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ОглавлениеHistory: How old is the finance–farming nexus?
Historically, finance capital has adopted many forms in promoting change in both farm structure and landowning relations.
(Munton 1985: 156)
In September 2014 the Queensland Art Gallery and Gallery of Modern Art in Brisbane hosted an exhibition called “Harvest”, which engaged with the history, geography, production and politics of food in the Australian state. The exhibition featured a collection of photographs by Richard Daintree, one of the first Britons to explore the region. A geologist and photographer, he took some impressive pictures of the region’s landscape (such as Photo 3.1), which he presented, together with geological maps, at the 1862 International Exhibition in London in a bid to attract immigrants and investors to the colony (entry in field diary 2014). Across the Tasman Sea, some 40 years earlier, whaling and shipping interests began to pitch Aotearoa New Zealand as a new frontier for British colonization. A proposal for a military colony in the North Island from 1823 sketches a promising investment case, highlighting its “delightful climate … uncommon fertility of soil, [which gives] … all the necessaries and most luxuries of civilized life … [T]here is no country on earth more favourably circumstanced for the operations of agriculture than New Zealand” (McAloon 2013: 86). Back then, pictures and some text were enough to mobilize capital for agricultural ventures from abroad.
Photo 3.1 Imperial landscape in Queensland
Source: Richard Daintree, England/Australia 1832–1878, “Volcanic downs country” (no. 7 from “Images of Queensland” series), c.1870
These snapshots can be juxtaposed with the investment prospectuses of capital-raising agricultural fund managers some 150 years later. Speaking to potential investors, these similarly pitch promising landscapes across a range of geographies, albeit now backed up with hard figures and fancy graphs. When placed into that historical lineage, a phenomenon that many media, research and activist reports have hyped as the outcome of the financialization of the economy starting in the 1970s (Harvey 2007; McMichael 2012), suddenly appears less novel. Metropolitan finance has a long history of helping to transform nature into property in different parts of the world, producing and reshaping agrarian landscapes via the provision of both debt and equity capital. As David Graeber (2011: 346) puts it in his historical masterpiece Debt: The First 5,000 Years,
Starting from … [the] baseline date of 1700, then, what we see at the dawn of modern capitalism is a gigantic financial apparatus of credit and debt that operates – in practical effect – to pump more and more labour out of just about everyone [and everything: my addition] with whom it comes into contact, and as a result produces an endlessly expanding volume of material goods.
Such a longue durée perspective (Edelman et al. 2013: 1528) on expansionist moments in metropolitan finance suggests that the coupling between finance and farming is less “unnatural” (Gosh 2010) than many existing accounts admit. Industry players are quick to even argue that farmland was the “oldest asset class in the world” (Lapérouse 2016: 4), which is a claim we should critically scrutinize but which nevertheless reminds us of the need to employ a broad historical optic.
The problem of many existing takes on the financialization of farming is not just that they often employ a narrow historical view (Christophers 2015a). Even the accounts more attuned to history are carried away by the presumably spectacular fact that finance now increasingly asserts direct ownership (via the acquisition of equity stakes in agricultural ventures) over the agricultural production process. Such a privileged focus on direct equity investments neglects the role that debt and stocks (as less direct forms of equity) have historically played in the making and remaking of agricultural landscapes in many parts of the world, particularly during imperial-colonial times. Moreover, during much of the twentieth century national governments around the world supported “agricultural transformation” via the provision of credit and mortgage schemes, often with tight links to both domestic and foreign sources of finance. Even the managed institutional investments in agriculture we have read so much about after the food and financial crises of 2007/8 have a surprisingly long history, as we shall see.
The historical examples discussed in this chapter show that we must carefully examine how current phases of “financialization” compare to earlier operations of finance capital formation in and through agriculture on a global scale. Yet, just because finance has had a long (but by no means straightforward) relationship with agriculture, it does not mean that there is not something new about finance’s run on all things agricultural. Eventually this chapter will do justice to this newness by outlining some of the novel features that characterize the contemporary financial economization of farming.
Frontiers into assets: imperial landscapes and the quite early globalization of finance
In agricultural economics, assets are conventionally defined as all the wealth that is at the disposal of a farmer. But, in many cases, there is a hidden story to that wealth, a history of appropriation, enclosure and transformation, and, historically, “finance” has played a significant role in that story. Indeed, a longue dureé perspective reveals that both private and public forms of finance were playing a crucial role in the production of capitalist agricultural landscapes from at least the late seventeenth and early eighteenth centuries in different parts of the world (see Table 3.1). The colonial companies that turned indigenous territories in the regions of Australia, Aotearoa New Zealand, Indonesia, India, the United States, South Africa and Argentina (to name a few) – often classified as “empty”, “idle” or “underutilized” lands – into “imperial assets” had tight links to investors and stock exchanges in the colonial metropoles (Kocka 2013: 52). These companies usually acquired lands through a variety of means, including brute force.
