Farming out farming

I don’t mean to make this a blog about food security, but there’s one more topic in that vein I want to talk about, which is the recent trend of rich but agriculturally dependent countries acquiring large tracts of farmland in poor but fertile countries. I won’t bother summarizing what’s going on, there’s this Economist article for that.

Predictably, there is a lot of outcry over this as the new form of imperialism, though in reality it’s not such a big shift. Yes, there will be situations like Sudan, where food is being exported to China because of these land deals while significant portions of the population are reliant on food aid, but this is more Sudan calling international aid agencies’ bluff than China trying to manipulate Sudan’s population. In the end, however, many of these countries were exporting large amounts of food, or trying to, in spite of prevalent malnutrition and the like. Furthermore, while food is a touchier subject than other commodities, countries had been ceding their natural resources to be exploited by foreign firms since they had rights over these resources.

I do, however, think that these purchases could create sticky situations in the future, mostly because of the exact nature of food as a commodity. The thing is, while foreign companies coming in to develop emerging market commodities is nothing new, it has always been done with a more or less tacit understanding that these companies do so at the risk of expropriation. Nationalizations are a common occurrence in the developing world, with some happening just because a government decides it wants more money, and others with the more reasonable rationale that many contracts that these foreign companies signed were signed with unrepresentative governments that were not acting in the interest of the state.

By and large, companies have had little recourse. The governments of the foreign companies have rarely imposed any meaningful penalty against nationalizing states, simply because the world order operates on a country-level basis, and countries generally don’t tell other countries how to run their politics. The only contrary example I could find was the Suez Crisis, where Egypt nationalized the Suez Canal and the British, French and Israelis sent troops to try to change their mind. Of course, the Suez was much more important to European political interests and broader economic ones than nationalized commodities typically have, so this reaction is more understandable in the context.

Of course, I mentioned that food was a touchier subject than most commodities, and with good reason. Countries need food to feed their population. Hungry people don’t have patience for their governments. This, in my mind, means two things. Firstly, none of the governments that are selling off their land to the Saudis, Koreans and Chinese will blink an eye at expropriating the land if domestic unrest from food scarcity starts to get out of hand. Countries have expropriated for much, much less.

The flip side of this, of course, is that if the investing countries begin to rely on these places as sources of food, this expropriation will have a significant impact in terms of food security for that country as well. After all, these investments aren’t motivated purely by profit, but also by a desire for political and social stability that comes with everyone being well fed. If that stability is pulled out from under them, suddenly their motivations will be closer to those of the English during the Suez Crisis than, say, those of the US after Chavez took back Venezuela’s oil fields. In other words, an invasion to protect the property will not look like a much more appealing choice. It’s hard to say whether it would be plausible (the Kuwaiti army – is there even one? – paratrooping into Cambodia? South Korea shelling Madagascar? Somehow, I don’t really see it, but maybe I’m being naïve), but at the very least, while right now the food commodity investment seems a lot like most other commodity investment, the stakes could end up being much higher.


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This is a group blog. JSC5 currently writes from the US. JSC7 writes from behind the Great Firewall of China.

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