Wall Street is at again.(Africa landscape photo: Creative Commons/Greg Wilis)
The nation’s financial sector is on a crusade to dominate an
irreplaceable African resource that the world increasingly needs:
massive tracts of open land available for large scale industrial
farming. The pace of land purchases is flying so furiously that it is
now commonly referred to as “a land grab.”
It’s the latest phase in Wall Street’s never-ending quest for profits
at-any-cost, but this time the focus of finance’s predatory gaze is the
world’s poorest region. The reason is simple: There’s an ocean of money
to be made by doing so.
The potential riches stem from the fact that the world needs more
food. For Wall Street, scarce resources translate into massive profits,
and U.S. financial firms are at the head of the pack to make them.
Global population growth, the rise of middle class diets in
fast-developing economies, especially China and India, and falling crop
yields due to climate change mean that the planet is in a scramble to
increase agricultural output. This year’s drought highlights the
problem.
Most of the land available to meet this growing demand is in the
world’s most distressed regions, especially in Africa and to lesser
extent Latin America. Buying, leasing, and selling that land is expected
to lead to double-digit returns for investors—the type of returns seen
in high-growth, high-tech companies. And financiers all around the world
are beating down the door to get their hands on it.
These acquisitions are another example of the way in which the
financial system thrives off of inequality, both internationally and
here at home.
This should come as no surprise. It’s not the first time that the financial sector has put short-term gains above all else.
Wall Street’s unapologetic avarice during the housing bubble led to
the largest erasure of wealth amongst the descendants of Africa and
Latin America living in the United States. Due to the housing crisis,
the wealth gap between people of color and whites has grown to the
widest level ever recorded. The devastating loss in property and
prosperity amongst blacks and Latinos is a direct result of Wall
Street’s assessment that these communities were ripe for predation.
Now they’re profiting from the mess they created by snapping up distressed properties for profit.
In Africa and around the world, Wall Street banks on inequality.
A Continent for Sale, Yet Again
Oxfam estimates
that over the past decade up to 560 million acres of land, equivalent
to "an area greater than the size of California, Texas, Arizona, Nevada,
New Mexico and Wyoming combined," has changed from local control in the
developing world to the hands of global investors. The World Bank says
that 112 million acres switched ownership in 2009 alone. Seventy percent
of those deals were in sub-Saharan Africa. These deals are occurring in
such volume that no part of the continent is immune.
The U.S. is the largest investor. Household names such as Goldman
Sachs and JP Morgan all have their fingers in the pie, along with others
such as Black Rock asset managers.
The size of individual transactions is huge.
According to a detailed report by non-profit GRAIN,
close to a million acres was leased by a New York-based private equity
firm from the world’s poorest and newest country, South Sudan. The same
report says that a fund controlled by George Soros owns 600,000 acres of
land in Brazil, Argentina and Uruguay.
The land grab is not accidental. Conferences, organized by firms like
High Quest Partners, are held in New York, Singapore, and London to
facilitate deal and capital flow to Africa. High Quest reports that 700
hundred attendees participated its New York gathering alone to get the
latest on the land rush.
Most open land in Africa is owned by the government. As national
property, millions of Africans presently farm it without owning the land
or paying rent.
Weak taxation, caused by lower levels of economic growth and poor
governance structures, lead African governments to constantly look for
new sources of income to fund their operations. Selling or leasing a
national asset, land in this case, is a logical step to raise badly
needed cash. Many countries around the world, including the United
States, have done it. The Democratic Republic of the Congo, for
instance, has offered to lease up to 20 million acres to international
investors.
The problem is that deals are done for pennies on the dollar.
The Oakland Institute says
that purchase prices can range from as little to $3 to $6 an acre.
Leases can be for up to 99 years at $0.75 an acre. Farmland in the U.S.
sells for $560 to $12,000 an acre.
Dirt cheap land prices in Africa lead to massive profits on Wall
Street. The margins made on these land acquisitions will range between a
whopping 20 and 40 percent. This is two to four times above what is
considered an amazing return; anything above 10 percent and finance
types are gleeful.
Profits are turbocharged because the true costs of converting lands
from public use to private, industrial farm purposes is not born by the
firms that purchase them.