Much of this land was held for speculation, but also for exploiting natural resources such as timber. Examples were the New Zealand Company, the Natal Land and Colonization Company in South Africa, the Mexican Land and Colonization Company and the Santa Fe Land Company in Argentina. In 1913 there were 130 British companies of this type holding 25 million hectares of land, largely in Africa and Latin America, but also in North America and Oceania. This compares with 746 companies that held 5.6 million hectares engaged directly in agriculture through plantations, and 40 companies that held 14.2 million hectares for ranching. A further 11 companies held 2.7 million hectares through railway concessions, most of which would eventually be sold off for settlement (Byerlee 2013: 23).
Table 3.1 Examples of territory occupied and main land use, 1650–1917
| Approximate dates | Region | Latitude | Main usage in period | |||
| 1690–1830 | Cape Colony | 30–34° S | Grazing Pockets of viticulture | |||
| 1750–1820 | Old (US) Northwest | 38–41° N | Grazing Grain | |||
| 1750–1850 | Buenos Aires province | 35–40° S | Grazing | |||
| 1785–1860 | US public domain east of Great Plains and north of river Tennessee | 37–42° N | Mixed farming | |||
| 1785–1840 | US federal and state public domain in the south | 30–34° N | Grazing | |||
| 1785–1850 | Upper Canada | 42–45° N | Cotton Mixed farming | |||
| 1803–1830 | Van Diemen’s Land (Tasmania) | 41–43° S | Timber Mixed farming | |||
| 1788–1840 | South-eastern Australia | 27–38° S | Grazing | |||
| 1820–1850 | Texas | 26–32° N | Grazing Cotton | |||
| 1836–1860 | Boer republics and Natal | 23–30° S | Grazing | |||
| 1865–1890 | US West: high plains and Great Basin | 32–49° N | Grazing | |||
| 1846–1890 | California | 32–42° N | Grazing Grain | |||
| 1840–1860 | Aotearoa New Zealand | 36–46° S | Grazing | |||
| 1870–1914 | Canadian prairies | 49–54° N | Grain Minor grazing | |||
| 1890–1900 | Zimbabwe (Southern Rhodesia) | 15–22° S | Grazing Tobacco Cotton | |||
| 1900–1914 | Highlands of Kenya | Equatorial | Grazing Coffee | |||
| 1885–1917 | Northern and north-eastern Tanzania (German East Africa/Tanganyika) | Equatorial | Coffee Sisal Grazing |
Source: Updated after Weaver (2003: 89) (reprinted with permission).
Many of the overseas investments during this period went into only six commodities – sugar, palm oil, rubber, bananas, tea, and food staples, all of which should play an important role in the production of agrarian landscapes up to the present. Sugar and palm oil even received “a new life” (Byerlee 2013: 23) as agrofuel inputs. Except for food staples (and wool), all these commodities were usually produced on plantations or large-scale estates, as these were amenable to economies of scale and vertically integrated production, thus making such operations attractive to scale-hungry financiers. In contrast, food staples such as grains, dairy or meat and wool were largely produced by family farms, particular in the settler colonies of the Americas, Australia, New Zealand and eastern and southern Africa. These would buy land from colonial governments or companies. Some argue that it was only more recently that financial investors would target food crops directly because of advancements in crop/animal husbandry, technologies and farm management and the increasing consolidation of farms in different parts of the world (Byerlee 2013). But a closer look reveals that even these petty colonialists had often tight links to (high) finance, connecting metropolitan credit, land speculation and enclosure (Weaver 2003: 194). With the advancement of credit, mortgage, farm insurance and agricultural futures schemes (Martin & Clapp 2015), these became enmeshed in “giant chain[s] of debt-obligations” (Graeber 2011: 347) and contractual entitlements.
