Risks of Financialization and Price Increases in the Food System - Hunger
We are realizing that hunger and
the abusive food price increases are the results of the financialization of
large corporations, especially in the food system. With the expansion of
agricultural commodity futures markets, agricultural products such as coffee,
corn, soybeans, live cattle, and several others are traded on the Stock
Exchanges, intensifying financialization in the food system with large
investment funds, such as pension funds, hedge, and shares of private
companies, in addition to other speculators.
There are several definitions of
financialization, but one of them refers to the growth and importance of
financial markets in global capitalism in recent years. Thus, financial actors
express their motives to institutions operating in domestic and international
market economies. With this, the power of corporations in large supply chains
increases and the risks of financialization turn food and land into objects of speculation.
Another definition is that of the sociologist Greta Krippner, who deals with
the tendency to make profits in the economy through financial channels and not
through productive activities.
These definitions opened the
perspective for several areas of knowledge to start studying the phenomenon,
such as political economy, geography, sociology, and anthropology, among others. In
short, the risks of financialization studies are challenging the neutrality of money and
critically analyzing the financial system.
While neoliberal trends in recent
years have intensified the financialization of the food system, favoring large
companies, micro, and small entrepreneurs have suffered from reduced aid almost
all over the world. Even in developed countries (Canada, the United States, and
Europe), which previously encouraged alternative agri-food models in response
to the entrenched dominant model, aid to small local producers was reduced in
the face of the neoliberal wave of globalization.
Even in these countries, small
entrepreneurs who defend a sustainable model of food production still suffer
today from the lending practices of traditional banking institutions, which
favor large food industries, increasing the unsustainability of the food
system. Small agricultural activities have been seen as a risky investment, as
they are vulnerable to nature's unforeseen circumstances.
Therefore, the difficulties in
accessing credit for small farmers have been harmful, as they cannot contribute
in a more regenerative way to an alternative food system. Many social
entrepreneurs struggle for access to the capital they need to start and grow
their businesses. Therefore, we can argue that the lack of access to capital by
such innovative entrepreneurs weakens the transition to a more sustainable food system.
In this case, the income or
profit of family farmers (if they are profitable at all) derives from the sweat
they shed. They are the ones who bring food from the field to the fork. The risks of Financialization, in turn, has contributed to a profound reconfiguration of the
food industry order, from production to consumption, increasing inequalities, making
food systems vulnerable, and disregarding the defense of sustainable food
systems. Therefore, the results of the increasing control of the food system by
large corporations jeopardize the survival of micro and small producers,
environmental quality, food safety, and consumer sovereignty.
Now, Covid-19 is being used as a
scapegoat for corporations that dominate the food market to set abusive price increases as they wish. As the President of the US Federal Reserve said in a US Senate
committee: they raise prices because they can. Well, if they can, they do what
they want.
For the White House, corporations
are showing the highest profit margins in 60 years. For the 100 largest
companies in the country, the profit margin is 50% higher compared to 2019. In
turn, the net profit margins of the main meat producers such as JBS, Tyson
Foods, Marfrig, and Seaboard, are above 300%. The Biden Administration and other
politicians, including Senator Elizabeth Warren, are calling this a crime.
It is such a crime that the US
Department of Justice has already put several executives behind bars for
setting abusive price increases and indicted several others. According to Time Magazine,
several corporations, including JBS, are paying millions to solve other cases.
If the power of these corporations can make inflation worse than it is, what
should be done?
In Brazil, in the current
government, it seems that nothing, but the United States Congress has just
passed the so-called “PRO Act”, which tries to regulate the actions of these
corporations, not only demanding that the well-being of their workers be above
their abusive profits but strengthening the unions and the workers' voice in
the decisions of these companies.
Countries like Mexico, Egypt, and
Bangladesh are already demonstrating against the abusive food
price increases, showing that the great food crisis, leading to hunger, is the result of
large investments benefiting large corporations. The battle against hunger in Brazil has always benefited large companies. In the current militarized and
Centrão-dominated government, we are on the way to hunger, waiting for some
presidential candidate to present a plan for a food system, different from
today's poverty plan.
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