Abstract
Understanding how global markets are made and maintained is a well-researched domain with many approaches and frameworks proposed to make sense of how global markets come into being. This book addresses the question ‘what is a global market?’ and abandons the two usual approaches—neoclassical approach and institutional approach that formed the basis of our previous understanding of how markets work. It also finds the commodity chain approach, the system of provisions approach and the social things in life approach to be inadequate to understand a global commodity market. The author suggests the criticality of the need for studying markets as a manifestation of economization as fields of power are created and maintained by human and non-human agents in the commodity chain interacting on unequal forums in order to understand how markets actually function at the field level. Price realization in markets is neither embedded in nor separated from the society; rather price realization process in the markets is constantly intervened in through various tools of power.
This work is a result of extensive fieldwork of five years done as part of PhD dissertation of the author to understand the creation and maintenance of the cotton market at the global, regional and local levels in the USA, Egypt and Turkey. These three countries were chosen because they cover major geographic areas where transactions in cotton takes place and provide an excellent context of the different levels of development achieved as an economy. Seven marketplaces which comprised three villages—Izbet Sabry and Kafr Gaffar (Lower Egypt) and Pamukkoy (Western Turkey)—and four merchant sites—Izmir (Turkey), Alexandria (Egypt), Memphis (TN) and New York City—were studied. The choice of cotton gives an unparalleled advantage in generalizability of the results due to the fact it is grown in large volumes; impacts almost everyone in the world; is a food, fibre and feed crop at the same time and has an important place in the history of evolution of markets. The author draws from methods of social study of science and technology, political science, sociology, economics, economic sociology and anthropology to understand how markets are a result of power exercised by people associated with the cotton commodity chain.
The book is divided into six chapters each addressing a question in a specific geographic context. The first chapter brings in the argument of how markets are both embedded in and dis-embedded from the social relations; globally, price realization is not achieved just through interventions via the Black and Scholes formula in cotton options but also through constant interventions by traders, marketing boards and farmers. The prosthetic prices like World Price of Cotton, Adjusted World Price and the A Index are contested, made or unmade by traders via their tools of power wielded and in this process, the real prices are realized. Therefore, traditional economics of supply and demand is not enough to understand how pricing happens in a market, it is imperative to understand how the market agents understand and engage in making, maintaining and challenging the market fields of power; to do that the prosthetic and real prices realization process needs to be understood so that the universe of world trade can be made sense of.
In the second chapter, the author follows the circulation of a bale of cotton in world trade which is made possible by two concurrent activities—using documents to facilitate actual exchange of cotton is one of them, it brings in a whole new set of actors like controllers and arbitrators who ensure documentary circulation matches real circulation of commodity; also use of a documentary trail opens up avenues of contestation at each step during the circulation. In fact, if the power of arbitrators is not recognized by the market agents, the commodity fails to circulate; in order to counter that the second activity that marketers engage in is networking—and nothing works better than meeting new people and exchanging gifts with them. The making of markets through documentary and actual circulation of cotton is made possible by building ‘human bridges’ that are maintained through exchanges of gifts.
The focus shifts from the global market in Chapters 3 and 4 to see how regional markets in Izmir, Turkey and Alexandria, Egypt affect the world cotton trade. The author contends that the relationship between the global market and the local markets is not one of an ‘encounter’—rather it is a derivation. The question of how these seemingly ‘original prices’ are realized is tackled. The traders at Izmir Mercantile Exchange create an original price that is neither prosthetic nor real—called the rehearsal price, a result of pit-trading held every weekday between 12:20 and 12:30 pm; the traders then use this rehearsal price as an anchor to close deals as part of the post-pit trading and another intervention is done after 2:00 pm when the Closing Price Committee of the Exchange decide on a market price, which is relied upon by traders in other time zones. The supply of cotton is also intervened via the Permanent Working Group on Cotton, affecting the process of price realization.
