Ethics of speculation discussion paper - Food Ethics Council

Ethics of speculation discussion paper - Food Ethics Council

The ethics of speculating on food: a discussion paperDiscussionpaperChris Sutton and Tom MacMillan (contact Ethics Council, 39-41 Surrey St., Brighton BN1 3PB, UK | www.foodethicscouncil.orgContents1 Introduction ........................................................................................................................................ 12 Overview: understanding commodity derivatives trading ................................................................. 22.1 The role of derivatives in agriculture ......................................................................................... 22.2 A brief explanation of commodity index funds.......................................................................... 33 The current debate: financial speculation and harm ......................................................................... 43.1 The argument that financial speculation causes harm ................................................................ 43.2 The argument that speculation does not cause harm .................................................................. 53.3 Complexity and uncertainty ....................................................................................................... 73.4 Implications for policy ............................................................................................................... 74 Wider ethical approaches ................................................................................................................... 84.1 Risk and the precautionary principle .......................................................................................... 84.2 Speculation and greed ................................................................................................................ 94.3 Speculation and gambling .......................................................................................................... 94.4 Speculation and social value .................................................................................................... 105 Discussion points ............................................................................................................................. 12References ............................................................................................................................................... 121 IntroductionConcern that speculative investment contributed to recent food price volatility has put the ethics ofspeculation under scrutiny. Public debate and the academic literature have focused on whether financialspeculation in commodity derivatives can be shown to influence food prices, with knock-onconsequences for the world’s poorest people. The stakes are high, as the price spike of 2007-8 isestimated to have pushed a further 40 million people into hunger (De Schutter, 2010, p.2).

The first part of this paper reviews the evidence for and against speculation playing an important part inexaggerating food price volatility, and concludes that much uncertainty remains. Indeed, thecomplexity of both food prices and financial markets, and the limitations of the available evidence,mean that this debate will likely defy definitive resolution.However, evaluating harm caused by actions is only one of the approaches people commonly take todeliberating on the ethics of public behaviour. Alternative approaches which focus on evaluatingconduct or relationships, depend less on being able to determine cause, and may therefore beparticularly helpful to decision-makers where the empirical evidence is ambiguous. The second part ofthis paper considers how some of these wider approaches to ethical thinking might bear on publicdebate and decision-making about speculation.The paper begins with a brief overview of commodity derivatives trading (section 2), beforeconsidering the current debate about the impact of speculation (section 3) and wider ethical aspects(section 4) in turn. The paper ends with some points for discussion.22 Overview: understanding commodity derivatives trading2.1 The role of derivatives in agricultureAt the centre of the debate on financial speculation and food prices are complex derivative products,known as such because their value is derived from some other underlying asset. Markets for aparticular type of derivative known as a ‘future’ enable the producers, purchasers and others involvedin the supply chain of certain agricultural commodities to ‘hedge’ against the risk that commodityprices will move unfavourably. Although important where they are used, futures markets provide onlyone of a range of approaches that farmers use to manage the risks inherent in agricultural production.To offer a very simple example, a US farmer sows wheat in the spring but expects to sell her harvestedcrop in October. At the time she plants her crop, she does not know what the price will be when shecomes to sell and therefore cannot know what level of profit she will make or even if she will make aloss. If she has a buyer arranged, she could enter into a forward contract with the buyer, agreeingbilaterally up front the price at which she will sell the wheat. This reduces the risk that she will losemoney due to the price falling, and passes it on to the buyer. Of course, he may be wanting to hedgeagainst the risk that the price will go up.An alternative way of managing this risk is to enter into a futures contract traded on a central exchange.The farmer entering the futures market will use standardised contracts which include specificationscovering commodity grade, quantity, delivery location and delivery date. These standardised contractsprovide a more ‘liquid’ market by appealing to a larger number of buyers and sellers than would beinterested in trading directly with the farmer. The main futures markets for commodities are found inthe United States, with Chicago prominent in several commodities including wheat and maize. Withinthe EU, the main markets are London and Paris (European Commission, 2009, p.4).

