John Buell

Neoliberalism Down on the Farm

Farming has always been a risky business. Even when the land is lovingly tended flood, drought, or disease can wipe out a whole year’s crop. Corporate media usually term such events “natural disasters.” Climate scientists are more likely to cite the role of human-induced climate change in increasing the severity of such events. But just which humans and what agendas are most guilty of squandering our natural capital? It turns out that one of the key culprits is our modern financialized agriculture. The damage that an unregulated finance has doe to our banking system is being steadily replicated in agriculture. Finance itself is a force increasing climate challenges and reducing the ability of the land and its human tenders to absorb and bounce back from trauma.

Jennifer Clapp’s and S Ryan Isakson’s “Speculative Harvest: Financialization, Food, and Agriculture” tells a complex story in a concise, readable fashion. In many introductory econ texts, agriculture is portrayed as part of a true competitive market where supply and demand determine price. No one buyer or seller has enough of the market to influence price. Yet that is not the case now and has not been so for decades. In the years following WWII, governments in both North and South employed buffer stocks as a way of mitigating wild price swings in domestic markets.

But with the crisis of New Deal liberalism in the late ’60s and ’70s, governments were under increasing pressure to deregulate both agricultural commodity markets and financial markets. Deregulated markets, however, were not perfectly competitive. As manufacturing profits were on the decline, finance increasingly became US capitalism’s fastest growing source of profit. And one of its most vital sectors was agriculture.

Trades in commodity futures contracts, promises to deliver certain quantity of a product on a specific date, had always been part of agricultural economics. But with this important limitation: Those who were not involved in or directly dependent on these commodities were limited in the number of positions they could take in the market so that outside investors could not corner the market.

Banking deregulation led agricultural policy down a dangerous path.. Investment banks crafted and then sold large numbers of commodity index funds, funds pegged to the value of a basket of diverse commodities. However, concerned they might have to make large payouts if commodity prices rose sharply, investment banks requested and gained the right to invest directly, no position limits, in agricultural commodity markets.

The combination of index funds indirect and direct investment by lightly regulated banks made commodity markets more volatile, with especially harmful effects on the poor. Poor farmers cannot simply accumulate and store food stocks when prices are low.

Neoliberalism, however, if nothing else is resilient. If commodity markets are volatile by reason of weather and if poor farmers are too technologically backward, offer environmental insurance packages and/or loans for upgrading and/or consolidation of farms. These, however, have unfortunate side effects. Qualifying for these services required cultivation of a limited number of crops, ones for which the derivatives and international markets exist as well as adherence to standard industrial farming techniques. In the process the role of these crops on the farm and in the halls of Congress is only strengthened.

Biodiversity is a major casualty Helena Norberg-Hodge, founder and director of Local Futures (International Society for Ecology and Culture, points out: “Most farm subsidies in the US go to five crops — corn, soybeans, wheat, cotton and rice — that are the centerpieces of global food trade.” The IMF estimates these subsidies and ignored environmental costs at $5.3 trillion per year.

Clapp and Isakson show that at all points of the food chain investments are made to enhance shareholder value rather than the quantity or quality of the product. Neoliberal agriculture is a self-reinforcing system. Reducing farmland to a simple numerical quantity abstracted from its history and social context facilitates opportunities to play financial games with land and encourages shareholders to treat corporate decisions solely in terms of profit and loss. The belief — accurate or not — that land can be quantified and sound models of risk assessment fashioned helps these markets escape regulation and grow. Their growth in turn adds to their political power and ability to continue to extort government subsidies. In a similar fashion sophisticated value at risk models and their underlying faith in predictability helped banks expand the market for the arcane securities they pedaled in the years preceding the Global Financial Crisis.

To advance short- term profits, mergers and acquisitions, which increase profit margins — often at the expense of workers and consumers — are widely practiced throughout the food chain. Nonetheless, displaced workers and consumers are offered the chance to invest in food through 401ks. In the process, finance becomes a staple of everyday life. The whole dynamic depends on and reinforces the concentration of both economic and political power. (In this context, the authors might also want to discuss the role that changes in anti-trust law have played in these trends.)

Food and agribusiness giants not only buy each other, they also have bought science itself. The assault on the diet is further aided by a nutritional “science” bought and paid for by the food giants. Jane Brody cites a recent example: “Coca-Cola has led an effort to undermine the contribution of sugar-laden carbonated water to the nation’s obesity epidemic…. The company funded a study of childhood obesity that, without looking for a possible link between overweight and sugary soft drinks, concluded that low physical activity, inadequate sleep and lots of television watching were most important. To make such conclusions appear valid, Coca-Cola enlisted the participation of university-based scientists, all of whom stood, directly or indirectly, to profit financially from their association with the research.” The financialization of agriculture thus has had ugly political and health consequences. How to respond, both at the dining room table and the world of politics and finance will be the subject of my next column.

John Buell lives in Southwest Harbor, Maine and writes on labor and environmental issues. His books include Politics, Religion, and Culture in an Anxious Age (Palgrave MacMillan, 2011). Email Jbuell@acadia.net.

From The Progressive Populist, August 15, 2019

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