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Contradiction exists over just how the recession is affecting how and what Western consumers buy. Whilst one study shows that 66% of consumers are still buying ‘green’ despite the recession, others show a fall in sales of organic produce, which has led to some organic farmers in the UK leaving the Organic certification scheme and which will inevitably have negative knock-on effects for small farmers in the developing world who benefit from the low-input, high premiums, organic production and sales can entail.

YouGov surveyed 2,000 UK adults in February 2009 on behalf of the Carbon Trust Standard and found that 66% say ‘it’s important to buy from environmentally responsible companies‘. Just over a quarter argued that environmental concerns affect them even more than a year ago.  In theory this can only be good for certification schemes that are perceived as more environmentally sustainable, such as Organic and Rainforest Alliance certified, but is what people say and do, two very different things?

The latest figures from TNS, market retail analysts, as quoted by the Guardian, show that there has been a 19% fall in sales of Organic produce in the 12 week period leading up to March 2009, when compared to the previous year. Are shoppers showing caution towards spending on more expensive food products?

As consumers, we have significant power in determining the fates of people and environments outside our own.

farming1Photo by DMahendra

For many small farmers in the developing world, participation in Fairtrade certification schemes, with its associated minimum market price and social premiums act as important safety nets when commodity prices fall and recognises the added costs for producers in participating in this certification scheme. Schemes like Fairtrade will become increasingly important in the economic downturn and should not necessarily be dismissed as unnecessary ‘luxuries’.

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An article recently written by the BBC, referencing research carried out by the International Livestock Research Institute has found that wildlife numbers have been falling in the Masai Mara between 1989 and 2003. This is thought to be a result of growing human settlements in land bordering the reserve:

“Our study offers the best evidence to date that wildlife losses in the reserve are widespread and substantial. These trends are clearly linked to the increase in human settlements on lands adjacent to the reserve.”

In particular numbers of giraffe, impala and warthog have been falling and this has a negative knock-on effect for the predators who depend on grazing animals for their own food source.

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It is believed that the loss of animal numbers is down to increased grazing of cattle in the reserve – an illegal activity, and a switch of some of the Maasai from conservation and tourism to agriculture. Wildlife also move from the reserve to bordering ranchland and as such are increasingly competing for habitat with Maasai livestock. However, some Mara experts doubt the findings of the research – based on direct personal experience and the validity of the methodology itself. The blog argues that in 2003 the situation in the Mara was very different to today – poaching was a real problem and one that has been brought under greater control through increased poaching patrols and protection. It argues that despite the recession there is sufficient funds to carry out anti-poaching and de-snaring on a daily basis.

‘Safe havens’?

Scientists also argue that the traditional nomadic-pastoralist way of life of the maasai has also played an important role in helping to conserve wild animals. Traditionally, the Maasai livestock is moved seasonally is search of water and pasture and by doing this on a well-patterned basis the land is able to re-generate. According to Kibwana and Masandika this pattern rhymes well with the migratory system of wildlife. As a result of ‘growing communities of pastoralists and their exclusion from the development of land policies has made their traditional way of life difficult to maintain’ and many have moved to permament settlements bordering reserves.

Robin Reid, a co-author of the ILRI paper who is now director of the Center for Collaborative Conservation at Colorado State University in the United States argues that ‘there appears to a be a ‘tipping point’ of human populations above which former co-existence between Masaai and wildlife begins to break down. In the villages on the border of the Mara, this point has been passed, but larged areas of the Mara still have populations low enough that compatibility is still possible’.

However, there is a potential solution as suggested by the ILRI. They are helping to promote schemes where Maasai living next to game reserves receive rent payments from private game lodges in return for allowing wildlife to continue to roam on their property and tourism companies are working with Maasai landowners to establish conservancies where they can manage the number of settlements and livestock to try and acheive an equilibrium. The community also receives a share of the profits from tourism on their land, creating an incentive to maintain wildlife numbers.

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And the recession…..?

