Follow the money: how the super-rich drive cropland expansion via direct investments in agriculture

The diffusion of flex-crops, like soy, oil palm and sugar cane, has serious implications in terms of both forest loss and local food security in the Global South. In this context, what is the role of super-rich individuals and their investment decisions?

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Three years ago, I travelled to Salta, North-West Argentina, together with my research team. It was the start of a new ERC-Funded research project (INCLUDE) looking at deforestation in the region, historically caused mainly by the expansion of soybeans. We held a workshop with local researchers and practitioners, where my team and I confessed our ambition to understand what could bring deforestation under control. One of the participants, an experienced practitioner, struck me with his comment. He said: “don’t you understand? You cannot stop it” - I replied: “Stop what?” - and he said: “Capital”.

Deforestation in Salta province, Argentina
Deforestation in Salta province, Argentina. Native forests are being cleared by using a massive steel chain, which is passed between two bulldozer driving along each other. The destruction is total. The land can then be used to sow crops or pastures (Photo by Greenpeace Argentina 2014).


It was a revelation for me. During my stay in Argentina, I learnt how a new mode of agricultural production had developed. “Sowing pools” were collecting money from investors and using it to rent cleared land and grow soybeans for the international markets. The high commodity prices ensured rates of return on the invested capital far higher than securities. This type of agricultural expansion was not limited to Argentina, but had come to dominate a large number of countries in the Global South, albeit under different organizational forms. So-called flex-crops (crops like soybeans, or oil palm, which can be deployed for food, feed and other industrial uses) were booming. The traditional agricultural economics’ approach to understanding demand for agricultural land, seemed inadequate. Certainly, crops and inputs prices as well as technology were important. However, the key aspect was that investment in agriculture followed a financial logic: it was driven by the availability of large pools of “idle money” searching for high rates of returns. In this respect, the expansion of flex-crops in the Global South, was consistent with the narrative of critical Marxist scholars. The ideas of Rosa Luxemburg on the geographical expansion of capitalism, and of David Harvey on investments in land as a “spatial-fix” to the over-accumulation of capital, seemed particularly fitting. Capitalism is extremely productive, as it allows the creation of large amounts of wealth, which are very unequally distributed. The global wealth has been estimated at 317 trillion US $ in 2018. In the same year, the wealth of the super-rich (high net worth individuals, with assets of 1,000,000 US $ or more, excluding their primary residence) was estimated at 68 trillion US $ (equivalent to about 80% of the global GDP). This wealth must however be invested or lose its value (as dictated by the laws of competition). As Marx noted “it becomes as completely the property of money to create value, to yield interest, as it is the property of a pear tree to bear pears”.

Rosa Luxemburg
Rosa Luxemburg (1871-1919) wrote extensively about the drive of capitalism to constantly expand geographically in order to productively absorb the surplus-value it creates, or face over-accumulation crises. In her book, The Accumulation of Capital, she notes: “It becomes necessary for capital progressively to dispose ever more fully of the entire globe,….., so as to find productive employment for the surplus value it has realized.”

Armed with these insights, I assembled a dataset covering the period 1991-2014 and spanning across twenty-one countries in South East Asia and Latin America. My assumption was that the large amount of wealth in the hands of the super-rich represented “idle money capital” in search of high returns. Investments in agriculture could indeed play the role of a “spatial-fix” to over-accumulation, particularly in periods of low interest rates. My results show that the inflow of foreign direct investment in agriculture (FDIA) in two regions of the Global South, responds positively to the concentration of wealth in the hands of the super-rich and negatively to short-term interest rates. The FDIA inflow is in turn a key driver of flex-crops expansion, with strong implications for both deforestation and local food security.

These findings are important since they show how wealth concentration among the super-rich has been driving cropland expansion via investment decisions. The results also point to a key distinction between stocks and flows. On the one hand, there has recently been some attention to the environmental impacts of the super-rich conspicuous consumption. On the other hand, it is sometimes noted how the super-rich contribute, through charitable donations, to research or environmental protection. These aspects are certainly relevant. Nonetheless, both charitable donations and conspicuous consumption are usually drawn from the income flow accruing to the super-rich. It is however by investing the stock of wealth at their disposal, that the rich stay rich (or get even richer), and by so doing they can cause extreme environmental harms. Besides drawing the attention to the urgency of addressing wealth concentration in any possible way, this article will hopefully stimulate further research on the link between wealth inequality, investments and environmental degradation.

Go to the profile of Michele Graziano Ceddia

Michele Graziano Ceddia

Assistant Professor, Centre for Development and Environment, University of Bern

I have a PhD in Environmental Economics and my main research interests are in the area of ecological economics and political ecology. I currently work on the issue of agricultural expansion as the main cause of deforestation in the Global South (with a strong focus on Latin America). I am particularly interested in understanding the environmental impacts of inequality, in its various manifestation, and what institutions and governance can do to improve the outcomes.

6 Comments

Go to the profile of Rosemary Hill
Rosemary Hill 3 months ago

What a great and important paper thankyou so much Michele. Cheers Ro

Go to the profile of Michele Graziano Ceddia

Thank you Rosemary! I am very happy you enjoyed the paper and the story behind it.

Graziano

Go to the profile of Dimitris Christopoulos
Dimitris Christopoulos 3 months ago

A convincing argument on the effects of the concentration of capital to the few and the role of FDI in deforestation/degradation.  The pronounced effect of capital in the global south is potentially linked to the interpenetration of wealth and politics.  Policies favour the interests of the few and implementation is lax. Land value taxes may indeed be a remedy. A major contribution, thank you.