To complete our example, the farmer will sell a number of standardised futures contracts that mostclosely match the wheat she is planning to sell at an appropriate delivery date in the future. As thedelivery month approaches, the farmer will close out her ‘hedge’ position in the futures market bypurchasing futures contracts equivalent to the one she originally sold, and will proceed to sell her wheatharvest on the cash market. Selling and buying futures contracts has effectively enabled the farmer tomanage the risk of adverse price movements. As in this example, futures contracts very rarely result inactual delivery of the commodity being traded (Kolb and Overdahl, 2007, p.24).32.2 A brief explanation of commodity index fundsThose who see financial speculation as a cause of the 2007-8 food crisis focus on speculation viaparticular types of financial instrument known as commodity index funds.Ninety-five percent of commodity index funds are based on the GSCI and Dow Jones commodityindices (Baffes and Haniotis, 2010, p.6). These are calculated by taking a weighted average of acombination of commodity futures prices. From Figure 1 (overleaf), it can be seen that agriculturalcommodities form only a small proportion of these indices.Commodity index funds are designed to enable investors to have exposure to a range of commodityfutures markets without having to invest in individual commodities futures. Commodities have becomeespecially attractive to large institutional investors such as pensions and hedge funds as they arebelieved to move in the opposite way to shares and bonds and provide a hedge against inflation(Masters, 2008).Commodity index funds come in a number of forms, but are predominantly traded over the counter(OTC) (De Schutter,2010, p.12). The defining feature of OTC transactions is that they are bespokebilateral contracts made directly between two institutions without the transparency of being traded onan exchange. In the US in 2008, these types of transactions accounted for $9 out of every $10 investedin index funds (Epstein, 2008).Figure 1: Commodity index components. Data from Dow Jones Indexes (2010) and Standard and Poors(2010).

43 The current debate: financial speculation and harm3.1 The argument that financial speculation causes harmThose who argue that speculation is a major influence on food commodity prices, argue that it is thegrowth in demand for commodity index funds that has put upward pressure on commodity prices aswell as or instead of underlying commodity supply and demand conditions. In other words, the marketmechanism for commodity prices has broken down, causing unnatural price rises and contributing tothe suffering of vulnerable people.Deregulation in the financial services sector at the turn of this century initially encouraged the growthof complex financial derivatives including commodity index funds. More recently, as the sub-primecrisis dried up returns elsewhere in the financial system, demand for these products by institutionalinvestors increased still further (De Schutter 2010, pp.5-6).The purchase of a commodity index fund in itself does not directly affect the commodities futuresmarkets. However, the financial institutions that sell commodity index funds are exposed to changes incommodity futures prices, and therefore hedge their risk by purchasing the underlying componentcommodity futures contracts. At no point are actual food commodities bought and sold on the cash(also known as spot) market.Michael Masters, a hedge fund manager, argued in testimony to the US Senate that part of the problemis that banks hedging in this way are exempt from position limits laid down by the Commodities andFutures Trading Commission (CTFC) designed to limit the ability of market participants to manipulatethe market. This enables them to assume very large positions (Masters, 2008). These can be more thanten times the size of positions held by other market participants (Sanders, Irwin and Merrin, 2008, p.8).Masters and Olivier De Schutter, the UN Special Rapporteur on the Right to Food, argue that financialinstitutions continually accumulating large ‘long only’ (buy only) positions in commodity futuresmarkets, generate upward momentum in food commodity futures prices that ultimately translates intoincreased food commodity spot prices (De Schutter, 2010, p6; Masters 2008).De Schutter concludes that, in 2008, food prices ultimately collapsed when the global financial crisismeant institutional investors could no longer maintain their long positions and pulled out of the market(De Schutter, 2010, p.6).De Schutter is not alone in arguing the significance of financial speculation. While Masters hasidentified the rapid growth of ‘long only’ positions taken by commodity index swap dealers as pushingcommodity prices up, the prominent financier George Soros argued in a magazine interview thatfinancial speculation was creating a speculative bubble driving up the prices of commodities (Soros,2008; Masters, 2008). Among academics, the economist Jayati Ghosh concludes that the wild swings inprices could not be explained by underlying ‘real’ economic factors, and the price movements “areclearly” a product of financial speculation (Ghosh, 2010, p.77), while development economist Peter

