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Research exploring the link between the credit crunch, trade credit and export horticulture in previous financial crises, shows that sharp falls in the availability of trade finance did cause problems for exporters – for example, Indonesia during the East Asian financial crisis of 1997, as international lenders withdrew from markets perceived as risky, to reduce their exposure.

However, in today’s economic climate, research is ‘lacking hard evidence‘ to confirm that declines in world trade are linked to trade financing.

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In recent research carried out by John Humphrey, where he surveyed 30 African export firms, none reported trade finance problems, despite the WTO warning of ‘substantial falls in trade credit, increasing lending costs and credit rationing’ in the context of today’s financial climate:

‘As of February/March 2009, very few of these firms faced any problems with respect to the availability of trade finance. What explains this finding? One factor was the resilience of the domestic banking system. Firms reported that credit in general is available from domestic banks as long as firms showed themselves to be creditworthy. Horticulture firms are considered good risks by local banks, so they did not have problems accessing finance.’

In addition to being regarded as ‘good risks’ by domestic banks, many horticultural firms benefit from inter-company credit, between exporters and producers for example and this lessens their direct reliance on the domestic banking system.

Nevertheless, these conclusions cannot be applied to the whole of the developing world, or indeed blanketedly to Africa. In South Africa, for example, it is thought that some exporters and producers of citrus fruits have been hard hit by ‘bad debtors’. Humphrey also argues that anecdotal trends in Latin America and the Caribbean, show that exporters are suffering as banks withdraw their credit.  In addition the recession is thought to be having an impact on small-traders and co-operatives who don’t necessarily have the trade ties to access inter-company credit.

Despite the incomplete conclusions about trade finance and its impact on trade, initial results for the first quarter of 2009 show that the recession is taking its toll on exports, as trade falls. Results recently published by USAID and the HCDA in Kenya, report a 17% decrease in horticulture export quantities in January, a 16% decrease in February and a 10% decrease in March. This translates to even stronger figures in terms of value, with a 32% decrease in $US earned through horticultural exports in January, a 26% decrease in February and a 16% decrease in March. This undoubtedly is having an effect on employment. One Kenyan source suggests that two major flower companies have laid off over 800 people between them, with more job losses to follow. In addition some Asian vegetable exporters have ceased to operate, and so called ‘briefcase’ exporter have stopped trading – this is regarded as a sign in the industry that the market is suffering.

As the horticultural sector starts to feel the pinch, suppliers are also affected in terms of the costs of seeds, fertilisers, protective clothing, transport, irrigation, and other inputs. Also, because cash flow on farms is tight, suppliers often receive late payments, exacerbating the situation.

The loss of earnings from horticulture will have nationwide repurcussions for many countries- in Kenya, for example, 80% of the population is reliant on horticulture for their livelihoods and as jobs are lost and incomes fall, so will the purchasing power fuelled by export horticulture, creating a ‘ripple’ effect throughout the entire economy. In some ways the recession is highlighting more than ever, the benefits of sustainable trading relationships between retailers in the developed world, importers, exporters, and producers in the developing world.

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Although no-one would want to suggest that a lengthy recession is a positive thing, research-wise, it has allowed us to see what kind of things happen in an economic downturn and in particular, when consumers start to either feel or perceive their disposable income dropping.

For example, a recent article by the BBC discusses how consumers in the UK shopped in April 2009, as compared to April 2008. The results are pretty startling – sales of baked beans are up by 21.6%, budget lines by almost 23% and there is a depressing story for organic produce – as sales have decreased by 10.6% when compared to the previous year. The story is even worse for March 2009, when there was a 21.6% drop in organic sales.

The most obvious trends of customers replacing a higher-end product, with a similar but less expensive substitution is Champagne and sparkling wine – sparkling wine sales were up 9.9%, whilst sales of Champagne were down 9.0%.

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Falls in organic sales and increases in budget lines may bode poorly for the environment, but other trends may work in its favour. For example, unit sales of low-energy light bulbs have grown by 38.8% (although value has fallen due to price drops for the bulbs – from £1.25 to 87p). Interestingly, but perhaps not surprisingly, air traffic at Heathrow, Gatwick, Stansted, Glasgow, Edinburgh, Aberdeen and Southampton airports has fallen as passenger numbers decreased 2.3% in April compared with the same month in 2008.

And people are driving less –  London’s congestion charge was paid just under 9.5 million times in the first four months of the year, which was down 9.8% on the same period last year. Similarly the number of people crossing the Severn bridge was also down, whilst railway passengers grew slightly.

