Financialization has profoundly changed the global commodities trade. What are the effects on local lives and what are the policy recommendations to be drawn for national and international regulatory actors?
This project examines social dynamics at the different nodes of a global value chain, following one single commodity, copper, from mining pits and the surrounding communities in Zambia through towns and harbours on African transport corridors, through Swiss trading firms and banks to the sites of industrial production and recycling in China.
The project aims to provide a better understanding of the direct and indirect consequences of financialized commodity trade on local lifeworlds and contribute to better regulation and oversight of the sector in order to move towards more ethical trading systems conducive to the vision of sustainable development.
The Research Issue in Context
Commodity chains are crucial for understanding global economic and societal connections. They emerge from and reproduce unequal roles in the global division of labour—an inequality increased by higher price volatility, greater international competition for investment, and increasing financialization of trade.
Financialization—the growing influence of financial markets and institutions on national and international economies—has deeply affected commodity markets. Since the early 2000s, new derivative instruments, higher market volatility and automated trading have critically changed the role of finance in commodity trading. Financial instruments today play an important role in determining commodity prices at all points in the value chain. This process is not only driven by trading firms, but also by private, public and institutional investors searching for returns in a volatile market environment. This has further disassociated trade in commodities from their material presence. Commodity markets are now more dependent on expectations about trade in derivative instruments than on commodity needs in the real economy. As a consequence of this decoupling, supply chain transparency and sustainability become next to impossible to achieve for commodities traded on financial markets.
Since the early 1990s, scholars have attempted to explain the new economic structures that drive the global economy. Those interested in commodities have theorized “global commodity chains” (GCC) with a focus on governance processes beyond the analytical lens of the nation-state, often drawing on Wallerstein’s world system framework. Global production networks (GPN) theory links localities by embedding them into global dynamics of production and trade that are no longer controllable from any one place, but offer a framework to detect uneven development both within and between countries. Such networks are theoretically well described and have been studied in a large number of cases. What is less well understood is how financialized commodity trade impacts on local lifeworlds along value chains.
Research Objectives and Questions
The project aims to provide a better understanding of the direct and indirect consequences of financialized commodity trade on local lifeworlds and contribute to better regulation and oversight of the sector in order to move towards more ethical trading systems conducive to the vision of sustainable development.
The project’s specific objectives are to:
- Contribute to a better understanding of how financialized commodity trade affects value chains and global production networks.
- Contribute to a better understanding of the degree to which this growing financialization of commodity trade translates into local realities in different places along the value chain.
- Contribute to a better understanding of the Swiss commodity trading hub—and ultimately of the societal and political factors that are driving financialization—and make this knowledge publicly accessible.
The project will answer the following research question:
What are the effects of the financialization of commodity trading on local lives, and what are the policy recommendations to be drawn for Swiss (and other national) and international regulatory actors?
Methodology and Approach
The project analyses the effects of the financialization of commodity markets on social life in different localities along copper’s value chain. It departs from the assumption that structural changes in global production networks, among them financialization, affect the distribution of opportunities at the sites of extraction, transport, trading, manufacturing, and recycling. It analyses such changes in different local sites in one network, and seeks to conceptually reconnect the social, political, economic and ethical spheres of action disconnected by financialized trade.
The project is conceived as a single case study connecting different sites and comparing two segments of a value chain. It combines anthropological research by experts positioned at specific nodes along the value chain with systemic analyses of financialization and global production networks from economic, managerial and policy perspectives. It employs a comparative approach through contrasting copper mined by publicly traded companies, exported from Zambia to Switzerland and traded by Swiss firms, with copper mined by Chinese state-owned enterprises in Zambia and sold directly to (equally mostly state-owned) Chinese producers. While Swiss trading firms do not play any direct role here, their existence changes the market environment and has indirect consequences. This bifurcation between classic commodity exports driven directly by the needs of manufacturers and financialized copper trade with Swiss intermediaries makes Zambian copper an ideal case for studying the consequences of financialization.
