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The Real George Osborne: World Development Movement's New Campaign

I have to admit that I find the World Development Movement quite fascinating. They’re running a new campaign to get people to write to the UK Chancellor, George Osborne. The campaign takes the form of little YouTube clips mocking said Chancellor. You’re then encouraged to sign a form email asking that he agree to regulate the commodity markets.

Excessive speculation on food by financial institutions has pushed up food prices, adding £260 to the average UK household’s food bill and leaving millions across the world facing hunger and malnutrition.

The allegation itself is entirely nonsense of course: the rise in UK food prices is largely because the currency has fallen in value and we import 40% of our food.

This is actually their second run at this specific point. Their first report contained the quite lovely following argument. In 2006/8, wheat and corn prices rose strongly. Rice prices were even more volatile. The Same report also noted that there are deep and liquid speculative markets in wheat and corn and very little in the way of such in rice. Their conclusion was therefore that speculative markets increase price volatility.


Yes, quite, they’ve got it the wrong way around. They point to a more volatile market with less speculation and then announce that speculation causes volatility. Some quite serious cognitive dissonance going on there. In their second report they try to answer some of the criticisms of the first:

The US economist Paul Krugman argued that “A
futures contract is a bet about the future price. It
has no, zero, nada direct effect on the spot (physical)
price”.86 Others, including research papers for the
OECD87 and the UK Government,88 have all argued
that financial speculators could only affect the
physical price if they took physical delivery and
held these supplies off the market, thereby
changing the supply of the commodity.

Remember Brad DeLong’s two points. 1) Krugman is always right and 2) If you think Krugman is wrong remember point 1).

But what is really worrying is how they go on to try and refute this point:

This view is based on the economic theory that the
pricing of commodities is led only by the supply and
demand relationship of the physical commodity.89
If this theory were correct recent changes in food
prices would be driven by clear and corresponding
changes in the fundamentals of supply and demand.
However this is not the case. Taking data from
the US Department of Agriculture on global
supply and demand for wheat and maize, there
is no significant shortfall of supply or excessive
demand associated with the sharp price spikes
seen in these markets in recent years.

OK, so we’ve seen large price movements with only small changes in supply and or demand. OK, we’re OK with that observation. Then two pages later we are told this:

The short run price elasticity of supply and demand
for agricultural commodities is also very low, in
other words supply and demand do not respond
quickly to changing prices. People need to eat
and will be willing to give up other expenditure
in order to maintain their levels of consumption.
Production of food takes months or years, so
producers cannot react quickly in response to rising
or falling prices. Therefore only very significant and
long lasting price changes could be expected to
change supply and demand sufficiently to produce
a noticeable change in actual inventories.102

OK, we’re also OK with this. It accords with observations of the real world outside our windows.

However, here’s the problem with the WDM. They seem incapable of putting these two points together. If food demand or supply has a very low elasticity with respect to price in the short term then when we have only a minor change in supply and or demand then we will see large changes in food prices. Because the inverse of supply and or demand not changing very much when prices change is that prices change a lot in response to only small changes in supply and or demand.

That’s what short term inelasticity actually means.

Which is what puts the World Development Movement firmly on my list of left NGOs that I dislike. They’re either too ignorant to understand their own arguments or willing to ignore their own arguments in favour of some other goal. The actual campaign being only a part of some larger desire and little things like facts or details just get over ridden in that chase to reach the larger goal.

Quite what that larger goal is, well, here’s the organisation’s head. Deborah Doane, commenting on her own piece in The Guardian:

@SethFreedman, thank you for supporting our ends if not our means. Perhaps I shouldn’t give away our trade secrets here, but if you want to strike to the heart of capitalism, you need to make sure you have your arrow in the right place first. Why was it that Robert Peston writes that “Goldman and wall street will rise again?” only last week? Why was it that on the day Goldman’s was slated with a $550 million fine that their share price rose by $800 million on the same day?

Because as a movement, simply striking out at “capitalism” without putting an arrow into its cheerleaders, we hit at nothing. And we’re nowhere near putting the final blow to those institutions that hold the world to ransom – and that’s where our campaign aims to hit.

Oh well, if it’s capitalism you’re trying to overthrow then there’s no need for facts, evidence or even logical consistency, is there? The goal is obviously worth any amount of dissembling: you go girl!

Which is, as I say, why the WDM is on my “Tim not like” list. Ignorant and opinionated just isn’t a winning combination.

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