The Law of Unintended Deregulation Consequences
I have been critical of the Globe‘s business reporting practices in the past (especially its tendency to quote Bank economists as “objective” observers of economic events) but on Saturday, it ran one of the best business pieces I’ve read in a long time.
The article, titled “Who is responsible for the global food crisis?” is a solid and thorough piece of investigative journalism that shines a bright and much needed light on the role deregulation has played in driving the current increase in food prices.
It also dovetails nicely into some important research into the financialization of our economy. Our own Jim Stanford has written about this in the past but there is also some excellent, and more recent work, being done by German Post-Keynesians on this topic. For those interested, I strongly recommend reading the recent (somewhat technical) working paper by Eckhard Hein (Vienna University of Economics & B.A.), which does a nice review of the literature and which shows how (with the help of Kaleckian models) the financialization process tends to be unstable in the medium to long run.
Problem with that paper is that it does not fit the facts of financialization and shareholder value in Canada. Corporate dividends as a percentage of corporate profits have been declining in Canada since 1991.
http://rppe.files.wordpress.com/2008/05/dividends.gif
The Globe article fails to mention Cargill’s heavy, and now obscenely profitable, hand in the commodities markets.
It also fails to mention that futures speculators, and yes, grain elevator owners like Cargill, further drive prices up by borrowing.
The Globe has twisted farmers’s outcry over the Fed-Morgan deal. Watch central banks step in to pick up Cargill shares.
And continue to work quietly away, changing the Bank of Canada Act in Bill C-50 to allow the BofC Governor to pick up shares at will, without informing anyone, as you’ve noted in your blog posts, Arun, all the while mouthing transparency.
Leigh