What America’s Withdrawal From The Paris Climate Agreement Means For Agriculture

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This article was contributed on behalf of Farm Locator, a UK based online marketplace for the buying and selling of second-hand farm machinery. Concerned by the impact of current events on the agricultural world, they are keen to provide insight into the major farming stories currently taking place.
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Policy and Agriculture: What Current Trends Are Pointing To

Last week the US President Donald Trump made headlines around the world when he announced that he would start the process of withdrawing from the Paris Climate Agreement. Only two other countries – Syria and Nicaragua – have declined to be part of the Agreement, which was seen as a major step towards a globally coordinated, long term strategy for tackling climate change.

When former US President Barack Obama originally attempted to get the terms of the Agreement ratified by Congress, he was blocked, so it was never enshrined in law. All that Obama could do was enact an executive order to instruct the federal government to implement the Agreement. With Donald Trump now in the White House, that executive order is set to

With Donald Trump now in the White House, that executive order is set to canceled and the US is free to withdraw from all participation in the Agreement.

Was the Paris Climate Agreement that Important?

The central principles of the Agreement focus on sustainable development and reducing pollution. On the surface, it’s easy to assume that fewer regulations for US farmers would be a positive thing. In fact, nothing could be further from the truth and the long-term impact on farmers could be significant. Unless coordinated action is taken to minimize the effects of climate change, the fragile ecology of the land we farm is under real threat from floods, drought, and other environmental issues.

In regions that are already impacted by food scarcity, the Paris Agreement was seen as merely a good start, with much more action needed to really tackle the long-term problems posed by climate change. In the US too, there is widespread support within the agriculture industry for adopting eco-friendly practices.

In an open letter to the White House, the US National Farmers’ Union has urged President Trump to stay within the Paris Agreement, saying that ‘farmers are on the front lines of climate change’.

The letter also highlighted that many jobs within the farming sector are linked to environmental innovation and research, such as the development of alternative power sources.

At present, many farms continue to use outdated, coal-based forms of power, so Trump’s insistence on putting coal first removes the impetus to find new, environmentally friendly solutions within the agricultural sector.

Experts have also stated that those farms that fail to adapt to modern technologies and today’s environmental constraints will inevitably suffer financially.

There is clear evidence to suggest that those within the farming sector who are most willing to change are the ones who are likely to reap the biggest rewards in the long term. Pulling out of the Paris Agreement simply encourages complacency and stagnation and it will do nothing for the industry, whereas in countries that are pushing forwards with the Paris Agreement, farmers will be motivated to find innovative and profitable solutions to environmental issues.

How can Individuals make a Difference?

Already, opposition to Trump’s decision is fierce and vocal, with 246 mayors from across the US issuing a joint statement to say that they intend to comply with the obligations laid down in the Paris Agreement.

It’s not just civic representatives, but big businesses, and unions that can also take action against Trump’s decision.

Individuals can make a real difference too.

As an example, buying local produce cuts down on food miles and really helps to reduce vehicle emissions. Thinking more carefully about food shopping can also help, by reducing the amount of food waste that is produced. A more considered and sensible approach to food shopping can dramatically reduce the amount of waste food sent to landfill and cut weekly grocery bills at the same time.

As Trump presses on with the rollback of the Paris Agreement in the US, it’s more important than ever for every one of us to play a part in curbing climate change in whichever ways we can.

Many companies have cottoned on to the economic benefit of people’s willingness to do their part, as can by typified by the increasing prevalence of eco-tourism amongst those looking to volunteer and aid in various conservation projects.

Donald Trump’s decision to withdraw from the agreement is, of course, a major setback for both the US and the global community alike. What we should all keep in mind is that a strong and sustained movement exists which is determined to find new solutions to the environmental problems we face, contribute to the global climate change debate and hopefully promote new environmental legislation at some stage in the future.

Should The FED Raise Interest Rates?

Discussing The FED

Within the sphere of economics and economic thought, the discussion which has overwhelmingly prevailed, above others, is that of whether the Federal Reserve, the central bank of the United States, should raise interest rates or not. At the current moment, the tide seems to have shifted towards a tightening of rates, however, the opposition towards an interest rate rise is still unyielding.

Economic scholars, who believe that an interest rate hike is the right way to go, assert that the hike will boost job growth through an increase in both opportunity and actual cost of automation, and that it will boost consumer spending, according to the Keynesian model.

However, proponents of keeping rates stable argue that a hike would send financial markets into turmoil, perhaps even worse than their late August plunge. Funny enough, the one minimum that both sides agree on is that whatever happens, a Fed rate hike would change the global economic landscape forever. However, in this article, the case for raising interest rates will be argued, as that is precisely what I firmly agree should happen.

