Blog post: I’m voting for Goldman Sachs…

...to win the worst lobby award.

In July 2010, in just one month, the price of wheat increased by 60 per cent. For us in the UK this could mean higher prices for our biscuits and bread but for those in developing countries, price hikes in basic foods like wheat are disastrous and leads to hunger and malnutrition.

By the end of August, demonstrations against rising food and fuel prices were held in Maputo, capital of Mozambique. “I can hardly feed myself. I will join in the protest because I’m outraged by this high cost of living.” said Nelfa Temoteo, a local resident.

And it’s not the first time. In 2008 the world experienced a global food crisis with rapidly increasing prices for basic food products. For example from early 2007 to mid-2008, the price of wheat shot up by 80% and maize by 90% and then after June 2008, the price fell back down.

So what can explain these huge price hikes? And what has all this got to do with Goldman Sachs? They’re a bank after all - they don’t grow, sell or process food, do they?

Unfortunately, Goldman Sachs has everything to do with these price hikes and this is why I am voting for them. The food price hikes of 2008 and 2010 were caused by speculative money flooding into food commodities markets as more and more financial players were betting on the price of food rising. And Goldman Sachs was instrumental in making this happen.

The lobbying activities of Goldman Sachs have paved the way for a new generation of financial gamblers. In the 1930s following the Wall Street crash, regulations were introduced by the US government to limit speculation on food. But in 1991 Goldman Sachs lobbied the US government to weaken these safeguards and the doors were open to rampant betting on the prices of staple foods. Shortly after, Goldman Sachs created new and more complicated contracts (called ‘commodity index funds’) based on a range of commodities including food to allow other financial players to gamble on food prices.

Speculating on food prices has been a highly lucrative activity for Goldman Sachs as they charge fees for advising and helping other financial players access food commodity markets. Last year, they made an estimated $1bn from speculating on food.

The European Commission is currently working on proposals to regulate speculation on food prices in financial markets. However, Goldman Sachs is lobbying hard to weaken proposals for regulations and is well placed within Brussels to do just that. Out of ten expert groups on financial services, Goldman Sachs is represented on three. When the commission formed a high level group on responding to the financial crisis, one of the seven key members was an advisor to Goldman Sachs and three former commissioners have taken up positions with Goldman Sachs at the end of their term.

Goldman Sachs is keen to protect this lucrative source of profit – a profit stream which is made at the expense of the very poorest and most vulnerable people across facing hunger and malnutrition due unaffordable food.

That’s why the World Development Movement is campaigning for effective regulation on food speculation so that companies like Goldman Sachs cannot bet and profit from betting on hunger.

Play our human blackjack game and help spread the word

Vote for Goldman Sachs to win the Worst Lobby Award