OK, I had to do it. I couldn’t write a book* about commodity trading without (finally) reading The Secret Club that Runs the World—Inside the Fraternity of Commodities Traders by Kate Kelly, formally a journalist with the Wall Street Journal. The book was published in June 2014, so you may ask why it took me so long to get around to reading it. The answer is that the title put me off. It reeks of a conspiracy theory; it suggests that the commodity traders work together to secretly “run the world.”
But it wasn’t just the title that put me off; it was also the advertising blurb. The publishing company writes, “… if the individual participants in the great commodities boom of the 2000s went unnoticed, their impact did not. Over several years the size of the market exploded, and so did prices for raw materials—raising serious questions about whether the big traders were intentionally jacking up the cost of gasoline, food, and other essentials bought by ordinary people around the world. What was really driving all those price spikes?”
All sensational stuff! The advertising blurb adds that the author “takes us inside this secretive inner circle that controls so many things we all depend on”.
Imagine my surprise, therefore, when I finally read the book and found that it wasn’t the conspiracy-accusing, and industry-demolishing, book that the title suggested. In fact, it was more like a cross between Gala and Vanity Fair magazines.
I recommend that you read the book if you are, for example, interested to know that the fiancée of one hedge fund manager went to Paris three times to have her wedding dress fitted, but eventually chose a dress that was off the peg. Or that the same hedge fund manager decided not to drive his Bugatti in the South of France for fear that gravel from the driveway would chip the car’s paintwork.
It is a nice book, fun and easy to read, and as entertaining as celebrity gossip always is. But I am afraid you won’t learn much about commodity trading from it. Nor will you learn anything about the secret club of commodity traders that rules the world.
So why the misleading title and advertising blurb? Probably because the publishing house knows how to sell books—and they know that everyone likes a conspiracy theory. They know that people like to believe that secret clubs—or groups of powerful, often sinister, people—control our lives, and indeed really do rule the world.
The only problem is that they don’t, and it was therefore impossible for Kate Kelly to write a book that lived up to its title.
The political scientist Michael Barkun has argued that people like conspiracy theories for three reasons. He writes,
“First, conspiracy theories claim to explain what institutional analysis cannot. They appear to make sense out of a world that is otherwise confusing. Second, they do so in an appealingly simple way, by dividing the world sharply between the forces of light, and the forces of darkness. They trace all evil back to a single source, the conspirators and their agents. Third, conspiracy theories are often presented as special, secret knowledge unknown or unappreciated by others. For conspiracy theorists, the masses are a brainwashed herd, while the conspiracy theorists in the know can congratulate themselves on penetrating the plotters’ deceptions.”
There is certainly no shortage of conspiracy theories in our commodity markets. As Dan Morgan wrote in Merchants of Grain, it explains why trading “companies…stay in the shadows most of the time. Perhaps it was the ancient nightmare of the middleman-merchant that made them all so secretive—the old fear that in moments of scarcity or famine, the people would blame them for all their misfortunes, march upon their granaries, drag them into the town square and confiscate their stocks.”
Unfortunately, there can often be an anti-Semitic element in this, particularly as many traders and financiers are Jewish. Daniel Ammann touched on this issue in his book, The King of Oil. He wrote,
“For centuries Jews in Europe had suffered from discrimination. They were unable to become farmers, as they were forbidden from owning land. As they were excluded from the craft guilds, they were unable to become craftsmen. The Catholic Lateran Council of 1215 stated that Jews were not allowed to carry out the most important economic activities of the time. They were however permitted to perform one function that was proscribed for medieval Christians: making loans with interest. Thus the Jews became moneylenders and traders in the absence of other options.
“It is one of the ironies of history that the persecution and expulsion of the Jews is what made such an efficient trading community possible. King Edward I of England expelled the Jews in 1290, and the French monarchs Philip IV and Charles VI chased them from fourteenth-century France….Sephardic Jews were forced to leave Spain in 1492. By the onset of the modern era, the Jewish Diaspora was greater than that of any other people. The scattered Jews had a trading tradition that was second to none and sufficient confidence to enable trade over large distances and periods of time.”
But I will lead the last word to Yuval Noah Harari, author of Sapiens—A brief History of Mankind. He writes,
“As a historian, I’m sceptical about conspiracy theories because the world is far too complicated to be managed by a few billionaires drinking scotch behind some closed doors.”
* I hope to publish Out of the Shadows: The New Merchants of Grain later this year