1963-2013 - 50 years of Research for Social Change

  • 0
  • 0

Back | Programme Area: Social Policy and Development

Valueworks: Effects of Financialization along the Copper Value Chain

  • Project from: 2017 to 2018


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 Neuchâtel (Switzerland)
  • Barbara Müller: Apartheid Debt and Reparations Campaign (Switzerland)
  • Wilma Nchito: University of Zambia (Zambia)
  • Christian Busse: ETHZ (Switzerland)
  • Ellen Hertz: University of Neuchâtel (Switzerland)
  • Hanna A. Haile: Cornell University (USA) 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; other presentations covered Global Production Network and Global Value Chain theory, economy and value, legal frameworks for the mining sector in Zambia, and financialization in China.

Outputs will include UNRISD issue briefs, and background and research papers.

Funding


This project is funded by the Swiss Network for International Studies (SNIS).