Economist who warned of global financial crash sees looming food crisis

There’s an old saying that those who cannot remember the past are condemned to repeat it.

But what of those who saw it coming, warned the rest of us, and were ignored, only to stand up 15 years later and realize we’ve built a much bigger house of cards, this time with the world’s dinner sitting on top of it?

Back in 2007, a political economist named Anastasia Nesvetailova published a book warning that the global financial system was drunk on cheap credit and shaky mortgages. She thought nobody would pay it any mind.

London was booming, the champagne was flowing, and the banks were handing out money like candy at a parade. But then the music stopped.

Lehman Brothers folded up like a cheap suitcase, and the world got a painful lesson in what happens when a few big players run the table with borrowed chips.

Now that same woman sits in a high office at the United Nations, looking at the global food supply, and what she sees ought to make your blood run cold.

She says the financial crisis of 2008 will look like a picnic compared to what’s coming if we don’t pay attention to who’s really running the grocery store.

The problem, stripped of all its fancy jargon, is that five giant companies have their hands on just about everything you eat.

That’s not an exaggeration. Depending on how you count it, somewhere between 70 and 90 percent of the global food trade is controlled by a handful of names you probably never think about while you’re pushing a cart down the aisle.

They go by the initials ABCCD, or just the Big Five.

They are Archer-Daniels-Midland Company, Bunge, Cargill (all three American), China Oil and Foodstuffs Corporation, and the French-Dutch Louis Dreyfus Company.

They own the grain, the shipping, the fertilizers, the logistics.

They are the pipeline from the farmer’s field to your kitchen table, and they sit right in the middle of it all. They have faced allegations of corruption and severe human rights violations.

Now, in calm weather, you might not notice. The trucks show up, the shelves stay stocked, and life goes on. But Nesvetailova points out that these aren’t just food companies anymore.

They’ve turned themselves into something else. They’re part of the financial system now, deeply and dangerously.

The UN estimates that nearly three-quarters of their income comes from financial wheeling and dealing.

They’re lending money, packaging loans into securities, and betting on the price of wheat the way Wall Street used to bet on subprime mortgages.

You see where this is going. The world food supply is dependent upon the continued success of greedy corporate gamblers.

If one of these giants gets into trouble, if their financial bets go sour the way the banks’ bets did in 2008, they won’t just be too big to fail.

They’ll be too hungry to fail. They’ll come to the government with their hats in their hands and say, “Bail us out, or nobody eats.” And what choice will anyone have?

The companies have more than 900 subsidiaries apiece, scattered across dozens of countries, borrowing from hundreds of banks that often don’t even know they’re all part of the same beast.

It’s a tangle so thick that no single regulator can untangle it.

While the nations of the world are busy stockpiling food again, worried about wars and climate and instability, the real power over what gets eaten and at what price sits in the boardrooms of these five outfits.

Nesvetailova calls some of these traders shadow banks, and the label fits. They’ve learned all the tricks of the financial trade.

They repackage risk, they move money through hidden channels, and they have better information about the global food supply than most governments do.

When a drought hits or a war disrupts shipping, they know it first. And they can position themselves to profit from it, whether the news is good or bad for the rest of us.

Now, the defenders of this system will tell you that size brings efficiency. That these giants can take risks on farmers that smaller companies wouldn’t dare. That they grease the wheels of global commerce.

Maybe that’s true, right up until it isn’t. The same things were said about the big banks, right before they needed a trillion-dollar rescue.

The uncomfortable truth is that we won’t know just how fragile this arrangement really is until it breaks.

And if it does break, it won’t be just a bunch of investment bankers carrying their belongings out of a skyscraper in cardboard boxes. It’ll be empty shelves. It’ll be prices that ordinary people cannot pay. It’ll be the kind of trouble that makes a financial panic look like a disagreement over the check.

The woman who saw the last crash coming is standing at the podium again, pointing at the same kind of smoke rising from a different part of the forest. It would be a shame if we waited for the fire this time before we believed her.

But then again, we’ve got a pretty good track record of waiting until it’s too late. It’s an American habit, and a human one too, to assume the train will keep running right up until the moment it jumps the tracks.