The real cause of our financial woes: Greed and Shameless Exploitation

James Ritchie looks behind the headlines

Are you feeling the pinch as a result of rising food and petrol prices? Are interest rates keeping your mortgage repayments/ or rents unacceptably high? You are not alone.
Meanwhile many developing countries are on the brink of civil war as people who were already at subsistence level can no longer afford the food to feed themselves or their families.
The media says the causes of these rising prices are the uncertainty of petroleum supply, droughts and other unpredictable weather events, the growth of food based bio-fuels and the rising standards of living in China and India which is pushing up the global price of food commodities.
This is all true but masks the economic analysis required to find long term solutions.
We are now paying the price of two decades of rapid accumulation of wealth in fewer and fewer hands. We cannot rid the world of poverty unless we rid the world of obscene wealth. Wealth creation is necessary for poverty reduction but without a fairer distribution of that wealth then the only thing that changes is that the wealthy just get richer and economic power is strengthened in the hands of the richest 1% of the world's population. Remember the trickle down theory - if the rich get richer some of it will trickle down into the pockets of the workers. The rich are getting richer all right - and they are pissing on us.
The Sunday Star Times reported (27/4/08) about one winner amid the misery. A key figure behind the US sub prime mortgage crisis, Angelo Mozilo made $US132 million last year despite huge losses on unsustainable home loans at his Countrywide financial empire. The CEO saw his pay and bonus fall 79% to $US10.8m. But as clients failed to keep up with repayments on loans worth $US1.5 trillion, the Californian firm lost $US704m and laid off 11,000 staff. The loans were worth much more than the value of the assets. Knowing that the game was up, Mozilo made $US121.5m by cashing in stock and share options. Meanwhile 2 million US families are likely to lose their homes as the sub prime mortgage crisis caused by white collar crooks like Mozilo bites hard.
The same powerful elite that advocates for labour market deregulation also advocates for financial market deregulation. Labour market deregulation is designed to allow employers flexibility to break unions and pay workers less. This is what happened in New Zealand in the 1990's under the Employment Contracts Act. This is the period when NZ wages fell behind Australian wages. Financial market deregulation allows the financial markets to operate unhindered in the relentless pursuit of profit. This is what has been allowed to occur under the George Bush US administration.
At home, the National Party is advocating less labour market regulation and will not restrict the financial markets. John Key is a former currency trader. He built his wealth on speculation - not on products or services that benefit the people.

What needs to be done?
Firstly, global financial markets must be regulated so there is transparency about the real value of assets and the ability to repay debt. The rich should not be able to turf people out of their houses in order to return greater profits to shareholders. Sustainable economic growth is good, the relentless pursuit of profit to accumulate wealth in fewer and fewer hands is leading us on a path to poverty and war for greater numbers of people.

Secondly, to solve the global food crisis, rich nations like ours need to put the needs of the poor at the top of the agenda. Oil and food- these basic commodities are interlinked in a way which we did not imagine just a few years ago. Paul Vallely writing in Britain's Independent newspaper explains why issues that have been around for some time have suddenly sent world food prices soaring:

"The trigger came when markets realised that last year's drought in Australia, the worst for a century, had halved its wheat harvest. The markets then magnified that blip into a crisis. Speculative activity betting, to you and me begins in the futures market. Then food traders begin to stockpile, which drives up the price for when they later decide to sell. Governments panic; big producers such as Thailand, India, Vietnam and nearly 40 others slap on export restrictions, to conserve their stocks. This drives up the price even further. Hedge funds come in looking for new markets. A handful of people make huge profits in the frenzy. The giant animal feed company Cargill last week (April) announced an 86% surge in profit this quarter. (Fonterra and its shareholders are also making a tidy sum).

"the trouble is that the amount of fertiliser required to do this means that it takes more than a gallon of oil imported from Saudi Arabia and other inputs to produce one gallon of ethanol"

Thirdly, there must be a reversal of the policies which have devastated smallholder agriculture in Africa, Asia and Latin America. The last three decades have seen the industrialisation of agriculture by huge agribusiness companies. Huge quantities of butter, grain and meat produced with the help of subsidies in Europe and North America were dumped on poor nations and local farmers went bust. Development of small holding agriculture ceased. Now the price has gone up. The Agribusinesses now control the whole supply chain- access to the land, the seeds, the crops the marketing and the shelf space in the supermarkets. The small farmer doesn't stand a chance.
In the short term we need food aid for the poor. In the long term put the interest of speculators aside and put in place support for the millions of farmers in developing countries who farm just a few hectares. Increase the production of food from these farmers and assist them with infrastructure, support with modern farming techniques and access to markets and food production could be doubled in a reasonably short space of time. Irrigation, cheap credit and food storage facilities all play a part.

Fourthly we must reduce our consumption of oil, live a more sustainable existence and find alternatives which do not use food as an industrial energy source.

All of this is important for our union and its members. We are food production, transport and storage workers in the global supply chain. The companies we work for can help build or help destroy a sustainable future. Our expertise in agriculture, food processing and supply chains can assist those in poorer nations to be self sufficient and lower the cost of food for all. This will contribute to our long term wealth as a nation much more than unsustainable price hikes in dairy commodities which deliver short term benefits to shareholders but also contribute to the increasing fuel and food costs and high interest rates that all New Zealand working families are reacting to with dismay.
It is a question of balance. We should demand policies for a sustainable future.