Unfortunately the overall impact of these trends (both the positive and negative, for the environment) won’t emerge until the recession has ceased, but let’s hope the positives will be permanent lifestyle changes.

The recession has drawn the aid debate into even sharper focus as ‘cash strapped’ governments in the West pledged to continue giving aid – G20 leaders agreed at last month’s summit London that an extra $50bn would be needed to assist the developing world through the global economic crisis.

Today’s global financial pressures place ever-heavier emphasis on the need for Aid to work, and the rising popularity of Zambian economist Dambisa Moyo has giving fuel to the debate of whether Aid should exist at all – the debate has raged between Moyo and Jeffry Sachs in particular. Moyo argues that Aid achieves the opposite of its desired effect, encouraging dependency, corruption and stifling enterprise and innovation:

“With aid’s help corruption fosters corruption, nations quickly descend into a vicious cycle of aid. Foreign aid props up corrupt governments – providing them with freely usable cash. These corrupt governments interfere with the rule of law, the establishment of transparent civil institutions and the protection of civil liberties, making both domestic and foreign investment in poor countries unattractive.”

She argues that the success stories used to support those who are pro aid-giving vary hugely from the African countries still receiving aid today – notably the aid the ‘success stories’ received was smaller in amount and shorter in duration – they then moved on to adopt market-based, job-creation strategies. Holman, former Africa editor of the Financial Times argues that aid diminishes the role and responsibility of the State to its citizens – the basic contract between a citizen and the State breaks down as the State fails to deliver basic services – roads, water, schools and clinics – within the context of an aid-dependent state, these services are better delivered by a third party, such as an NGO.

Moyo and Holman make some very valid points and for countries who rely heavily on aid, adopting new financing and development strategies and ‘weening’ themselves off aid in the long-term can only be a good thing. However, Moyo’s argument can also be taken at face-value and very simplistically and misused, without more detailed understanding of the nuances of her argument and of the different forms of aid and the circumstances in which it is needed and can work. We can ill-afford to desert the poorest who can only be worse-off as a result of the financial crisis and who are in need of basic social protection.

Steve Radelet, senior fellow at the Center for Global development in Washington, poses some solutions in ensuring aid is used in the right way:

  1. Be more selective. Africa is not a monolithic entity. More aid should go to countries that can use it well, especially the emerging democracies that are implementing sensible economic policies.
  2. Set clear goals, set them publicly, and measure results with independent monitors.
  3. Streamline bureaucracies and make sure a larger share of funds gets to those that need it most.
  4. Listen more. Ask Africans – government officials and ordinary citizens – what they need most and how programs can best be implemented both to achieve immediate goals and build capacity over time.

The clothing and textile sector in the UK alone, produces around 3.1m tonnes of carbon dioxide, 2m tonnes of waste and 70m tonnes of waste water a year (Department for Environment, Food and Rural Affairs). Approximately 1.5 million tonnes of clothing end up in landfill every year. If the recession curbs our endless appetite for fashion, this might have positive impacts for the environment.

However, the recession is likely to have mixed effects on the fashion industry. Anecdotal trends demonstrate a move away from quick ‘fast-fix’ shopping habits, like buying a cutting-edge ‘this season-only’ dress from Topshop only for it to collect dust and provide food for moths in the back of wardrobe once the season has drawn to a close. It is predicted that overall clothing sales will fall and this is reflected in the windows of every high-street retailer as they battle for customers with pre-christmas sales, mid-season sales and other price cuts and offers. Industry experts have also predicted a preference for ‘classic’, ‘timeless’ pieces that are well-made, offer longevity and can be used every season. They have also predicted a fall in conspicuous consumption as those who have cash to splash spend their money more discreetly. Obvious labelling of clothing and the impression of excessive luxury is not seen as appropriate within the context of rising unemployment and rising food prices.

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Other trends show that accessories are faring well in the credit crunch as a means of satisfying the shopping itch, whilst also having the versatility of being able to wear with every outfit. Thus, for every pound spent an accessory can provide far more ‘bang for its buck’ in terms of frequency of use. Other trends reveal a move towards thrift – sewing and home-made clothing has soared in popularity as demonstrated by John Lewis’ 14% increase in haberdashery sales, as early on as late 2008.

However, other trends show rising popularity of stores like Primark, that epitomise the cheap, quick-fix side of the fashion industry. Primark sales have increased by 5% in the 6 months running up to February 2009. Most worrying, in 2005, Primark was named as the least ethical clothes shop in Britain. However, it has made some progress it recent years, working to ensure that none of its suppliers involve child labour and the launch of its Better Lives Foundation to provide financial assistance to organisations devoted to improving the lives of young people.

