Wall Street or in Chicago? No, they have had their profits.

In 2008, we have experienced real financial crisis. It included shares and real estate market. That’s when the investment in food products became even more popular. Total value of shares has risen from 13 billion dollars in 2003 to 317 billion in 2008. Prices went up again, because it was worth to manipulate this financial instrument.

The HFT system - High Frequency Trading, is an automated, algorithmic and computerised machine, that’s created to boost prices, depending on fluctuation on the stock market. All done, in order to provide profits. Does it sell real goods? No, it trades contracts and investments.

Until 2003, a ton of wheat has cost 123 dollars. After this date, the prices were continuously rising and in 2008, they have reached 440 dollars. Why did it happen? Did the production cost triple? No. Around the world, corporations are continuously looking for methods to reduce production costs. The increase, was the effect of HFT's work.

People leaving in developing countries are only numbers in calculations and statistics. Nobody is able to help them. It is too difficult. That’s what at least majority of us think. And it is those assumptions that are slowing down the process of solving hunger. We could easily afford to do it, if we all wanted to.

The increase in food prices is strongly connected with the price of oil. In 21st century, oil price has risen to 130 dollars a barrel. It is essential, because we use it for food production and transport, and also as an ingredient of pesticides and fertilisers. Production of 1 food calorie requires 7 oil calories, so the food marked is highly dependant on global economic mechanisms. Sadly, many economists are going to far with it. People, for whom it is the matter of life are insignificant. Global economy and financial politics are their curse.

Large international companies often agree to help them on specific terms and conditions, for example opening borders to their goods and lowering duty charges. Those deals ruin local farming, increase unemployment and work migration, that leads to humanitarian crisis.

We have to find new solutions. There might be a hope in stimulating local food independence, as well as escape from global rules of competitive economy (where money, not a human, is a priority).

Article based on the book ‘Hunger’ by Martin Caparros.