This can be vividly illustrated using the example of Aotearoa New Zealand, where “[f]rom early times farmers insisted on securing the freehold of their land, which alone created demands for heavy doses of capital” (Pryde 1987: 6-1). Just 45 years later, after James Cook as the first European had landed in Aotearoa (as the local Māori tribes would call it), the first cattle were brought to the country in 1814, once the colonizers had realized that “the local climate allowed for year-round pasture growth and that wool, meat and dairy produce could be produced in New Zealand with very few resources” (Wynyard 2016: 63). As elsewhere, the sporadic trading activities backed by merchant capital soon gave way to more direct forms of colonization, spearheaded by large colonial companies and a few land-hungry individuals. Even though these forces were not always successful in their agricultural ventures (Fairweather 1985), they were still quite effective in dispossessing the autochthone Māori populations through a mixture of purchase, theft, fraud and coercion. Millions of acres of land, particularly in the South Island (Wynyard 2016), were thus appropriated. Early settlers would engage in speculative runholding practices, whereby livestock herds, often financed by loans from overseas or larger runholders, would be moved around. After the colonial government signed the Treaty of Waitangi (1840) with local Māori tribes, the leasing of Māori land became illegal, as the Crown was given “a complete pre-emptive right to all land purchases” (Fairweather 1985: 441) in order to “shield” Māori lands “from unscrupulous land jobbers” (Wynyard 2016: 76). Runholders therefore became a crucial force in pushing for the autonomy of the colony, so that they could establish full property rights over the best lands. The squatting mode of production increasingly reached spatial limits in the years to come, which led to the emergence of larger ranching estates (Fairweather 1985). Contrary to the runholding, with its links to more short-term-oriented sources of finance, domestic and overseas alike, estates had tight financial connections to private persons and investment trusts in both England (London) and Scotland (Edinburgh).1 One of these companies was the New Zealand and Australian Land Company, founded by Scottish financier James Morton in 1865/6 (Tennent 2013). The company acquired dozens of properties in the Southland and Otago Regions, turned them into “British farms” by introducing European flora and fauna and established the first frozen meat exports to the colonial motherland in 1882. In later years it also leased out and sold land to settlers. The company “established a managerial structure which linked specific places on both sides of the world and allowed directly for the transfer of financial capital, technology, skills and raw materials” (ibid.: 91). This structure, when juxtaposed against contemporary financial investments in Aotearoa New Zealand agriculture, looks all too familiar (see Figure 3.1). In the case of the Land Company, as well as other estates backed by metropolitan finance, a shareholder value gaze “penetrated the production sphere of pastoralism” (McMichael 1987: 431) at a surprisingly early juncture, “institutionalising the managerial goals of closely supervising production, enhancing productivity and rationalising the enterprise with various technical developments involving fixed capital investment” (ibid.).
Sources: A: own research*; B: redrawn from data provided in Tennent (2013: 86).
The estatization of Aotearoa New Zealand agriculture was also supported by several legislative acts passed from 1863 onwards. Passed amidst a series of wars with Māori related to the control of the highly productive regions of Waikato, Taranaki, and Eastern Bay of Plenty in the North Island (where Māori tribes were better placed to resist European colonization and runholding, and estates could not spread accordingly), these provided the basis for the confiscation of millions of acres of additional Māori land (Wynyard 2016: 75). With these acts at hand, all the colonial government had to do was to claim that an iwi (the traditional family unit of the Māori), or a significant number of members of an iwi, had risen against the Crown. In addition to war and “punishment”, state-led land purchasing and the establishment of a Native Land Court in 1865, intended to “modernise” the Māori communal land tenure system by individualizing it, further redistributed land or access to it in favour of Pākehā (the Māori name for white colonialists) settlers. At the same time, the land inequalities between settlers would grow tremendously. As a consequence, many of the South Island’s large land holdings were broken up through a series of Land Acts between the late 1870s and early 1890s. Crucial here was the small-farmer-oriented politics of John McKenzie, the agriculture minister of the Liberal Party government from 1891 to 1900 (Wynyard 2016). Although this laid the foundation for different farm structures and land ownership relations, it was the rise of the government-mediated credit and mortgage industry that was the tipping point in the country’s agricultural history. Via the Advances to Settlers Act of 1894, the Liberal government of the time obtained funds in London and made loans to farmers below current market rates of interest, thereby providing “the credit necessary to establish small intensive farms … and stimulate the dairy industry …, remov[ing] the barrier which had been preventing New Zealand from recovering from the long depression …, [and] organis[ing] and systematis[ing] the market for rural long term credit” (Quigley 1989: 51).2 This system was to prevail almost unchanged until the 1980s, with the public Rural Banking and Finance Corporation (RBFC) serving as the most important lender, but also other institutions such as stock and station companies, insurance companies, commercial and trading banks, investment and finance companies, and solicitors, families and trusts generously extending credit to Kiwi farmers (Le Heron 1991). The RBFC-backed system of credit provision was abandoned only during the neoliberal restructuring of the 1980s, which led to a further globalization of the finance–farming nexus in Aotearoa New Zealand (Argent 2000). Against the backdrop of rising interest rates, the burdening nature of farm debt and the restructuring of the farming sector according to free market principles (Wallace 2016), experts argued that farmers should open up to new forms of capital, such as equity, so that non-farm investors would have “greater opportunities to purchase shares in large farms” (Pryde 1987: 6-13).
It was at this time that business-savvy farmers rolled out new organizational structures such as syndication and equity partnerships as part of a more corporate-oriented farming model (Wallace 2016). Although some individuals had already experimented with syndication in the 1970s (Hawke 1985), a model in which the ownership and management of farms is split and thereby allows the entry of other (non-farming) investors, it became more widespread in the 1980s. For instance, a group of entrepreneurial farmers helped set up the New Zealand Rural Property Trust, opening up Aotearoa New Zealand farmland to passive investment by superannuation funds from Australia. By the late 1980s the trust held 34 farming properties across Aotearoa New Zealand (Le Heron 1991: 164). Interestingly, its key architect would also become one of the crucial players in the new finance-driven land rush in the late 2000s (see Chapters 7 and 8).
