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ОглавлениеOptic: How do we study the finance–farming nexus?
Whither financialization?
“Financialization” has become a key term in the critical social sciences. Often used to describe a historical condition that is marked by “the increasing dominance of financial actors, markets, practices, measurements and narratives, at various scales, resulting in a structural transformation of economies, firms (including financial institutions), states and households” (Aalbers 2015: 214) over the past four decades, observers have found that almost everything has been financialized: economies, firms, sectors, public services, households, daily life, nature. In the wake of the global land rush, many scholars and activists have used the concept to make sense of finance’s growing appetite for all things agricultural (for critical reviews, see Ouma 2014, 2015b). For them, this growing interest seems to be a textbook case of geographer David Harvey’s idea of the spatio-temporal fix (Harvey 1982): after crises and devaluations in established domains of finance, capital sought greener pastures, extending its operational space into geographies and domains in which it was previously not much interested. Such a reading has gained widespread purchase. It is attractive, because it opens the debate on finance’s penetration of farming to broader questions about the boom and bust cycles of globalized capitalism and their geographical ramifications. Scholars embracing “financialization” as an analytical tool have without doubt contributed to our understanding of the rise of global finance and its implications for the “real economy”. But the reiteration of the concept across the social sciences has not been unproblematic, and some of the problems characterizing the more general debate on financialization (Christophers 2015a) also permeate the land rush debate. This results in a range of analytical and epistemological challenges, which this book seeks to address.
First, much of the literature deploys “a restricted historical optic, … thus overlooking historic parallels and (dis)continuities” (ibid.: 192). After all, finance has a long history of penetrating farming in different parts of the world. The historical examples discussed in this book will show that we must carefully examine how current phases of financialization compare to earlier operations of finance capital formation in and through farming on a global scale. Such an endeavour becomes complicated by the fact that there is not one, but multiple histories of capitalist transitions. But, as we will see, just because the finance–farming nexus has “old roots”, this does not mean that there are no “new shoots” (Sommerville 2018).
Second, owing to a rather restricted structuralist analytical lens, the existing literature has shed little light on how the agri-focused financial industry works in practice (Fairbairn 2014; Gunnoe 2014; Russi 2013; Clapp & Isakson 2018). We are yet to develop a more comprehensive understanding of the evolution and internal architecture of “agriculture as an alternative asset class” and the socio-spatial relations and practices through which these domains are turned into financial assets. The lack of knowledge of these issues is the result of a limited engagement with financial market players among researchers. This is a result of normative and epistemological choices informing existing research strategies, as well as the existence of physical and cognitive entry barriers to a highly secretive and complex industry. With a little bit of luck and the right strategy, however, we may manage to “follow the money” (Christophers 2011) and ground agri-finance, like other trades of finance (Ho 2005), in particular places. It is in this way that we can unravel the mechanisms that bring institutional landscapes into being. Often, capital does not flow smoothly from one place to another.
Third, as I have shown with my colleagues Leigh Johnson and Patrick Bigger elsewhere (Ouma et al. 2018), the politics of information and “data” is too often sidelined in research on financialization. It can be agreed with Adeniyi Asiyanbi (2018) and Donald MacKenzie (2005) that unpacking the grounded operations of finance can help repoliticize a field that is often shrouded in complexity and technical jargon. Doing so could open spaces for broader debates, generating real answers to socio-ecological crises rather than temporary financial fixes. But how can we practically produce knowledge about the grounded operations of finance when many of its key players – the investment banks, hedge funds, private equity managers, family offices, endowments and pension funds that ought to be the objects of public scrutiny – keep their profiles low and doors closed? Such practices of non-disclosure are supported by the still overwhelming epistemic authority that financial elites command over economic matters and a global legal architecture that is tilted in favour of financial investors. Notwithstanding recent methodological attempts to trace the socio-spatiality of various forms of capital, including finance, in order to make things public (see, for example, Galaz et al. 2018), we should not underestimate the barriers to generating knowledge about finance’s operations in and beyond farming. An alternative source of information may be the state, as the ultimate guardian of cross-border flows, investment regulation and national statistics.
