The Financial Times ran a eulogy on Marc Rich, who as a fugitive from US justice lived in Switzerland in the last 30 years. He was granted a presidential pardon by Bill Clinton shortly before President Clinton left office. Rich was a generous donor to many worthwhile causes. There is no doubt he was a financial genius but many lost income, savings, even whole companies as a result of the style of commodity trading he shaped. I wrote this short correction letter to the FT today.
The eulogy to Marc Rich (Comment 28 June) needs some qualifying. A look at the graph on page 22 of the Swiss Government’s report into commodity trading published in March shows the most extraordinary almost Alpine surges then drops in prices of oil, copper and aluminum during the heyday of Rich’s career. As with the upto 20 fold increase in iron ore prices in the last decade these price movements were unrelated to supply, demand, production or external factors like war. A small number of traders cleaned up massively but the world manufacturing economy had a commodity traders’ tax imposed on it which resulted in a loss of faith in making things and blind worship in derivatives and other elements of what is essentially a form of betting. As the Swiss Government warns it is necessary ‘ensure that the commodity derivative markets …remain free from manipulation.’ With commodity trading increasingly based on indices not the real cost of extraction and transportation the Swiss admonition is timely. More and more of these trades are moving away from the regulatory framework of rule of law democracies to the Gulf and Asia. Rich was indeed a financial genius but his legacy is open to question.