Abstract
Prices of, specifically, primary foods spiked during the global food crisis of 2007–2008. This motivated governments with food security concerns and profit-seeking investors to engage in large-scale land acquisitions (LSLA) in mainly least developed countries (LDCs). In economic terms, this reaction is desirable for two reasons: (1) more efficient production lowers food prices and increased food production improves food security; on the other hand, (2) least developed host countries benefit from development opportunities. Drawing on Hal Varian’s (1974) concept of fairness, this article contributes an ethical perspective on the matter: particularly based on the analysis of 81 investment contracts, this partial analysis understands LSLA into Sub Saharan LDCs as a socio-economic reform. It focuses only on two affected groups when land is redistributed from LDCs’ local smallholders to foreign investors. It concludes that LSLA predominantly contradict Varian’s concept in practice as they hardly if at all improve the situation of local smallholders who might in extreme cases even suffer human rights violations.
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Notes
Some mention an increase by a factor of 10 regarding the number of land deals (the number of reported deals was obviously much higher than those cross-referenced). The respective area should be multiples of this factor. Reliable data on this development is rare; see, for example the 2011 graph “Global Pace of Land Acquisitions, 2000-2010” from the International Land Coalition that can still be found online on the blog “Desdemona Despair” on http://www.desdemonadespair.net/2011/12/graph-of-day-global-pace-of-land.html, June 22, 2015. Regarding the source of data, see also footnote 6.
There is no definite notion of LASLA. As different defining parties like investors, host or home governments, or Non Governmental Organizations (NGOs) mirror their particular interests in their definition, a very general definition is applied here: LASLA are large-scale land investments mainly into LDCs aiming at large-scale agricultural use. Investors are predominantly, but not in every case, foreign parties with access to significant financial resources. To have access to such resources, investors are often supported by their respective governments.
Matavel et al. (2011) also include the lack of access to education systems, health care, or social services to human rights violations. Indeed, since investors and host governments often include these as promises when propagating LASLA, there is a certain legitimacy to this inclusion.
See for example, the Land Matrix project aiming to collect data on LASLA, “a global and independent land monitoring initiative that promotes transparency and accountability in decisions over land and investment”, on http://www.landmatrix.org/ (November 6, 2013).
Cotula (2011) highlights that some projects define an even longer period between 50 and 99 years.
ETB1 was worth $0.0565 in June 2012. This exchange rate translates into prices from $8.927 to $40.26 per Ha and month. However, over the last decade the ETB depreciated about 50 % against the $, which is why ETB prices are provided.
Varian’s concept of equity is based on Foley (1967). In more detail, Foley (1967: 74f.) holds that “an allocation is equitable if and only if each person in the society prefers his consumption bundle to the consumption bundle of every other person in the society. […] In other words, ask each person to imagine changing places with every other, not by exchanging incomes, but by experiencing the material aspects of that person’s life. If no one is willing to change, the allocation is equitable.”
The philosophical approach of utilitarianism can be defined as “the doctrine that an action is right insofar as it promotes happiness, and that the greatest happiness of the greatest number should be the guiding principle of conduct” (McKean 2005).
The UN declaration on the Rights of Indigenous People was adopted in 2007 by a majority of 143 states (most of Sub-Saharan countries adopted the convention). Australia, Canada, New Zealand, and the United States voted against the declaration and Azerbaijan, Bangladesh, Bhutan, Burundi, Colombia, Georgia, Kenya, Nigeria, Russian Federation, Samoa, and Ukraine voted “present.”
Illustrated, for example, by the following observation of the World Bank: “If investments generated profits, social impacts depended not only on the magnitude of benefits, but also on the mix of different types of benefits. For example, entrepreneurial and skilled smallholders could gain from jobs created by an investment, while vulnerable groups or women lost access to livelihood resources without being compensated. This illustrates the importance of clearly addressing distributional issues upfront” (Deininger et al. 2011: XXXIII f.).
In 2011, for example, The Guardian reported the statement of a project manager of Bangalore-based food company Karuturi Global regarding an investment project in Ethiopia: “We are building reservoirs, dykes, roads, towns of 15,000 people. This is phase one. In three years time we will have 300,000 hectares cultivated and maybe 60,000 workers. We could feed a nation here.” A local government officer in Gambella, an Ethiopian region at the center of foreign investment, emphasizes that relocation of smallholders is voluntary: “This year we will relocate 15,000 people to give them better access to water, schools and transport. [But] it is a coincidence that the investors are coming at the same time as the villages are being relocated. […] We are not relocating people to give land to the investors. The problem is there is no infrastructure where they have lived. It’s all voluntary.” However, affected people complain that they have not been compensated or that they are told to wait: “We were promised a school, a health clinic and fresh water eight months ago. We only have one water pump so far” (The Guardian 2011c).
The specified number of jobs varied from 42 to 4500 for the largest 150,000Ha project, with a median of 577. The more detailed numbers for jobs were (per respective project size in Ha) 42 (10,000); 84 (10,000); 300 (10,000); 577 (73,513); 577 (73,513); 628 (21,500); 670 (6214); 2200 (6141); 4500 (150,000) (one contract for a 30,000 Ha project stated no number for the promised jobs). Thus relative numbers of jobs per Ha are 0.004; 0.008; 0.008; 0.008; 0.029; 0.03; 0.03; 0.108; 0.358 (rounded after the third decimal place).
The currency in LASLA contracts for Ethiopia was Ethiopian Birr and not $, which is why it is separate from the other countries. For the exchange rate used here see the paragraph with footnote 7 in the introductory Sect. 1.
Agency theory addresses problems emerging from agency relationships that are defined as a contract between principal(s) and agent(s). Principals engage agents to perform some service on their behalf, involving the delegation of some decision-making authority to the agent. Problems arise when the goals of the parties diverge. Agency theory is concerned with finding an effective way to solve or regulate principal-agent relationships by decreasing agency costs. Jensen and Meckling (1976) define agency costs as the sum of (1) the principals’ monitoring expenditures, (2) the agents’ bonding expenditures, and (3) the residual loss. The residual loss is the welfare loss despite monitoring and bonding. It represents those potential gains from trade that could not be realized because principals cannot perfectly incentivize agents (Klein 2000).
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A complementary paper has been published by us under the title “John Rawls’s Theory of Justice and Large-Scale Land Acquisitions: A Law and Economics Analysis of Institutional Background Justice in Sub-Saharan Africa” in Journal of Agricultural and Environmental Ethics, 26(6):1223–1240, 2013. We owe our sincere thanks to Lieske Voget-Kleschin, Konrad Ott, Anne van Aaken, and Manfred J. Holler for their generous support and valuable discussions.
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Montilla Fernández, L.T., Schwarze, J. International Land Acquisitions and Hal Varian’s Concept of Fairness. Homo Oecon 33, 281–295 (2016). https://doi.org/10.1007/s41412-016-0023-2
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DOI: https://doi.org/10.1007/s41412-016-0023-2