Fourth, much of the existing literature has focused on a few selected examples in the core regions of the Global North, particularly in North America (Fairbairn 2014; Sommerville & Magnan 2015; Gunnoe 2014). Even though a few authors have recently offered treatments of the financialization of farming in places such as Australia (Sippel 2015; Larder et al. 2015) and Brazil (Fairbairn 2015), we are yet to see more nuanced accounts of “the real life incarnation of finance in the sector by looking at investment arrangements, including connections with the state, and its (regional) variations” (Visser et al. 2015: 541). What happens if we start researching the new finance–farmland nexus in Zambia, Tanzania, Romania or Aotearoa New Zealand? Might accounts from “the margins” not requalify existing understandings of “financialization”? Such accounts from the margins are not just ones of capitalist accumulation dynamics produced in a so-called “periphery” (Shivji 2009) but accounts that aim at decentring histories of capitalism written in epistemic centres such as North America or Europe in relation to “other spaces” (Taylor 2010). From such a perspective, even “Northern countries” such as Aotearoa New Zealand or Australia would count as “margins” because they have featured strongly neither in the prominent literature on financialization nor in the literature on its agrarian variant (for exceptions, see Le Heron 2013; Magnan 2015; Sippel et al. 2017). As this book will show, expanding the empirical focus in the study of the finance-driven land rush, and utilizing a more contextual understanding of the workings of “global finance”, allows us to unpack how global agri-finance chains materialize within concrete geographical settings with distinct histories. It also helps us shed light on how investors gain access to farming properties in market environments with different agrarian, economic and political-institutional features, and how such contextual features affect the strategies of investors and asset managers. This in turn necessitates coming to terms with both the productive and constraining power of investment and property regimes as well as the modalities of state–investor relations in target regions, since these regulate investors’ access to natural “resources” (Bridge 2014). The emphasis on access, defined here as “the ability to derive benefits from things” (Ribot & Peluso 2003: 153), is important, as it implies an “analysis of the constellations of means, relations, and processes that enable … [finance] to derive benefits from resources” (ibid.).
As we shall see for the case studies of Aotearoa New Zealand and Tanzania, relations of access in the frontier regions of finance-driven investments into farming are more complex and contested than often suggested in the current debate. For instance, social forces such as NGOs or the media, from abroad as well as from within, have questioned the morality or economic reasoning behind farmland investments. In addition, states often play more ambivalent roles than being mere facilitators for financial investors.
Fifth, more structuralist accounts often tend to overlook the fact that economizing farming in a profitable manner often turns out to be a challenging project on the ground. Agricultural production as a localized, biogeophysical and risk-prone venture may pose challenges to any investment plan (Mann & Dickinson 1978). Indeed, there is growing evidence that many investments do not proceed as envisaged by investors (Cotula 2013; Li 2015; Locher & Sulle 2014; Grain 2018). As we shall see in this book, the intended transformation of nature into a financial asset is not a mere technical problem (Li 2014). Often, demands by investors need to be balanced with those of local stakeholders, such as labour, adjacent communities or the state. The extraction of financial value from farming is as much a political process as it is a technical one (Ducastel & Anseeuw 2017).
Sixth, we are yet to examine the financialization of farming for its global value relations (Araghi 2003) and associated inequality dimensions in a more explicit and sustained way. Even though this is a grand topic in its own right, the book tries to partly fill this gap, by connecting current debates on global value relations, inequality and “imperial lifestyles” (Brand & Wissen 2017) to finance’s expansion into the world of farming. The transformation of agricultural ventures into a financial asset ties the reproduction of certain social classes to the circulation of capital in and through nature: the fee-collecting financial elites engaged in money management; the HNWIs, institutions and endowments investing their money in green financial products; the “‘mass affluent’ in national middle classes” (Seabrooke & Wigan 2017: 13) who entrust their money to pension funds and life insurance companies targeting various forms of nature; and the populations in core capitalist countries (including Gulf states and China) more generally, whose huge aggregate ecological foot- and hoofprint (Weis 2013) continues to enlarge despite claims that it is compensated for elsewhere.
