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ОглавлениеFinance has gone farming. Since the financial and food price crises of 2007/8, the world has seen a stark rise in financial investments in farmland and agricultural production by investment banks, sovereign wealth funds, pension funds, private equity funds, insurance companies, family offices, endowment funds and high-net-worth individuals (HNWIs). Indeed, finance has been identified as one of the main drivers of the so-called “global land rush” (Grain 2008; McMichael 2012; Fairbairn 2014; Ouma 2014), in which non-financial entities, such as state-run or parastatal companies or other types of corporate entities, also play a central role. As a result of declining or negative returns on mainstream assets in the wake of the global economic meltdown, a fear of rising levels of inflation caused by counter-cyclical interventions, money printing and quantitative easing in “core countries” such as the United States, low returns on savings and a rise in general distrust in complex financial products, investors searched for new “alternatives” within their “investment universe”. What was suddenly in demand was less “financial engineering” and more “real things”. Farming seemed a perfect match, with parts of the financial industry starting to make a strong case for the sector as an “alternative asset class” that was sustained by a set of strong market fundamentals. A growing world population (passing 7 billion people by the end of 2011); changing dietary preferences towards meat and protein in emerging markets such as China and Indonesia; a rising demand for agrofuels (and carbon sinks) in the light of peak oil and climate change; the limited availability of agricultural land (“peak soil”); and stagnant, or even decreasing, productivity levels in core production regions and climate-change-induced crop failures all seemed to make farming a safe financial bet. The financial industry quickly determined that these factors would shape future demand–supply dynamics along the agri-food chain in crucial ways.
In light of these dynamics, a standard narrative has evolved, which emphasizes that investments in agricultural operations and the underlying farmland should guarantee stable returns on capital invested. In addition, their “value” is likely to appreciate when growing demand meets growing resource scarcity. Unlike gold, a favourite during times of financial crisis, agricultural production and the underlying land store and produce capital. Additionally, investments in farmland and agriculture are said to enhance portfolio diversification and efficiency, thereby increasing the robustness of investment portfolios with regard to external shocks. These promises, which go hand in hand with the relatively low complexity of farmland investment instruments and the tax allowances granted on farmland investments in many countries, have made agriculture a space of “other investment”, rendered as exceptionally secure in a turbulent world. As The Economist puts it, “No matter how bad things get, people still have to eat” (The Economist 2009). Accordingly, between 2005 and mid-2018 the number of investment funds specializing in food and agriculture assets skyrocketed from 38 to 523, with assets under management (AuM) surpassing US$83 billion, excluding timber (Valoral Advisors 2018a). During the same period institutional investors, such as sovereign wealth funds, pension funds, insurance companies, asset management companies, investment banks, family offices, endowment funds and HNWIs, have significantly increased their exposure to food and agriculture (Lapérouse 2016: 1). This surge in agri-investments has led to the proliferation of new investment vehicles, relations and practices. Although these numbers seem tiny compared to other “asset classes” – investors had channelled US$533 billion into natural resources globally as of June 2017 (Preqin 2018a: 56) – one cannot deny that something has happened in the “AG space” (to use the industry vernacular) over the past ten years. Shiny investment brochures, high-profile conferences dedicated to the agricultural investment space and the rise of an agri-focused investment media are further testament to this.
Placing this book’s approach
The global run on farmland and agricultural production by financial actors has sparked a lively debate in the media, among scholars and in activist circles. The overall tone of these debates is an alarming one, as financiers are blamed for rising land prices, corporate enclosures, the dispossession of smallholder farmers and the expansion of large-scale industrial agriculture around the world. Although this book acknowledges the concerns voiced in these debates, it takes a broader and deeper view on the transformation of farmland, agricultural production and food chains into objects of financial desire. It proposes a middle ground between work that is engaged with theorizing the systemic dynamics of financialized capitalism and its extension into the world of farmland and agriculture (Russi 2013; Schmidt 2016; Clapp & Isakson 2018) and more practice-oriented approaches to the world of finance. It does so by providing critical entry points for moving in between M–M’ (in analogy to Karl Marx’s schematization of the circulation of money, which – when invested – becomes more money). This implies studying the practicalities of agricultural investment chains in their wider historical and systemic context. Investigating the conditions that mediate and limit attempts at financializing land and the commodities it produces, the approach proposed here treats the realization of M’ as an operation that cannot simply be taken for granted. The particular gist of the approach proposed in this book is that it invites us to trace the formation of agri-finance capital across a number of interlinked sites (Schatzki 2016), rather than assuming that it readily hops from place to place. Eventually, such a perspective allows us to develop a “microfounded political economy of the investment chain” (Braun 2016: 6) at a moment when ever more domains of the social and natural world have become captured and transformed through such far-flung relations, as well as the practices of asset and wealth management that underpin them.
