2012. 5. 30

Great Divide

/TIME Magazine. May 14, 2012. Page 38-42./

Introduction

     Growing inequality is a global phenomenon. London’s case from today’s article seems to cover various couses of economic gap between rich and poor people; therefore, analyzing it may be helpful when thinking about other countries’ unequal economy, including Japan. In the case of London, it is important to focus on three main factors which have drived the city to unique inequality, and which can be applied in understanding grobal inequality. 

Briefing

     First factor is permanent and drastic. London’s economic scale to that of the national economy is relatively high among developed countries, and high-end income earners are concentrated in the city; also, the city is very popular for foreign millionaires’ immigration and investment. Accordingly, inequality index, such as the Gini score, is comparatively higher than any other OECD countries. 

  In addition, within London’s economic scale, quite large percentage is accounted for by the financial sector, which is traditionally dominated by wealthy people. Although Wall Street has larger scale, London is more dependent on the financial district than New York is on Wall Street. 

     Finally, British government’s financial program at the 2008 crisis has widened the economic gap in the city of London. The financial deregulation has benefited wealthy people more than the working class because they could increase profit by utilizing their properties; in contrast, nothing was available for poor people except cheap credit. 

Conclusion & Opinion 

   In conclusion, the first two factors describes London’s economic structure which works as basement of its inequality; then, the third is clearly a government controlled factor which resulted in intensifying the economic gap in London’s case. This article suggests that every country suffering from aftereffects of the economic crisis needs to pay special attentions to the financial program against the depression, especially for the countries whose capital city is as economically dominant as London. In this context, Tokyo is a potential city of great inequality, so how do you feel like working in Tokyo with great divide? 

Multiple Effects of The Tohoku Earthquake on Japanese Agricultural Industry

     The Tohoku earthquake on March 11th, 2011 in Japan has had a catastrophic impact on every industry in Tohoku area, especially in Fukushima and Miyagi prefecture, which are located along the east coast facing epicenter of the earthquake. Now, 14 months after the disaster, most of non-agricultural industries seem to be restored by reconstruction of industrial facilities, recovering population, and continuing aids from the whole country. Japanese agricultural industry has also suffered from multipul aftereffects of the earthquake, Tsunami, and a following nuclear disaster; still, some of these influences is going on, and new effects of the disaster revealed recently is going to damage Japan’s agricultural industry. In this essay, these complex effects of the Tohoku earthquake are divided into four groups in accordance with time axis and relation with the disaster; moreover, typical and specific examples in each four divisions are introduced.

     In a series of disaster, the earthquake itself and Tsunami was a primary impact on Japanese agricultural industry. The earthquake and Tsunami devastated the whole primary industry mainly in the east coast of Tohoku area, destructing agricultural facilities, farmlands, and fishing vessels; the whole economic loss in the industry by the disaster was 2.34 trillion yen (Fig.1). Moreover, many proficient farmers and fishermen in coastal areas were killed by Tsunami, for the eastern coastal areas lying from Iwate to Fukushima prefecture is a main agricultural zone supplying farm products to Tokyo metropolitan area, where primary industries’ population is relatively dense.

Figure 1. Economic loss in the primary industry

Industry	Amount (billion yen)
Fishery	1,249
Farmlands & facilities	830
Farm products	62
Forestry	198
Total	2,341

Source: About the Tohoku earthquake, par. 2

     In addition to these direct damages, the nuclear power plant disaster in Fukushima prefecture, which is triggered by Tsunami, has released radioactive materials such as Cesium 137 over Tohoku’s agricultural fields. According to an official report (Japanese government’s report for the cabinet conference of the IAEA, page. Ⅵ-1), the total amount of Cesium 137 spilled from a nuclear reactor was 1.5*10¹⁶ becquerel: equivalent to 168.5 times as much as Hiroshima type atomic bomb (Article on August 25, 2011, par. 3). This is a major indirect impact of the Tohoku earthquake on the farm sector and have as much damages as the natural disaster itself.

      Both direct and indirect impacts have caused significant aftereffects on Japan’s agricultural industry which ranges from temporary disorder to permanent damages which have to be coped with over generations, as shown in Figure 2. Though it is impossible to deal with every consequence of the disaster by describing one by one, what has Japan’s agricultural industry experienced in each of groups of effects, specifically?

