Reinventing the wheel? Or adding new air to old tires?

Christophers (2015: 183) delivers a methodical critique of financialization as both a concept and an unfolding process. As a concept, he contends that the term is both overused and used without precision, that it is largely a repackaging of old ideas, and that the fad for framing everything in terms of financialization leads other equally important topics to be overlooked. As a process, meanwhile, Christophers argues that the magnitude and importance of recent financial developments are often exaggerated and that financialization faces material limits that are rarely acknowledged.

At the risk of blunting my own response, I must confess that, for me, some of Christopher’s admonitions hit very close to home. If his primary intent was indeed that of ‘urging caution in our collective appeal to the financialization concept’, then he can consider this objective achieved with at least one reader.

However, while duly chastened in many respects, I will nonetheless venture to raise questions about a persistent theme in the piece: that of financialization’s novelty. According to Christophers, financialization is not new enough—either theoretically or historically—to merit a fancy new label and to cause such a scholarly hullabaloo. That periods of financial expansion have recurred throughout history is indisputable; Arrighi (1994) demonstrated convincingly that to study financialization is to suffer from permanent déjà vu. For Christophers, this makes the term superfluous—a new buzzword stamped onto an ongoing phenomenon. His critique boils down to an essential question: Is it worth coining a new term to describe the latest variant of something old? Christophers thinks not. I will argue that it is worth it, provided that the hype does not obscure the history. Rather than ‘reinventing the wheel’, scholarship on financialization, if done well, should acknowledge historical continuity and theoretical debts, while also detailing the many developments that are unique to this historical moment. At its best, work on financialization should pump new air into the worn but sturdy tires provided by foregoing theorists of finance. Because my work is on farmland, I will focus my response on Christophers’ arguments about the financialization of property.

Christophers argues, first, that work on financialization is ‘theoretically limited’ because it constitutes a reformulation of preexisting scholarship. Arrighi constructs his theoretical edifice on foundations laid by Braudel, Lapavitsas builds on Hilferding, and so on. Current work on the financialization of land/property, meanwhile, is essentially a repackaging of Harvey’s (1982: 347) depiction of ‘the increasing tendency to treat the land as a pure financial asset.’ While agreeing that Harvey’s work is indispensible to understanding current developments—I draw from it explicitly in my own work (Fairbairn, 2014)—I disagree that we should therefore confine ourselves to Harvey’s language and formulation. For one thing, it is considerably easier to make use of a concept when it can be expressed in fewer than 12 words. Even if we accept Christophers’ premise that current work brings little to the table that wasn’t already laid out in The Limits to Capital, why repeat cumbersome paraphrasings of Harvey on principal, when the ‘financialization of land’ rolls off the tongue and the fingertips so easily?

More importantly, Christophers holds the financialization literature to a standard of innovation that is rarely seen in academic work. Theorization almost always occurs in cumulative increments, and one would be much harder pressed to find a body of scholarship that does not parse or parrot the work of earlier theorists than to find one that does. (Neoliberalization certainly would not make that grade.) Even Christophers’ selection of someone as eminent as Harvey as his ultimate reference point for theories of finance and property is somewhat arbitrary. Harvey had contemporaries in the 1970s and 1980s who wrote on similar themes, including Massey and Catalano’s (1978: 115) work on financial investment in British farmland. Like Harvey, they describe the use of land as a financial asset:

What should be stressed is that the object of these institutions’ investment is purely the (long or short-term) return on capital … Thus capital will be allocated among different investments, including land, depending on their relative attractiveness; the proportions going to different types of investment will shift in response to changes in relative yields.

Nor was this wave of scholarship the first time that the relationship between finance and property had been theorized. We could also go back further in time and use as our reference point George (2009 [1879]), who railed against land speculation long before Harvey was a gleam in his father’s eye. Or perhaps we should simply confine ourselves to the terminology used by Marx—the specific giant upon whose shoulders Harvey stands. My point is that a certain amount of retreading old ground is inevitable. The scholar who eschews any concept that lacks complete theoretical novelty will have few words left to use.

However, Christophers’ old-wine-in-new-bottles critique of financialization extends beyond the term’s tendency to be theoretically derivative. He also sees the concept as ‘optically limited’, arguing that spatially and temporally narrow accounts have led researchers to exaggerate the significance of the current historical moment. To a certain extent, these critiques amount to the same thing; previous scholars theorized the increasing power and prominence of finance because they saw it unfolding around them. But while historical parallels are undeniable, I would argue that the current wave of financial expansion has its own unique characteristics that the term financialization can help us to identify.