The book will unravel and engage these processes in eight chapters and an epilogue. In each, I will first engage with an analytical or empirical problem that we encounter in the existing debates on the global land rush and the role of finance therein. Many of these problems stem from the particular way in which the notion of financialization – the preferred analytical optic of many scholars on the finance-driven land rush – has been mobilized; others are related to certain practical problems that researchers often encounter when trying to uncover the geographies and operations of global finance.
This pedagogical strategy allows for the debunking of some widely held assumptions in the existing debate on finance-gone-farming, and, indeed, the workings of global financial markets more generally.
Institutional landscapes and the financial asset character of agriculture
The connecting tissue of this book is the notion of institutional landscapes. Inspired by a report published back in 1979 on the rise of institutional land ownership in the United Kingdom, titled The Landscapes of Institutional Landowners (Worthington 1979), as well as more recent takes on the notion of landscape in critical human geography (Mitchell 2000), institutional landscapes are those parts of the human and non-human world that have become transformed into a financial asset, a property that yields an income stream and that can be resold in the future, as part of portfolio considerations of institutional investors. These, in turn, serve the needs of the more privileged ones of “us”.
The term “institutional investor” does not have a common standard definition. One feature often mentioned is that these are “not physical persons” but “are organised as legal entities” (Çelik & Isaksson 2014: 95–6), and that they can assume a wide variety of legal forms, from closed-end investment companies to private-equity-like limited partnerships to sovereign wealth funds. They “may act independently or be part of a larger company group or conglomerate” (ibid.: 96), such as mutual funds, which are often subsidiaries of banks or insurance companies. At times, the term is used synonymously with “intermediary investors” (ibid.) – that is, beneficiary institutions that manage “other people’s money” (Kay 2015) in line with specific performance, risk and maturity goals1 – but in some cases institutional investors may be the ultimate asset owners (for example, institutions representing wealthy families).2 These definitional niceties aside, institutional investors now move a staggering amount of money across the globe and are key makers of space in the early twenty-first century.
In other words, institutional landscapes are an expression of the expansion of a “global return society”, in which the reproduction of the better-off people of the Global North (and, increasingly, the Global South) has become tied to the reproduction of finance capital, both “at home” and abroad. Today a wide range of “things” can become part of institutional landscapes (and thus financial resources or “assets”), but, in this book, it is something most closely associated with the term “landscape”: agriculture. Bereft of a better word, however, this book mobilizes farming as a generic term in order to indicate that finance has become interested in all things related to “the farm” as a production unit (arable crops, livestock, trees, etc.), but also in the pre- and post-farm-gate stages of the agri-food chain. So, although the book heavily focuses on farmland investments, it also repeatedly moves beyond them, and several of its case studies blur the line between production and other domains, with one of them moving beyond it altogether.
In detail, institutional landscapes can be described as follows.
•They sensitize us for the fact that the workings of supposedly higher forces – so-called “financial markets” – are engrained in many things surrounding us.
•They are characterized by their financial asset character, whose realization requires concrete and future-oriented interventions in the world of farming. It is through such interventions that the latter becomes synchronized with the conventions and capital needs of investors, even though this often remains a frictional endeavour.
•They are not a product of nature but of landscaping practices: space-making social activities we can investigate. Institutional landscaping creates distinct socio-natures reflecting the asset character of the targeted agricultural venture.