Although this article does not deal directly with the potential impacts of the recession, tourism, sustainable development and conservation are inevitably impacted by the recession but the form this impact will take remains unclear. A fall in tourist numbers could decrease revenues for parks and reserves and thus the amount of money spent on conservation methods, such as anti-poaching measures and the amount of revenue received by the Maasai to aid in conservation. As their income decreases, will deforestati0n and poaching actually increase as a means to obtain an alternative income source or will there be less incentive to monitor livestock?

However, it could also lead to a decline in ‘lower-end’ trips to the Mara and the congestion, overcrowding and negative knock-on effects that brings for wildlife numbers and disturbance. Tourists have a role to play if, and when, they do decide to visit the Mara – they can help support lodges that support local communities and have sound conservation practices and choose not to visit those that don’t. Perhaps the recession will make us more thoughtful about the ways we do decide to spend our money?

buying_green_study_0409A recent national poll by Harris Interactive [with BBC World News America of 2,123 adults surveyed online between April 6 and 8, 2009] found that more than two thirds of those who purchase green products or services said their green buying habits have not changed because of the recession. 26% said they’ve actually increased their purchase of “green” goods or services. Only 8%of green purchasers said the economy has reduced their buying of green products and services.

Among the 73% of those who reported buying green products 67% reported buying the same, 26% are buying more green products and 8% are buying less.

This finding backs up anecdotal evidence from retailers that there exist resilient preferences among wealthier consumers for perceived higher value products during the recession. This is of interest to sustainableslump since these same consumers are also interested in supporting sustainable development in developing countries through both food purchases [such as Fair Trade] and in other parts of their life [such as charitable donations]. This survey’s finding begins to give salve to worries that falling donations, through trade and donations by developed world consumers would imact severely on efforts to support sustainable development in developing countries.

A article by ODI’s Dirk Willem te Velde argues that the G20 should consider a global fiscal stimulus, ‘with a significant part for early disbursement to poor countries‘. Growth revisions made by the IMF up until February 2009 calculated losses of more than $50 billion in Sub-Saharan Africa and $750 billion in developing countries as a whole. Few developing countries can afford the kind of fiscal stimulus needed to ‘address a crisis originating from the developed world’, despite the fact that many developing countries possess larger reserves than they may have done previously. Willem te Velde argues that a ‘rainbow’ coloured set of stimuli should be implemented to help the developed and developing world cope with the recession. Blue – represents market forces, green environmental considerations and red – Keynesian state intervention.

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1) The blue:

Accelerating support for the private sector (on the supply side) by creating an appropriate framework for investment. Investing in infrastructure. However, to ensure that the outcomes are desirable and socially beneficial, global trade rules need to be implemented.

2) The green:

Implement green stimulus to correct the significant market failure that the price of energy does not reflect the cost of its environmental externalities. If this were to change, trade and growth strategies would not exacerbate climate change and might contribute to positive changes to help meet the urgent and necessary CO2 emission targets. Secondly, there are information-related market failures relating to the adoption of  green technology and technical change.

Further stimulus could go to measures to ‘help people adapt to the realities of climate change’.

3) The red:

Market intervention – inject finance into the economy to stimulate consumption and demand. This could stabilise the macroeconomic situation in the short-term. These could include tax reductions of government transfers or public investment support for growth orientated policies.

Willem te Velde claims that developed countries should have significant interest in supporting this fiscal stimulus for developing countries. Firstly because the crisis originated from the developed world. Secondly because growth in the developing countries has contributed a great deal to previous growth in the developed – for example through China’s large importation of goods and services from developed countries. The flip side of this argument is what hurts the developing world will exacerbate the crisis for the developed world. Not supporting developing countries, when they do not have the resources to implement such fiscal stimulus, may encourage a ‘beggar thy neighbour’ or a protectionist attitude to be adopted by the developing world, which may further negatively affect the developed world.

How much is needed?

The IMF believes that 2% of GDP could be enough and WIllem te Velde believes much more needs to be given to Aid for Trade and for investment in infrastructure.

What is clear, I think, is that the economic crisis is very much a global one and will require a global solution. Although the temptation exists for countries to retreat inwards and concentrate on their own, erecting invisible, but very real walls, this will achieve very little in the long run and is likely to lead to protracted decline.

