Agriculture Reference
In-Depth Information
Change and Crisis in the Global
Political Economy
The conditions for interlinked financial, food, and ecological crises developed over the
1990sandearly2000storeachthepointwherecombinedweatherandinancialshocks
in2006-2007pushedtheglobaleconomyintoacriticalstate.Amongthesalientback-
groundprocesseswere(1) inancializationintheglobaleconomyandspeculationin
commoditymarkets,(2) declininginvestmentandlowproductivitygrowthinfoodpro-
duction,and(3) climatechangeandclimatepolicyresponses,especially(4) theexpan-
sion of biofuels production.
Financializationistheprocessthroughwhichinancialtransactionscometorepre-
sent an ever-larger share of economic activity and increasingly come to determine pro-
ductionandcirculationintherealeconomy.IntheUnitedStates,theinancialservice
industry'sshareofcorporateproitsrosefrom10 percentintheearly1980sto40 percent
in2007(Quiggin2010,46).Alreadyintheearly2000s,priortothesubprimemortgage
collapse, financial investors had begun to use commodities indexes to balance against
stocks and other securities. These indexes included oil and minerals as well as agri-
cultural commodities, and so rising oil prices (driven substantially by speculation; see
DuganandPleven2011)begantodriveupagriculturalpricesnotjustthroughrising
costs of production, but also through the packaging of derivatives. The gross market
valueofcommodityderivativesrosebyafactorof25betweenJune2003andJune2008
toreach$2.13trillion,faroutpacingthegrowthincommodityproductionortheneed
forderivativestohedgerisk(Moberg2011;BasuandGavin2011).hus,externaltothe
dynamics of food production itself, the conditions for food price volatility were sharp-
ened through financial speculation in commodities markets.
Declining investment and low productivity growth in food production, meanwhile,
contributedinternallytothefragilityofthefoodsystem.Timmer(2010)identiiesan
agricultural investment cycle where high food prices are met with policies supporting
increased production and lower prices, but subsequent low prices discourage invest-
ment in research and infrastructure to the point where the growth in the food supply
falls behind the growth in demand, setting the stage for renewed crisis. Rising commod-
itypricesinthelate2000sfollowedaperiodoflowfoodpricesduringthe1980sand
1990s,duringwhichpubliclyfundedagriculturalresearchanddevelopmentdeclined
andproductivitygrowthslowed(Timmer2010;Trostle2008).Rapidgrowthindemand
(dueinparttogrowingpopulationsandchangingdiets)outpacedgrowthinsupply,
leadingtodecliningglobalstock-to-useratiosforgrainsandoilseeds,whichin2007
sank to their lowest level since 1970 (Trostle 2008). Reduced stocks and increased
demand made the food system less resilient in the face of the economic and environ-
mentalshocksthathelpedcatalyzethe2007-2008foodpricesurge.
Climate change places additional pressure directly on food production. Rising tem-
peratures, in particular, may be responsible for signiicant reductions in maize and
 
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