•They do not simply overwrite the past, but often incorporate and thrive on older agrarian landscapes in order to generate financial value from the human and non-human world. Like other landscapes, institutional landscapes are a palimpsest, a layered product of multiple histories and determinations, including both the visible and the invisible hand of the state.
•They are, eventually, the product of “global value relations” (Araghi 2003) established between multiple places and the operations that link them. In this way, institutional landscapes can never be thought of without the “imperial” needs of those whose capital has been instrumental in bringing them into being in the very first place. Often the roots of this capital lead right back into the “middle of society”.
The book renders institutional landscapes intelligible, unpacks their political contestation and eventually aims at repoliticizing the spatially extensive operations that lurk beneath them. It does so by offering a number of specific entry points into the global economic connections through which such landscapes are produced. These are often taken for granted, reified in popular and professional discourse or mistaken for what they are not. Thus, the journey that follows covers a range of topics that are pivotal for understanding how institutional landscapes emerge, what knowledge we can produce about them, how we situate these historically and geographically and how these are produced and reproduced as “large-scale phenomena” (Schatzki 2016) on the ground. This clearly sets apart what follows from other, more macro-oriented accounts that take a more orthodox, and less geographically attuned, political economy approach (e.g. Russi 2013; Schmidt 2016; Clapp & Isakson 2018).
Grounding agri-investment chains
As this book will show, assets as sources of financial income have become so widespread that it is justified to speak about “the age of asset management” (Haldane 2014; see also Muniesa et al. 2017). Therefore, there is an urgent need to understand how assets come into being. Like a commodity (Callon 1998), something is not born an asset, but turned into one. Assetization inside and outside agriculture often happens through spatially extensive investment chains (Arjaliès et al. 2017; Cotula & Blackmore 2014) involving many players. As expressions of the fact that the original sources of capital (e.g. depositing employees) are often linked via delegation structures with other intermediaries such as pension funds or asset managers (Clark & Monk 2017), these connect different actors, histories, institutional contexts and material realities with each other and often cut through different legal systems. By combining risk-return-effective geographic localizations and specific extraction strategies, global investment chains become arenas for the redistribution of value, besides becoming the enablers of new, sometimes global, commodity chains. We can trace their making, the actors involved, the links they establish and the glue that underpins these – which is exactly what I have done over a period of six years (2012 to 2018), conducting multi-sited research across five continents. The approach adopted here takes us to investment conferences – sites of group making, where agriculture as an asset class is consolidated through narratives and numbers so that investors become confident enough to bet on farming; it takes us to meetings of asset managers, where they give accounts to their investors and try to raise new capital; it takes us to the headquarters of pension funds and asset managers, where capital allocation and investment decisions are being made; it takes us to the agricultural assets themselves and the surrounding communities in frontier regions, such as Tanzania and Aotearoa New Zealand,3 where we will witness how agricultural ventures are restructured in such ways that they meet the models, calculations and requirements of the world of money management; and it takes us to the offices of various intermediaries, such as investment consultants, lawyers and market intelligence providers, who provide crucial business services to investors and asset managers alike, and who play an important role in consolidating “agriculture as an asset class”, as well as the state agencies in the frontiers of the finance-driven land rush, where investments are being facilitated. But it also leads us to sites of resistance, where finance-driven investments in agriculture are being criticized, and alternative visions of agriculture are being propagated (as an interesting side note: if time and resources permitted it, it would also take us to exotic places such as Luxembourg, Guernsey and the Cayman Islands, places that are crucial for optimizing the tax structure of some of the agri-investments discussed in this book).
Obviously, the socio-spatial complexity of agri-investment chains poses a challenge for regulators, as well as for political engagement and research. Yet, once investment chains and their underlying actor constellations have been identified and geographically grounded, different “pressure points” (Cotula & Blackmore 2014: 3) can be identified for regulation or activist engagement (see Figure 1.1). Such an endeavour must always keep in mind that it is “ultimately all of us” (Muniesa et al. 2017: 133) who are linked to global investment chains, and the production of institutional landscapes, via a giant “network of delegation” (ibid.).
Figure 1.1 The agri-investment chain and its share- and stakeholders
Source: Adapted from Cotula and Blackmore (2014: 2) (reprinted with permission).