Go to the profile of Ronnie Hawkins
Ronnie Hawkins 27 days ago

I read with interest Marx’s observation that, within the belief system we call capitalism, we agree to accept that “it becomes as completely the property of money to create value, to yield interest, as it is the property of a pear tree to bear pears.” In a passage condemning usury (Politics, 1258b), Aristotle noted the absurdity of believing that money can be bred with itself to generate offspring in the same way that cattle and fruit trees can—not only is money not a living thing, it is not even of the same ontological order as any real thing, since, as a symbolic entity, money has no independent existence at all outside of our human belief systems. The irrationality of allowing the ontologically real biogeophysical systems that sustain all planetary life to be destabilized in a mindless competition among certain human individuals to maximize quantities of socially constructed symbols needs to become increasingly obvious. 

Ronnie Hawkins

Go to the profile of Michele Graziano Ceddia

Dear Ronnie (if I may), thank you for your comment. Indeed, it seems we live under the power of abstractions. Marx talks at length about this aspect (e.g., with respect to the concept of value). In some respect Aristotle' observations on chrematistic are reflected in the debate about financialization, about which Marxist scholars have quite a bit to say. I sincerely hope that man will grow past capitalism, liberate himself and live in order to fullfill her/his true potential.

Go to the profile of Ronnie Hawkins
Ronnie Hawkins 25 days ago

Dear Graziano—this is an important discussion that you have opened up here, and I hope that other scholars will grapple with the situation as well. I come from a perspective incorporating a good bit of the science of conservation biology into environmental philosophy, so I have always had a problem with the Lockean notion that “value” is created only when human labor is mixed into the natural world—apparently just taking the existence of the latter for granted—and it has been my impression that Marx made the same mistake as well (please correct me if I’m wrong about this). Yes, we humans can increase the “productivity” of certain ecosystems by e.g. irrigation, applying fertilizer, etc, and we can move nature’s output around and distribute it, but it is the photosynthetic ability of plants that captures the sun’s energy and turns it into biomass—the original source of “value” for all other living things. The fatal move has been to slide from grasping (if not in full scientific detail) our dependence on the physical reality of the land community in conjunction with human labor (which must have been understood intuitively by preindustrial human societies) to seemingly believing that money itself provides the bedrock of human existence. 

It’s just not that kind of thing—and to think otherwise seems to me to be a kind of category mistake, a serious error, philosophically. Unlike land, plants, animals, human bodies—all of which exist concretely in the world—“money” is a concept that exists in our minds, a collectively recognized symbol that functions a certain way within our societies only because we agree to accept that it does. In The Construction of Social Reality, John Searle presents a pretty convincing picture of how our social institutions have come into being—similarly to our language, through our human capacity for symbolization: we let something (a sound, an image, a thing) stand for something else and be collectively recognized as such, so that it can “function” for us by taking on that new meaning. Money is one of his prime examples—Searle terms its kind of existence “ontologically subjective.”

An instructive contrast, I think, is the ontological difference between the “NPP”—net primary productivity, the amount of biomass synthesized by green plants that is available to power all other, nonautotrophic organisms—and the “GDP”—a number signifying the monetary value we assign to the transactions conducted among ourselves for certain “goods and services.” Sure, there are ontologically real things among those “goods and services,” and so far these transactions have managed to keep our societies going, but the competition among nation-states to increase that number bears little relationship to creating a just and sustainable form of social organization, just as the competition among individuals to increase the quantity of monetary units in their portfolios bears little relationship to their moral (or social) “worth.” 

An even more telling contrast, however, comes into view when we consider exponential growth. As Aristotle pointed out, real, living organisms can multiply, producing more of themselves—pear trees produce pears that fall to the ground and make more pear trees, humans bear children that can go on to bear more and more children, and even nonliving viruses can commandeer living cellular processes to crank out more viruses—all of these have a substantial form of existence once they come into the world, and they must be dealt with as such. But when “compound interest” is calculated, nothing ontologically real actually comes into existence—all that’s been done is that abstract numbers have been multiplied together, to be thought of positively as “wealth” or negatively as “debt.” These things exist only by virtue of our continued collective belief and acceptance—i.e., they only exist in our human minds, and would cease to exist, should we collectively agree to change our minds. And perhaps we should.

In a more recent book, Searle asks why people accept institutions that generate what are often, on the face of it, unjust arrangements, and his answer is that they typically do not really understand what is going on, they just grow up within a society where people do things in a certain way and learn to do so themselves—they do not realize how much what they take for granted is a matter of human social creation, taking their existing institutions to be as “given” as the weather or the force of gravity. Or, one might add, as “given” as the Biosphere—not realizing that the present form of these institutions is actively undermining that reality, on which their lives ultimately depend. And not (yet) realizing that they can restructure those institutions, instead of letting them de-structure the systems of the Earth—just by changing their minds. The challenge before us, as I see it, his how to bring this realization into widespread human awareness, so that, together, we do start changing our minds, and doing things differently.

Unfortunately, the economic meltdown presently going on in many countries as a response to the coronavirus pandemic may bring the fragility of our supply chains—if they happen to “bottom out” in social constructions instead of actual ecosystems—to light in some abrupt and unpleasant ways. That's not the way I would have chosen to wake people up to our precarious global situation, but it may be the way it comes about.