The case of Aotearoa New Zealand tells us that finance capital was crucially involved in the transformation of imperial “frontiers into assets” (Weaver 1999), but how this advanced varied significantly from frontier to frontier. The work of Rudolf Hilferding (1981 [1910]), writing at the height of the colonial frenzy, allows us to connect these various imperial frontiers. He argued that “[t]he export of capital and the struggle for economic territory” were tightly interlinked during the age of empire. Yet neither the export of capital nor the conquest of new territory was as straightforward as in this case (or Australia, Argentina or Canada, to name a few other dominion states). This is exemplified by the example of modern-day Tanzania. Like Aotearoa New Zealand, it is an example of capitalism’s expansionary drive to tap into new markets, export its internal social or environmental contradictions (e.g. “surplus people” or “environmental destruction”) and appropriate new human and non-human resources. But it is also an example of how local factors may change that project, and how each postcolonial government has tried to correct its respective colonial heritage, albeit with often limited or short-lived success.
The coast and some hinterland parts of mainland Tanzania (the island of Zanzibar is another part of it) had been profoundly influenced by the slave, ivory and spice trade, backed by Arab, Chinese, Persian and Indian merchant capital for centuries, when it became the focus of organized merchant capital from the West in the 1830s (Coulson 2013 [1982]). When the region was proclaimed as German East Africa in the 1880s, this was spearheaded by the Society for German Colonization (Gesellschaft für deutsche Kolonisation: GfdK), rather than by the state itself, which was reluctant to spent taxpayers’ money on the colonial project. Like similar outfits to follow, the society had various shareholders, with all of them betting on the colonial ventures of its notorious director Carl Peters (Peter 1990: 199). After having negotiated access to land with a number of local authorities in the north-east of the country, the GfdK managed to get state backing and was renamed the German East Africa Company (Deutsche-Ostafrikanische Gesellschaft: DOAG) in 1887 (ibid.). The DOAG set up plantations as the first “major institution” (Rodney 1983: 1) of German colonialism, but also rented out land to settlers. Altogether, the company was involved in at least 24 other companies spanning different sectors. Later, Deutsche Bank and other banks were also crucial providers of credit to support the building of the colonial space economy (Slater 1977). Some of these “did good business in that they were able to declare high dividends” (Peter 1990: 208). Since the Germans wanted to turn Tanganyika into a settler state, the DOAG also provided credit to white settlers, although this provision seems to have been quite limited. This plan was soon abandoned by the colonialists after they faced local resistance to the expansion of large-scale farms from the 1890s onwards. In 1891 the state took over territorial control from the DOAG, and proclaimed all land occupied or unoccupied as Crown land, except for that land already in private ownership or owned by chiefs, who were often collaborators in the colonial project (ibid.). Despite this adjustment, settler estates and plantations cultivating sisal, coffee, tea, tobacco, rubber and cotton numbered around 700 in the Usambara and Kilimanjaro regions of the north-east and north, and a few other places, by 1912.
Even though not all were set up by German investors (the Germans restricted the involvement of other nations), they marginalized local populations and significantly altered existing agricultural practices (Sunseri 2005: 1540). When the Germans saw that a settler-colonial project akin to the Aotearoa New Zealand venture was not possible, they tried to expand cash crop production by imposing taxes on smallholders, which thereby were forced to join the export economy. Credit provision to local farmers was extremely limited, however, and even restricted by law (Coulson 2013 [1982]). It served the extractive need of the colonial economy rather than allowing local farmers to transform their farms. As in Aotearoa New Zealand, local people were locked out of colonial credit markets, but, contrary to there, they largely kept their de facto power over land, despite some large-scale appropriations in the north and north-east of the colony. This would initially remain the case under the British, who took over Tanganyika after Germany’s loss in the First World War as part of a League of Nations mandate in 1922. Under these political restrictions, the British moved away from the alienation of local land to the promotion of African cash crop production (Aminzade 2013), espoused by the Colonial Development Act (1930) and Colonial Welfare Act (1940) respectively.
After the Second World War, Britain shifted to a more transformative approach that was meant to promote “modern farming” in order to serve the rising food and foreign exchange needs of the empire. The infamous groundnut scheme, supported by public money via the Overseas Food Corporation, but also the extension of private credit to large-scale farming settlers via commercial banks, particularly the Land Bank (founded in 1947), was indicative of this shift (Mittelman 1981: 190). By 1959 1,284,647 hectares of land had been alienated for commercial agriculture (Aminzade 2013: 35).3 Additionally, the Colonial Development Corporation (now called the Commonwealth Development Corporation: CDC), founded in 1948 and widely considered to be the first development finance institution, became an important provider of loans to large-scale plantations and food enterprises across Africa. It reinvented itself as a private-equity-focused institution in the late 1990s (and will reappear later as a backer of one of the Tanzanian investment cases).