On the other hand, in Alexandria, the prices in the market are realized without these institutionalized exchanges, which affirms the argument that global market and local markets are not encounters rather they are derivatives of each other. After privatization of cotton trade in 1994, the private merchant houses took back the control of the market and leveraged in the Egyptian cotton export sector via the Alexandria Cotton Exporters’ Association (Alcotexa). Even though there was an exchange present—it was never used as traders knew that the price realization occurs outside the exchange building as a result of their interventions. Every Sunday, the Managing Committee of Alcotexa determined the minimum export prices for each cotton variety and grade grown for the week—this was referred to as associate price. The public companies had to use this price as their minimum actual price. But, the traders used associate prices to strengthen their position through two ways—gain competitiveness with respect to the public companies and use their network of capital, knowledge and research in order to realize the actual price in the market. An interview with a cotton merchant of a private trading company brings this to light:
So world prices help you find your price.
Yes, they help us. They help everyone, but they don’t exist in reality.
What exists in reality?
[After a long pause] You know, bargaining, trying to learn what others know, what others want to do and don’t want to do. (p. 116)
The last two chapters take the perspective of what is a global market as observed from the villages—it focuses on two main activities—the changes that shape the production of cotton till it is sold to the merchants and the power dynamics associated with this exchange. Traders and farmers both do ‘research in the wild’ in order to adjust their operations to the ever-changing context brought in by human and non-human factors. Farmers learn via observation and discussion and experts have very little understanding of their learning process. Growing cotton requires co-operation among farmers and their environment. In the world cotton market, production and exchange of cotton are not two separate fields of encounter. In fact, farmers and traders responsible for cotton production and exchange engage in different activities to make money and survive.
In the context of power dynamics in the market, the traders are in a better position to influence the prostheses as compared to the farmers. Also, these prosthetic prices are not very important to the farmers for a number of reasons; in fact, as one farmer puts it, ‘the price is what I carry in my pocket after I sell my crop’. The reasons are, first, it is used as a tool to depress prices; second, most of the farmers are in debt to merchants or have to sell through their cooperatives; also they need to sell their cotton crop quickly as they cannot wait indefinitely for a good price. The farmers who are not in debt face another struggle of meeting the grade requirement of the merchants. But, it is not just the farmers that are excluded, they also engage child labour which is also a form of exclusion. The workers are exploited by gang leaders and large farmers in terms of payment of lower wages and impossible amount of work. Farmers push back against the power field of the traders via three ways: (a) they lobby for changes in the grading of the cotton, (b) show anger if things are not done according to their requirements and (c) threaten to withdraw their produce from a certain market. Even with the floor prices, though the quality of the cotton produced is improved, the benefits remain with the traders and are not passed down to the farmers in proportion to the contribution made in quality improvement.
This account of global market creation and maintenance in cotton emphatically brings out the Foucauldian idea that power relations are embedded in the society, the power is diffuse and is not necessarily negative always—as can be seen that global and regional traders and farmers also exert their power to influence prices and react to each other’s actions and reactions to create and maintain the global cotton market (Foucault, 1982). The points suggested by Foucault to execute a power relations analysis: (a) The system of differentiations which allows one to act upon the actions of others; the basis of these differentiations can be by law, tradition of status, privilege, economic differences, cultural and competence differences. (b) The types of objectives pursued by them. (c) The means of bringing power relations into being: how the power is exercised via the threat of arms, the word or by means of economic disparities. (d) Forms of institutionalization: example—traditional predispositions, legal structures, phenomena relating to custom or to fashion. (e) The degrees of rationalization: of an action resulting in a particular outcome are illustrated well by the author in terms of how price setting is not so simple and various socio-economic and ethnographic factors lead to uneven platforms for wielding power by different actors in the cotton commodity trade that decides the prices realized in the cotton market. This approach to understand power that leads to making of a global market enriches the literature in addition to the commodity chain approach, which focuses on four main dimensions—input–output structure, the territory covered, internal governance structure and institutional framework that identify the role of local, national and international conditions, all of which change the globalization process (Gereffi, 1995).
The book brings in a completely new perspective of looking at global markets in terms of the power being used by various actors in the market to realize prices and addresses the gap left by the traditional neo-classical, institutional, commodity chain and systems of provision approaches. This approach can be helpful to have better targeted market interventions if we are aiming at improving the farmers’ and the workers’ position in the cotton commodity market. It is a well written and researched book that puts its argument in a graded fashion which makes it easy for a person not trained in economics to follow how prices are realized and how social, political, economic and ethnographic factors interacting with the fields of power wielded by different market agents influence prices and markets. This approach offers a rich alternative to the commodity chain approach to understand how markets create and maintain themselves and can be extended to other important commodities like coffee, cocoa and tea.