Clicking through to the commodities news section on the internet (such as reuters) is like taking a glimpse into the future. The stories there detail the raw stuff of life and the struggles to come to secure access and control over those things. Headlines such as ‘Gold eases as US dollar bumps higher before Powell’s speech’, ‘China’s biggest salt maker urges public not to panic buy after Fukushima discharge’ or ‘India’s food price surge forces government measures to improve supplies’ (to take just one day’s offering) prefigure the social and political events to come.
While we would normally understand a commodity, in Marx’ words as any ‘object outside us, … that by its properties satisfies human wants of some sort or another’ produced for sale, when discussing commodity markets journalists and traders understand them as ‘a market that trades in the primary economic sector rather than manufactured products, such as cocoa,’. So, that is food cereals, oil, metals and the like. The firms that trade in these goods are, as Blas and Farchy relate in their book The World for Sale, an ‘international clearing house for essential goods.’ As they explain:
‘Commodity traders are arbitragers par excellence, trying to exploit a series of differences in prices. Because they’re doing deals to buy and sell all the time, they are often indifferent to whether commodity prices overall go up or down. What matters to them is the price disparity. By exploiting these price differences, they help make the markets more efficient, directing resources to their highest value in response to price signals.’
Or, put another way, they make use of information disparities to make their money, making use of networks of knowledge and connexions in industries to predict and find price disparities to target. The advent of the internet and modern computer communications technology has revolutionised the industry, removing some of the advantages some of the older trading houses had.
Trading water
Such trading is oblivious to human need, and is contrary to the quoted section above, only driven by effective demand. So, news reports that: ‘Water has joined gold, oil and other commodities that are traded on Wall Street, as worries about the uncertainty of its availability in the future rises. The US’s water trade market, the first of its kind, launched on the Chicago Mercantile Exchange with $1.1 billion in contracts tied to California water prices’ (earth.org/water-trade/) is alarming. This will enable spot markets and futures markets over the price of water.
There have been instances of commodities firms cornering the supply of a commodity (such as aluminium) in order to maximise their profits. Commodities markets put social power into the hands of the commodity traders, and give capital power over society. Further, the traders seek to take control of the supply chain, seeking competitive advantage by integrating all the stages of bringing the commodity to market.
In this way, they are recreating the way industrial capitalism emerged, as Jairus Banaji notes in his A Brief History of Commercial Capitalism:
‘Next to monopoly of the raw materials (wool of different qualities, dyestuffs, alum), integration of control over all these separate processes was the true basis of the merchant’s dominance in capitalistically organized domestic industries. (…) By compressing the chain of circulation … vertical integration increased its velocity and re-appropriated a part of the surplus-value that accrued to middlemen.’
Banaji also observes generally through his text how the physical presence of the merchants, and their contacts with political and military power, secure and control their markets, hence the movements and reports about commodities markets ripple out into the political and international realms, driving the actions of governments. This had led to many corruption scandals among the commodity trading world, as they slosh money around to their contacts to secure favourable terms. But, also, they are able to make quick agreements, accepting commodities in lieu of cash, as well as the converse of supplying cash when other financial bodies will not.
For example, in the 1980’s, Marc Rich & Co. was able to cut a deal to supply Jamaica with $10 million worth of oil (without even a formally signed contract). In return his firm secured favoured access to Jamaica’s bauxite and alumina. Further, the firm was able, through creative accounting, to bypass international financial institutions such as the IMF. The flip side of this was when local politicians started to suspect the traders were taking advantage of them, the traders were able to bring to bear international pressure to deter investigation. Similarly, the commodity traders were interested in profits, and would work with (and prop up) regimes of any stripe as long as they could get access to the goods.
Such manoeuvring allowed a relatively small circle of firms, such as Vitol, Phillip Brothers, Cargill, Trafigure and Glencore (who, for example, made $3,408 million net profit in 2018), to dominate many commodities markets.
For the billions, not the billionaires
These firms do provide a useful role in worldwide production in bringing agents in the productive process together, but they make their profits, essentially, from taking advantage of gaps in information. Opening up the information of stocks, orders and production would enable a co-operative community to carry out its own production. As we say in our pamphlet Socialism as a Practical Alternative:
‘On the smallest local scale, information centres could monitor the position of stocks and productive capacity to meet local needs. By collating these statistics, regional information centres would be in a position to know the complete picture throughout the region. This could be achieved by also monitoring the position of stocks, productive capacity and needs among regional production units.A world information centre could collate regional statistics in a similar manner. This would be a connected but decentralised world information system providing any combination of information that people required.’.
The commodities news – as it is – is a record of the minority rule of billionaires. It could become the means of self-control for the lives of billions.
Pik Smeet
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