I will illustrate with an example from my own work on the financialization of farmland. In the late 1970s, US farmland was booming. In 1976, farmland values nationally increased 17%, and in the Corn Belt they rose a jaw-dropping 33% (Bleiberg, 1977). The following year, Merrill Lynch and the Continental Illinois National Bank jointly proposed the creation of a farmland fund called Ag-Land Trust. Their idea was innovative for the time—to raise capital from pension funds and other financial institutions and invest it in farmland as a means to make capital gains for the investors. According to the declaration of trust, the purpose of the fund was ‘to invest in United States agricultural land primarily for appreciation and secondarily for current cash return to the Participants’ (US Congress, 1977:185, original emphasis). In the words of a Merrill Lynch Vice President, “The game really is in long-term land appreciation” (Forbes, 1977). In other words, the land was primarily attractive as a financial asset, if not quite a “pure” one.

However, Ag-Land Trust turned out to be an idea ahead of its time—so much so, in fact, that congressional hearings were held to critically evaluate the proposal. During the three days of hearings, the fund’s promoters were relentlessly questioned and upbraided by congressional representatives. They were accused of plotting to drive up farmland prices for their own profit, of monopolizing scarce resources that should rightfully be owned by farmers, and even of ‘tinkering with the virtue of country America’ (US Congress, 1977: 70). They were told that, if they wanted to invest in agriculture, they could ‘follow the example of the major insurance companies and make direct real estate loans to farmers at current rates of interest’ (U.S. Congress, 1977: 34). In other words, finance should stick to its subordinate role of supplying capital to producers. In the face of this political hue and cry, it is not surprising that the Ag-Land Trust promoters opted to bow out gracefully and cancel the fund.

Yet today the proposal that prompted such congressional outrage seems positively run-of-the-mill. In 2007, just three decades after the Ag-Land Trust hearings, giant US pension fund Teachers Insurance and Annuity Association–College Retirement Equities Fund (TIAA-CREF) began buying farmland aggressively, rapidly acquiring almost US$3 billion worth of land globally, including substantial acreage in the United States. And it was far from alone in this pursuit; institutional investors—from university endowments to hedge funds to sovereign wealth funds—began buying up farmland, drawn by the expectation of dependable land appreciation, and the attractive benefits of portfolio diversification (Highquest Partners, 2010). Meanwhile, new farmland funds emerged (Fairbairn, 2014; Sommerville and Magnan, 2015), including farmland private equity funds, which offer relatively short-term investments in farmland transformation and resale (Daniel, 2012). Beginning in 2013 it even became possible to invest in US farmland on the stock market via publicly traded farmland real estate investment trusts (Fairbairn, 2014). This time, no politicians denounced the moral perils of farmland speculation, and none insisted that the role of finance in agriculture be limited to granting loans to farmers.

So, what changed in the three decades between Ag-Land Trust’s cancellation and TIAA-CREF’s buying spree? I agree with Christophers that land’s appeal as a ‘pure financial asset’ was no greater in 2007 than it had been in 1977—or, for that matter, than it had been in 1917, when US farmland was in the midst of another major boom associated with World War I (Johnson, 1974). But demand for land’s financial qualities clearly did not manifest itself in the same ways during each historical period; despite underlying similarities, something had changed. The value of the term financialization, as I see it, is in helping us to identify that something; it provides a label for this particular iteration of financial expansion, thereby bringing its unique elements into focus. One of the greatest strengths of the term—as Christophers describes but then dismisses—is that it allows scholars to see connections between apparently discrete developments. In this case, the expanded size and clout of institutional investors (Engelen, 2003), the increasing prioritization of financial profits over productive profits among both financial and nonfinancial companies (Krippner, 2011), and the growing acceptance of financial investment as a morally legitimate activity (Langley, 2008) can probably all help to explain why the historically recurring demand for land as a financial asset has taken a novel form over the last few years. These differences, though they may seem trivial from the eagle’s eye view of history, have very real effects for the smallholder farmers that must now compete for land with multibillion dollar financial institutions. To say that farmland is undergoing a process of financialization highlights the considerable differences that exist in this round of financial expansion, and yet using the term need not lead us to ignore history.

Christophers’ piece serves as a valuable reminder of the great care that is needed when discussing a process that is enduring yet somehow also new. There is a broad middle ground between focusing myopically on the events of the last few decades and examining recent financial developments as carbon copies of their historical counterparts. While to me the existence of theoretical precursors and historical parallels does not seem a good enough reason to abandon a concept as eminently useful as financialization, I intend to heed Christophers’ warning to weigh carefully the relative contribution of old and new as well as the relationship between the two. Thanks to his piece, I’m sure that many of us will be employing the term much more judiciously in future.