I recently attended an event hosted by the ESRC which explored the recession and the green economy. It asked how we can best move to a ‘green economy‘ – an alternative economic model that incorporates social and environmental concerns – whilst also stimulating the economy and helping to move out of the depths of a recession.

A statistic quoted by Professor Paul Ekins was perhaps the most powerful ever cited in relation to the impacts of climate change on humankind: ‘if current emission pressures continue, by 2100, the world will only be able to support 1 billion people. The projected population for 2100 is 9 billion.‘ As a result of our inability or unwillingness to act 8 billion people may effectively cease to exist. This is worse than any prediction previously made and yet it represents the current trajectory, we are moving, like a juggernaut, along. He argues that we now face a low carbon imperative.

Developpement durableEkins argues that a transformation to a low-carbon economy is the biggest challenge facing human kind, but one that we must face with urgency and strength. The UK is already way behind other parts of the world. China, for example, will have put in place 100 GW of wind power by 2020. The UK will have 1.7 GW. Low carbon technologies will be at the heart of the next industrial revolution. Germany is also way ahead of the UK, providing increased jobs, outputs and exports through its transition to a low carbon economy. Ekins says there are three priorities for the UK government:

1) Fiscal stimulus (in the short term only) –

Support employment and skills which benefit from and contribute to developing a low carbon economy. Incentivise private investment in low carbon technologies. All public investment in a fiscal stimulus package should support low carbon objectives, even if this is not their primary purpose. For example, all hospitals should be built to the highest environmental standards. There should be no support for high carbon industries. We cannot continue with a business as usual approach. This needs to be a transformation. Increasing the energy efficiency of building stock is one of the greatest opportunities for labour intensive measures – contributing to economic growth. The government can also set an example by changing laws relating to double glazing on listed buildings and transforming their own to ‘low carbon friendly’ buildings.

2) Leveraging private investment

The UK is currently an unattractive destination for low carbon investment. Spain has reduced its investment in wind farms because of a lack of support from the UK Government. There needs to be the right mix of revenue support, capital grants, tax incentives, partnership investments and revolving funds.

3) Environmental tax reform

15-20% of tax revenue should come from green taxes by 2020. We need a green tax shift. This would give us a robust carbon price across all taxes and would lead to a large reduction in carbon emissions, an 450,000 increase in jobs and only a 0.5% reduction in GDP.

Ekins argues that the 2009 budget reveals some inkling of a tax reform. For the first time since 2000, fuel taxes will provide their greatest revenues. The trend to date has been falling revenues from fuel. But this needs to go further. Skeptics have argued that moving to a low-carbon economy would be fruitless because we would merely be buying ’embedded carbon’ – buying imported products that have been produced using high carbon processes elsewhere. This would mean that whilst our direct actions would signify a move to a low-carbon economy, our purchasing habits might not be so benign in their impact.

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Ekins argues that undoubtedly we need a global response and a global framework to prevent some countries drastically cutting their greenhouse gas emissions whilst others continue using carbon intensive technologies regardless. However, the UK can and must, work unilaterally and become a ‘first mover’, setting an example to the rest of the world about what can be achieved and prove we are commited. There are likely to also be ‘first mover advantages‘ in doing so. Emerging markets will then follow suit.

1_fruitThe loss of credit from supply chains which reach rural parts of developing countries will impact the potential for diffusion of new technology to rural populations. While the thought of the latest iPod gadget or iPhone app being delayed by a couple of months might be palatable for many, the implication for agricultural inputs is a different matter. Better newer technologies require champions and time to become mainstreamed as inputs. Often these are more expensive in the early days but the early adopters and innovators keen to advance their skills and productivity, will be keen to try.

But, with less credit, arguably there will be longer time lags in repayment on new technology roll-out for the middlemen/intermediary suppliers of these products. Longer pay-back periods will mean slower diffusion.

The chief issue here is that diffusion crowds out previous worse practice. DDT is still used by the government agencies in Uganda

Yet, more positively, some governments are injecting cash into their agricultural economies to keep persistent innovation up. Nigeria has commiteed N200m to productivity gains .  through the private sector.

