Perspective Financialization of Food, Phoebe Stephens

PERSPECTIVE OF FOOD PHOEBE STEPHENS IN THE FOOD SYSTEM Phoebe is a Postdoctoral Fellow at the of where she studies the role of finance in the food system and is particularly interested in assessing the potential of alternative mechanisms to support transitions towards more sustainable and regenerative food systems . Phoebe has published a number of book chapters and journal articles on this topic . She holds a in Social and Ecological the University of Waterloo and is a 2018 Pierre Elliott Foundation Scholar . Learning Outcomes PHOEBE STEPHENS 499

After reading and discussing this text , students should be able to Explain the context for the rise of in the food system . Outline the core debates amongst scholars of tion Identify the main manifestations of in the food system and how they impact social and ecological outcomes INTRODUCTION Have you ever wondered how decisions made in the abstract world of financial markets affect something as intimate as the food you eat ?

Did you know that the investment landscape of food and agriculture has significantly changed in the last two decades , in ways that your choices at the grocery store ?

The reality is that we live in a highly era , that is , profits made through financial than productive taking on a greater share of our economy . In big and small ways , our food systems are being shaped by financial investment patterns . It is important to understand such forces in our food systems , as they profoundly shape on the ground , often in unsustainable ways . If we want to have any hope of changing those realities , we must know how the system is structured and which levers to pull . The academic literature on gained momentum after the financial crisis , and has grown rapidly in the last decade . It is a broad area of scholarship that originates dominantly from political economy and geography , but is also informed by other disciplines , including sociology , and development studies . Mainly , scholars of OF FOOD

tion seek answers to and explore the implications of the increasing role of finance in the economy . At its core , the on contributes to the study of Its primary contribution is to challenge the belief in the neutrality of money , that is , the literature on critically analyzes the financial system . There are many definitions of . A common one is by economist Gerald Epstein , who describes as the increasing role of financial motives , financial markets , financial actors and financial institutions in the operation of domestic and international economies Another , by historical sociologist Greta , emphasizes the abstraction from the real economy is the tendency for profit ing in the economy to occur increasingly through financial rather than through productive activities Scholars identify different causes for the increased tion of the economy from , and . A interpretation relates to the crisis of capital . Since the , capital has accumulated increasingly through financial rather than productive means , as definition The thrust of the argument is that declining profits in the manufacturing sectors of industrialized countries encouraged financial deregulation , which was meant to stimulate the stagnant economies of the and gave rise to led Globalization is one of the primary drivers of this structural shift , as companies in the Global North increasingly moved their production and began to control foreign van der 2014 . Epstein 2005 , 2011 . 1994 . 2015 . PHOEBE STEPHENS 501

supply chains in order to keep costs low and remain competitive Rather than profits into the ness , they were increasingly distributed to shareholders or invested in financial The relates to the shareholder revolution that arose in the . At this time , companies began acting more like financial firms , in the sense that they their strategies to maximize shareholder return . The of shareholder activism tied business performance to the compensation of executives through stock options , which tends to result in more value creation , rather than term investments in innovations By the late , the holder of corporate governance conventional wisdom and spread around the world , gaining prominence not only in North America , but also in Europe , japan and emerging economies . value model became A final , aspect is the concept of the of daily life . This refers to the fact that , increasingly , people must resort to financial products to manage life stages and life Other themes that fall under the of daily life include discourses around ing and , and the way that state policies everyday habits of savings and borrowing . While the 2008 financial crisis helped to expose the interconnection between households and global financial markets , the of daily life was already well way . The first factor relates to the erosion of the social contract prevalent in the United States and Canada , starting in the , whereby employers provided certain forms of security der . Ibid . Schmidt 2016 . der 2014 , 109 . 502 OF FOOD

through living wages , meaningful pension , and health insurance . The second factor occurred around the same time , when the welfare state started to dismantle , pushing many citizens around the world to turn to financial products to underpin their livelihood security . DEBATES Since scholars attempt to make sense of a host of complex interactions , it is no wonder that there has been such a wide variety of empirical studies on the topic . This ing of the literature has come under scrutiny , however . For instance , views as the of the , arguing that it is both conceptually and empirically His critique largely stems from the lack of analytical clarity of the concept of and he cautions scholars researching the topic to be conscious of its theoretical Lawrence and Smith wrote a response to arguments , defending as a 12 Their main rebuttal was that rather than viewing as intellectually vacuous , more rigorous studies of are needed to better understand the phenomenon . As has gained traction among a variety of scholars , there has been more research into how the process of incorporates actors . in the food system is one such example , and resents an important body of literature for how financial investment patterns and the rise of holder value social and environmental outcomes in food systems around the world . 10 . Ibid . 12 . Lawrence Smith 2018 . PHOEBE STEPHENS 503

