Housing, Food, Oil – What Next

EDITORIAL, 7 Jul 2008

#15 | Johan Galtung

“You see, this is a buying-and-selling car, not a driving car!”, the Chilean said as he wrapped the car I had sold him in plastic. I had used it, as a UNESCO expert, and did like they all do (the standard excuse): had a garage make it look new, and pocketed the difference. Seller and buyer shook hands at that border between real and finance economy. He was, of course, waiting for prices to go up to pocket his difference.

At the bottom of the world economy they die from hunger and preventable-curable diseases with no cash to grow or buy food and medical services, nor does the country for simple preventive measures against, say, the malaria mosquito (DDT also pollutes crops for export, a choice between two evils – guess who wins).

At the top of a world economy transporting enormous wealth upwards, particularly into US hands, speculation becomes the twin of starvation, both being genuine offspring of the same morbid, and probably moribund, system. If the basic theme of the USA, as Hofstadter says, is to get wealth to make more wealth, the speculators are certainly doing like everybody else. They buy large quantities of something, including “buying future in oil at $140, $150 or more per barrel, thinking they’ll make a killing if there’s is an attack [on Iran] and prices zoom over $200.” (Michael Klare, “Anatomy of a Price Surge”, The Nation, 7 July 2008, p. 7). And pocket the difference for next attack.

Buying big already drives prices up, others follow suit, prices become astronomical till the bubble bursts, partly because people see the gap between finance value and use value (alternatives may appear, for instance), partly because they sell big. For housing foreclosures add to the fall in prices.

Of course there is more to it.

No doubt many wanted houses beyond their economic reach as prestige symbol–stately they look when you drive in the USA and look at the foreclosed properties–no doubt they preferred not to understand the moving interest rates. No doubt banks out of greed had only one idea in mind, to sell as many mortgages as possible, and when they started stinking to sell the mortgage to the next institution down the chain, destroying any bond of trust between banks and clients. Families went bankrupt and banks went bankrupt. The system put huge amounts of money into saving the latter where they might have controlled the whole mortgage industry and stepped in, retroactively, saving both families and banks by covering (much of) the mortgages. People were more often blamed as irresponsible than the banks.

And the New York Stock Exchange closes for the day with the bell ringing and stupid hyena smiles, celebrating themselves.

Now, there is more to it, also for food, and for oil. The world has known for a long time that China managed a miracle India never performed: bringing 400 million from poverty into middle class life from the early 1990s to the mid 2000-2010s. Middle class does consume food and energy, China is only one. What do they expect all those who define development as the less developed LDC imitating the more developed MDC supervised by Washington DC? That they continue eating some rice to fuel their bicycling? To fail to predict this is one more telling piece of evidence in the brief against neo-classical economics, obsessed with system growth to the points that humans disappear. But rather than focus on demand they blame oil supply while also blaming oil for global warming. Some thinking, please.

And of course there is also more to food. As George Monbiot points out in his superb Guardian articles there is an economy of scale in agriculture, but small, not large scale, the output per unit input being so much higher in smaller farms. Big capital drives up the scale to huge holdings and massive crops based on massive seeds-water-fertilizer, super-marketed beyond the reach of those on less than $1-2 a day. There is talk of “green revolution”, good for the farmers who can afford all the inputs, for consumers who can pay, and for export of a surplus non-affordable to starving masses. The system invites speculators anywhere, including in the food-fuel competition.

In speculation history Black Tulip fever in Amsterdam four centuries ago and gold-gold-gold dominate. Innocent relative to housing, food and oil since they were for buying-selling only, not for end consumption. Moreover, and much worse: housing, food and oil are for basic needs; yes, oil too, for heating and cooking and moving. Overconsumption in all three domains does not remove them from the basic needs satisfier list.

Basic needs satisfiers are ideal for speculation because demand to a large extent is inelastic, independent of price. People need them for basic needs not to suffer, starve, die. Unbelievably brutal. Capitalism not only exploits workers but also kills the consumers, in the name of the market.

The next in line is there: health, medical services, and not only the pharmaceuticals. Watch out, the logic is clear.

What to do about it? Take what is needed for basic needs out of the commodity market. Freely available, subsidized, as minimum living income, singly or combined, but sustainably so, not as charity. And define basic needs speculation as crime.

This article originally appeared on Transcend Media Service (TMS) on 7 Jul 2008.

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