A Case For Raising The FED’s Interest Rate

When one looks at the facts, they would find it indubitable that corporations would not want to invest in automation with higher interest rates, as the amount of money which they have to pay back is larger than before.

Owing to this, companies would find it more profitable to simply employ human workers, who, with the addition of being smarter than automation in that they can apply themselves to every situation, have the guarantee of all of them not simultaneously crashing, which would cause a momentary disaster in the production wing of the company.

federal reserve interest rate

Therefore, when applying cost-benefit analysis to the situation, the companies may see this as the straw on the camel’s back, as, unlike before, in a near zero interest rate environment, the cost of automation will simply be too much, given the obvious drawbacks which it has at the moment. Although it is only an incremental increase in interest rates, for these businesses, every unit of currency is important and there is no point purchasing something that will yield a loss in the long term, given the restrictive monetary policy being applied.

There is also the issue of inflation. Some major economists argue that the Federal Reserve are waiting far too long to raise interest rates and that this is potentially a fatal error, in that this massive duration of time with the accommodative monetary policy will give rise to soaring inflation levels.

Of course, the elderly dependents of the USA, amongst others, will suffer the most from this, as the value of the money which they have saved up in banks will decrease at a rapid rate. In addition, it punishes first-time home buyers while making stock traders and the like richer. Obviously, this kind of thing is the bane of an economic liberal’s existence, and it is clear to see that morally, this is not right.

Therefore, one could make the moral argument that the Federal Reserve should raise interest rates in order to protect the elderly and the vulnerable of the USA while restoring some semblance of equality to a massively divided nation. Although there is no guarantee that this will happen, there is nothing wrong with protecting against unforeseen circumstances.

Some also argue that the US economy is strong enough to handle a rise of 25 basis points. From the previous bottom, stocks are up over a hundred percent, so, therefore, they argue that the financial markets are a non-issue in the Federal Reserve’s decision. With this chain of reasoning, it can be stated that we have already waited too long to begin the process of economic

With this chain of reasoning, it can be stated that we have already waited too long to begin the process of economic normalization, and that in order to get the US economy up and running again, we must raise interest rates, at least incrementally to begin with.

Labour force participation rates are at the same levels as 1977, under the Carter administration, and so to get ourselves out of this mess which we have put ourselves

Labour force participation rates are at the same levels as 1977, under the Carter administration, and so to get ourselves out of this mess which we have put ourselves in to, we must make things normal again and raise interest rates. This raise in rates, although small numerically, will be a gigantic step in the right direction, and will mean that the savers, elderly, and first time buyers in the economy are saved.

This raise in rates, although small numerically, will be a gigantic step in the right direction, and will mean that the savers, elderly, and first-time buyers in the economy are saved.

A Lesson To Be Learned From Japan’s Economic Hardships

Whenever the devil in you wants to see a spectacular economic fall from grace, look no further than Japan.

After decades of strong economic growth, culminating with it becoming the world’s third largest economy in the latter part of the 20th century, growth has stalled in recent years, igniting strong fears regarding the long term future of the Asian country.

From Japan’s much publicized aging population to its astronomical debt to GDP ratio, the future looks bleak for Shinzo Abe and his countrymen, with no solution to its financial woes foreseeable. Regardless, if much of the developed world want to stop themselves from plunging into the same economic quicksand that Japan finds itself in now, they need to look at the country and examine exactly where it went wrong.

Only then can they stop history repeating itself, but with them being the victims, rather than the country across the waters. This is because the Japanese have many of the same problems that many developed countries such as the UK and USA have, but are simply feeling the pinch sooner, rather than later. To save ourselves from an economic depression, we need to learn from Japan’s horrendous situation, rather than simply standing by and watching.

One of the media’s most publicized stories about Japan is its aging population.

With 1 in 4 Japanese being over 65, it is clear that the Asian country does not have much in the way of a substantial workforce.

The main problem with an aging population is that it means that there are simply not enough people of a working age in a particular country, decreasing the total productive capacity of that country, hence decreasing GDP and GDP growth. When this is combined with the increased dependency ratio that Japan now faces, the problem seems almost insurmountable.

However, the most worrying thing about this is that the exact same thing is set to happen in many developed countries such as the aforementioned UK and USA.

By 2050, the number of Americans aged over 65 is projected to reach over 80 million, with their percentage of the total population going over the 20% mark.

From these harrowing figures, it is clear to see the direction in which the USA is going with regards to age, and therefore with regards to productive capacity.