Similar plans are needed across developing countries to ensure that quantitative easing does not result in DDT persisting, and productivity further flatlining.

Robert B. Zoellick, president of the World Bank Group argues that now is the moment to ‘seize opportunity from crisis’. He believes this can be achieved through multilateralism, through ‘reforming and empowering’ the institutions already in place.

He celebrates Keynes as a crucial founder of multilateralism – through the creation of the cornerstones of the World Bank Group, the International Monetary Fund and the World Trade Organisation during the era of World War two and argues that like Keynes we should ‘not shrink away from unifying ideas and actions’ despite the current crisis. He argues that ‘unlike crises in the past sixty years, this is a global crisis’. It therefore demands a global solution. He believes that multilaterlism can magnify the advantages, and temper the downside risks of economic interdependence. It can provide an important monitoring system and control and ensure that the global economic system, particularly trade, is mutually beneficial for all parties.

 He paints a bleak picture of the global context that frames his thoughts and the urgency with which he believes we must act:

The World Bank’s latest estimate of global economic growth in 2009, released today, forecasts a contraction of 1.7% compared to economic growth last year of 1.9%. This would be the first decline in the global economy since World War 2. We also face a 6% drop in the volume of world trade in goods and services, the largest decline in 80 years…just as our economy once helped to lift hundreds of millions out of poverty, today there is a risk of development in reverse, as our interconnected world transmits negative shocks with greater power and velocity.’

Zoellick recommends that as a first step, the G20 should ‘endorse a WTO monitoring system to advance trade and resist economic isolationism, while working to complete Doha negotiations to open markets, cut susbidies, and resist backsliding. We are already seeing creeping protectionism – measures taken at the expense of other countries: ‘Buy this’ or ‘buy that’ campaigns’.

Drawing more seats to the table

It is important, however, that multilaterism serves the interests of developing countries and that open markets aren’t enforced blanketedly on developing countries without their consent and participation in decision-making and an assessment of country-specific and developmental factors.

In Zoellick’s opinion developing countries can be a key part of the solution to the global economic crisis. However, their economies need support from the developed world to ensure that social programs aren’t negatively impacted by the recession and that development and poverty gains achieved aren’t undone. He has called on developed countries to invest 0.7% of their stimulus packages in a Vulnerability Fund to help developing countries.

He proposes supporting developing countries to invest in infrastructure, building productive capacity to pay back loans. This will boost global demand.

Zoellick concludes that if develping countries are going to be part of the solution they must have ‘seats at the table’. The G7 was not inclusive enough to suit the ‘economic realities’ of the time. But the G20 has the potential to do so. However, it still excludes over 160 countries. Zoellick argues that multilateral institutions have an important role to play with their ‘broader membership’ in connecting the G20 to the rest of the world.

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‘The World Bank’s Board of Governors made a start this year with a first phase of reform to increase the influence of developing countries, but we must now go further to rebalance voting shares and Board seats. Making those changes will require that both Europe and the United States reconsider old prerogatives and controls. How they do this is a decision for governments. But I would urge them to be bold and far-sighted. The rising stakeholders must also recognise that with rights come responsibilities, including to boost development assistance’.

Reform is indeed long overdue. Lets hope as Zoellick hopes, that governments can be bold and far-sighted resist the temptation to withdraw and look after their own.

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Dambisa Moyo’s well-received book Dead Aid is grabbing the headlines around the world, and with the next stage of her book tour including giving advice to the Zambian government, the findings seem likely to gain traction throughout African politics. Her key point is that previous aid provided to Africa has been detrimental to the economics of the local private sector, crowding out innovation and favouring international solutions over homegrown ones. There is a mountain of evidence for this, and more will likely emerge as this message is rammed home via Amazon and AllAfrica.com. However, I worry this is a partial solution ceteris paribus but is not so viable a solution under tighter fiscal times. Donors have and continue to pilot new forms of aid – matched funding, structural adjustment, challenge funds – and possibly the current credit crunch calls for new aid models to be piloted which enable trade credit – so vital for the functioning of supply chains that reach into and start in rural parts of developing countries – to persist. While the idea of providing at-cost credit facilities for moneylenders and middlemen might be unpalatable to many aid agencies stuck in a “giving” mentality, it might be the sort of thinking that can provide insurance for Africa’s poor and its fragile environments.