Timmer concludes that, in the short run, some of the price increases in corn and wheat were “almostcertainly caused by financial speculators” (Timmer, 2009, p.38).53.2 The argument that speculation does not cause harmWhile the argument above makes intuitive sense, it has been difficult to prove conclusively. The debatecentres around whether or not the presence of a large amount of commodity index fund investment canalter prices. In other words, is the market mechanism broken? Derek Headey and Shenggen Fan of theInternational Food Policy Research Institutute (IFPRI) argue that in order to show that financialspeculation was a cause of the 2007/8 food price crisis, it must be proven both that the financialspeculation has increased futures commodity prices and that futures prices in turn affect underlyingfood commodity spot prices (2010, p.41).Attempts to prove empirically the impact of commodity index funds on prices have had limitedsuccess. Quantitative analysis by Christopher Gilbert, an economist from Trento University, foundevidence of speculative bubbles in energy and metals futures but less so in agricultural commodities(Gilbert 2010, p.28). An EU study found it difficult to identify “a straightforward relationship” betweenthese investment flows and price developments (EU Commission, 2008, p.13).George Rapsomankis (2009, p.19) of the United Nations Food and Agriculture Organisation (FAO)argues that in order to shift prices above fundamental values, speculators would need to actunpredictably, otherwise other informed market participants would see a profitable opportunity toarbitrage and move the market back to its fundamental price. In reality, the mechanical transactions thatcommodity index traders engage in to purchase futures are well-known as are the target componentweightings of the indices (Figure 1) (Sanders, Irwin and Merrin 2008, p.15).While Gilbert counters that price movements above fundamental values are possible due to theasymmetry of information held by different market participants, economists Irwin and Sanders find thisunlikely. They argue that in order for speculative activity to have moved prices above theirfundamental values, other highly experienced traders in futures markets would have to act on the beliefthat commodity index traders possessed better market information than them (Gilbert, 2009, pp.13-14;Irwin and Sanders, 2010, pp.7-8).As well as proving the influence of commodities index funds on futures markets, the impact on actualfood commodity prices also needs to be demonstrated. A number of observations show that theselinkages are not straightforward. If speculation was causing changes to underlying commodity prices,then this would be expected to lead to increased stocks as producers hold stocks in anticipation ofhigher prices in the future. In reality stocks were at very low levels and could themselves be seen as acause of the food price crisis (Bobenrieth and Wright, 2009, p.9).Observed changes to commodity spot prices also cast doubt on the role of commodity index funds.Despite very large long positions held by commodity index fund traders, there was no crisis inlivestock commodities futures. Meanwhile, futures prices for rice and fluid milk increased rapidly, but

are not included in commodity index funds. To add further doubt, there were price spikes in durumwheat and edible beans, which don’t have futures markets (Sanders, Irwin and Merrin, 2008, p.15).For some commentators, the role of financial speculation is seen as less important because the interplayof more fundamental factors is seen as more likely to explain the food price crisis.These other contributory factors include:• Oil prices – energy and food prices are ever more entwined on the supply side due to fertilizers andtransportation, and on the demand side via the biofuels industry (European Commission 2010, p.5).The US diverted more than 30% of maize production into biofuels in 2007 (Ghosh, 2010, p.73)• Historically low global food stock levels resulting from supply shocks and diversion of crops tobiofuels. This is seen as a similarity to the situation ahead of the 1970s food crisis (Bobenrieth andWright, 2009; Piesse and Thirtle, 2009, pp.120-122)• Macroeconomic factors such as low interest rates and a low US dollar, the impact of the USeconomy being particularly important due its dominance in world grain markets (Headey and Fan,2010, p.7).• The impact of export restrictions implemented by governments increasing food prices andgenerating panic (Piesse and Thirtle, 2009, p.123; Timmer, 2009, p.16).Figure 2, taken from Headey and Fan (2010, p5), shows a conceptual framework illustrating thecomplex interplay of the components affecting commodity price.6Figure 2. The complicated nature of commodity price formation. Reproduced from Headey and Fan(2010, p.5).