When Tanganyika became independent, in 1961, it quickly embraced an Afro-socialist path of development. After 1967 many large export-oriented estates, plantations and businesses in other sectors were nationalized. Although foreign capital, both private and public, was still backing some farming projects, the institutional and political features of the time limited foreign capital’s penetration of agriculture. The main transformative effort of the time was focused on rural collectivization, and rural farmers were serviced by national banking institutions, whose access to foreign private finance was restricted, however. This would change after the demise of socialism towards the end of the 1980s (Aminzade 2013). After Tanzanian subscribed to the structural adjustment plans of the World Bank and International Monetary Fund (IMF) in 1986, the financial sector and virtually all other domains of the economy were liberalized (Lwiza & Nwankwo 2002). In the 1990s this also led to the privatization of former state assets (Temu & Due 2000), including many agricultural enterprises (one of which we shall encounter later as a “financial asset”). As we shall see in Chapter 8, the privatization of former state farms, and the rise of associated market-oriented agricultural policies in the new millennium as an apex to the neoliberalization of the Tanzanian economy, would provide a window of opportunity for the entry of large-scale overseas investments (Chachage & Mbunda 2009). At the same time, the rural population’s overall access to credit did not improve and sometimes even got worse compared to the era of state-backed credit provision (Bee 2009).
The historically limited expansion of credit in earlier periods paired with the restrictions put on large-scale private farming during the socialist period (other than state farms and a few other plantations) would provide opportunities for the entry of global finance in the 2000s. On the one hand, friends of the market could argue that smallholders – still the majority of the country’s population – did not produce enough to feed the nation and posed no viable development future (Collier & Dercon 2014). On the other hand, the country, despite the fact that it still presented significant barriers to foreign investment in agriculture (e.g. a quite restrictive land tenure system), inherited a number of large-scale farming pockets that had the scale that institutional investment needed.
This brief account of imperial frontier making shows that finance, even structured transnational investments, had tight connections to the production of agricultural landscapes in many parts of the world. In certain geographical regions, such as modern-day Tanzania, a number of structural barriers prevented finance from penetrating agriculture more thoroughly, while in others it faced far fewer obstacles. In some contexts finance proceeded through genuine equity investments and direct ownership chains, but in the majority of cases it advanced through the provision of credit. Credit is central to the (re)production of capitalist relations and “facilitates structural change in agriculture” (Green 1987: 69) and, by itself, is a way of extracting surplus from production (ibid.: 62). Across the globe, for sustained periods of time, it was the vehicle of choice for money flowing into agriculture. Credit not only links savers and borrowers, who would use it in the creation of new “assets”, including agricultural ones, but also serves as “a mechanism for increasing the turnover rate of capital” (ibid.: 29). Depending on the context, however, the “terraforming” power of credit was limited or even restricted (such as in colonial and socialist Tanganyika/Tanzania), or at least heavily regulated, as part of a wider state-interventionist project of economy making (as was the case in Aotearoa New Zealand).
After the demise of empire, financial thinkers and practitioners soon discovered new ways of capitalizing on farming. By the mid-1960s attempts were made to reimagine agriculture as a genuine object of modern asset management. This manifested itself in the rise of institutional farmland investment thinking in the United States, and a first wave of institutional farmland investments in the United Kingdom in the 1960s. Although, in the United States, it would take until the farm crisis of the 1980s before finance could legitimately enter farming more directly, backed by finance-mathematical claims about how it could add value to an institutional investor’s portfolio, the flow of finance into farmland in the United Kingdom was born out of more practical considerations on the part of the institutional investment managers of the time. After all, the Crown, Church, aristocracy and gentry had put their monies into land and forestry for centuries, so why should they not do so as well?
From individual to institutional asset: the rise of farmland investment thinking in the United States and United Kingdom
The rise of modern forms of farmland investment thinking dates back to the United States of the 1960s. It evolved against the backdrop of increasing land consolidation (reaching a scale interesting to financial investors), such that average farm sizes “ballooned between 1910 and 1970, from 138 to 390 acres” (Axelrad 2014: 6; see also Weis 2007: 83), as well as the increasing influence that financial institutions had gained in agricultural lending and mortgages. The first attempts to make a case for farmland investments were made by a number of economists working at the land grant universities of the Midwest in the mid-1960s (Barry 1980; Kaplan 1985; Kost 1968). Based on these thoughts, Merrill Lynch and the Continental Bank of Illinois tried to set up a farmland fund in the late 1970s, which did not materialize because resistance from “an unusual alliance of government, Congressional, labor, farm, consumer and religious forces had denounced the plan as likely to lead to domination of agriculture by huge tax-exempt investors and to threaten the future of family farming” (New York Times 1977; see also Chapter 6). What instead took off without much resistance was institutional investment into timberland (Gunnoe & Gellert 2011), as “[v]ertically integrated US timber companies, facing increasing market pressure, began to view their land holdings as deadweight on their balance sheets” (Fairbairn 2014: 788). Their lands were either bundled in real estate investment trusts (REITs) or managed on their behalf by a timberland investment management organization (TIMO). The full-blown entry of institutional investors into farmland was sparked one decade later by the great farming crisis that ensued in the 1980s, which left many owner-operated farms bankrupt and saw some formerly solely insurance companies, such as Prudential Travellers and John Hancock, take direct ownership of indebted farms. These and other institutional investors moved beyond timberland interests, with the TIMO serving as an important template for the newly emerging farmland investment management organizations (FIMOs) (Gunnoe 2014; Fairbairn 2014). In the mid-1980s the most important players owned almost 3.5 million acres of farmland across the United States (Green 1987: 74). Today Hancock, now as Hancock Agricultural Investment Group, and Prudential, now as Prudential Agricultural Investments, are still important players in the agricultural investment industry.
