Ever feel like history is repeating itself?

Christine Haigh, food and finance campaigner

Researching the report we’ve released this week on how to regulate food speculation, I was struck by a sense of déjà vu.

Back to fundamentals: why position limits are needed to prevent food price hikes shows how limits on the number of contracts traders can hold are used to prevent speculators disrupting commodity markets almost everywhere that they exist – from São Paolo to Singapore.

The report also tracks their contested introduction in the US following the Wall Street Crash of 1929. At that time, the world was suffering a severe economic downturn following a financial crisis caused by the unregulated and irresponsible gambling of the financial sector. In the aftermath, attention inevitably turned to measures to help prevent the same thing happening again.

However, the financial sector was doing its best to avoid regulation, predicting major problems if its risky activities were reined in. When position limits were first proposed, the president of the Kansas wheat exchange claimed that “any sort of legislation that is enacted will tend so greatly to reduce speculation as to make hedging a most difficult thing.” Again in 1936, in a last-ditch attempt to stave off legislation, the Chicago commodity exchange testified to a US Senate committee that it could not “accept under any circumstances in principle…limitations on speculation.”

In the event, regulators resisted the self-interested arguments of the financial lobbyists and acted in the public interest. History proved that the ‘fears’ of the banks were unfounded – after position limits were introduced in the late 1930s, the markets functioned well for the farmers and traders of real food who use the markets to protect themselves from risk, with relatively low levels of volatility.

Europe now finds itself in a situation strikingly like that of the US in the 1930s. For once, we need history to repeat itself, and for decision makers to put the public interest ahead of the financial sector’s. Unfortunately, with the UK’s financial regulator increasingly recognised as siding with those it’s meant to regulate, the battle is going to be tougher. Take action now to demand that MEPs vote for position limits to curb food speculation in the EU.