13 . 14 . in the food system The activities of the financial sector have become increasingly enmeshed in food and agriculture . Just over a decade ago , the of the food system captured scholarly interest when it first became widely apparent in the area of agricultural commodities . From , the Food Price index rose by 125 percent , spiking dramatically between 2007 and 2008 at the height of the food Although a of factors contributed to this situation ( including rising energy prices , increased costs of agricultural inputs , and droughts around the world ) many pointed to the dramatic increase in speculative financial activity in agricultural futures markets as a core ver . The high food prices of the food crisis hurt many poorer communities around the world as they struggled to afford to feed themselves . Exorbitant food prices incited riots in different parts of the world , including Egypt , Haiti , and . The impacts of the food crisis demonstrate how financial investments can have very real repercussions for ple lives . in the food system is demonstrated in part by the involvement of a new group of actors such as pension funds , private equity firms , hedge funds , and sovereign wealth funds in food and agriculture Spurred in part by the food price crisis , new financial actors in the food system also moved swiftly into farmland investments . Though financial investors had long dismissed the agricultural sector as unpredictable and unprofitable , they turned their focus to farmland , and agriculture more broadly , during the financial crisis , as higher commodity prices and the prospect of stable , returns provided a promising alternative to traditional Schmidt 2016 . Lawrence Smith 2018 , 31 . 504 OF FOOD

, which were at the Other factors , such as a rising global population , greater demand for meat , and fuels made agricultural land an appealing investment . The est in farmland has stuck , and between 2005 and 2017 , institutional investors ( private equity funds , hedge funds , pension funds ) and worth individuals invested an unprecedented billion dollars ( US ) in However , it bears noting that investor interest in farmland ebbs and depending on a variety of factors , including changing regulations around which actors are allowed to invest in land . For example , in response to dramatic price increases of agricultural land in , in 2015 , pension funds and trusts of more than ten people were banned from acquiring farmland in the Initially , the land rush predominantly took place in emerging economies and prompted concerns around tenure rights and land access for farmers in these countries . One example involved South Korea Logistics , which was negotiating a lease of half of Madagascar arable Had the deal gone through , the company could have exported all of the produce grown on the land and imported all labour from South Korea , as the governance were weak . The scale and nature of the deal caused public outrage and was a primary cause for the ousting of the dent at the time . Though this one deal did not move ahead , Africa is a popular target of land grabbing by foreign entities , which raises many concerns regarding African countries food security and food sovereignty . Over time however , higher income tries such as the United States , Canada , and Australia have also 15 . Schmidt 2016 , 105 . 16 . 2016 . 17 . 18 . 2012 . PHOEBE STEPHENS 505

19 . 20 . attracted private and institutional investment in This has served to drive up the cost of rural land in these countries , making it difficult for new or farmers to enter the market . Such investments in agricultural land tend to entrench the trial model of agriculture , as they target large tracts of land tined for commodity and monoculture farming . This type of agricultural production is highly mechanized and involves the use of chemical pesticides and fertilizers , and is a significant to global greenhouse gas other . 20 tive environmental . At the institutional level , firms such as seed and companies , food and processors , and grocery being reshaped by while also profiting from it . For instance , agricultural trading firms such as are involved in financial activities to generate profit . is made up of a number of business units and . The company produces and trades seed , feed , fertilizer , and chemicals . It is also a landowner , cattle rancher , maker of vehicles , biofuel producer and a provider of financial services , through subsidiaries such as Black River Asset Black River acquires private equity in agricultural companies , indirectly controlling land in various countries around the world , which demonstrates the connection between agricultural companies and farmland . Another way that affects business behaviour is by motivating firms to participate in mergers and acquisitions in order to generate value for shareholders . There is therefore 2018 . Foley et al . 2011 . 2014 , 1710 . 506 OF FOOD

an indirect connection between rising and rising corporate concentration along the food value chain . These have led to a situation in which four companies dominate the global grain market , a handful of supermarket chains in advanced economies control the vast majority of food sales , and the top five seed companies have massively increased their ket share in the last twenty As fewer and fewer control the food system , the of the few remaining firms becomes more powerful . This growing power allows them to shape rules , regulations , and practices along the food chain to their Some of the results of rising corporate control in the food system include jeopardizing small farmer livelihoods , environmental quality , food safety , and consumer sovereignty . Consider the unprecedented acquisition of Whole Foods by Amazon in 2017 , which has not only expanded Amazon reach but has also pushed the entire grocery industry towards online shopping and delivery services . Moreover , there are about how the acquisition will affect sustainability comes on the ground . As the leadership at Whole Foods changed with the acquisition , many wondered if the new management would uphold the same values of prioritizing local and ably produced food . Four years on , it seems as though Amazon has maintained many of Whole Foods original commitments to sustainability and traceability , but it is perceived as less nimble from an innovation standpoint and less able to support local companies , now that it has centralized its buying This reality limits its ability to support more diversified , regional food systems , which is understood to support greater resilience and sustainability . 22 . Bonny 2017 . 23 . et al . 2013 . 24 . Cox 2021 . PHOEBE STEPHENS 507

