WASHINGTON DIARY: Commodity price bubble —Dr Manzur Ejaz

[notesdev]

If governments of developing countries continue to pander to global capitalist forces, running after imaginary foreign investments that are not there anyway, they will be vulnerable to the highest levels of internal unrest and destruction

Rising commodity prices have left fragile developing economies neither here nor there. Developing countries pressured or advised by the World Bank, IMF and the US, opened their markets to attract foreign investments. For most of them, real foreign investments have remained illusive because it was a zero sum game to start with. However, global speculative capitalist forces, unhindered by national restrictions, have started destroying them at an accelerated speed.

Now more than ever, effects of speculation on commodity prices in the Chicago Board of Trade or the Kansas wheat market are immediately transmitted to the rest of the world. Presently, US commodity markets are in the grip of a speculative price bubble similar to the one prevalent in real estate markets. After wrecking millions of households, speculative money has taken over essential commodities such as petrol, gas, wheat, rice etc. And this commodity price bubble has started affecting every corner of the world in the so-called global markets.

The corporate media is trying to avoid the core issue of the emergence and expansion of speculative financial forces. Instead, the causes of rising commodity prices stated in the media are mere trivial afterthoughts. Stated reasons of higher commodity prices neither withstand the empirical test nor economic reasoning.

Most often, rising world population, higher growth rates in China and India, poor weather conditions in the US and Australia, the plunging dollar and alternate use of land for ethanol are blamed for commodity price hikes. Higher growth rates and the plunging dollar are the most touted causes of higher commodity prices in the media. But, if one puts these reasons to test, they do not explain the price hikes.

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