Conjecture and Speculation

Rushing to buy bread as wheat runs short and food prices rise in Mozambique.

When the international trading giant Glencore made £50 million out of humanitarian crises, some charged them with moral wrongdoing and some gave them praise. Neither side is obviously right, but both mask the real problem.

 

Glencore and companies like it, make millions out of commodities like grain, by essentially betting on the price of food. This process, called speculation, works by buying ‘futures’ on commodities and selling them when the price is high.

A future is a contract made between a producer and a purchaser, which ensures the producer she will be entitled to the price the commodity is predicted to have at the future date at which the contract expires. So a farmer might grow 500kg of grain and, not wanting to sell it now, contract into a future with a producer, ensuring she can sell her grain at the market price the grain is predicted to have at the time the future expires, say £500 in 6 months. This makes sense for farmers and makes millions for Glencore.

Companies like Glencore buy the futures at the price the commodity is predicted to have at the time the contract expires but, if they can outsmart the market, they can sell them at a higher price than they were predicted to be worth. In the case the Guardian reported, which caused the controversy, Glencore were said to have information that Russia were going to ban grain exports. Because demand was then far higher than supply, which is usually met by Russia’s grain exports, the price of grain rose above the contracted price for the futures and, low and behold, Glencore made a killing.

Enter controversy. Glencore paid the lower contracted price for the grain and then sold the grain to the World Food Project for the now higher market price, because they desperately needed it to feed dying humans. Immediately, the transaction reeks of wrongdoing. In a single deal, Glencore made nearly £9 million out of the Ethiopian famine. However, put another way, the WFP just bought food from a company who sells food, and saved thousands of lives doing so.

Those who press a claim of moral wrongdoing here can cite greed, market deregulation and dishonest economic practice. Those who praise Glencore can claim free markets increase liquidity and unintentionally distribute goods where they are needed most. However, all these well rehearsed arguments are simply conjectures based on ideology.

Of course, Glencore’s activity looks questionable, but who are we kidding, they’re in it to win it. Pointing the finger at speculators just masks the real problem: famines aren’t cases for ‘humanitarian’ aid, which implies us going ‘above and beyond’ our actual moral duties somehow, out of the kindness of our hearts; they’re cases for straight up morally obligatory action. In the case of speculation, there’s no case for pressing a claim of moral wrongdoing, as Glencore don’t in any obvious way cause harm. In the case of famine, however, the international community is causally implicated in harming poor countries.

Take two examples cited by the philosopher Thomas Pogge. First, the international community directly upholds the ‘international resource privilege’, which gives any authority in any country, no matter how corruptly it came to power, full ownership rights over its territories resources, and the right to fully confer those rights to any investor it wishes. Because of this, it can use any means to ring the country of all its worth and auction it off to whoever can pay up, without any regard for its people. Second, the international community directly upholds the ‘international borrowing privilege’, which gives any authority in any country, no matter how corruptly it came to power, the entitlement to borrow as much as it likes in the name of its people, without ever relaying them the benefits. Because of this, it confers on its people international legal obligations to pay back the debt, even after the corrupt regime has been replaced.

When someone is causally implicated in harm, this constitutes a wrongdoing and confers a moral obligation. Similarly, when the international community are causally implicated in upholding harmful legal privileges, they acquire a moral obligation to act. Conjecturing about speculation just passes the buck onto businesses like Glencore. They are under no duty to play fair; the international community are.

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