Figure 2. Four groups of effects on the agricultural industry

     First, effects at the early stage of the disaster were of short-term and directly-caused; for example, soil degradation of farmlands flooded by Tsunami was a first major problem. The total damaged area which is either flooded or washed away is accounted for by three prefectures lying along the coast line (Fig. 3). Even after salt water was removed from farmlands, loss of fertile topsoil and salty soil left underground have prevented farmers from achieving as much yields as before the disaster.

Figure 3. Damaged area of farmlands (ha)

Source: Estimation of damaged farmland area by Tsunami, page. 1

     Another directly-caused effect of the earthquake on the farm sector are concerned about recently, which is a long-term effect of absence of proficient farmers. Loosing farmers and fishermen means that empirical skills in cultivation and fishing failed to be inherited to young generations. Furthermore, even farming know-how with survived people are going to be lost because many of them have given up to re-engage in farming for ruined foundation for agricultural productions, such as eroded farmlands.

     On the other hand, radioactive materials emitted from the nuclear power plant accident, which has indirect but powerful effects on the agricultural production, cannot be overlooked. A few months after the accident, it was feared that some farm products in Tohoku area may have been contaminated with the radioactive. When highly-contaminated farm products were discovered actually, most of which were juicy items like mushrooms and vegetables (Radioactive examination of farm products, par. 2), consumers avoided to buy whatever was produced in Tohoku area, even if they are strictly examined and turned out to be safe. As a result, such concerns led to bad reputations of every farm product from Tohoku without any scientific foundation (Information of the Tohoku earthquake, page. 2).

     Finally, an inevitable effect of the radioactive contamination needs to be referred as a last category of aftereffects of the disaster. Once radioactive materials spread over fields, it costs huge to correct and dispose of them; besides, there is no way to neutralize radioactivity of leaked nuclear fuels artificially, except waiting for them decomposed for centuries. It is a fact that the soil throughout the Tohoku region does include relatively higher density of radioactive materials, even outside a 30 km radius as a evacuate zone (Fig. 4).  This suggests that farm products from such a zone may include comparatively much radioactive materials while those amount is kept under a safety limit. Although eating farm products from such soil just for a day does not damage human health, no one knows what happens if doing so for a lifetime.

Figure 4. Radioactive contamination level of topsoil

Note: The center of circles is the Fukushima Dai-ichi nuclear power plant.

    　　   The second circle drawn with a broken line shows the evacuate zone.

Source: Monitoring information of environmental radioactivity level

     To sum up, the Tohoku earthquake has brought about a various impacts on Japanese agricultural industry which can be described under four divisions. A short-term impacts are soil degradation in farmlands directly caused by the earthquake and groundless rumors about contamination of farm products caused by the following nuclear accident. As for the long-term impact, it needs to be considered that empirical skills in the primary industry are going to be loosed, and that soil contamination with radioactive materials does exist even though most of farmlands do not exceed permissible amount. Within next few years, Japan has to make a comprehensive plan to treat these long-term effects which are expected to remain over generations.

References

About the Tohoku earthquake. Ministry of Agriculture, Forestry, and Fisheries, Japan.

     Retrieved May 25, 2012.

     http://www.maff.go.jp/j/press/keiei/saigai/111125.html

Japanese government’s report for the cabinet conference of the IAEA. Prime Minister of

     Japan and His Cabinet. Retrieved May 25, 2012.

     http://www.kantei.go.jp/jp/topics/2011/pdf/houkokusyo_full.pdf

Article on August 25, 2011. Tokyo Web. Retrieved May 25, 2012.

     http://www.tokyo-np.co.jp/article/feature/nucerror/list/CK2011082502000106.html

Estimation of damaged farmland area by Tsunami. Ministry of Agriculture, Forestry, and

     Fisheries, Japan. Retrieved May 25, 2012.

     http://www.maff.go.jp/j/tokei/saigai/pdf/shinsai.pdf

Radioactive examination of farm products. Ministry of Agriculture, Forestry, and Fisheries,

     Japan. Retrieved May 25, 2012.

     http://www.maff.go.jp/j/kanbo/joho/saigai/s_chosa/index.html

Information of the Tohoku earthquake. Ministry of Agriculture, Forestry, and Fisheries,

     Japan. Retrieved May 25, 2012.

     http://www.maff.go.jp/j/council/seisaku/kikaku/bukai/230510/pdf/03_siryo1_2.pdf

Monitoring information of environmental radioactivity level. Ministry of Education, Culture,  

