A Moral Imperative for commodity trade and global economic justice

This article, penned by Ambassador Sheikh Mohammed Belal, Managing Director of the Common Fund for Commodities (CFC), brings to you the critical role of commodities in the global economy and the need for a moral framework to govern their trade. Borrowing from the 1992 Clinton campaign slogan, "It's the economy, stupid," Ambassador Belal drew attention, in a lighter vein, of all conscious consumers to say that "It's commodities, stupid."

Drawing upon the work of Raúl Prebisch and Gamani Corea, Ambassador Belal highlighted the historical power imbalances in the global economy, particularly the “core-periphery” model where industrialized nations in the Global North (the "core") extract raw materials and cheap labor from developing nations in the Global South (the "periphery"). Prebisch's “core-periphery theory” and the Prebisch-Singer hypothesis, developed in collaboration with Hans Singer, emphasize the unequal terms of trade faced by developing nations dependent on commodity exports.

Sri Lankan economist Gamani Corea's advocacy for addressing global trade imbalances, particularly in commodities, led to the establishment of the Common Fund for Commodities (CFC) in 1989. His vision, embodied in the CFC's two-tier system, aimed to empower developing nations to move beyond raw material exports and capture a greater share of the wealth generated by their commodities as was agreed by consensus under the premise of the “Integrated Program of Commodities (IPC)”.

Ambassador Belal urged all to pay greater attention to the importance of "morality" in economic systems, drawing upon Adam Smith's "Theory of Moral Sentiments," which posits that unchecked self-interest can lead to exploitation. He argues that institutions like governments, regulatory bodies, and international organizations (like the CFC and UNCTAD) must play a vital role in enforcing "morality" within global commodity markets. These institutions should ensure fair wages, prevent monopolies and unfair trade practices, and promote sustainable resource management.

The article highlights the intricacies of commodity value chains, in which various actors – from producers to traders to consumers – interact. This complexity often results in a significant gap between the wealth generated by commodities and the financial stability of the people who produce them. Many smallholder farmers face low prices for their products, lack access to essential resources, and struggle with the impacts of climate change, leaving them in a cycle of poverty.

In his article, Amb. Belal calls for a paradigm shift in how the industry approaches commodity production. He suggests that humanizing commodity value chains should not be seen as an added cost but as a critical investment in sustainable development. By placing people at the centre of commodity discussions, businesses can create a more resilient supply chain that benefits everyone involved.

The article reminds us that our economic systems must reflect our moral values. Enabling the ethical treatment of all those involved in the commodity sector is key to creating a more just and equitable world. The CFC is committed to leading this effort, by investing in agribusinesses that enable smallholder farmers to thrive.