Not only is the environment directly affected by the fashion industry, but millions, if not billions of people rely on cotton, textiles and clothing manufacturing, particularly in the developing world, for their livelihoods. How will changing consumer patterns impact these people? As Primark sales soar, how are costs squeezed for producers and manufacturers further down the global value chain and what are the environmental externalities to produce clothes at such ‘bottom end’ prices?

The credit crunch may provide an opportunity for shoppers to reflect on what they really need in terms of clothing and despite Primark’s success, shoppers may be re-considering just what ‘value for money’ really means. The recession is also an apt time for retailers to take stock and plan a business strategy that differentiates them from the competition – using sustainability and ethics as a unique selling point – and allowing them to emerge stronger after the downturn.

A new action plan to make fashion more sustainable and less environmentally damaging was launched at the start of London Fashion Week in February of this year, by Defra Minister Lord Hunt. This may provide an apt means for businesses to achieve the competitive advantage mentioned above.

The Sustainable Clothing Roadmap has brought together over 300 organisations, from high street retailers, to designers and textile manufacturers to battle the environmental impacts of ‘throw away fashion’: ‘Companies and some of the biggest names in fashion have signed up to take actions to make a significant difference to the environmental footprint and social inequalities which blight some of the production and retail processes of consumer fashion.’ For example:

  • Marks and Spencer, Tesco and Sainsbury – all of these have signed up to a range of actions on increasing their ranges of Fair Trade and Organic, increasing take back and recovery of unwanted clothing and supporting fibres/fabrics that enable clothing recycling.
  • In addition M&S and Tesco are supporting green clothing factories, improving animal welfare across their supply chain and increasing consumer awareness on washing at 30 degrees centigrade.
  • Tesco – are extending their traceability programme across cotton supply chains to ban cotton from countries known to use child labour as well as carbon labelling of Tesco laundry detergents.

As this big businesses move towards sustainable practices and labels, sustainability becomes ‘mainstreamed’ and places significant pressure on the Primarks of the world to recognise their contribution to the environmental and social impacts of throw away fashion. This can only be a good thing.

When the breadth and depth of the global financial crisis became evident it is unlikely that many businesses first response was to consider anything other than the sustainability of their bottom line.

However, as the recession has taken its toll and some businesses have faltered and other survived it has become clear that sustainable development or CSR considerations and businesses’ bottom lines need not be foes, but in fact can be allies, benefiting one another in a virtuous ‘win-win’ cycle.  Businesses, more than ever, can make important gains from harnessing sustainable development as the bedrock of their business strategy, through actions that both minimise environmental impacts and that through either their supply chains or distribution include and contribute to the livelihoods of the poor in the developing world.

Positive gains for businesses include; the minimisation of reputational risk; innovation; cost -savings; an important source of competitive advantage;  legitimate access to new markets thereby increasing market share; and increased shareholder value.

Graham McKay, CEO of SAB Miller argues that “when I look at our ten sustainable development priorities – which include using less water to make our beer; tackling poverty by stimulating economic activity among local suppliers; reducing the spread of HIV/Aids in our spheres of influence – I do not see how we could remain competitive if we invested less in these core business activities during difficult economic times… Our consumers do not see sustainable development as a discretionary activity either.”

According to the International Business Leaders Forum, responsible businesses and their leaders can continue to be the drivers of economic growth by:

  • Affirming their commitment to responsible and sustainable business practices;
  • Balancing the need to reduce costs with the importance of maintaining the long-term health of the company, its stakeholders and the communities in which the company operates;
  • Contributing to strategic social, economic and environmental investments for sustainable development by drawing on core business competences and resources;
  • Demonstrating determination to act collectively to set new standards of acceptable corporate practice and governance.

For those businesses who re-affirm their commitment to sustainable development throughout the crisis, they are likely to emerge all the stronger for it.

A small town in Belgium, called Ghent, has become part-time vegetarian, after its inhabitants decided to abstain from eating meat one day a week, says the Guardian.

The FAO claimed, in 2006, that the livestock industry accounts for 18% of all anthropogenic greenhouse gas emissions. A pretty compelling stat considering meat eating is conventionally regarded as a benign practice, one that is seen as important for our health and a core part of the developed world’s mealtime habits. Since 1950, however, meat consumption is thought to have increased by 500%. Is our meat eating spiraling out of control?

