A senior official from the UN Conference on Trade and Development (Unctad) has said that Unctad is in the process of quantifying the effects of finacialisation and speculation in commodity markets, as Unctad research has found a direct correlation between these elements.
Heiner Flassbeck, director of the division on globalisation and development strategies, Unctad, said: “If you have the kind of cross-market correlations that we find over a very long period of time, and they are absolutely stable, then you cannot argue anymore that the commodity prices are driven by supply and demand. Then the supply and demand for copper or wheat drives the Standard & Poor’s 500, this is very implausible, to be mild. Just recently, we have done a study for the G20 about the macroeconomics of commodity volatility and problems that producers and consumers are facing.”
Flassbeck cited a recent study produced by two young researchers that show very strong correlation in high-frequency markets. “If you take high-frequency between shares and commodities, you find even more stable correlations on these markets.”
Flassbeck said that in some cases, speculation and financial markets dominate commodity markets. “The oil market is the best example as the most financialised market, and I find a correlation between the Brazilian Real and the Japanese Yen exchange rate and the oil price at 100% over many months. No one can say that this is the result of supply and demand, Saudi Arabia has flooded the market with oil over the last couple months. The oil stocks are absolutely full but the price went up, so this is clearly the result of financialisation.
The Unctad official said that commodity speculation is a more pressing issue than currency speculation, as “we do not have a market economy if we have these distortions coming from the financial markets”.
Flassbeck also supported the call for a UN task force for directly advising and assisting countries regarding their unique individual trade and development needs.
He said that while his agency cannot compete in terms of funding, it can certainly provide the alternative intellectual input to the IMF and World Bank, who have a narrow minded neoliberal, free-market oriented viewpoint that is responsible for many major counterproductive policies. While Unctad does not have the funding mechanism of the IMF and World Bank, Flassbeck said that Unctad’s policy recommendations are often best supported by regional banks.
Flassbeck said that relatively minor financing would allow for these kinds of missions, as all that is required is the staff needed to conduct data analysis. He said that it would be helpful to have an increase in funding to be able to do these kinds of activities on a larger scale, “because we can go to one or two countries per year, but we cannot go to five or ten”.
Flassbeck’s comments were made at the launch of a new publication titled ‘Trade and Development Report, 1981-2011: Three Decades of Thinking Development’.
The publication reviews 30 years of Unctad’s work in challenging the Washington Consensus: an economic ideology marked by deregulation, privatisation, and trade and labour liberalisation policies. The consensus was a reflection of neoliberal and free-market fundamentalist thinking, strongly supported by the Bretton Woods institutions of the IMF and World Bank, as well as academia, the media and policy makers. It was widely implemented in Latin America, Africa, and later the developing and less developed countries.
The Trade and Development Report (TDR) was first launched in the 1980s, a time often referred to as the lost decade, as a counter argument to the often destructive and counterproductive policies of the Washington Consensus.
The TDR has been a critical tool for Unctad’s work in providing an alternative viewpoint on development from the perspective of less developed and developing countries.
Alfredo Calcagno, Head of Macroeconomics at the Division on Globalisation and Development Strategies, Unctad, said that the studies conducted by Unctad for 30 years that are presented in the new publication are useful not only for the history of economic thinking, but also for understanding today’s world with its economic challenges. In three decades of producing the TDR, “Unctad has also come up with an alternative approach for analysing development, and this is an approach that we think will be in the future a valuable asset for understanding present economic challenges and posing new policy recommendations for development strategies”.
Source: Gulf Times