Financialization, distance and global food politics
Jennifer Clapp1, The Journal of Peasant Studies
It cannot be denied: over the past fifteen years, global markets for agricultural commodities were subject to globalization and growing financialization.
These developments were accompanied by the progressive and uncontrolled deregulation of the sector, coupled with the progressive liberalization of international trade.
There is a lot of literature on this subject, yet it is only recent and is far from reaching consensus. The links between financialization and food insecurity are still widely debated, as is the impact of financial speculation on price volatility and by extension on world food security.
In a recent article (extract here2), Jennifer Clapp, the Canadian political scientist and economist at the University of Waterloo believes that the links between financialization and global agricultural policy should be examined. Explicit links as transcribed in the graph we have reproduced following this extract.
Using the concept of “distancing”, she accurately raises the growing disconnect between the real economy and the financial sector on agricultural commodities. This disconnection has favoured the opacity of agricultural markets and exacerbated the role of certain financial players, ultimately leaving little room for civil society to effectively combat food insecurity and the inherent volatility of these strategic markets.
momagri Editorial Board
Recent decades have seen phenomenal growth in the sale and purchase of financial products linked to agricultural commodities and farmland by banks, agricultural commodity trading firms and investment funds. This trend is taking place alongside a larger process of financialization within the global economy, which has seen financial markets play an increasingly important role in investment decisions and outcomes in a variety of sectors. The food studies literature is only just beginning to examine what this greater role for financial actors in the global economy means for political dynamics within the contemporary global food system (e.g. Burch and Lawrence 2009, Daniel 2012). A growing number of studies have situated financialization within the context of food regimes, showing how new financial instruments are widely used by transnational agrifood corporations as yet another mode of accumulation that further solidifies their dominant role in the global food regime (Burch and Lawrence 2009, McMichael 2012, 2013). This work has been important in developing a deeper understanding of how changing dynamics of capitalism in the global economic drive corporate investment decisions with repercussions throughout the food system.
This paper highlights an additional political implication of the increased role of financial actors in the food system. At the same time that financialization opens new opportunities for corporate accumulation in the global food system, some of its specific dynamics shape the political context for resistance. In particular, both the increased activity of financial actors and the growing range of specific agriculture-based financial investment tools that they utilize have contributed to a new kind of ‘distancing’ within the food system.
Distance – which includes the geographical expanse from farm to plate along global commodity chains, as well as knowledge gaps about the social and environmental impacts of food production – affects the distribution of power and influence over the governance of the food system (Kneen 1995, Princen 2002, Clapp 2012). Heightened financialization in the global food system contributes to distancing in two ways. First, it increases the number of actors involved in global agrifood commodity chains and, second, it abstracts food from its physical form into highly complex agricultural commodity derivatives that are difficult to understand for all but seasoned financial traders.
Both of these kinds of distancing tend to obscure the role that financial actors play in the food system, making it difficult to link them to the social and ecological consequences of financial investment activities on the ground. Financial derivatives, such as index funds that derive their value from changes in an index tracking the prices of commodities, farmland
and agrifood firm shares, have been prominent forms of financial investment in the sector, and have been popular with financial speculators. These financial investments, in
turn, affect food prices and provide the capital for firms to make investments in the productive sector, often resulting in negative side effects, including higher and more volatile food prices as well as a host of environmental and social problems associated with largescale farmland acquisitions. But distancing associated with financialization means that the role that financial actors play in fuelling those problems is not always transparent.
This lack of transparency about which actors are involved in driving these trends creates space for competing narratives – often advanced by the financial actors themselves – that point to other explanations for negative social and environmental outcomes. Distance thus shapes the political context for groups that seek to oppose financialization, complicating attempts by civil society to challenge the dominant norms around the role of finance in the food system.
1 Jennifer Clapp holds a Canada Research Chair in Global Food Security and Sustainability in the Environment and Resource Studies Department and she serves as Associate Dean for Research in the Faculty of Environment at the University of Waterloo.
2 The article, Financialization, distance and global food politics by Jennifer Clapp was originally published in the Journal of Peasant Studies, 2014. The full version of the article is available here: http://www.tandfonline.com/doi/full/10.1080/03066150.2013.875536#.UzvG_7Nwbcs, and is freely available online until 30th April 2014. Excerpts from the introduction have been reproduced here with permission of the author and Routledge, Taylor & Francis.