Finally, there remains the big question of how other kinds of food futures can be organized. What role should finance play therein at a moment when our social and socio-natural relationships are urgently in need of “‘protection’ from unfettered markets, but, in a significant twist …, markets, private investors and entrepreneurship are held out as the very means for providing that protection” (Langley 2020: 143)? There is ample evidence that dominant paradigms of agricultural production, which also often materialize in institutionally backed farming ventures, need to be radically rethought in order to create more sustainable and inter-/intra-generationally just food futures (see, for example, Cassidy et al. 2013; Grey & Patel 2015; Marsden & Morley 2015; Lawrence 2017). Since the giant amounts of capital administered by institutions worldwide will not go away anytime soon, and the time left to create more sustainable economic–ecological relationships is quickly slipping away, the possibility of whether such giant amounts of money can be remobilized to that end should be explored (Castree & Christophers 2015; Knuth 2017). Can finance be “smart” (Palmer 2015) in radically different ways?
Towards an operational account of institutional landscapes
Unpacking the practical activities of finance in situ has been the prime goal of an interdisciplinary field popularized as the social studies of finance (see, for example, Langley 2008; MacKenzie 2005; Preda 2013; Pryke & Du Gay 2007). Insights from this field can breathe fresh air into the study of “finance-gone-farming”. Even though not explicitly rooted in that intellectual tradition, Martin et al. (2008: 128) capture the gist of such a programme quite well: “Reckoning finance into a practical activity discloses capital’s own methods such that they might be both reappropriated and redeployed …” They continue: “[I]t is an effort to specify what capital’s movement does, both to itself and across a whole range of social sites and activities” (ibid.: 129).
Embracing more practice-attuned approaches to study the multiple activities of global finance, however, risks denying “analytical validity to the category of capital” (Mezzadra & Neilson 2013: 10) and capitalism more generally (Leyshon & Thrift 2007; Preda 2013). In this regard, the social studies of finance have attracted the same sort of criticism as their related field, the social studies of economization and marketization (see, for example, Fine 2003; Christophers 2014). A useful bridging concept in this regard is that of “operations of capital”, recently developed by Mezzadra and Neilson (2013, 2015, 2019). Speaking from a critical political economy perspective that has had fruitful encounters with practice-oriented thinking, it helps develop a grounded understanding of the historio-geographically variegated operations of “global finance”:
Using the concept of operations of capital … opens a new angle for the critical analysis of the relation between capital and capitalism. An operation always refers to specific capitalist actors while also being embedded in a wider network of operations and relations that involve other actors, processes, and structures. This gives us two analytical avenues through which to examine the work done by an operation. The first, with its reference to specific capitalist actors, reveals the workings of capital in particular material configurations, shedding light on processes of valorization as well as on the frictions and tensions crisscrossing them in lived and grounded circumstances. The second focuses on the articulation of operations into larger and changing formations that comprise capitalism as a whole.
(Mezzadra & Neilson 2015: 6–7)
Thus, an operations of capital analytics does not solely focus on the everyday practices of finance – finance as work. Operations are quotidian and abstract at once, as they speak to the shared legal frameworks, conventions, metrics and rationalities of the global finance industry. These are recursively enacted in the everyday practices of financial economization, invoking a relation between the “micro” and the “macro”. It is through such operations, and the practices they come along with, that institutional landscapes emerge as material effects. In the case of this book, this implies moving back and forth between ethnography and world history (Hart & Ortiz 2014) – between the macro, historically grown, and the micro, accomplished in situ.