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The production of meat is a relatively inefficient energy-wise – not only is there energy loss in the consumption of food products by livestock, that we then eat (when we could eat the food product or an equivalent food product such as wheat, directly) but livestock are also thought to use up to 200 times more water per kilogram produced of meat, than it does for wheat. In addition,  livestock production has come to be associated with deforestation, particularly in areas like Brazil, which has led to the loss of an important carbon sink not to mention its biological and ecological value. With rising and volatile food prices, it seems illogical to be diverting food – particularly cereals – to feed livestock, to then feed us with a luxury food product that in many cases is eaten excessively. Meat consumption has been scientifically linked to cardiovascular disease, diabetes and some cancers in the West, where meat consumption is particularly high.

Relatively speaking meat is expensive and although an important source of protein I doubt very much our diets need to consist of a daily dose of meat. It would be interesting to see if the recession has cut down on overall sales of meat as people tighten their purse strings, or if consumers have moved away from higher quality or speciality meats, such as Organic or Free Range and downgraded for cheaper options (which unfortunately are likely to have more negative externalities for the environment).

It is important to bear in mind that there is significant variation between meat sources and that production practices vary hugely in their environmental impact. Compare, for example, meat produced in the U.S and Kenya – in the U.S,  for each calorie of meat or dairy consumed, livestock consumes on average more than 5 calories in its production. In Kenya, livestock yield more calories than they consume because they are fattened on grass and agricultural by-products that are inedible to humans. Similarly, the developed world, not only in its production practices, but also in its consumption, contributes far more to livestock-related emissions than the developing world. Compare Uganda and the U.S and Europe – in Uganda 45 kg of meat and dairy products were consumed in 2003, whilst in Europe and the U.S. this figure soared to 400kg.

Whilst vegetarianism is a goal that is perhaps unrealistic, cutting down on meat intake could have a significant impact on greenhouse gas emissions.  A one day a week ‘vegetarian’ goal is argued to be achievable and one that is gaining popular traction – let’s hope the small town in Belgium is only the beginning…..

There is an intriguing new paradigm stalking the developing world, of politicians, national governments renationalising the environment and economic development.

In light of financial mis-management in the developed world, some southern American governments are realising that externally-imposed policies, systems and principles of economic development, aid and structural adjustment [sold to them by these same people who created the financial crisis] are also founded on quicksand. The governments of Bolivia, Ecuador, Nicaragua and Venezuela have all taken steps back from a globalised system of economic development to a more nationalised system.

In these natural resource rich nations, it doesn’t take a great leap of economic thinking to begin re-investing resource rents in locally sustainable ways. Not in ways which perpetuate economic slavery to past loans and agreements with previous US administrations. And in ways that conform to good environmental economic management of non-renewable natural resources. Bolivia has renationalised natural gas reserves. And when Ecuadorians re-elected Rafael Correa on April 26, they fully endorsing his policies of “21st Century Socialism” and collectively lay blame at capitalism’s feet for the global economic crisis. Operationally, Correa’s New Socialism means refusing to repay some foreign debts and significantly increasing social programs for the poor. ACAIJKIB8CAGQVIEYCAMLUMJGCAH1JC58CAPFV6I4CAPKWE8ECAJBVE28CAWJWA4UCA04KWHLCABYYH2VCAI2MRL7CAI0HP6XCAS46ADKCA7ADKW4CA4GWZWECAWWIX3ICA28LM4DCAMBG11R

But the principles appear good, that by taking responsibility for their problems, and matching these solutions to their opportunities, that there is stronger economic systems and hope of being permanently de-linked from their developed northern cousins. There are the skeptics of course, but SustainableSlump is watching in tempered awe.

An article by the Guardian recently revealed plans for increased numbers of armed guards and miles of electric fencing to be erected around its key national parks in order to ‘protect water sources and stop impoverished people felling trees’. Kenya’s five national parks are thought to provide almost 80% of the country’s drinking water and hyrdroelectric power, but in one park in particular – Mau, 15,000 people now live ‘illegally’ and are believed to have cut down 104,00o hectares of trees in the past 15 years. Other parks – including the Mara, mentioned in an earlier post – have suffered from excessive livestock grazing and from deforestation for charcoal.

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The increased use of natural resources in national parks is believed to be a result of drought triggered by changing weather patterns associated with climate change and is being futher exacerbated by population growth.

The head of the government run Kenya Wildlife Service states that “the long rains have failed for the first time. The implications for food security and water scarcity and energy are profound. Kenya will face these three crises in the next 10 years without a doubt. If we carry on the way we are going, in 20 years the consequences will be horrific”.