Research Team
- Rita Kesselring: University of Basel (Switzerland)
- Stefan Leins: University of Zurich (Switzerland)
- Katja Hujo: UNRISD (Switzerland)
- Marja Hinfelaar: Southern African Institute for Policy and Research (Zambia)
- Gregor Dobler: Albert-Ludwigs-Universität Freiburg im Breisgau (Germany)
- Ganga Jey Aratnam: University of Basel (Switzerland)
- Yvan Schulz: University of Oxford (UK)
- Barbara Müller: Apartheid Debt and Reparations Campaign (Switzerland)
- Wilma Nchito: University of Zambia (Zambia)
- Christian Busse: University of Oldenbourg (Germany)
- Ellen Hertz: University of Neuchâtel (Switzerland)
- Hanna A. Haile: McGill University (Canada) and UNRISD
The project also features collaboration with two NGOs: The Berne Declaration and SOLIDAR.
Research Beneficiaries
The research will have direct results for policy interventions relating to transparency in the commodity sector, transnational policy coherence and sustainable development in the Global South.
The results will feed into policy recommendations for national and international regulatory actors. The research thus targets researchers, policy makers, practitioners, non-governmental organizations and advocacy groups, and the general public.
Outputs and Activities
Activities will include a literature review and road mapping, workshops in Switzerland and Zambia, a final symposium hosted by UNRISD, and publication and dissemination activities.
Inception workshop: 8 – 10 March 2017, Basel (Switzerland)
The meeting brought together project members to reach a common understanding of the project’s topic and context, discussing the perspectives of a diverse group of researchers as well as the different entry points into the Copper Value Chain along sites in Switzerland, Zambia and China. The workshop focused on several overarching issues, such as basic definitions, the conceptual framework and key analytical tools that will be applied in the next project phase of fieldwork in the different sites. UNRISD presented a background paper on financialization and social development (authored by Katja Hujo and Luisa Lupo). Other presentations covered Global Production Network and Global Value Chain theories, economy and value, legal frameworks for the mining sector in Zambia, and financialization in China.
Second project workshop: 4 – 9 September 2017, Lusaka (Zambia)
During the second project workshop researchers presented preliminary research findings from their fieldwork. It was an opportunity to engage more closely with Zambian researchers and activists who are working in mining communities on social and environmental issues. UNRISD presented the second background paper for the project on “Extractive Industries and the Agenda 2030 for Sustainable Development” (authored by Katja Hujo) as well as fieldwork research findings on the study “The Gendered Aspects of Copper Mining: A Case Study of Mining Communities in Kitwe, Mufulira and Chambishi” (authored by Hanna Haile).
Third project workshop: 24 – 26 May 2018, Zurich (Switzerland)
The third and last project workshop provided an opportunity for project researchers to present updates on their research; to open the project to some key experts in the field and connect with their recent research (Andrew Bowman, Cassandra Vet, Natascha Van der Zwan, Liliana Doganova); and to move the project’s communication and outreach strategy forward regarding civil society engagement, the final symposium and publications.
Public Events: Life Along the Copper Value Chain: The Swiss Commodity Trading Hub and its Impact on the Global South
On behalf of an international research consortium in which it is a partner, UNRISD organized two events in Geneva in December 2018.
- Round Table Discussion: Monday, 10 December 2018, 18.00–20.00 at the Graduate Institute of International and Development Studies
- Research Symposium: Tuesday, 11 December 2018, 09.00–17.00 at the Palais des Nations
Further information can be found
here
Outputs include UNRISD background and research papers.
📘 UNRISD study on The Gender Implications of Transformations in the Copper Value Chain: A Case Study of the Zambian Copperbelt, Hanna Haile
This report provides a synopsis of the results of two months of fieldwork conducted in the Copperbelt. It examines the local-level gender implications of operational and financial transformations in the copper value chain, such as increased financialization at extraction, commodities trading or manufacture. According to informants’ stories, spaces in which mining has created specific gendered dynamics include hiring practices, workforce discrimination, the perceived gendered dangers of underground work, and exposure to environmental contaminants. Although it was difficult to establish a clear nexus between financialization and gender dynamics at the local level, the research shows that following privatization of mining companies and increased financialization of the copper value chain, mining companies’ business operations, management and decisions made in response to the volatility of copper prices in the commodities markets tend to favour profit over welfare of workers. Casualization of labour, emphasis on profit maximization over other societal and environmental goals, employees’ increased reliance on debt as a result of job insecurity, and, to some extent, erosion of gender stereotypes and gendered division of labour are some of the ways that the impacts of transformations such as increased financialization play out in local lifeworlds in the Copperbelt in Zambia.
Resources
Funding
This project is funded by the Swiss Network for International Studies (SNIS).
