Will the 'Financialisation' of Food and Farming Provide the Basis for a Prosperous Future for Rural Asia?

Abstract

'Financialisation' is a term used to describe the penetration of financial entities into many aspects of economic life. Private equity firms, hedge funds, merchant banks and sovereign wealth funds have been investing in significant sections of most economies-largely in an effort to provide increasing returns to their shareholders. Most recently, these investments have targeted the food and farming industries. For a variety of reasons-unpredictable weather, perishable products, volatile world commodity prices, fluctuating interest rates, and slow growth in agricultural land prices-farming had not, in past decades, been seen as being as attractive as dot.com investments or, more recently, real estate (Burch and Lawrence, 2009; Clapp, 2014). But when the dot.com speculative bubble burst in the early 2000s and real estate (particularly in the US) was deemed 'toxic' in 2008, agriculture became a target for investment. The movement of finance into food and farming industries was not only driven by the collapse of previously viable sectors of the economy, but also by some underlying realities: globally, good farming lands were becoming scarce; there were profits to be made from crop biofuels; the growth of the middle classes in places like China, India and Indonesia stimulated investment in meat and processed foods; and, new financial products-such as derivatives-that tied food to unrelated products such as coal, gas, and gold provided financial capital with the opportunity for speculative gain. The takeover of agrifood companies by finance capital together with an unprecedented interest in the acquisition of foreign farm lands by sovereign wealth funds and private land managers (sometimes referred to as 'land-grabbing') have become two of the main features of the financialization of the food and farming sectors. In this paper, the process of 'financialisation' will be outlined, followed by a short discussion on whether or not 'financialisation' might assist in the creation of a more prosperous future for rural Asia.