A tale of two frontiers
Aotearoa New Zealand is regarded as one of the prime agricultural investment frontiers globally. Together with the United States, Brazil and Australia (Luyt et al. 2013), the country has accounted for most of the individual funds and other institutional equity structures invested in primary agriculture. This is at odds with the public and academic perception that most of the financialization of farming has taken place in countries of the Global South. The country adopted neoliberal agricultural policies in 1984, with successive governments supporting foreign investment into agriculture in an effort to recapitalize indebted farms, boost export volumes and enhance efficiency. The result of more than three decades of regulatory and rural restructuring has been an influx of investors, first in forestry from the early 1990s onwards, but later on increasingly in the agricultural sector more generally. Foreign direct investments (FDIs) into farmland have sharply increased since about 2010, with the entry of pension and private equity funds into the country’s dairy, beef, wine and deciduous fruits subsectors. The country’s strong agricultural potential, well-developed farmland markets, proximity to Asian markets, significant depth in farming expertise and effective legal and contracting processes make it an “institutional-grade” investment destination. Although the state-mediated efforts of granting foreign investors access to farmland and forestry have by no means been uncontested domestically, foreign investment is often normalized in a context in which overseas connections are part of the national history and rural imaginary.
The east African nation of Tanzania is interesting because it is considered to be one of the main “frontier markets” by financiers. Many would go as far as considering it “an ideal country for large-scale agricultural land investments due to its record of liberal economic reforms and high growth rates in the last two decades” (Bluwstein et al. 2018: 807). Despite the frenzy, frontier markets such as Tanzania are associated with particular risks that usually keep large Western institutional investors away, but they may attract more risk-taking factions of capital. Thus, the country has seen a number of private-equity-driven investments into large-scale farms over the past 15 years or so. Some of these investments have targeted former state farms from the socialist era, which have been promoted by Tanzanian state players as ready-made sites for investment. The bid to attract investors into farmland is driven by a larger agricultural transformation agenda that aims at modernizing the largely “peasant-based” agricultural sector of the country, which has, however, attracted considerable criticism from civil society organizations within and outside Tanzania. This conflict-ridden transition context makes Tanzania an ideal setting for studying the articulation of global agri-investment chains with local agrarian, economic and political-institutional settings.
Producing knowledge about institutional landscapes
The first part of the research informing this book included participant observation of agricultural investment conferences, the analysis of hundreds of industry intelligence and investment brochures, and interviews with key players in the agricultural investment scene. The second part followed specific investment chains into two main frontier regions of the finance-driven land rush, Aotearoa New Zealand and Tanzania. The grounding of particular investment chains in these distinct geographical contexts also allows us to place the contemporary drive of financial expansion into agriculture into a longer history of metropolitan financial expansion and place making in colonial and settler-colonial contexts. Moving back and forth between the macro and the micro, this book will ground agri-finance investment chains in specific sites, but seeks to “study up”4 their workings at the same time. Obviously, such a research strategy comes at a price. It not only tends to lose sight of those affected by the workings of the powerful (e.g. workers in farming ventures, adjacent communities, other farmers) but also encounters many challenges in practice owing to the secretive nature of the money management industry. Many of the players involved – especially private equity funds – are exempt from comprehensive reporting because of their private nature (unlike stock listed enterprises) or are bound to confidentiality agreements as a result of their fiduciary duties. These limits to knowledge production will become repeatedly visible in the narrative that follows. The words of an eminent scholar of modern financial markets, sociologist Donald MacKenzie, capture this problem well:
Those who conduct interviews to open black boxes may gain insight but may lose the capacity to condemn, while those who condemn, at the cost of insight, may end up condemning ineffectually, or condemning the wrong things. Certainly, though, the opening of black boxes is no panacea. It is a technique of research, and like all such techniques also a political act, one fraught with ambiguity and with compromise.
