It’s only a few months ago that Barclays were taking their turn at being the villains of the banking sector with their Chief Executive, Bob Diamond, resigning following the LIBOR rigging scandal. Given that banks are not exactly the most popular corporations a the moment, it’s an unedifying honour to hold that is particularly damning.
Following Diamond’s departure and with the appointment of Andrew Jenkins as the new Chief Executive things now appear to be moving in a dramatic new direction. On Tuesday Barclays published its strategic review setting out the direction it wishes to head in over the coming years. “Barclays is changing. There will be no going back to the old way of doing things. We get it. We are changing the way we do business, we are changing the type of business we do, and we are setting a new course for the future of Barclays,” announced Mr Jenkins. He summarised his new mantra in five words: “Respect, integrity, service, excellence and stewardship.” insisting his plans for Barclays were, “not window dressing or PR”
He went on to say: “Banks have to reposition themselves to become more efficient and effective to serve customers and clients.” and then laid down a firm line for staff compliance adding, “If you don’t want to work this way, you can go work somewhere else.”
These words seem to suggest that he does understand his bank desperately needs to rebalance its priorities if it is not going to continue to cause widespread damage further down the line.
As with these things though, words are worthless unless they are matched by actions. The media on Tuesday got very excited over his announcement that the controversial part of its Structured Capital Markets (SCM) business that helps clients avoid tax will be axed and made it headline news. Jenkins had said “Although this was legal, going forward such activity is incompatible with our purpose. We will not engage in it again.” What was less widely reported was that this quote did not just apply to the tax SCM unit but also to speculative trading in agricultural commodities. These closures and withdrawals will see Barclays forgo about £500m in annual revenues
Apologies if this all sounds rather dry, but the news about Barclays ceasing to speculate on food prices is actually of great importance to millions of people around the world. Speculating on future food prices has become big business for banks in recent years. According to the World Development Movement (WDM) which was launched by Christian Aid, Oxfam, other aid agencies and churches in 1969, Barclays made an estimated £278 million last year from this while Goldman Sachs, recognised as the world leader in this arena, made around £251 million. Many put the rapid rise in global food prices over the last few years down to the consequences of this trading.
Since the deregulation of the commodities markets a the end of the 1990s, the share of the markets for basic foods like wheat held by speculators – who have no connection to food – has increased from 12 per cent to 61 per cent.
This extract from an article by American food journalist, Frederick Kaufman explains the reason why this has happened:
‘The money tells the story. Since the bursting of the tech bubble in 2000, there has been a 50–fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities — including food — seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. “You had people who had no clue what commodities were all about suddenly buying commodities,” an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since. From 2005 to 2008, the worldwide price of food rose 80 percent – and has kept rising.’
The cost of this food inflation is widespread. We have felt the impact here in the UK, but the WDM estimates that in the last six months of 2010 alone, more than 44 million people were driven into extreme poverty as a result of these rising food prices.
From a biblical perspective, making profits at the expense of the poor is considered abhorrent. There are plenty of examples in the pages of the Bible condemning those who exploit the poor. This passage from Jeremiah in which God refers to a wicked king expresses it clearly:
“Woe to him who builds his palace by unrighteousness,
his upper rooms by injustice…
“Does it make you a king
to have more and more cedar?
Did not your father have food and drink?
He did what was right and just,
so all went well with him.
He defended the cause of the poor and needy,
and so all went well.
Is that not what it means to know me?”
declares the Lord.
But your eyes and your heart
are set only on dishonest gain… and on oppression and extortion.”
Barclays has strayed far from its Quaker roots, where the three founding principles were honesty, integrity and plain dealing. Maybe at last though the tide is possibly beginning to change. Antony Jenkins should be praised for withdrawing Barclays from the food speculation market. It is an acknowledgment that gambling on food at the expense of millions of vulnerable people is not an acceptable way to make profits.
In June eyes will be turning to the G8 summit being hosted here in the UK. Nick Clegg has said that our government, which will be holding the G8 Presidency, will concentrate its efforts on the three Ts of tax, transparency and trade in order to reduce the exploitation of developing countries by some governments and multinationals, stopping millions of people from being able to drag themselves out of extreme poverty. Many organisations and individuals have already begun through the Enough Food for Everyone.. IF campaign to build the pressure on the G8 leaders to take action to tackle extreme poverty and hunger around the world. There is a growing movement of people insisting that we have the abilities to make the world a better place for those at the very bottom of the pile – if we choose to do so.
Extreme poverty and hunger is a complex issue that can be solved, but governments and corporations need to be motivated to make it happen. Barclays is an example that things can be changed for the better when leaders begin to put people before profits. Other banks such as Goldman Sachs in particular need to be urged to follow suit. For Christians and others who care about seeing change, now is as good a time as there has ever been to take action to stop the unacceptable and oppressive practices that make a few rich at the expense of the many. If enough consciences can be pricked and shaken into life, then we’ll be well on our way to seeing that happen.