Interestingly, by the early 1980s the United Kingdom had already experienced two decades of institutional farmland investing, a boom that ended when the one in the United States was about to start. Albeit less explicitly guided by the principles of modern portfolio management, this was a significant moment of financial expansion. Although insurance companies already held by 1875 “‘between two-thirds and three-quarters of the long-term debts secured on landed estates’” (Northfield Committee Report; cited in Munton 1985: 157), and had supported the colonial enterprise, up to the 1960s these players had not invested in domestic farmland “because private owners were prepared to pay 45 per cent on borrowed capital with rental yields at only about 21 per cent” (ibid.: 158). After government policies such as the promotion of credit and mortgage expansion and support for owner-occupier farming had led to the increasing commodification of land rights between the First World War and the 1960s (Whatmore 1986), pension funds, insurance companies and property unit trusts overcame the traditional “city antipathy” (Munton 1977: 31) towards agriculture and started to acquire farmland in England and Scotland. Combined with some macroeconomic drivers (discussed below), the preceding “transformation of land rights into financial assets and the development of the land market as a specialised investment sector” (Whatmore 1986: 117) created the necessary conditions for finance to take direct ownership of farms. This takeover “formed the basis for some of the more dramatic political debates in Britain during the 1970s” (Duncan & Anderson 1978: 249), and sparked a series of critical investigations into the workings of the “property machine” (Ambrose & Colenutt 1975). Two observers at the time noted that “[i]nvestment by financial institutions had been particularly obvious during the 1971–4 boom and again from 1976” (Duncan & Anderson 1978: 249). Drawing on a comprehensive survey of 40 funds that had a stake in farming properties, Richard Munton (1985) – probably the leading scholar on the assetization of farmland in the United Kingdom at that time – notes that, between 1966 and 1982, finance-driven investments in farmland saw a significant expansion (see Figure 3.2). By the end of 1984 financial institutions owned 286,517 hectares of lease land and a further of 48,341 hectares with vacant possession. This was “equivalent to 1.9 per cent of the total agricultural area and 3 per cent of the area of crops and grass in Great Britain” (Munton 1985: 160). Although this seems small, the large-scale properties controlled by these institutions commanded a much larger share of total food output, and often owned prime land in the targeted regions. “Financial landowners” (Massey & Catalano 1978: 122) were also thought to have a significant impact on land price volatility, as they could acquire and dispose of relatively large land holdings “overnight” (Munton 1985; Whatmore 1986). In addition, the dramatic shift that financial institutions were credited with driving lay less in their land market share and more in their creation of new land tenure arrangements. Most of the institutions opted for a sale/lease back model, whereby a farmer sells his or her land and then leases it back from the financial institution, which wants to benefit from both capital gains and rental income. Others worked with “manager-tenants” (Munton 1977: 35) through partnership agreements or took land “in hand” and managed it through a subsidiary farming company (Whatmore 1986: 119). Suffice it to say, we will encounter the former model again later, as it is one of the preferred models in the United States, the main investment destination of financial flows into farming today, while the latter two models have been reborn in some of the operational strategies we encounter in Aotearoa New Zealand and Australia.
Source: Redrawn from data provided in Munton (1985: 161).
Surprisingly, the drivers of the 1970s wave of finance-gone-farming in the United Kingdom were similar to those that would take precedence almost 40 years later: a fear of rising levels of inflation; ever-growing liabilities derived from the savings boom during this period; and the poor performance of traditional long-term investments, such as government bonds. Combined with government restrictions on overseas investments, and strong government support for the agricultural sector, this led to a rush on rural farming properties (Whatmore 1986: 118). Even though urban land acquisitions far outstripped the acquisitions of rural land, the latter were considered particularly controversial, with the then minister of agriculture admitting publicly that he was “‘scared as hell’” by what was going on (cited in Duncan & Anderson 1978: 251). This even led to the establishment of a commission, the so-called Northfield Commission, which presented its rather futile attempt (Leftwich 2010 [1983]: 212) to establish patterns of institutional land ownership in the United Kingdom in a report in 1979.