(MacKenzie 2005: 570)
This said, it has been surprisingly easy to gain access to many informants from the world of money management via a mixture of personal networks, unmediated e-mail contacts, physical contacts at investment conferences and (sometimes) straightforward farm visits. Many of the people interviewed for this book were happy to talk about their trade and were supportive of the research. None of them was the “typical investment banker” or interviewee one would have expected after reading the first scholarly engagements with the finance-driven land rush published after 2008. Some of them would proudly claim that they have solid farming backgrounds, conveying a down-to-earthness one would associate with “real farmers”. In total, 90 formal and ethnographic interviews with asset managers, original asset holders, industry experts, market intermediaries, regulators, non-governmental organization (NGO) representatives, farmers and farm/firm operators inform this book.
When direct access was not possible, the nature of the cases selected allowed other complimentary sources to be drawn on, such as the work of NGOs or other researchers, public information (e.g. newspapers, company websites, state registers) or private industry intelligence. For instance, I shall draw on some third-party findings when discussing the potential community impacts of some of the investments studied, since studying global agri-investment chains, their assets on the ground and the communities they are embedded into symmetrically is virtually impossible.
Structure of the book
In the next chapter, I outline how we can go about studying the finance–farming nexus. The most tempting way would be to research this nexus through the prism of “financialization” (see Ouma 2016), drawing on the wide range of writings across the social sciences and humanities that have deployed this term to make sense of the increasing and systemic power of financial markets in the global economy. I outline some of the limits found in the existing agriculture-focused literature that has worked in that register, and propose a supplementary, more practice-centred approach that allows us to arrive at an operational account of institutional landscapes. Such an approach wants to ground agri-investment chains in the materialities, socialities and spatialities of everyday life in an attempt to bring back what is often talked about in abstract and almost metaphysical terms into the realm of the tangible.
Challenging both the general and agri-focused financialization literatures’ limited historical lens, and the assumption that finance and farming present an unnatural coupling, Chapter 3 shows that farmland as “socially produced nature” in many corners of the world – especially in postcolonial environments – cannot be thought of without taking the transformative, and often-state backed, powers of globalized financial relations into account. Although most of these transformations have been based on the extension of credit to farmers, a new form of investment emerged in the 1960s: farming as part of modern portfolio management, supported by the rise of institutional investment thinking and practice. At the same time, it will be argued that ideas in and operations of modern finance have been crucially shaped by developments in land-based production.
Chapter 4 engages with the question of what we do and can know about the contemporary wave of financial expansion into farming and agriculture. It offers an attempt to open the black box of finance-gone-farming: the actors, relations and geographies underpinning farmland investments. It will become clear that finance’s run on farmland has been less Global-South-centred than many critical accounts suggest and that agri-finance capital is not a homogeneous entity but made up of various financiers with different investment cultures, fiduciary obligations and liabilities. The chapter then moves on to problematize the opacity and secrecy that characterize many of these investments.
Chapter 5 interrogates how far investment records of states may provide alternative sources of information on finance-gone-farming. This is ultimately linked to the larger question as to how financial investments into farming are regulated and accounted for. Despite the talk about the retreat of the state in a globalized economy, and the growing power of footloose finance, the state, in all its manifestations and across juridical scales, remains a central figure in the regulation of all sorts of flows critical to rendering farmland, and agricultural production more generally, investable. The regulation and state-mediated “landing” of agricultural investments in Tanzania and Aotearoa New Zealand invite us to shed light on these themes. The countries offer two starkly contrasting examples of a state’s role in turning particularly farmland into a global financial resource, exhibiting very different histories and forms of “geopower” (Parenti 2016), but also varied capacities (and willingness) to regulate and account for the new financial flows into agriculture.
Chapter 6 follows the collective, globally distributed processes buttressing the ontological reconfiguration of farming into an “alternative asset class”. It challenges the idea that finance is an amoral force by reimagining the world of asset management as one permeated by shared moral registers, norms and standards. These conventions help coordinate the actions of industry participants in light of the uncertainty attached to the future outcome of their trade and serve as higher common principles against which the legitimacy of investment decisions and the worth of a potential “asset” are assessed. In tandem with legal and technical devices, they help enact the morality of asset management. As will be shown, however, the quest to turn agriculture into an “alternative asset class” has by no means gone uncontested. The conventions structuring the world of money management have also constituted a barrier for those trying to mobilize capital from weighty institutional investors because of the size, risk profile and idiosyncratic nature of farming deals. At the same time, social forces from outside the world of asset management have challenged its stable framing as a legitimate “alternative asset class” (NGOs, activist-scholars, regulators).