For a nation which is as dependent on service industries as the USA, the problems associated with their population getting older, and hence their numbers of industrial workers dwindling are huge, and could perhaps result in economic growth completely grinding to a halt, or maybe even turning negative; a massive roadblock for one of the biggest economies in the world.

It has long been an economic axiom that debt is a large impediment to the growth of an economy, and this is proved even truer when you look at Japan. In 2013, public debt of Japan increased above a quadrillion yen (over $10 trillion), bringing their debt to GDP ratio to over 200%.

japan debt to gdp ratio

Japanese government debt-to-gdp ratio

This carries with it massive economic implications: nearly all the money that the Japanese government receive will have to go towards paying back its monstrous debt. This means that Shinzo Abe and his fellow policymakers will not have the funds to spend and improve Japan’s public services and infrastructure, thereby decreasing the standard of living for many Japanese citizens.

This is a financial ailment which is echoed by their US counterparts, with their debt to GDP ratio reaching 102.98% in 2014. Although not as severe as Japan’s, this is still growing and is showing no signs of stopping, with senior US policymakers acting as if they have an infinite debt ceiling, and eventually, it is a huge possibility that the US’ situation could very well reach the gigantic proportions that Japan’s has. This does not just have immediate ramifications confined within US borders, but given the US’ global stature, it has the potential to cause shockwaves all over the world, very possibly triggering another global recession.

A great reduction in aggregate demand has also been one of the prime factors behind Japan’s downfall. It has long been well known that Japan has a severe lack of consumer spending, with the nation having consigned its citizens to hoarding, rather than spending.

With the reduction in real purchasing power that the Japanese have seen in recent years, it would be illogical to blame them for not spending as much as they would otherwise, as they simply do not have the sense of economic security that they once did. However, the real surprise regarding this lack of consumer spending is that the exact same thing, again, is beginning to happen in the USA.

In December 2015 in the USA, spending on both durable and nondurable goods dropped by 0.9%, a clear indication that many Americans are turning to saving rather than spending. Of course, this results in a decrease in John Maynard Keynes’ positive multiplier effect, leading to a reduction in economic growth, a reduction in the purchasing power of the average American and also a reduction in the overall standard of living.

If they do not amend their ways, America has a real chance of ending up like Japan, a nation of could-have-been. Although the USA has achieved a great deal in its time, they must look east to their Asian counterpart if they want this prosperity to continue.

Capitalism Vs. Socialism: Which Is Superior?

 

Throughout history, the economic ideologies of both capitalism and socialism have dominated the economic, and, indeed, the political sphere.

Some argue that capitalist economies are inherently superior, while others propagate the idea that socialist economic collectivism is the hallmark of a successful society. Although some Socialists argue that socialism is simply a theoretical ideology and that it has never truly be implemented in practice, the debate between the two would, therefore, be a zero sum game.

This is because the argument could go back and forth ad infinitum because capitalists could say that a pure form of capitalism has never been tested in the real world, which would, in turn, be rebuffed by socialists, and so on and so forth. It is important to realize, before the beginning debate, that there are capitalist and socialist elements in every economy, and so arguing that a pure form of each will never be found, although true, is pointless. I, myself, am in favor of the capitalist system, due to a number of reasons, chiefly the idea of a reward for labor.

In capitalism, the idea of labor is firmly attached to the prospect of reward. Contrastingly, the reward system detaches from labor in socialism.

It is an intrinsic fact of human nature that people will be at their most productive when offered a reward, and the socialist ideology denies people this reward.

Over time, when people realize that they are not gaining a comparative advantage over their fellow employees, despite working harder than them, they will lose the incentive to keep working at their most productive capacity.

The idea of artificially maintaining people’s standard of living, when those people have not worked as hard as they need to, is fundamentally flawed, and will eventually erode any element of substantial productivity out of an economy. When we juxtapose this with capitalism, there is a stark difference. People have an incentive to work in order to gain a comparative advantage over their counterparts, resulting in a substantial increase in productivity, which increases output and therefore results in the positive multiplier effect, growing an economy. This capitalist system is the reason why the USA has grown astronomically over the past century, with other Marxist socialist states such as the Soviet Union falling in their wake.

It is my firm belief that the markets alone allocate resources far better than a government scheme ever could. As such, I see the capitalist alternative as far better than the socialist one. In socialism, markets are not efficient in the slightest, and will not react to small shifts in supply and demand.

The efficient market hypothesis simply cannot be proved true when the state owns all the goods in any one economy. In addition, it is obvious that state-regulated prices mean that not everyone will get the goods that they want, as production will not increase for a highly sought after item until much further down the line. This leads to a highly inefficient allocation of resources.