Sustainableslump hopes that Dambisa can consider ensuring her message is not no aid, rather better modified aid that stimulates not stifles local innovation and economic activity.

The video below from BBC’s Newsnight is an example of just some of the debates raging over the impacts of the recession on ’emerging economies’ and whether the notion of ‘decoupling’ still holds true in an increasingly globalised world. It argues that the impacts of the recession may be minimal for China and India when compared to the West and will neither exacerbate the crisis in the West nor will it help lift the West out of a crisis. However their global growth rates will improve how the global economy looks as a whole. It argues that the way in which the global economy is governed and how economies interact with one another will need to be significantly re-organised. The move from G8 to G10, including India and China is ‘long overdue’ and the balance of power is shifting. China and India and other emerging economies need to be better represented in the global economic system.Vodpod videos no longer available.

more about “A global recession? “, posted with vodpod

A report published by Euromonitor in November last year argued that the theory of ‘decoupling’ – an economy that is able to grow, regardless of the economic pressures surrounding it –  for the so called BRIC economies (Brazil, Russia, India and China) had proved wrong, as ‘the financial meltdown sent stock markets in the BRIC economies tumbling‘. Many economists have debated whether the BRIC economies will follow the US’ gloomy path into economic meltdown as a result of their highly interconnected economies or whether the BRIC economies could emerge from the crisis unscathed.

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A major consequence of a globalised world, is that the impacts of the recession are also likely to be global. The BRIC economies have increasingly come to depend on foreign markets as consumers of their exports. Euromonitor predicts that Brazil and China will see weaker demand from the USA and Europe for their exports and India’s service sector will also suffer. Falling energy prices will impact Russia, being a country heavily dependent on oil for its GDP. According to the BBC ‘Russia has failed thus far to use revenues from oil to develop the economy to support growth now the commodity price for oil is falling. it has failed to develop a broad base of small businesses that can help Russia’s economy grow from another quarter.’ Russia’s economy is therefore heavily exposed to falling oil and energy prices and may be unable to sustain growth from other sources.

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However, BRIC economies have ‘large trade surpluses and foreign exchange reserves that make them more resilient to the crisis’. Additionally, the growing middle classes in these economies and their increasing purchasing power will help to shore up economic growth. ‘The crisis is also expected to remove the danger of inflation making life easier for BRIC consumers and allowing governments to ease interest rates, fuelling further growth.’ According to Newsweek, for example,  China’s retail sales grew by 15% in February this year. The article predicts that the BRIC economies will together be larger in dollar terms than the original G7 by 2027. The date for this milestone achievement has even been brought forward by the author of this article – such is his firm belief that domestic demand in those economies are proving that the notion of decoupling ‘is alive and well’.

Despite the fact that the BRIC economies may not be as badly affected by the crisis as the West, they are by no means completely immune. And where these economies are affected the West may also see consequent negative knock-on effects. This is the flip side of an economy in which decoupling is not as relevant as we might have hoped in today’s economic climate.

As cheap imports from China fall as a result of closing Chinese factories and global demand, the era of falling product prices for the West will be over.  Our spending has been funded largely be foreign money which is drying up due to the recession. Western companies and pension funds are global companies, investing in these emerging economies. It was hoped that that the BRICs could be a cushion for the western world and we might be able to export our way out of the recession. Some economists argue that ‘it is clear that this is no longer the case’.

Let us not forget that the BRIC economies are by no means wealthy by the standards of the West despite their recent history of significant growth and a global recession therefore bodes particularly poorly for the enduring levels of poverty that exist in these countries: ‘recession will be painful for millions even billions of the people in the BRIC countries – people who thought they were now in a world where they could feed their families. Our recession will mean they can’t’.