Life is more complicated than Rupert Russell's book "Price Wars" suggests

See ‘Price Wars’ Review: Hedge Funds on the Attack: Investors can easily be blamed for all sorts of problems if prices are seen as ‘weapons’ deployed by the few to harm the many by Roger Lowenstein.

"Albert Einstein looked for a theoretical framework to tie up the universe but didn’t succeed. Rupert Russell, a British filmmaker and writer, believes he has done it. In “Price Wars: How the Commodities Markets Made Our Chaotic World,” Mr. Russell reduces much recent history to a morality play in which global financial capitalism wreaks chaos on the developing world.

The author, who traveled to Iraq, Ukraine, Venezuela, Somalia and other hot spots for his research, attempts to link “disparate episodes of chaos large and small.” His thesis is that far-flung events over the past two decades or so were not “free-floating snowflakes but bound together in an avalanche.”

Price Wars

By Rupert Russell

(Doubleday, 276 pages, $29)

His avalanche is really a series of storms in which reverberations in commodities markets unleash mayhem. Thus prices of foodstuffs such as wheat soared in 2008, triggering the Arab Spring, terrorist militias and refugees. Coffee plummeted, spurring more refugees, from Guatemala. Soaring oil prices, supposedly inflated by Wall Street, emboldened Vladimir Putin to bully neighboring states—but then oil prices fell, unleashing chaos on Venezuela.

Such avalanches, Mr. Russell maintains, also rocked the West.In Britain and in the U.S., refugee arrivals tore at the social fabric and a housing bubble (also the fault of oil prices) spurred voter discontent. Voila, Brexit; hello, Donald Trump.

The trouble with such deterministic exercises is that life tends to be more complicated. If oil encouraged Russia’s imperial ambitions, why not a similar effect in Norway? And if, as the author suggests, Venezuela was undone by wild price fluctuations and not by its leftist and corrupt government, why did it implode and not other petrostates?

Mr. Russell assures us that his logic is “devilishly simple” and that in commodity prices he has found his “butterfly.” He means the proverbial insect whose wing flap leads to a hurricane. It seems that he has scarcely seen a butterfly that didn’t cause a hurricane. “Price,” he intones, “can spark riots, revolutions and war. Prices unlock cages and release monsters.” 

According to standard theory, prices are not a causal agent any more than newspapers or cell towers. Prices communicate scarcity or surplus, or uncertainty. They transmit information. For Mr. Russell, prices are “engines of chaos”; they “hide,” spread “magic” and “manipulate.” They are tools for the few to enrich themselves at the expense of the many.

Mr. Russell focuses on the 2008 global food crisis. Scholars have identified a host of factors contributing to rising grain prices: inadequate investment in developing countries, misdirected subsidies, weather events, export restrictions, increasing oil prices and rising demand for biofuels. Mr. Russell isn’t buying it. He says there wasn’t any food shortage; higher prices resulted from traders piling into commodity index funds. He views hedge-fund investors as akin to terrorists for manufacturing hunger. He is similarly suspicious of the market’s judgment, in the early 2010s, that political unrest in the Arab world posed a threat to oil supplies. That claim, he says, was only a story that “maintained the bubble,” though he doesn’t trouble to say who was maintaining it. He says that prices can be a “carefully deployed rational weapon.”

“Price Wars” thus leaps from the truism that prices often turn out to be wrong to the more sinister implication that omniscient traders are knowingly distorting them. Mr. Russell makes much of the fact that feedback loops convey plenty of dodgy information; but they also convey plenty of true stuff. Nassim Nicholas Taleb, the “Black Swan” author and a former options trader, coined the term “narrative fallacy” for the urge to impose causality on random events. Mr. Russell is its avatar.

For him, prices are supposed to deliver “peace and harmony” rather than transmit news from a turbulent world. He misconstrues “chaos” as an unnatural condition foisted on society by hedge funds. When harmony is absent (or chaos present), Mr. Russell smells a rat. He pines for the pre-deregulatory era and in particular blames the Commodity Futures Modernization Act of 2000 for turning the market henhouse over to Wall Street foxes. There is much not to like about the bill, but Mr. Russell’s assertion that, before then, “order had reigned” is baffling. What about the Hunt brothers’ effort to corner silver? Futures markets have always been volatile and speculative.

Mr. Russell is furious at neoliberalism, but his attack is a muddle. He accuses the late Fed chairman Arthur Burns of conservative “austerity” policies that thwarted the desires of democratic masses for freer spending. But it was Burns, who ran the central bank for most of the 1970s, whose policies led to the Great Inflation. And Mr. Russell excoriates the U.S. for promoting liberalized markets, a policy he says left the developing world “to experience the full force of the mushroom cloud.” This radioactive metaphor is an example of his inflated language. (Accusing “many hedge funds” of the equivalent of “war crimes” is another.) And he has neoliberalism backward. Whatever its effects on Gary, Ind., global trade brought unprecedented growth to the developing world.

Though Mr. Russell is unhappy with central bankers, his real venom is saved for government officials who have supposedly appeased Wall Street with Hooverish tight budgets. He asserts that the huge deficits of the Covid period have demonstrated that inflation “was no longer a threat”—a seriously ill-timed assessment—and that, therefore, the U.S. and other governments should have been more free-spending all along. Mr. Russell says that his story shows how global financial capitalism is undermining political freedom, but no evidence is offered. “Price Wars” is a painful book. It reads like a Twitter feed, a deluge of words in the service of rhetoric."