2000s >> 2006 >> no-1224-august-2006

Cooking the Books 2: Commodity markets

  “1p and 2p pieces are now worth more on the commodities market than in the high street”, reported the Times on 12 May. Pre-1992 copper coins are 97 percent copper and, as the price of copper had reached a record high of $8,312 a tonne, they had, theoretically, come to be worth more than their face value. “Commodity prices yesterday”, the report went on, “continued their bull run as traders bet that demand from fast-growing economies such as China would continue.Platinum, nickel, zinc and copper prices hit a new high”.

  Socialists, too, talk about “commodities”. We say that capitalism is “the highest form of commodity production”; that workers’ ability to work is today a mere “commodity”, bought and sold on a market; that people’s needs, and life generally, have become “commodified”.

 The meaning that the financial pages of the papers attach to the word is much more restricted. For them, it refers only to primary products, not just metals such as platinum, nickel, zinc and copper but also to oil and to agricultural produce such as coffee, sugar and wheat. These are indeed commodities in the Marxian sense in that they are items of wealth produced with a
view to being bought and sold, but they are not the only things that are commodities.

 In the Marxian sense, anything produced with a view to being sold is a commodity. Capitalism is the “highest form of commodity production” in that under it most items of wealth are produced as commodities. In addition, the human capacity to work, our mental and physical energies, take the form, as something bought and sold, of a commodity. In fact, this is what distinguishescapitalism from “simple commodity production”, where this is not the case.

 Under capitalism anything, even if not originally produced to be sold, can, and increasingly does, take the form of a commodity, from honour, sex and influence to body parts and past works of art. There is a market for all these things. The tendency of capitalism is for everything to become “commodified”.

 But to return to the commodities of the financial pages, the Times report was unusually frank in admitting that gambling is involved in “commodity markets”. The primary products on sale on these markets have two types of price: a “spot” price, which is the price on the day, and a “futures” price, which is a price at which someone agrees to buy or sell the product at some set future date.

 The economics textbooks say this is to allow the users of the product to plan ahead. This is true but you don’t have to be someone who actually wants copper or oil or wheat or whatever to intervene on a commodity market. When you buy something there is no physical transfer of the product but merely a change of ownership.

 Gamblers can offer to buy a product in the future at a given price even though they don’t want it, in effect betting that the spot price at that time will be higher. In which case they sell – transfer ownership – and walk away laughing with a bigger bank balance, while the product goes to someone who will use it to produce something.

 It’s nice to know that while millions are suffering from malnutrition there are others gambling on the future price of wheat. What a way to organise the production and distribution of the things humans needs to live and enjoy life.

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