The recession is undoubtedly a double blow to the communities involved in conservation and tourism in areas surrounding national parks, as they begin to suffer from falling tourist revenues and as food prices and inflation rises.

Whilst the article highlights a very serious and significant issue, its stance is very much one of a concerned conservationist or environmentalist with local populations regarded as the core problem. What it fails to consider is the wide responsibility we all have in facing and dealing with the global impacts of climate change and above all, worsening poverty, on people.

Many have argued that ‘conservation’ has long been a powerful political tool to justify the control and subordination of marginalised people, and whilst this fence may not be a direct means of subordinating the local population it does not deal with the root cause of the issue – that of profound poverty and the exacerbation of this poverty caused by anthropogenic climate change and the financial crisis.

Fences, after all, can be climbed and when your family’s life depends  on it, no wall is insurmountable.

Does Kenya, therefore, provide a small glimpse of the future for many communities in the developing world as the recession and climate change take their hefty toll? Surely a more long-term, meaningful solution than an electric fence is needed? Now, more than ever, can we ill-afford to solve only one, very small part of the problem.

Pew Research Centre in the States specialises in exploring social and demographic trends. Its latest piece of research (which shows trends from 1973) shows that the average American no longer has the same attachment to their tumble dryer, microwave, dishwasher or even T.V than they did three years before. The microwave in particular, has taken an hammering. In 2006, 68% of those surveyed argued that their microwave was a necessity, this has now fallen to 47% of Americans. The T.V – a seemingly staple product in the houses of the more fortunate, is now regarded as a necessity by 52% of people, from 64% in 2006, this is particularly prevalent amongst young adults. The proportion of people who regard TV as a necessity is the lowest its been since the same question was asked 35 years ago.

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Despite these possibly positive signs for the environment, the recession has done little to impact the love of the car – with 88% of Americans rating the car as a necessity (down only 3% from 2006). It would be interesting to compare this data to other countries, where public transport links and cycle lanes are seen to be particularly effective, where geographical distance is not so significant and urban planning is not based on the use of a car. Despite the reluctance to give up the car other changes in spending habits and technology uses are likely to have a positive impact and these changes in attitudes towards luxuries and necessities have been across the board – not just amongst those who have been worst hit by the recession, such as the unemployed.

It may be that as soon as the recession is over that our idea of necessities shift once again and for that reason it is imperative that regulatory change is implemented on the back of this positive move toward thrift. One of the most tangible is the UK government’s plan to have smart energy meters in all homes by 2020. According to the Guardian, the new meters will send information on real-time electricity and gas use in households and small businesses direct to utility companies, eliminating the need for customers to stay at home for meter readings or to receive over-estimated bills. Previous studies have shown that smart meters encourage homeowners to cut their energy use by 3-15%, although experts warn that the technology requires consumer education and is not an “install and forget” energy-efficiency measure like loft insulation. They will play an important role in highlighting the amount of energy used by everyday household appliances, showing a surge in energy usage, for example, when the kettle or T.V is switched on. However, some of the most obvious financial gains will be for energy companies who will save time and money by being able to calculate energy usage remotely – let’s hope they invest these savings in developing low-carbon technologies. Although a necessity, smart energy meters won’t solve the issues of climate change alone.

Prices of cocaine at wholesale level are reportedly skyrocketing owing to successful enforcement by drug agencies around the world. More interestingly, the price elasticity at sale is so high, that consumers perceive they are paying the same price per volume, whereas they are actually buying insecticide and other cuttable agents.

The BBC report on this today, but neglect to mention the impact that this enforcement is having on the farmgate price or export price from the developing country producers. Agencies regularly recommend using the lure of alternative legal livelihoods for the producers of illicit drugs to reduce total production. See here for the UNODC. This often fails owing to the relative farmgate value of the legal and illegal crops. No to mention the different supply chains involved and other, less savoury aspects of growing illegal crops in developing countries.

Is now the right time for leveraging the goal excellently stated by the UNODC: “The success of quality alternative development interventions is undeniable; however, many challenges still lie ahead. The gains made in reducing illicit cultivation in key countries over the past decade could come undone if poverty does not abate. Poverty alleviation and sustainable development should continue to be the main goals of alternative development.”

So, is the recession combined with more successful enforcement of trade at the consumption level providing a renewed impetus for legal sustainable development? It is not often convergence of global economics unveils an opportunity – the question is can this convergence be determined, and can donors and national governments act quickly enough to seize this opportunity? Missing opportunities has grave consequences, as the explosion in opium planting in Laos proves – loss in tourism coupled with a weakened economy, has seen farmers lured back to illegal crop production.