In retrospect, the boom in farmland investments in the United Kingdom would be over in less than two decades. When inflation declined, agricultural futures looked increasingly bleak, UK tenant laws proved to be too restrictive, restrictions on overseas investments were lifted and other asset classes looked more promising in the early 1980s, so fund managers started to placed their capital elsewhere. As we will see in Chapter 6, back then the same rule of investment applied as today: “Investment in farmland was a matter of comparative returns and the return from agricultural property would be continuously compared with returns from other assets” (Munton 1985: 159). Suddenly the city antipathy towards farmland was back. It would last until the late 2000s. Nevertheless, even though the boom in farmland investments in the United Kingdom seems short-lived, this relatively early financial economization of farmland formed an important antidote to the contemporary finance-driven land rush, and is still remembered by some industry veterans as a “first attempt”. It led Sarah Whatmore (1986: 113) to a conclusion that reads like an excerpt from a recent paper in the Journal of Peasant Studies (one of the leading outlets for “land grab debates”) but is backed up by research that is rarely discussed in these circles: “The social and economic relations of modern agricultural land ownership have thus become thoroughly enmeshed in the sphere of finance or banking capital in which fictitious capital circulates.”
Finance from farming
“Finance” is often positioned as antithetical to farming or other domains of the real economy, as if it had developed a life of its own completely delinked from it. Modern finance, with its high-speed mode of operation and lust for disruption, seems to be the complete opposite of the world of agriculture, which is often portrayed as conservative, slow-paced and unpretentious. Often, modern finance is also presented as a child of late, deregulated capitalism, a historical formation in which agriculture in many places (at least, in the Global North) seems to occupy only a marginal social and economic position. Indeed, as capitalism has advanced, the economic role of agriculture in many countries of the Global North, reflected by its changing share in GDP and the total labour force, has declined (see Roser n.d. for a current incarnation of this argument). Yet such binary positioning of finance and farming makes us forget the crucial role that agriculture has played in the development of modern finance and some of its practices. Indeed, these roots even transcend the age of “modern” capitalism and the age of “global finance” often associated with it, and have a pre-capitalist history:
It would seem that almost all elements of financial apparatus that we have come to associate with capitalism – central banks, bond markets, short selling, brokerage houses, speculative bubbles, securitization, annuities – came into being not only before the science of economics (which is perhaps not too surprising) but also before the rise of factories, and wage labour itself.
(Graeber 2011: 345)
A few snapshots may illustrate how modern finance evolved via a domain that is often placed far away from it.
•As already outlined in the Introduction, the notion of “asset” can be historically traced back to the idea of an estate that produces enough output to satisfy one’s obligations (e.g. debts, legacies). It soon passed into a general sense of “property” that can be converted to ready cash as early as the 1580s, way before the rise of modern capitalism. When bearing this in mind, it becomes clear why an asset in the craft of modern portfolio management is not only something of value to someone but also something that allows potential obligations to others to be satisfied.
•The efficiency-seeking and highly calculative approach of management that private-equity-minded financiers like to instil into acquired companies in and beyond agriculture was first developed on slave plantations in the Caribbean and the antebellum South – prior to the rise of “scientific” management principles in the factories of the American Northeast. Benchmarking productivity levels across different farm units was a crucial part of this calculative regime (Rosenthal 2018). Ever since then benchmarking has become a crucial tool of firms and investors to assess the performance of subsidiaries, branches or portfolio companies.
•Slave plantations in the Caribbean and the American South were also among the first sites where separation between the management and the distant ownership of an asset – a very important model of operation in contemporary capital placements in agriculture – was first established. For some historians, separation of the ownership and the management of an asset represented a “‘landmark in the history of capitalism’” (Caitlin Rosenthal; cited in Johnston 2013).
•The development of future contracts and options, now widely used financial tools, as well as the development of early stock exchanges, such as the Amsterdam Stock Exchange in 1602 and the Chicago Board of Trade in 1865, can be historically linked to trade in agriculture (Clapp 2011; Bernstein 1998). As the historian William Cronon (1992) has shown, hedging has firm agricultural roots.
•The discounted cash flow (DCF) model, now a widespread tool for asset valuation in the financial industry, was first developed in forestry. Estimating the current value of an asset by estimating its future income-generating capacity, “discounted by a certain factor based on length of time and, if applicable, the uncertainty of their occurrence and size” (Muniesa et al. 2017: 37), the DCF model allows one to establish how much one should pay for an asset at the point of sale, and allows one to structure investment among “several scenarios involving different types of … [assets]” (ibid.: 43).
•Even the idea of “capital value”, which underlies the notion of “asset” as a property whose value is underpinned by its future income earning capacity, has firm agrarian roots. Economist Irving Fisher was instrumental in shifting the prevalent thought of the time. For him, “[t]he orchard produces the apples; but the value of the apples produces the value of the orchard … We see, then, that present capital wealth produces future income-services, but that future income-value produces present capital-value” (Fisher 1907: 13–14, emphasis in original).