     Sports, Science and Technology, Japan. Retrieved May 25, 2012.

     http://radioactivity.mext.go.jp/ja/

The Comparison of Arguments Over Japan's Engagement With the Trans-Pacific Partnership

     The Trans-Pacific Partnership (TPP) is a large scale framework of Economic Partnership Agreement for a group of countries located along the Pacific rim, and the main component of this trial for economic cooperation is to establish a mobile market for jobs, goods, and services in participant countries; in other words, it is simply a Free Trade Agreement for everything tradable. Although the TPP sounds beneficial for whole industries in a country to promote exports and stimulate the economic growth, an argument over the engagement with the TPP in Japan reached at a deadlock, for this economic partnership works differently to each sector of Japanese industries and causes conflicts of interests between them. For a typical example, the agricultural cooperative association in Japan strongly oppose to the participation to the TPP while Japan Business Federation, which covers almost all sectors of business except agriculture, appeals to the government to proceed the negotiation on the TPP. The former says the liberalization of trades of farm products will increase imports of cheap agricultural commodities and devastate domestic farmers’ business whereas the latter insists the competition with overseas farmers will enhance farming productivity and ultimately benefit Japan’s agricultural industry (“What’s the TPP”, par.2). In this essay, these different opinions over the effect of the TPP are compared by introducing two points of view: efficiency and equity.

     Before discussing the case of Japan’s engagement with the TPP, let us confirm the reason why trading is basically good for a country’s economy. According to the theory of comparative advantage (Ricardo, p.28), countries with different relative efficiency in producing certain goods can gain by trading with each other. In this theory, if a country specializes in producing certain goods the cost of which is relatively lower than other countries (here let this described as ‘comparative advantage’), and barters such goods for those of no comparative advantage with other countries, the country can minimize the cost to gain the goods without comparative advantage. For example, if Japan and the United States produce two goods at different labor cost shown in Fig.1, and these goods are traded at equal price, Japan can obtain wheat at a price of 100 by trading, rather than 150 by producing, and the United States can obtain car at a price of 20 by trading, rather than 90 by producing. Consequently, the international division of labor between Japan and the United States is more efficient than the individual production of both goods in each countries. In short, trading brings about efficiency in a country’s economy.

Figure 1. Unit labor costs

	Wheat	Car
The U.S.	20	90
Japan	150	100

     The TPP opponents, most of which are from agricultural sector, refuses the agreement for unfairness brought by a following prediction. As the theory of comparative advantage is applied to Japan’s industries, the manufacturing industry has comparative advantage, but the agricultural industry does not have; accordingly, the industry scale of agriculture will shrink under the trade liberalized by the TPP while the manufacturing industry will profit from expanded exports. Actually, comparative advantage in Japan’s manufacturing industry is suggested by strong automobile production (Kamery, p.116-117). In contrast, according to a statistic survey (Fig.2), labor productivity of agriculture in Japan is relatively lower than those of other countries, which means no comparative advantage in Japan’s agriculture.

Figure 2. Labor productivity index

Source: Honma and Hayami, p.122

     However, opponents need to cope with a counter argument: nonattendance to the TPP is to give up a chance to enhance efficiency in Japan’s economy, also supported by the theory of comparative advantage. Opponents say an effective alternatives to achieve economic efficiency is to operate a development program for Japan’s agricultural sector to improve its productivity although running the program causes a budget loss in the government finance.

     On the other hand, from a point of view of the TPP advocators, their argument for the TPP is based on coming efficiency in the Japan’s agricultural economy. According to the statement of Japan Business Federation (“TPP: Trans-Pacific Partnership”, p.14), participation to the TPP will promote exports of farm products with trade liberalization and stimulate investments into the agricultural sector which faces competitions with foreign farmers; as a result, the TPP will benefit Japan’s agricultural industry. Within the agricultural industry, there are some farm products with comparative advantage which is currently exported such as high quality beef, fruits, and processed foods (“TPP: Trans-Pacific Partnership”, p.14). If Japanese farmers specialize in the production of these items by correcting labor, capital, and land, the industrial structure of Japan’s agriculture will gain more efficiency, as a consequence of the theory of comparative advantage, and be competitive among foreign agricultural industries.

     Nevertheless, the TPP might be unfavorable for Japanese farmers who grow crops without comparative advantage, compared with, for example, automobile manufacturers in Japan who are clearly advantageous in the global market; therefore, it is controversial how equity among Japan’s industries can be secured. For a solution, increased profits in advantageous industries can be allocated to farmers whose business are damaged by the TPP and promote them to transit to other business.

