Farming as Financial Asset. Stefan Ouma
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Financial keywords under scrutiny
A practical account of operations behind the formation of institutional landscapes also implies that we critically engage with how we narrate and represent these markets (Vogl 2015), which inevitably leads us to the question of keywords. Keywords are important empirical terms that are frequently used during everyday language (Williams 1985) but that – at a higher reflexive level – should always receive critical scrutiny. Even in scholarly texts, however, keywords are often taken for granted. Scrutinizing keywords can be done for a number of social fields, but this seems to be particularly pivotal with regard to the financial industry, as it often operates using an opaque language, with many things remaining obfuscated because they are considered too technical and the realm of experts. Here, “complexity is the enemy” (Foroohar 2016: 25). Keywords require both cultural and etymological analysis. Ironically, the words of an investment guru help here: in order to understand something you have to know not only what it is and how it operates, but how it came about and what beliefs and other influences operated upon it (Fraser-Sampson 2014: 19).
Financial “markets”
It is a common narrative in accounts of modern finance that the key function of financial “markets” is the “pursuit of new investment opportunities” (Kay 2015: 136) (“search”) and “the management of long-term assets that have already been acquired” (ibid.) (“stewardship”). Yet the abstract market metaphor not only fetishizes the “flesh-and-blood institutions” (Christophers 2015b: 92) making up financial markets but also conveys “the qualities of dispersion, anonymity and competition” (ibid.) when there is in fact centralization, socially dense relations and the “systemic power of large financial institutions” (ibid.). What is commonly called the “global financial market” actually more closely resembles a global allocation bureaucracy (Ortiz 2014), populated by players such as institutional investors, including pension funds, private equity firms and insurance companies.
The market metaphor also suggests that financial markets operate like commodity markets. Yet the former are ultimately not about bestowing something with exchange value and trading it as a commodity for a return. Even though tradability – often referred to as “liquidity” – is certainly a desirable feature of many financial products, these markets do not operate according to the same logics as commodity/production markets (Knorr-Cetina 2010). Rather, financial markets are about speculation and investment, and these activities involve claims and commitments exercised over time and oriented to the realization of future income.
Asset
An important term in this book that the reader will encounter regularly is that of the “asset”, the key pillar of institutional landscapes. Deriving from an Anglo-French legal term (aver a(s)setz/to have enough, with roots in the Latin words ad satis = to be enough/sufficient) that first surfaced in the middle of the sixteenth century (Murray 1884: 507), it originally denoted “the property of a deceased person that in the hands of his heir or executor is sufficient to pay his debts and legacies” (G. & C. Merriam Co. 1971 [1901]: 131) but quickly passed into a general sense of an “item of value owned” (ibid.) that can be converted into ready money, or that “serves as a resource or source of strength” (ibid.). This is notable, because, right from the beginning, the term implied that assets have an inherent quality that allows them to serve the cash needs of external parties. Today it is a key notion in economics and the world of investment management, describing “a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit” (Barone 2019). Financial assets, in particular, represent investments in the assets and securities (bonds/stock/private equity) of other institutions, but increasingly also of urban and rural real estate, infrastructure or various forms of “natural capital”. In a more foundational sense, an asset is a “property that yields an income stream” (Birch 2017: 468) and is not meant for immediate sale.
Assets can also be intangible, with intellectual property rights and various forms of legal arrangements constructed around them (e.g. licensing), providing important income streams to financial investors and corporations. The process of turning something into a source of future income should be called “assetization”. It should not be equated with other popular political economy terms, such as “commodification” or “marketization”. Although certain types of assets – especially in their securitized form – can be traded in markets and thus have a quasi-commodity character, the underlying form of value is distinct from a commodity for its income-stream-generating quality. The term “assetization” should also not be used synonymously with “capitalization” (Muniesa et al. 2017) – a set of specific accounting techniques for capitalizing the assumed future value of an asset in the present.
The proliferation of assets has also led to a proliferation of professional asset managers, such as private equity funds and wealth management arms of large international banks (Braun 2015: 8). By the end of 2016 these entities, also known as “shadow banks”, managed US$85 trillion (up from US$60 trillion in 2007), “with around 80 per cent held on the accounts of institutional and retail investors in Europe and North America” (Gabor 2018).1
Investor
Agricultural investment is about investors. Contemporary textbook definitions of the term “investment” as the allocation of capital for the purposes of capital maintenance, revenue generation or capital appreciation distinguish it from “unproductive” economic activities. Thus, today the investor appears as someone (a person, a corporate entity) who is not a speculator (someone who takes high risks in order to achieve high returns), nor a gambler (someone who takes very high risks in order to achieve disproportionately high returns) nor an arbitrageur (someone who exploits interest rate or price differences at the same time in different places for the purpose of profit taking through so-called “carry trades”) but someone who produces real value. In practice, however, investment strategies, especially those in the financial sector, often follow less clear lines and often combine all or several of the economic activities mentioned here.
From a radically different perspective, many of the activities taking place in so-called financial markets today need to be understood as capital placements rather than as investments: “Placement means the purchase of titles to debts or shares, which is financed either from savings, from income or from the proceeds of selling other property. In contrast, investment designates using financial resources for creating capital goods” (Robinson 1956: 8; cited in Zeller 2008: 10).
Even though the production of material output is still an important means to the production of financial value for direct investments into farming ventures, the original sources of capital (such as future pensioners) assume the role of rentiers rather than investors. A rentier is someone (a person, a legal entity) who lives from dividends, asset price appreciation, payments of interest, payments of licences or payments of ground rent, with rentiership being fundamentally about securing, operationalizing and exchanging the rights to future income streams from a now bewildering array of underlying assets. We will re-encounter the ghostly figure of the rentier in Chapter 9.
Private equity
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