73.3 Complexity and uncertaintyDebates around the impact of financial speculation on food commodity price are set to continue. Themany complex factors that can affect both food prices and financial markets mean that a definitiveresolution of the issue is unlikely. This complexity includes the interplay of multifarious supply anddemand conditions on food commodity production, and how the impacts of these are transmitted intoprices internationally, nationally and to local market levels. This complexity means that accounts ofwhether or not speculation causes harm cannot rely only on illustrating correlations – multiple factorscould explain the same phenomena, and diverse, empirically accurate correlations have beenmarshalled to support both arguments. Therefore, the debate also hinges on theoretical explanations ofcause and effect.Yet complexity and uncertainty also extend to our understandings of how the economic system andfinancial processes operate in theory and how they are experienced in reality. Political scientists Archerand Fritz (2010, p.120) remind us that markets are not following natural laws “but are ultimately basedon human beings and their interests, ideologies, and normative convictions which [do] not necessarilyhave to follow the rational actor model”. Inasmuch as many critics of speculation question the validityof classical economic assumptions about the rational behaviour of market actors and their access toinformation, economic modelling based on such assumptions does little to resolve the controversy.Theoretical models may suggest that speculation is not altering commodity prices, yet the experience ofUS wheat farmers and elevators increasingly unable to use futures markets to hedge production anddistribution activities (US Senate 2009, pp.44-49), illustrates that markets are at the very least notoperating as they should.3.4 Implications for policyThose who see commodity index funds as a significant cause of food price volatility advocate a strongregulatory approach. New legislation in the form of the Dodd Frank Act in the United States, andproposed in Europe by Commissioner Michel Barnier, aims to improve transparency and reduce risk infinancial markets by standardising OTC transactions and requiring that trades be cleared using centralbodies (Gensler, 2010; Barnier, 2010). As most commodity index funds fall under this description, thetransparency of food commodity futures markets will be improved, thus providing data that will help inthis debate in due course.Agreement about more direct interventions, such as the implementation of mandatory position limitswhich would affect the ability of financial institutions to hold large positions in food commoditymarkets, is less certain. The UK government does not support a mandatory approach, arguing that thecase that position limits are effective at controlling prices has not been made (FSA and HM Treasury2009, pp.31-32). It remains to be seen how this legislation will be implemented and what effect it willhave on food price volatility.A common theme throughout the literature on this topic is the need for more data. This includesinformation on futures markets to better understand their functioning and impact on commodities prices

(Sanders, Irwin and Merrin 2008, p.18; IOSCO, 2009, p.3), but also information on the linkagesbetween energy prices and food commodities (Baffes and Haniotis, 2010 pp.18-19) and betterinformation about fundamental food demand, supply and export capabilities (FAO, 2010, p.68;Bobenrieth and Wright 2009, p.10).Alongside reform of financial markets, De Shutter calls for the establishment of grain reserves tocounter extreme food price volatility, manage risk and to respond to emergencies (De Schutter, p.8),similar to an approach proposed by IFPRI (Von Braun and Torero, 2009). In an interview discussingthe 2010 price rises, the Financial Times commodities editor Javier Blas notes the possibility ofinternational cooperation to create reserves but notes disagreement, particularly from the US and EU(Blas 2010).84 Wider ethical approachesAs Irwin and Sanders note, the debate over the effect of commodity index funds on food prices“continues unabated” (2010, p.5). To a large extent this seems to be due to the difficulty in establishingconclusive proof either way. Yet while there may be doubt on the significance of the role of financialspeculation in food price volatility, this does not exhaust the ethical debate. Wider questions canlegitimately be asked about the value of commodity index funds to the wider economy or to society atlarge. Indeed, despite the focus of academic debate on demonstrating or disproving that speculationcauses harm, the public and political outrage over speculation may have its roots in such widerconcerns. Engaging with broader ethical questions may be practically helpful in providing guidance fordecision makers where the empirical evidence on the consequences of speculation remainsinconclusive.4.1 Risk and the precautionary principleThe current debate about financial speculation has been focused on defining the extent to whichfinancial speculation causes harm. This debate implies that policy responses take a risk-basedapproach, based on an assessment of the probability that financial speculation influences food pricesand the extent of harm caused. The precautionary principle – a contested but widely used concept –may offer an alternative way of deciding how to act. A risk-based approach relies on two parameters:first the hazardous outcome and second the probability that this outcome occurs. Risk governanceexpert Andrew Stirling (2007, p.310) argues that whilst a risk-based approach is suitable where there isstrong confidence in the assessed outcomes and probabilities, it is not applicable to situationscharacterized by uncertainty, ambiguity or ignorance. It is in these circumstances that the precautionaryprinciple is valuable in providing guidance by “giv[ing] the benefit of the doubt to the protection ofhuman health and the environment, rather than to competing organizational or economic interests”(Stirling, 2007, p.312).As an alternative way of making decisions about financial speculation and food prices, theprecautionary principle might be instructive. Given the uncertainty and complexity of assessing the