By contrast, the capitalist system means that prices move in reaction to any small thing, immediately allocating the resources required to whatever good is in demand at the time. This is a far more efficient system than the socialist alternative, where you never know how long it will take before you can get the good that you want.

A key point often stated by proponents of socialism is that socialism results in a far more equal, fair society. They also state that socialism has a far greater regard for the environment, and other ethical issues, than the capitalist system. However, I would counter this by asking the question: what could be fairer than a society where one reaps rewards proportional to his or her labor? If the people of a particular state would want environmentally friendly alternatives, they would thus turn to the company with the most environmentally friendly means of production, and the revenue of this company would increase.

Is it not fair that the company with the least environmentally damaging policies reaps far more rewards than companies with less environmentally damaging policies? This shifting of revenue towards the company will also persuade its competitors to invest in more environmentally friendly means of production, thereby making the whole sector more “green.” This environmental example can be applied to any scenario where the consumers do not like the ways which companies are carrying out their business. For example, if people do not like companies using sweatshops, then they would boycott that company, forcing the company and other similar companies to revert to a more ethical form of production.

Of course, in this piece, I am not arguing that capitalism is wholly perfect. I also agree that a successful society needs elements of both capitalism and socialism to succeed. However, all I am doing in this piece is simply arguing as to why capitalism is by far the superior economic ideology to socialism.

Protectionism Vs. Globalization – Which Policy Prevails?

David McDonald

David McDonald

David is a 19-year-old Canadian student currently attending the University of Guelph. He currently studies Public Management and economics with hopes of one day becoming an accomplished journalist. David enjoys reporting on global events and actively try to make a difference in the world.
David McDonald

 

The benefits from International trade far outweigh any feasible economic forecast that can be achieved through Protectionism. Although there are pros and cons to both, there is no denying that globalization has had the largest influence on global technological innovation, and without global trade, we would fail to make the necessary advancements needed to sustain our species.

Supporters of globalization argue that it has the potential to make this world a better place to live in and solve some of the deep-seated problems like unemployment and poverty.

Free trade is supposed to reduce barriers such as tariffs, value added taxes, subsidies, and other barriers between nations. This is not true. There are still many barriers to free trade. The Washington Post story says “the problem is that the big G20 countries added more than 1,200 restrictive export and import measures since 2008. The proponents say globalization represents free trade which promotes global economic growth; creates jobs, makes companies more competitive, and lowers prices for consumers.

Furthermore, the sharing of technology with developing nations will help them progress. True for small countries but stealing our technologies and IP have become a big problem with our larger competitors like China.

In the case for protectionism, if a country is trying to grow strong in a new industry, tariffs will protect it from foreign competitors. That gives the new industry’s companies time to develop their own competitive advantages. However, domestic industries and markets can only grow so much until they must embark on global trade, otherwise, they won’t be able to meet growing supply and demand.

Protectionism does temporarily create jobs for domestic workers. The protection of tariffs, quotas or subsidies allows domestic companies to hire locally, but again, if a company in a protectionist state wants to expand, they won’t be able to.

In the long term, trade protectionism weakens the industry. Without competition, companies within the industry have no need to innovate. Eventually, the domestic product will decline in quality. It will be lower quality and more expensive than what foreign competitors produce.

Job outsourcing is a result of declining U.S. Competitiveness. Competition has declined from decades of the United States not investing in education. This is particularly true for high-tech, engineering, and science.

Increased trade opens new markets for businesses to sell their products. The Peterson Institute for International Economics estimates that ending all trade barriers would increase U.S. income by $500 billion.

protectionism

Increasing U.S. protectionism will further slow economic growth. It would cause more layoffs, not fewer. If the United States closes its borders, other countries will do the same. This could cause layoffs among the 12 million U.S. workers who owe their jobs to exports.

Although certain policies in the US are pointing to more of a protectionist future, there will always remain an element of global trade within their economic arsenal because of the concept of comparative advantages. The US has withdrawn from the TPP, is looking to withdraw from NAFTA, while aims to increase import tariffs and focus more on service and manufacturing industries for their long-term economic development plan.

This can most definitely work in favor for the US, but it’s not hard to see that the more the United States withdraws from the Global economy, the more room emerging economies have to work with. This will indeed, be very beneficial for those living in developing nations, as outsourcing of US products will shift away from China and closer to other Asian or possibly even Latin America and African countries in the future because they pose no significant threat to US economic stability.

Developed country or developing country – both can implement protectionist policies to some degree of success – but without engaging in global trade to capitalize on their comparative advantage in the world market, capacities for growth are severely limited.

How do you think Donald Trump’s conservative economic approach will weigh out for the United States? Let us know in the comment section below.