Tuesday, November 11, 2008

Flawed system


Activists are calling for a re-examination of the capitalist system to overcome the social and economic ills of the world.

THE current global food and energy crises have one thing in common – they deal with commodities which are vulnerable to speculative trading on the world stock exchanges.

These commodities are traded in the futures markets where investors do not buy or sell a physical commodity like rice or crude oil, but merely bet on price changes. Hedge funds and other speculative investment funds control about 60% of the wheat traded on the global commodity markets. So lucrative is this business that speculative investment increased from US$70bil in 2006 to US$215bil, a 300% growth within a two-year period.

Agri-business has transformed food into a speculative commodity as opposed to ensuring peoples’ right to food and a livelihood.

Most Malaysians will remember the criticism levelled at hedge fund investor George Soros by then Prime Minister Datuk Seri Dr Mahathir Mohamad for manipulating the futures market and triggering the Asian financial crisis of 1997.

As the 7th Asia-Europe People’s Forum (AEPF) got under way in Beijing last month, participants were reminded of how the world economy had lurched from crisis to crisis in a global financial system rooted in increased deregulation and liberalisation, and where national governments have no control of how commodities are traded.

AEPF is civil society’s parallel meeting to the annual Asia-Europe Ministers Summit (ASEM), and serves as a platform for social activists to identify, analyse and work on critical issues affecting the people of the two continents.

Its international organising committee member, Charles Santiago, said back in 1998, it was clear, from the social movements and civil societies of Asia and Europe, that a radical new policy or development model was needed – one which addressed the impact of economic policies on ordinary people, human rights and the environment.

“In short, we demanded that ASEM should broaden its agenda to include governance and human rights issues, environmental sustainability and people-centred development,” he said. However, he added that governments did not heed the call.

He pointed out that ASEM had allowed the business sector a representation in its meeting but did not provide the same to AEPF which represented grassroot views on issues that affect workers, farmers and consumers.

Santiago, an opposition Member of Parliament in Malaysia, said instead of reflecting on the dangers of rapid liberalisation, deregulation and privatisation, governments and development institutions like the World Bank and International Monetary Fund allowed neo-liberals to launch an even more extensive assault on the global economic system.

“The circuits of finance capital and the food and energy crises are intimately related. Agri-business has transformed food into a speculative commodity as opposed to ensuring peoples’ right to food and a livelihood. In fact, at the heart of the food crisis are neo-liberal policies that focus on free trade as opposed to self-sufficiency,” said Santiago.

The US Congress recently passed a US$700bil rescue package, while the British government announced a £500bil bail-out plan to save its financial institutions.

Development activists warned that the volatile financial system, if left unchecked, could lead to increased poverty and social inequity. This would compromise the Millennium Development Goals (MDGs) programmes set out by world leaders in 2000. The goals include halving world poverty, putting all children in school and halving the number of people without access to drinking water by 2015.

Other non-traditional threats to regional security and world peace are aggravated global warming, environmental degradation, food crisis, infectious diseases, increased scarcity of resources, development debts, trade agreements, human trafficking and professional crimes.

The three-day forum highlighted the debts accrued by developing countries through loans from financial institutions like the World Bank and the Asian Development Bank.

The loans were channelled towards infrastructure projects like bridges, power plants and dams, and urban development and agricultural schemes such as cash crop plantations.

In most projects, cost overrun and poor implementation resulting in poor yields or structural defects, severely undermined the benefits of the project and the government and people could not afford to settle the debt.

Loans come with unfavourable conditions laid down by the lender. In the Philippines, the agricultural sector was forced to compete with foreign produce which enjoys huge subsidies from their home states. The country’s rice farming sector was badly hit due to unfair competition.

Lopsided, non-transparent trade agreements will further weaken the traditional sector which employ millions of workers. To a large extent, the traditional sector guarantees food sovereignty of the people so that they do not have to rely on imported food items which are dictated by artificial market mechanisms like futures trading.

Of huge concern is the on-going negotiations on the European Union-Association of Southeast Asian Nations Free Trade Agreement (EU-Asean FTA) which was launched in May 2007 without public consultation.

Individual member countries of Asean are involved in a total of 128 FTAs in varying stages of development. As a bloc, it is involved in six other FTAs with Australia-New Zealand, China, India, Japan and South Korea, besides the EU.

Meanwhile, traditional threat in the realm of military power saw military expenditure reaching a new height that observers said is on the verge of a post-Cold War renewed arms race.

The forum also discussed the unresolved compensation to victims of weapons of mass destruction, including the atomic bombs that were dropped in Hiroshima and Nagasaki that ended World War II, and the use of the defoliating chemical Agent Orange by US troops in the Vietnam War. The anti-nuclear movement activists called for a world that is free from nuclear weapons.