impact of financial speculation, and the extreme hardship caused by volatile and high food prices,should financial speculation should be avoided in case it exacerbates such harm?94.2 Speculation and greedA common theme accompanying or underlying the debate on financial speculation is the perceptionthat those involved in financial speculation are motivated by greed. The World DevelopmentMovement concludes that “allowing gambling on hunger in financial markets is dangerous, immoraland indefensible. And it needs to be stopped before any more people suffer to satisfy the greed of thebanks” (Jones, 2010, p.4).Associating financial speculation with greed challenges the motivation and values of the speculatordirectly, irrespective of the effect of his actions. By greed, people generally mean not simply the desirefor money or other things, but an excess of that desire. While there is an obvious link to religiousthought here, with greed recognised as one of the seven most deadly sins in the Christian tradition, thisthinking also has origins in philosophy.In Aristotelian philosophy, moral virtue is about finding the balance between two unacceptableextremes. By this thinking, we should desire neither too little wealth to the detriment of those whodepend on us, nor too much which would signal an irrational appetite for wealth ahead of perceived‘higher external goods’, which might include honour, friendship and love (Hadreas, 2002, p362, pp364-5).How could this help in the debate over speculation and food prices? If speculators in foodcommodities are motivated by an excessive desire for money, is this simply an issue of personalmorality for them or does it imply a wider problem for society? Is society poorer because speculatorsare focusing on themselves rather than perceived ‘higher’ values – compassion, for example?If speculation is seen as problematic from the perspective of greed, does this imply that action isnecessary, for example taxing speculative activity to make it less attractive?4.3 Speculation and gamblingAs well as being associated with greed, financial speculation is also connected in public discourse withgambling. The similarities between speculation and gambling suggest at least three ethical concerns.The first is about the morality of gambling as such. It relates to questions over the appropriateness ingeneral of gaining benefits based on chance rather than effort, and the potentially harmful effects ofgambling on those who partake in it. These are largely questions of individual morality which, inliberal societies, are by and large regarded as is matters of personal choice unless they also cause harmto others: it is the public consequences, rather than the personal implications, that are seen as relevantpublic decision-making. Nevertheless, gambling is banned or restricted in many societies: where that isso, are the similarities with speculation sufficient that a clear case would need to be made for nottreating it the same way?

The second concern is whether some personal acts are so at odds with the common morality that theyshould be restricted even if they do not cause any direct or indirect harm to others. Even citizens ofliberal societies in practice consider some acts to be so wrong as to warrant prohibition, even if theevidence of their harm is limited. By this thinking, speculating on food prices might be wrong becauseit means benefitting from others’ misfortune, or trivialising life-or-death events. Here, the mostinstructive comparison may be with spread-betting: numerous websites are available that enableindividuals, from the comfort of their living rooms, to wager on price movements of wheat, coffee,soybeans or corn amongst many other commodities. A more extreme point of comparison would be‘dead pools’, where punters bet on when named celebrities will die. Whereas commercial ‘dead pools’are unusual and not operated by mainstream bookmakers – when the bookmaker Paddy Power offeredodds on the assassination of President Obama, it was greeted by such disgust from the public and thebetting industry the odds were withdrawn (Belfast Telegraph, 2008) – such wagers are legal. Shouldcritics who argue that food commodity speculation is so at odds with the common morality as towarrant tight limitation, irrespective of the evidence of harm, also in principle support restrictions onspread-betting and gambling that relies on the serious misfortune of others?Of course, while the comparison with gambling may be helpful in clarifying the reasons underlyingconcern over the speculation, the scale of financial trading on food commodity markets dwarfs theglobal gambling industry. Indeed, while comparatively few people directly engage in either spreadbettingor commodity derivatives trading, very large numbers of people in affluent societies areimplicated in the latter, through the financial institutions and corporations on which we depend forbanking, pensions, insurance and consumer goods: our money finances speculation. Thus, the thirdconcern arises from the fact that speculation differs from gambling since it is an institutional practice,not primarily a question of personal morality, and relates differently to the public interest. In practice,individuals may have comparatively little freedom to influence the conduct of the financial institutionsthey engage with, and therefore rely on the market being regulated to ensure an approximate fit withtheir personal values. Should it be made easier for individuals to avoid interacting with organisationsthat engage in financial speculation on food commodities?104.4 Speculation and social valueWhereas the arguments about greed and gambling consider the values of individuals engaged inspeculation, a related perspective questions the social value of speculative activity. Rather than arguingwhether or not financial speculation causes harm, the emphasis here is on whether financial speculationpromotes good. This is not a new idea. In a critique of financial speculation written in 1902, John A.Ryan, a catholic theologian and economist, argued that whilst the miller adds utility by turning wheatinto flour, and an investor adds utility by providing capital for use in productive business, a speculator“add[s] nothing to the utility of any property” (Ryan 1902, pp.335-6).As Angel and McCabe (2010, p.278) argue, financial speculation can provide a useful role, for instanceby taking on the risk of other market participants and enabling them to produce more than theyotherwise could, providing market information to help set more accurate prices and providing theliquidity that enables markets to operate more efficiently. As financial speculators usually aim to buy

