Bankers Anonymous – World Development Movement Brighton

Local members of the World Development Movement demonstrate outside Barclays bank on a busy Brighton Saturday. WDM has long argued that food speculation by banks and dealers distorts the way commodity markets operate. Since deregulation in the late 90’s, billions have been poured into commodities markets. Little of this ‘investment’ has any bearing on how actual supply & demand affect price. Most of it is bank and dealer-only trading in complex financial products, specially developed to skim money from betting on changes in commodity prices.

The US introduced regulation after the 30’s Wall Street crash. This was to protect farmers, the food industry and consumers from price rises caused by speculation. From then until the 90’s mostly farmers and food companies speculated on food; trading actually related to demand, supply and predicting prices. ‘Hedging’, the predominant trading in longer term contracts, helped to stabilise and risk-insure the industry. Speculation was limited by statute. However deregulation opened the floodgates to banks and dealers looking for speculation opportunities. Since then, betting on commodity prices has itself been driving prices, irrespective of actual demand and supply of commodities.

So WDM’s ‘Bankers Anonymous’ campaign particularly targets food speculation by banks. Barclays, Goldman Sachs, Morgan Stanley and Deutsche Bank have each been making hundreds of millions a year from gambling on food prices. Barclays announced in February that it was withdrawing from direct speculation on food commodities. That’s after making an estimated £278m on food related trades last year alone. While trying to bury another of Bob Diamond’s toxic legacies, the bank still continues to sell investment products facilitating others to speculate on food.

A number of Scandinavian and German banks have also withdrawn. However  Deutsche Bank and Goldman Sachs seem unapologetic, with Deutsche stating that futures trading offers benefits and risk protection to the agricultural sector. That may be true for farming and commodity sectors in wealthy countries, but not necessarily for farmers and the poor in developing countries. And informed commentators point out that before deregulation, a high ratio of hedging to speculation was healthy for the markets. Deregulation has caused exactly the opposite, with disastrous results.

Bank & dealer-only speculation isn’t at all transparent, distorts pricing and increases volatility and risk. Many now agree that regulation is advisable, especially in view of very poor 2012 grain harvests and likely price increases in 2013. Links between discontent over hikes in food staple prices and the Arab spring have already been made, with concerns that 2013 could hold further food-led flashpoints. There are EU plans in train to regulate food speculation, but unsurprisingly, the ConDem government is looking to water down the EU’s proposals. Presumably for some of the same reasons it opposes the ‘Robin Hood’ financial transactions tax.

With its 2010 report on food speculation ‘The Great Hunger Lottery’  successfully focusing comment in the  media, WDM’s launch of Bankers Anonymous aims to keep the pressure on Chancellor George Osborne. He should vote to agree the EU stance. A return to regulation could help protect farmers and the world’s poor from the effects of profiteering by investors and institutions.

WDM makes action easy with its campaign mimicking a 5-step addiction recovery programme. First step: Lobby your MP via the Bankers Anonymous website. Second step – well, you’ll find out. I’m lucky living in Brighton, my MP is Caroline Lucas. I bet she’s already on George Osborne’s case. I took the first step nonetheless, and I’m taking Step two…