Chapter 7 follows a number of investment chains into concrete agrarian environments in Tanzania and Aotearoa New Zealand. Since finance capital and investment chains are often imagined as a fait accompli in the existing debate, the task of this chapter is to unpack the socio-technical, -legal and -cultural relations and practical operations through which the journey from money to more money via agricultural production (and processing) is organized. It moves the empirical focus from abstract circuits of agri-finance capital – as in much of the structuralist literature on financialization – to the frictional enrolments for agri-finance capital formation. This process meanders between the universal aspirations of financiers and the place-based frictions and uncertainties that pose a challenge to their calculative schemes. For instance, re-resourcing agriculture into a financial asset in “emerging markets” such as Tanzania, with a largely smallholder-based economy, entails challenges that investors often do not encounter in countries with highly advanced capitalist agricultural sectors, such as Aotearoa New Zealand.
Chapter 8 zooms in on different agricultural ventures (including cases of agro-processing) in the research regions, which are part of extended and heterogeneous global investment chains. It unpacks the ontological reconfiguration of farming into a financial asset, which depends on instituting certain material, organizational, legal and technological conditions on the farming ventures acquired, through which these become financially productive. It will become clear that turning farming ventures into financial assets is not a straightforward process, as it encounters a variety of forms of recalcitrance and unforeseen obstacles. Neither is it one that is necessarily always about the maximization of shareholder value (as often posited in existing debates on financialization). In “frontier markets” such as Tanzania, investors are often forced to make a wide range of costly adjustments to their original investment calculus in order to accommodate social demands or political resistance mobilized in adjacent communities. In countries with a highly productive and technology-intensive agricultural sector such as New Zealand, investors often do not reinvent the farming wheel but mimic established industry practices, albeit with a much deeper capital structure. Surprisingly, institutionally backed investments in farmland may have a stronger sustainability ambition and track record than many domestic “family farms”. Although increased demand for farmland has led to rising land prices in many hotspots of the global land rush, some Aotearoa New Zealand farmers are active partners or advisors to foreign financiers, or need them to drive up land prices so that their own speculative endeavours can materialize. This type of farmer can be contrasted with the “Third World peasant” usually making the rounds in debates on the global land rush, who is usually presented as a victim of foreign investment activities.
Chapter 9 explores whether, despite the criticism that institutional investments in agriculture have received (touted as large-scale, productivist and poor in terms of their social and environmental footprint), the massive amounts of financial wealth accumulated in the present can still be harnessed for greener and more just food futures. It introduces two potential models. One is an enhanced “ESG (environmental, social and governance) model”, accompanied by technological fixes and some regulatory adjustments, which does not evade some core problems characterizing the financial present, however: the opacity of the money management industry; the unsustainable growth imperative engrained into debt-based economies; how value is imagined and produced in financial markets; the homogenizing tendencies of scale-hungry agriculture; and various inequality issues related to financial accumulation. The other model breaks in more radical ways with the temporality, sociality and materiality of modern finance and the return logic inscribed into contemporary institutional landscapes. Each of these models forces us to ask what kind of spatialized value relations are engendered by particular kinds of food futures. The book closes with an epilogue that takes us back to some of the very origins of institutional landscapes.
1.Maturity goals refer to the planned date of payment – i.e. when a liability, such as a pension or insurance payout, is due.
2.They can be contrasted with retail investors, who are individuals and who can access only certain types of financial products.
3.I use the wording “Aotearoa New Zealand” in this book in order to make visible the colonial origin of today’s nation state, a past that continues to shape the present. The addition “Aotearoa” stands for the description of the country in the language of the indigenous Māori population, which is also the second official language of the country (next to English).
4.“Studying up” implies engaging with “the colonizers rather than the colonized, the culture of power rather than the culture of the powerless, the culture of affluence rather than the culture of poverty” (Nader 1972: 289).