when prices are low and sell when prices are high, they can even be seen as reducing the extremes ofcommodity prices (De Schutter, 2010, p.4).However, the degree to which complex financial products such as commodity index funds provide suchbenefits is more questionable. Masters (2008) argues that, by assuming ‘long only’ positions,commodity index funds reduce rather than provide liquidity. Additionally, if futures contracts arebought regardless of price, to what extent can this contribute to reducing extremes of commodityprices?With the advent of increasingly complex financial innovation, is there a more general ethical issue herewith ensuring that our financial system operates to provide social goods? Adam Smith (1986, p.119) isoften quoted by those in favour of a laissez-faire approach to the economy, epitomised in the famousquote that “it is not from the benevolence of the butcher, the brewer or the baker that we expect ourdinner, but from their regard to their own interest”. However, Smith also recognised that the pursuit ofprivate gains could lead to wider social loss. He was deeply critical of ‘prodigals’ driven by a desirefor present enjoyment and ‘projectors’ who were essentially speculators taking excessive risks (Sen,2000, p.125).In the aftermath of the credit crunch, this is an issue that has come to the fore within the financialservices sector. In a 2009 speech, the chairman of the Financial Services Authority questioned thesocial value of some recent financial innovations, arguing that the elements of the financial servicessector should “recommit to a focus on their essential social and economic values”, suggesting thatwhere profitable activities are unlikely to have either direct or indirect social benefits, banks shouldwalk away from them (Turner, 2009). Meanwhile, the chairman of HSBC bank argued that “there is anoverriding need to extend the understanding of corporate sustainability to include responsibility forbuilding the business as a whole in a way which enhances the common good”(Green 2009).While the banking industry created commodity index funds, the demand for them comes frominstitutional investors such as pension funds, insurance companies, and hedge funds as well as banks.As financial returns disappeared in other markets, more and more of these investors have been attractedto commodities markets that were deemed to be more stable (De Schutter, 2009, p.6). This move overto commodities may then indicate less a strategy of wealth maximisation, and more a strategy ofseeking any available return and minimising risk during turbulent economic times. Where futuresmarkets were created to help agricultural producers manage risk, are they are now providing thatfunction to other sectors of the economy?The attractiveness of commodity index funds could then reflect a wider characteristic of the economicsystem: that it depends on continual economic growth seemingly regardless of how that growth isachieved. In his book ‘Prosperity without Growth’, sustainable development expert Tim Jackson talksof a dilemma between economic growth, which is unsustainable, and ‘de-growth’, which is unstable.Failure to pursue a growth policy currently leads to recession, and consequently losses in livelihoodsand wellbeing (Jackson, 2009, pp.62-64). This dependence on growth may go some way to explain the11

deregulation of the financial services sector, which can contribute large amounts to national income,especially in the UK.Does it matter that the economic system can generate the “socially useless” financial productsdescribed by Lord Turner (2009) or are economically profitable activities to be encouraged, regardlessof societal worth, as means to the end of income generation? How can the economy be improved tomake it more socially responsive?125 Discussion points• Should policy responses to financial speculation in food commodity markets be risk-based orfollow the precautionary principle?• How can values-based approaches assist in making decisions about the appropriateness of financialspeculation in food commodities?• Should individuals be better able to take an ethical position on financial speculation and food intheir dealings with banks and corporations? How might this be achieved?• Does financial speculation in food commodity markets reflect a wider dependence on anunsustainable model of economic growth?• How can the financial system be changed to better incorporate social values and ‘the commongood’?• Financial derivatives provide a mechanism for large producers in developed countries to hedge risk.What mechanisms are available for assisting developing country commodity producers to mitigaterisk?ReferencesAngel, J. and McCabe, D. (2010) ‘The Ethics of Speculation’ Journal of Business Ethics. Vol. 90.Pp.277–286Archer, C. and Fritsch, S. (2010) ‘Global fair trade: Humanizing globalization and reintroducing thenormative to international political economy’, Review of International Political Economy, Vol. 17,No.1 pp.103-128Baffes, J. and Haniotis, T. (2010) ‘Placing the 2006/08 Commodity Price Boom into Perspective’ TheWorld Bank Development Group. Policy Research Working Paper 5371 [online] Available at:

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