Speculators should be allowed to continue betting on food prices. The Federal Council has recommended that the initiative to stop speculation be rejected. Alliance Sud criticizes the Federal Council’s decision and its arguments. The recent Swiss franc shock makes the problem obvious.
High price fluctuations in the prices of basic foodstuffs create enormous uncertainty and hardship in developing countries. Speculative financial transactions with agricultural products exacerbate this uncertainty. Despite this, the Federal Council recommends rejecting the popular initiative “No speculation with food!” in its dispatch published today.
Price increase as a bogus argument
Alliance Sud considers this decision to be highly questionable. The Federal Council justifies its rejection primarily on the grounds that the initiative is inappropriate: there is a lack of scientific evidence that speculative transactions contribute significantly to food price increases. For Alliance Sud, this is a bogus argument. “The problem for developing countries is not the high food prices, but the massive price fluctuations,” emphasizes Mark Herkenrath, financial expert at Alliance Sud.
Swiss franc shock makes harmful effects obvious
Numerous scientific studies show that excessive financial speculation further exacerbates price volatility and also disrupts the beneficial effects of an orderly financial market. “The Federal Council is failing to take these important findings seriously, despite the fact that Switzerland itself is realizing the drastic effects that rapid price changes can have following the Swiss franc shock,” says Herkenrath.
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