     In conclusion, it is revealed that two different opinions over the TPP are based on different grounds: efficiency and equity. On the one hand, Japanese farmers’ association is disagree with participation in the TPP, arguing that such a policy is an unequal treatment of Japanese farmers. On the other hand, other industries’ opinions, represented by Japan Business Federation, support the engagement with the TPP because they expect profit increases not only in their business, but also in the agricultural sector, ultimately. Both these arguments over the TPP seem to be reasonable; however, there is no solution which can satisfy each sides’ requests at the same time because they stand on different argument grounds.

References

Ricardo, D. (1817). On the Principles of Political Economy and Taxation. Retrieved form:

http://www.econlib.org/library/Ricardo/ricP.html

Honma, M. and Hayami, Y. (1986). Structure of Agricultural Protection in Industrial

Countries. Journal of International Economics. 20. p.115-129.

Kamery, R. (2004). The U.S. and Japan: Comparative Advantage Between Automobiles

and Aircraft. Proceedings of the Academy of Legal, Ethical and Regulatory Issues. 8(2). p.115-120.

“What’s the TPP”. Japan Agricultural Co-operatives. Retrieved May 18, 2012.

http://www.zenchu-ja.or.jp/tpp/whatstpp.html

“TPP: Trans-Pacific Partnership”. Japan Business Federation. Retrieved May 18, 2012.

http://www.keidanren.or.jp/policy/2012/pamphlet201204.pdf

Three Influential Factors to A Country’s Agricultural-Based Economy

     A country’s agricultural-based economy is basically determined by market mechanism, which consists of demand, supply, and price: the adjustment system of these quantitative factors. Most people, as consumers of agricultural products, will be familiar with the demand-side aspects of the agricultural economy; for example, a range of the price for rice, and a daily consumption of bread. Farmers, as suppliers of agricultural products, play an important role in a country’s primary industry, although their business styles (e.g. comercial scale or self-sufficient scale) vary from country to country. These subjects in a country’s agricultural economy are likely to behave differently according to three major factors: eating culture, international trade, and a government’s agricultural policy. 

     First of all, eating culture forms a country’s range of demand for agricultural products. A typical economic phenomenon which explains this is a changing consumption of rice in Japan. Japanese eating culture has dramatically changed from a traditional style to a mixed style with western culture, which is enabled by economic development in the late 20th century. In this process, a rice consumption per capita have decreased until now, while a consumption wheat has gradually increased throughout the development period (fig. 1).

This means the demand for rice has been partly substituted for the demand for wheat. In other words, changing diet of people affects a country’s demand for agricultural products. 

     On the other hand, international trades restrict a range of suppliers’ behavior in a nation’s primary industry. In agricultural industry, as well as other industrial field, trades between countries is very effective to supply a country’s necessary farm products efficiently. For example, growing wheat in Japan costs extremely much, compared with the production costs in the United States (fig. 2). According to this data, Japanese farmers are clearly not competitive at wheat price in the international wheat market. This example shows that farmers should specialize themselves to advantageous crops in their country, instead of covering all kind of crops demanded by their country, if they are under the free trade market.

     In addition, a government’s agricultural policy affects its country’s farm product supply in both plus and minus effects. Tariff on imported farm products is a common policy among most countries for the protection of domestic productions to support farmers. A famous case of tariff barriers is the Common Agricultural Policy (CAP) imposed on some farm products in the EU region such as cereals, daily and beef. The CAP includes not only a conventional tariff program on imported farm products into the region, but also a subsidy program on exported farm products from the region, sometimes called ‘reverse tariff’ (fig. 3). In contrast, there is also a certain program which set a limit for the supply of farm products. In 1970s, Japanese government introduced a policy of reducing rice acreage in order to prevent the price corruption because of shrinking demand for rice and growing efficiency of the rice production. As a result of these governmental interventions in the agricultural market, farmers would be protected well, although the distorted supply might cause grobal inefficiency in the world agricultural economy. 

     In conclusion, it is proved that a diet of people which differs from cultures determines the demand for agricultural products, and that the range and quantity of a country’s farm product supply is affected by the international trade with other countries and the agricultural policy of the government. As a consequence, these factors decides how suppliers and consumers behave, and then structures a country’s agricultural-based economy. 

