There seems to be general agreement over the need for more “investment” in agriculture in order to combat hunger and accelerate rural development. However, the talk is all about investment funds and large entrepreneurs and very little about farmers. Does the use of the word not mask a disinformation campaign intended to serve the interests of the few?

It was only towards 1920 that the meaning of the French word “investissement” we are concerned with here first appeared, borrowed from the English word investment: capital investment in a company for its equipment and the acquisition of production inputs. This meaning is directly linked with a profit-seeking logic. Today, the word is used with a broader meaning: investissement is also used for non-capitalist producers or for public investment in cases where profit is not necessarily the main objective.

 

The increasing interlinkage between investment and speculation

An investment aims to obtain a long-term result. It therefore always includes a degree of risk-taking and “speculation”, in the original sense of the word (without the negative connotation that is usually attributed to it), that of an expectation based on observation. One invests today in the hope of obtaining a higher return tomorrow.

However, the large-scale speculation we are witnessing today is no longer of the same nature. It goes well beyond risk-taking in any investment. With the development of financial capital, the link with production has become less and less direct. Profits can be made by buying and selling shares, by no longer banking on the material counterpart of these shares, but on the idea that other players have of their future development. Goods which have not yet been produced can be bought and sold (futures markets), but it is also possible to invest with borrowed capital. Bank loans are transformed into negotiable securities (“securitization”) and very different types of “financial derivatives” are devised, which are becoming increasingly important in exchanges. These developments were originally intended to limit companies’ risks by transferring them to entities specialized in managing them, but have led to an increasing interlinkage between investment and speculation and have, moreover, considerably increased the virtual nature of the economy. The emergence of “bubbles”, which end up bursting with losses and a thunderous crash, and the recent financial crises, have demonstrated the danger of this type of situation.

An investment, even private, is never removed from the society in which it is made

The assessment of the interest of an investment for a private entrepreneur is made through financial analysis, which only takes account of the data that has an impact on the profitability of the operation. All the immediate upstream and downstream consequences, the impact of the jobs created or suppressed, and discharges into or withdrawals from the environment, do not interest investors if they do not interfere with their costs and profits during the project lifecycle. The implications for future generations are not a fortiori taken into account. Financial analysis only reflects the investor’s point of view.

If we wish to take account of the benefits that the investment has on society as a whole, it is necessary to use other fundamentally different tools, which are grouped together under the name of economic analysis. Not making the distinction boils down to implying that maximizing the investor’s profits is always the best solution for the general interest. This is a big mistake which has serious consequences. There are two main methods of economic analysis. The “effects method” seeks to measure all the cumulative impacts of each project component. The “reference price method” is based on fictional prices calculated in order to correct the many market flaws and is “intended to better represent the economic and social cost of resources invested in projects and the satisfaction that the goods and services provided give to the community” (Dufumier, 1996, Agricultural Development Projects). However, these methods are still insufficient to address environmental issues and all the things and services that do not have a price at a given moment, but the destruction of which may have considerable impacts.

Investments or the capture of wealth?

The word “private” comes from the Latin word privare, which means “to deprive” (of a good, law…). The private sphere is built by removing from the common sphere the goods and services to which others no longer have access. It is therefore not at all surprising that private investments sometimes lead to certain users being deprived of access to certain resources that used to be partially or totally common!

What we call land investment, but also more generally agricultural investment, often concerns the phenomena of the appropriation of common or public land (CTFD, AGTER 2010, Les appropriations de terres à grande échelle). In this situation, but also when land that has already been subject to private appropriation has been purchased or rented for long periods, the investment rationale often comes from the opportunity of revealing production capacities that have not yet been developed. This is the case when an Investment Fund acquires ranches for extensive livestock rearing and turns them into agricultural production units to produce soya, for example. Investors can be the first to take advantage of fertile soil, water, wood resources and minerals because they have access to capital, technologies and/or markets which the previous users of this land did not have access to.

At the same time, they take risks and this gives some legitimacy to the profits they gain from it. However, this interpretation is over-simplistic. Beyond the investments, there is the concealed appropriation of a rent that the historical occupants were not able to develop. What we call rent here is the expression of a natural wealth that existed prior to the investment, which the latter did not create, but exploits. Other actors could have benefited from it if they had been able to have access to the same resources.

Faced with the collapse of certain assets (such as real estate assets or sub-primes), it is understandable that investors seek to invest at least part of their profits in goods which are not virtual. This is one of the reasons for which demand for farmland has soared in recent years, making it just another financial asset. However, the expected profit rate must be of the same order of magnitude as the rate it would be possible to achieve in other sectors. To achieve this, the percentage of added value that serves to obtain a return on the capital must be as high as possible. The remuneration for work, the cost of access to the land and the various taxes must then be reduced to a minimum (Cochet, Merlet, 2011, Brighton). These are the conditions that international financial institutions aim to impose by liberalizing markets left right and centre and reducing the role of States.
Achieving a high profitability rate for the investor is often in contradiction with the general interest. Those who praise the benefits of win-win projects forget to point out that it is only worthwhile for an investor to invest under the conditions mentioned above. This mystifying rhetoric is echoed by all those who have a personal interest in promoting these practices, particularly by a number of members of government in both Northern and Southern countries.

Building a different governance of natural resources
In order to take the interest of the society as a whole into account, there is a need to distinguish between what falls under financial speculation and the grabbing of land or common wealth and to understand which operations can best guarantee the interests of future generations.

Economic assessment must be used for all ex ante studies of the impact of large-scale investments and be complemented by ecological and social impact assessments.

For the first time, the July 2011 report of the United Nations High Level Panel of Experts on Food Security mentions the implementation of win-win-win projects. The third “winner” refers to society. This is not a small matter, but an essential issue. A powerful comeback of “public” and “politics” is essential and implies strengthening public policies and arbitration bodies at the different local, national and global levels. This is simply a matter of gradually building a new governance of natural resources.

The link with the different notions of ownership must be emphasized. An absolutist notion of ownership implies that all the rights are placed in the hands of the owner. Whoever buys land therefore at the same time appropriates all the resources it contains, whether or not they are visible, subject to the legal restrictions in force. This notion facilitates private land appropriation and not sustainable development. A new governance of natural resources and land necessarily implies a new distribution of the different types of rights over these resources between individual and collective stakeholders.

The construction of agricultural infrastructure, biodiversity protection, the fight against climate change, as well as education, research and the introduction of fiscal mechanisms, allowing certain “rent situations” to be resocialized, are also areas which today require resources and from which we will reap the benefits tomorrow.

Public investments and investments made by small non-capitalist producers must truly be taken into account. Even if their financial performances are weaker, their interest for society and future generations may be considerable. For each investment project, all the different possible options should therefore be examined along with the societal choices that each of them implies.

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