Financial keywords under scrutiny
A practical account of operations behind the formation of institutional landscapes also implies that we critically engage with how we narrate and represent these markets (Vogl 2015), which inevitably leads us to the question of keywords. Keywords are important empirical terms that are frequently used during everyday language (Williams 1985) but that – at a higher reflexive level – should always receive critical scrutiny. Even in scholarly texts, however, keywords are often taken for granted. Scrutinizing keywords can be done for a number of social fields, but this seems to be particularly pivotal with regard to the financial industry, as it often operates using an opaque language, with many things remaining obfuscated because they are considered too technical and the realm of experts. Here, “complexity is the enemy” (Foroohar 2016: 25). Keywords require both cultural and etymological analysis. Ironically, the words of an investment guru help here: in order to understand something you have to know not only what it is and how it operates, but how it came about and what beliefs and other influences operated upon it (Fraser-Sampson 2014: 19).
Financial “markets”
It is a common narrative in accounts of modern finance that the key function of financial “markets” is the “pursuit of new investment opportunities” (Kay 2015: 136) (“search”) and “the management of long-term assets that have already been acquired” (ibid.) (“stewardship”). Yet the abstract market metaphor not only fetishizes the “flesh-and-blood institutions” (Christophers 2015b: 92) making up financial markets but also conveys “the qualities of dispersion, anonymity and competition” (ibid.) when there is in fact centralization, socially dense relations and the “systemic power of large financial institutions” (ibid.). What is commonly called the “global financial market” actually more closely resembles a global allocation bureaucracy (Ortiz 2014), populated by players such as institutional investors, including pension funds, private equity firms and insurance companies.
The market metaphor also suggests that financial markets operate like commodity markets. Yet the former are ultimately not about bestowing something with exchange value and trading it as a commodity for a return. Even though tradability – often referred to as “liquidity” – is certainly a desirable feature of many financial products, these markets do not operate according to the same logics as commodity/production markets (Knorr-Cetina 2010). Rather, financial markets are about speculation and investment, and these activities involve claims and commitments exercised over time and oriented to the realization of future income.
Asset
An important term in this book that the reader will encounter regularly is that of the “asset”, the key pillar of institutional landscapes. Deriving from an Anglo-French legal term (aver a(s)setz/to have enough, with roots in the Latin words ad satis = to be enough/sufficient) that first surfaced in the middle of the sixteenth century (Murray 1884: 507), it originally denoted “the property of a deceased person that in the hands of his heir or executor is sufficient to pay his debts and legacies” (G. & C. Merriam Co. 1971 [1901]: 131) but quickly passed into a general sense of an “item of value owned” (ibid.) that can be converted into ready money, or that “serves as a resource or source of strength” (ibid.). This is notable, because, right from the beginning, the term implied that assets have an inherent quality that allows them to serve the cash needs of external parties. Today it is a key notion in economics and the world of investment management, describing “a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit” (Barone 2019). Financial assets, in particular, represent investments in the assets and securities (bonds/stock/private equity) of other institutions, but increasingly also of urban and rural real estate, infrastructure or various forms of “natural capital”. In a more foundational sense, an asset is a “property that yields an income stream” (Birch 2017: 468) and is not meant for immediate sale.
Assets can also be intangible, with intellectual property rights and various forms of legal arrangements constructed around them (e.g. licensing), providing important income streams to financial investors and corporations. The process of turning something into a source of future income should be called “assetization”. It should not be equated with other popular political economy terms, such as “commodification” or “marketization”. Although certain types of assets – especially in their securitized form – can be traded in markets and thus have a quasi-commodity character, the underlying form of value is distinct from a commodity for its income-stream-generating quality. The term “assetization” should also not be used synonymously with “capitalization” (Muniesa et al. 2017) – a set of specific accounting techniques for capitalizing the assumed future value of an asset in the present.