References

Niek Koning. (2006). Agriculture, development and international trade: Lessons to be learned from the Common Agricultural Policy of the European Union. 

　　　　　http://roppa.info/IMG/pdf/Niek_Koning-Agriculture_development_and_international_trade-Niamy_November_2006.pdf

Ali, M. & Vocke, G. (2002). How Wheat Production Costs Vary. Wheat Year Book, March 2002. Economic Research Service, United States Department of Agriculture.

　　　　　http://www.ers.usda.gov/briefing/wheat/pdf/WheatProdCosts.pdf

“Self-Sufficient Rates”. Statistics. Ministry of Agriculture, Forestry, and Fishery of Japan. Retrieved May 11, 2012. 

　　　　　http://www.maff.go.jp/j/tokei/index.html

“Wheat; Agricultural Production Costs”. Statistics. Ministry of Agriculture, Forestry, and Fishery of Japan. Retrieved May 11, 2012.

　　　　　http://www.maff.go.jp/j/tokei/index.html

The Consumption of Energy From Fossil Fuels and The Standard of living

     The standard of living in the present society depends on the consumption of a wide range of goods; from daily food and water, industrial products, to also services provided by companies and governments; all of which need energy to run the production and distribution. In multiple sources of energy, the most popular and plentiful source is fossil fuel which have greenhouse effects if they are incinerated. In this article, the author discuss whether it is possible to avoid the fossil fuel’s negative effects to the environment while maintaining and developing people’s life standard.

     Today’s global economy relies so deeply on fossil fuels for its energy source that it is difficult to keep or enhance the standard of living without the stable supply of conventional fuels. A typical economy dependent on fossil fuels is the U.S. where 83 percent of whole energy use is covered by fossil fuels (“Fossil Fuels” par. 1). Other economies also are not able to manage themselves without fossil fuels; for example, Japan’s dependent rate on oil is remarkable after the nuclear disaster. Although some countries is trying to shift to renewable energy which is basically generated by natural resources such as sunlight, and therefore have minimum effects on the environment, it does not seem possible to supply the total demand of any country from renewable sources (Ediger and Kentel, p. 753). 

     However, replacing fossil fuels with renewable sources still effective in addressing environmental issues. For example, Kyoto city has introduced the program of the biodiesel fuel made from disposed cooking oil corrected by resident’s cooperation, which saved 4 thousand tons of annual CO₂ emission and triggered the biodiesel boom in other local governments in Japan (“Biodiesel Introduction Project” par. 2). This case suggests that some of fossil fuel uses and its ecological impacts can be avoided without any special technology and substantial effect to the living standard.

     Changing the way of consumption of fossil fuels is also effective to reduce its damage to the environment. A worldwide attention to the carbon tax shows that it is promising in controlling the demand for fossil fuels at a proper level. The concept of carbon tax is to impose a tax on the emission of carbon dioxides as a disposal cost of emitted greenhouse gas. This is, in tern, expected to prevent the overuse and unnecessary use of fossil fuels, and promote an efficient operation and an effort to decrease the amount of the emission in the business sector. The carbon tax policy is estimated to be considerably effective in European region and not to have a direct effect on the individual’s consumption level (Agostini et al. p. 279). 

     In conclusion, it is likely impossible to keep the standard of living without using fossil fuels, because of existing economy’s structure which is completely reliant on such fuels. However, replacing fossil fuels with clean alternative energy sources is able to cut an unnecessary environmental impact by burning conventional fuels. It is also important to set an appropriate price for fossil fuels including environmental management cost of carbon emission.

References

Agostini, P., Botteon, M., & Carraro, C. (1992). A carbon tax to reduce CO₂ emissions in Europe. Energy Economics, volume 14, issue 4, October 1992, Pages 279–290

     http://www.sciencedirect.com/science/article/pii/014098839290034B

Ediger, V., & Kentel, E. (1999). Renewable energy potential as an alternative to fossil fuels in Turkey. Energy Conversion and Management, volume 40, issue 7, May 1999, Pages 743–755

     http://www.sciencedirect.com/science/article/pii/S0196890498001228

“Fossil Fuels”. Institute of Energy Research. Retrieved May 4, 2012.

     http://www.instituteforenergyresearch.org/energy-overview/fossil-fuels/

“Biodiesel Introduction Project”. Kyoto City. Retrieved May 4, 2012. 

     http://www.city.kyoto.lg.jp/kankyo/page/0000001904.html