Rio+20: the financialisation of nature

Date: 14 March 2012

James Angel, campaigns and policy intern

We might have hoped that the 2008 financial crash would have presented us with an opportunity to rethink the power and influence that the financial sector has amassed since its deregulation in the 1970s. But, far from this, since the crash we’ve seen ever-increasing financialisation, meaning that financial markets, motives and institutions have taken on even more of a role in our economy, in our political systems and within society at large.

In a desperate attempt to kick-start growth we have seen new avenues for financial speculation and investment explored. WDM has exposed the human cost of this in highlighting the role played by financial speculation on food commodities markets in causing spiralling food prices that have sent millions into poverty. But the scope of financialisation and the social and environmental havoc that it promises does not end there.

    

Rio+20: what’s on the table?

Next on the agenda for profit-hungry financial institutions like banks and hedge funds are the planet’s natural resources. In June, governments and corporations will be meeting at the Rio+20 conference on sustainable development, and the conference looks set to be hijacked by the interests of the financial sector. The British government, with many others, are hoping to use the conference to drive forwards the financialisation of nature. What this amounts to is assigning a financial value to natural goods like water, forests and biodiversity and the creation of new markets in these goods.

The narrative being used by those pushing for the financialisation of nature is twofold. On the one hand, we are told that we can only avoid environmental crisis by assigning a financial value to nature, as this forces us to pay the proper price for natural resources. On the other hand, we are told that economic recovery requires growth, which requires new markets. As such, we are told that we have an economic case, on top of an environmental case, for the creation of these new markets, which the financial sector can invest in and profit from. 

The true costs of financialisation

Unsurprisingly, this story doesn’t really have the happy ending that its authors promise. What the financialisation of nature really amounts to is a new vehicle for financial elites to extract profits at the cost of the lives and livelihoods of the world’s poorest people.

Land grabs
We’re already seeing the effects of financialisation in terms of land grabbing. Since 2001, an area the size of Western Europe has been bought or leased in developing countries by financial investors. This has seen smallholder farmers exiled from the land that they have owned for several generations, with this land going into the hands of distant financial institutions like hedge funds and pension funds.

Mining and extraction
The financialisation of nature is seeing an ever-increasing role for finance in funding fossil fuel extraction projects: Morgan Stanley chartered more oil tankers than Chevron in 2009. The financialisation agenda being pushed at Rio stands to extend the grip of finance over mining and extraction. The finance sector’s involvement in these projects that devastate the environment and surrounding communities makes resistance even more difficult, as information about these financial institutions is hard to come by and their actions are very difficult to influence.

Price volatility
WDM research has exposed how the financialisation of food markets has played a key role in causing the price hikes and volatility behind recent food crises. This volatility has also been seen in carbon markets, which have repeatedly been subject to price bubbles and crashes. We should expect the same for the new markets that the financialisation of nature agenda stands to create.

Putting a price on the priceless
In assigning a financial value to natural resources, we extend market logic to nature. In doing so, we turn what ought to be a common, shared good there to be cherished and sustainably managed by all, into a commodity that exists in order to make private profit. Seeing nature in this way can only lead to its further degradation: we need to value nature as a good in itself, not financially, if we want to respect it.

Financial enclosure
What the financialisation of nature amounts to is what activists in the global south are referring to as the ‘financial enclosure’ of the global commons. Nature will be put under the control of financial institutions and at the mercy of volatile financial markets. This locks in the global commons to private control, making the task of reclaiming it as a common good even more of a tall order.

                                       

Fighting financialisation

So what can be done? The first step we have to take is to campaign against the deregulation of finance. WDM’s campaign against food speculation is doing just this, in its call for the re-regulation of food commodity derivative markets.

If we’re really serious about stopping financialisation, we need to think beyond piecemeal financial reforms, as important as these might be. Financialisation is one of many alarming symptoms of our destructive neoliberal economy, which will always place the profits of corporate and financial elites as a priority over the needs of people and the environment.

What we need is an alternative vision for how to organise our social and economic relations, based on a radically different understanding of nature and our place within it. Communities in the global south that will be worst affected by financialisation are calling for food and energy sovereignty, meaning collective democratic control by communities of the resources necessary to meet their needs. This alternative vision is about allowing people and communities to have autonomy and control over their means of subsistence, as opposed to private ownership designed to ensure corporate profit at all costs. This vision is about ensuring fairness and that all have the resources they need to live a flourishing and healthy life. This vision is about seeing forests, rivers, oceans and ecosystems as goods to be valued in their own right as opposed to commodities to be valued financially. And, this vision is about living in a way that respects the planet’s ecological limits, through community owned renewable energy alongside smallholder agriculture and agroecology. Resisting financialisation means making sure that this new vision gets realised.

 

You can take action with WDM against the financialisation of food by taking part in our e-action calling on George Osborne to regulate commodity derivative markets, and by participating in WDM local group actions and MEP lobbying. You can also help support WDM’s campaigning on the broader financialisation issue by donating here.