The proliferation of assets has also led to a proliferation of professional asset managers, such as private equity funds and wealth management arms of large international banks (Braun 2015: 8). By the end of 2016 these entities, also known as “shadow banks”, managed US$85 trillion (up from US$60 trillion in 2007), “with around 80 per cent held on the accounts of institutional and retail investors in Europe and North America” (Gabor 2018).1
Investor
Agricultural investment is about investors. Contemporary textbook definitions of the term “investment” as the allocation of capital for the purposes of capital maintenance, revenue generation or capital appreciation distinguish it from “unproductive” economic activities. Thus, today the investor appears as someone (a person, a corporate entity) who is not a speculator (someone who takes high risks in order to achieve high returns), nor a gambler (someone who takes very high risks in order to achieve disproportionately high returns) nor an arbitrageur (someone who exploits interest rate or price differences at the same time in different places for the purpose of profit taking through so-called “carry trades”) but someone who produces real value. In practice, however, investment strategies, especially those in the financial sector, often follow less clear lines and often combine all or several of the economic activities mentioned here.
From a radically different perspective, many of the activities taking place in so-called financial markets today need to be understood as capital placements rather than as investments: “Placement means the purchase of titles to debts or shares, which is financed either from savings, from income or from the proceeds of selling other property. In contrast, investment designates using financial resources for creating capital goods” (Robinson 1956: 8; cited in Zeller 2008: 10).
Even though the production of material output is still an important means to the production of financial value for direct investments into farming ventures, the original sources of capital (such as future pensioners) assume the role of rentiers rather than investors. A rentier is someone (a person, a legal entity) who lives from dividends, asset price appreciation, payments of interest, payments of licences or payments of ground rent, with rentiership being fundamentally about securing, operationalizing and exchanging the rights to future income streams from a now bewildering array of underlying assets. We will re-encounter the ghostly figure of the rentier in Chapter 9.
Private equity
One of the key “flesh-and-blood institutions” (Christophers 2015b: 92) in the money management world that this book deals with is private equity funds. In agricultural capital placements, this investment structure is used for investing in the share (equity) of a farming venture. This company could have been listed on the stock market (a public company) or bought from its existing owners (a privately held company) (Toporowski 2012: 278; Appelbaum & Batt 2014) in order to resell it at a profit. As part of the non-organized capital market (“non-listed”), private equity funds cater for so-called “sophisticated” investors and are thus subjected to less regulation than vehicles serving the organized capital market (“retail markets”). Private equity structures are now so widespread as the new owners of companies across different sectors that observers have spoken of “private equity ubiquity” (Kelly 2012: 199) as a peculiar historical moment.
Private equity companies collect money from institutional investors by setting up a special legal arrangement called the “limited partnership”, in which the original investor assumes the role of the limited partner (LP) and the private equity firm the role of the general partner (GP). The limited partnership is as much an organizational structure for the extraction and capture of value (Appelbaum & Batt 2014) as it is a legal structure through which large institutions such as pension funds can delegate investment risks and decision-making power to specialized third parties, in order to live up to their legal responsibility to act in the very best interests of the original asset holders (the so-called “fiduciary duty”), while at the same time allowing the investor to reap certain tax benefits (Fraser-Sampson 2010).
Conclusion
In this chapter, I have outlined how this book intends to study the finance–farming nexus. As argued, the most tempting way would be to do this from a “financialization” perspective. Although I have acknowledged the insights from work embracing this optic, I have proposed a complementary, more practice-centred approach that allows us to fill in existing gaps in the literature, including the following: being more attentive to history; scrutinizing the concrete practices of institutional landscape making; interrogating the politics of information and data; extending to epistemic margins as sites of empirical investigation; uncovering material and political frictions in agri-investment chains; and addressing the global value relations behind agri-investment chains and their social and ecological footprints. This helps us arrive at an operational account of the production of institutional landscapes without losing sight of the “historically established, structurally stable attributes of the world” (Kleinman 1998: 285). As I have shown, such an account also implies that we critically engage with how we narrate and represent the financial structures that give rise to institutional landscapes. Thus, this book eventually paves a middle ground between work that is engaged with theorizing contemporary dynamics of capitalism and more praxeological accounts of finance’s “empire of values” (Orléan 2014).
1. Global gross domestic product (GDP) stood at about US$75 trillion at that time; see www.statista.com/statistics/268750/global-gross-domestic-product-gdp (accessed 1 January 2020).