25 . 26 . 27 . 28 . CONCLUSION Ultimately makes it difficult for more able , alternative food systems to develop and thrive . In particular , the of shareholder maximizing shareholder returns are sought over or ethical to increase corporate concentration through ers and acquisitions ( because these activities generate strong ) This trend crowds out chances for economic diversity in the food system and limits opportunities for smaller and more sustainable alternatives to scale up and research on the power dimensions of the food system has demonstrate how markets have a tendency to become by a handful of When markets become skewed in this way , companies have the power to shape comes to their benefit and the already disadvantaged end up bearing the brunt of The of agricultural commodity markets have hurt consumers around the world as food prices rise and become increasingly unaffordable . The meteoric rise in farmland investments has also had profound repercussions for social and environmental justice . For instance , many of the crops grown on land bought by foreign investors in poorer countries are exported , instead of feeding local and often communities . Moreover , these investments tend to entrench the industrial model of agricultural production , which is heavily dependent on fossil fuels , degrades soil fertility , and is highly Inconspicuous , structural forces like can often go unexamined in daily life . To bring about food system change , 2018 . Howard 2016 . Ibid . 508 OF FOOD

however , it is necessary to make the invisible visible , so as to understand the leverage and pain points in a system . Reading and learning more about at the , and levels is one way of advancing your knowledge of the and opportunities that exist for transforming food systems , towards more sustainable and regenerative outcomes . Discussion Questions What are the three levels of and how are they connected to the of the food system ?

How do you see the presence of in your daily food provisioning practices ?

Who owns the farmland in your region ?

Does it matter who invests in farmland ?

How might farmland ownership impact social , economic , and environmental outcomes in your region ?

Land Grabbing Role Play In groups of approximately six students , engage in a game to understand the perspectives of various stakeholder groups associated with farmland investments ( also known as land grabbing ) Scenario A large land deal is being negotiated in which and foreign investors are poised to acquire acres of PHOEBE STEPHENS

some of the most fertile land in your region . There is significant opposition to the deal , but it promises to be very lucrative . A town hall meeting is being held to discuss possible ways forward . Roles pension fund manager foreign state investor provincially elected government official farmer domestic food consumer environmentalist Assuming one of the roles identified above , present your for or against the deal and identify possible areas for promise . Once everyone in the group has had a chance to present , discuss the issues , tensions , areas of agreement or , and anything else that piqued your interest . Be prepared to share and discuss your observations with the rest of the class . Additional Resources ETC Group Reports The ETC Group is a organization that investigates and reports on ecological erosion the ment of new technologies , and global governance issues including corporate concentration . They often focus on the food system . and Ryan . 2018 . Speculative Harvests , Food , and Agriculture . Black Point , Nova Scotia Publishing . 510 OF FOOD

References , 1994 . The Long Twentieth Century Money , Power and the Origins of Our Times . London Verso . and Lawrence . 2018 . tion The of In The of Systems Contested Transformations . New York ledge . Bonny , 2017 . Corporate Concentration and Technological Change in the Global Seed ( Dixon , and Lawrence . 2013 . Introduction to Symposium on the Changing Role of Supermarkets in Global Supply Chains From Seedling to Supermarket ply Chains in Agriculture and Human ( and Lawrence . 2013 . in Food Supply Chains Private Equity and the Transformation of the Retail Agriculture and Human . 2015 . The Limits to Dialogues in Human ( and . 2018 . Speculative Harvests tion , Food and Agriculture . Press . 2015 . and Beyond From Global Grain chants and Agricultural Value Chain Canadian Food ( and . 2018 . Risky Returns The of in the Food Development and ( PHOEBE STEPHENS 511

, 2015 . Distant Agricultural Sustainability ( Cox , A . 2021 . Has Amazon Spoiled Whole Foods ?

February de , 2016 . Agriculture A New Asset Class Presents Opportunities for Institutional Epstein , 2005 . Introduction and the World In and the World Economy , UK and , MA Edward . Foley , Cassidy , ber , Mueller , Ray , West , Bennett , Carpenter , Hill , 2011 . Solutions for a cultivated planet . Nature 478 ( 7369 ) 2005 . From Colonialism to Green Capitalism Social Movements and Emergence of Food New in the Sociology of Global Development . and . 1989 . Agriculture and the State System The Rise and Decline of National , 1870 to the ( and . Food for Thought The Politics of in the Competition ( 2011 . Capitalizing on Crisis . Cambridge Harvard University Press . 512 OF FOOD

Lawrence , and Smith . 2018 . The Concept of tion Criticisms and In The of Systems Contested Transformations , New York . and van der . 2019 . an In International Handbook of . A . 2018 . Farmland Values Media and Public courses around Farmland Investment in Canada and In The of Systems Contested , New York . 2009 . A Food Regime The of Peasant ( 2014 . Capitalizing on the of culture Land Investment Techniques in the Third World Quarterly 35 ( Schmidt , 2016 . The Political Economy of Food and Finance . London . van der , 2014 . Making Sense of 129 . PHOEBE STEPHENS 513