But Fisher was not the first to underline that agricultural land is a very special “asset” that possesses both a capital and an income-generating value, from which financial gains can be derived:
Years before he wrecked the French economy with his scheme to colonize and monetize the Mississippi territories, notorious gambler and financier John Law captured the allure of financialized land in his 1705 pitch for a land mint, where he contended that “land conveyed by paper” loses nothing of its natural qualities, but rather, because it “serves the uses of money and produces at the same time,” it “will receive an additional value from its being applied to the uses of money.” … The obvious, “real” productivity of land makes the productivity of notes (or securities) based on it equally obvious and real.
(Yates 2018)
Conclusion
This chapter has shown that agriculture as socially “produced nature” in many corners of the world cannot be thought of without taking the transformative, and often state-backed, powers of globalized financial relations into account. The production of settler-colonial agrarian landscapes in contemporary land rush frontiers such as Aotearoa New Zealand cannot be discussed without considering the far-flung financial networks that linked “the city” (metropoles such as London) and “the countryside”. If space permitted it, similar accounts could be provided for places such as the United States, Australia, Brazil, Canada, Uruguay or South Africa, where “within three generations, during the nineteenth century, some of the best lands [were] secured, surveyed, apportioned, registered and drawn into finance capitalism” (Weaver 2003: 89). Russian economist Alexander Chayanov came to a similar conclusion as early as 1925 when comparing different regional pathways of capitalist transitions in agriculture:
If to this we add in the most developed capitalist countries, such as those in North America … widely developed mortgage credit, the financing of farm circulating capital, and the dominant part played by capital invested in transport, elevator, irrigation and other undertakings, then we have before us new ways in which capitalism penetrates agriculture. […] They convert agriculture, despite the evident scarred and independent nature of the small commodity producers, into an economic system concentrated in a series of the largest undertakings and, through them, entering the sphere controlled by the most advanced forms of finance capitalism.
(Chayanov 1966 [1925]: 262)
The places where finance helped transform nature into landed property, people into (enslaved) labouring subjects, and animals into livestock were often “global countrysides” (Woods 2007) from the very onset of colonial encounters. In these places, finance had its own ways of extracting surplus from farming. Although stock-listed or shareholder-based private enterprises were crucial drivers of colonization, generating both dividends and rent for shareholders (e.g. by leasing it out to settlers), the provision of credit was an equally crucial element in the “terraforming” of the planet. Although, in the age of nation states, credit was often provided by national governments, even these would often borrow from international markets or financial institutions to provide agriculture credit. The owner-occupation of farms first established during colonial times, and later flourishing in many state-backed credit agricultural economies across the globe, veiled the fact that such credit relations – at the very core – would often qualify as rent relations (Whatmore 1986) as much as contemporary institutional investments in farming (see also Chapter 9), even though the mode of rent production from agriculture has profoundly changed. As we shall see later, paradoxically, the ongoing expansion of credit in a country such as Aotearoa New Zealand over the past 130 years or so not only transformed agricultural landscapes but also created an opportunity for new forms of capital to enter farming, as a result of increasing debt levels among local farmers. In contrast, in Tanzania it has been precisely the absence of credit for smallholder farmers – a condition with firm roots in the colonial era – that has justified the search for new forms of financing agricultural transformation.
This chapter has also shown that “modern finance” has, in part, firm agricultural roots. Many of the practices and organizational forms now taken for granted in financial markets have origins in agricultural production and trade. This improbable history needs to be acknowledged. My detailed historical account of the finance–farming nexus does not deny that something is new about the contemporary finance-driven land rush, however. The unparalleled financial power of institutional investors such as pension and insurance companies, the more general acceptance of financial practices and rationalities, the emergence of an unseen globality of finance because of regulatory convergence, the “massification of finance” (French et al. 2011: 801) in many countries of the Global North, the proliferation of investment standards, the crises of established asset classes such as stocks and bonds and the increased demand for food, agrofuels and carbon sinks are all new developments shaping the context for agricultural investments. Financiers increasingly extract value – or, better, rents – by acquiring direct ownership of farmland and control of the production process in order to transform an agricultural asset into a financial one.
To be fair, this book is not the first one to note this shift. As early as 1978, during the rise of financial landowners in the United Kingdom, Doreen Massey and Alejandrina Catalano (1978: 161) concluded that “landownership is undergoing a further change”, and agricultural production was becoming “yet more ‘adapted’ to the capitalist mode of production, and … [was] doing so under the direction of banking capital”. Contrary to the radical political economy analyses of the time, however, this book will show that assetization is not as straightforward as imagined and promised by those tasked with it. Such an insight can be generated only when finance, and the people who work on it, are followed on their journey into farming, rather than letting deductive assumptions be made about them from above. Data could provide some orientation here, but the journey quickly ends in muddy waters, as the next chapter shows.