Environmental degradation from factory farms and increased poverty,
caused by the forced removal of millions from native land and into
overburdened cities, are among the long-term tolls of Wall Street’s
“land grab” that are not paid for by the companies that initiated and
benefit from it.
Hundreds of pounds of chemical fertilizer are used in industrial
agriculture to increase crop yields on just one acre. Data from
Sustainable Table indicates that an industrial hog farm produces up to
200 million pounds of waste per year. Over 700,000 people in Ethiopia
are in the process of being moved to make way for just one land deal.
These environmental and human costs will be shouldered by the
ecosystems and people who are the victims of them. As with the U.S.
housing crisis, costs are socialized and the benefits privatized. This
seems to be Wall Street’s formula for making the numbers work.
Given the bargain basement prices and future food demand, buying,
holding and cashing out on land in Africa is money in the bank for
investors.
Black and Brown America’s ‘For Sale’ Sign
So is the wreckage from the foreclosure mess caused by Wall Street.
Over 9 million property foreclosures flowed from the bursting of the
housing bubble in 2008, and 3.6 million of these, more than four out of
ten, were owned by blacks and Latinos.
Just last month, Wells Fargo settled with the Justice Department
on charges that it deliberately steered people of color into toxic
subprime loans. These loans set up borrowers, whom loan agents referred
to as “mud people,” for failure.
As a result of the foreclosure process that followed, millions of
properties have been transferred from black and brown individuals to
banks, hedge funds, and other financial institutions, which are turning
them around at a profit.
Property is the number one way that people of color build wealth.
Blacks and Latinos hold fewer stocks, bonds and other financial assets.
Consequently, rising property values is an even more important source
for net gains in those communities over time. The $7 trillion in home
real estate values that has been erased since the 2008 crisis are felt
disproportionately on the balance sheets of blacks and Latinos.
A generation will likely pass before hard hit communities recover
what was lost. But banks and hedge funds, including those grabbing land
in Africa and Latin America, stand to profit from the mess they created.
All over the world, Wall Street is at work to separate millions of
people from their property at a dizzying pace. Delivering returns to
their shareholders means doing whatever is necessary to the rest of the
population in order to achieve them.
Once bearish Goldman Sachs is now bullish on the U.S. housing market.
Since late last year, financial institutions have started to buy
distressed properties. Forbes reports
in that just in the last 10 days a $1 billion fund was created to snap
up foreclosed houses, apartments and condos to transform them into
rentals.
Due to the actions of Goldman Sachs and others which precipitated the
current crisis, millions of former black and brown home owners now need
those rentals. In fact, demand for rental properties is at all time
high. In some markets, like New York City and San Francisco, rents have
soared to pre-crisis levels.
Americans have lost at every stage of the sub-prime process, but the
financial sector gains. No matter where or who—Africa, Latin America, or
amongst African Americans or Latinos in the United States—Wall Street
manages to prosper from inequity and wrongdoing.
No one has held them account for it yet. Just last week, the Justice
Department declared that it wouldn’t prosecute Goldman Sachs for its
role in the subprime mess. In response to a recent question over whether
Wall Street should answer for its egregious deeds, JP Morgan’s Chair Jamie Dimon shouted,
“It’s a free fucking country.” He and his fellow financiers don’t seem
to get the distinction between being free and getting off scott-free.
For them, they’re one in the same.
“The same financial firms that drove us into a global recession by
inflating the real estate bubble through risky financial maneuvers are
now doing the same with the world’s food supply,” warned the Oakland
Institute’s Executive Director Anuradha Mittal on CNN.
She’s right.
Africa’s and America’s experience with Wall Street shows that
predatory behavior not only abounds, but may be endemic to the way the
financial sector does business.
The only way to minimize the damage, barring muscular regulation not seen in 40 years, is to cut the banks down to size.
Everyone from the nation’s former chief banker, Paul Volcker; to the
Godfather of the nation’s first too-big-to-fail institution, former
Citigroup Chair and CEO Sandy Weill, have called for it. Weil recently
said that the time had come for the mega-banks to be “split up.” Even
President Obama has signaled support for it. But it hasn’t happened yet.
Whatever the reason, the failure to bring the financial sector to
heel has global consequences, especially for those that have
historically been least able to afford it.
© 2012 ColorLines
No comments:
Post a Comment