The Arguments over the Reform of India’s Public Distribution System

10. 3. 2012

Introduction

India’a Public Distribution System is controversial as an agri-food topic in the fast developing country because it represents the issue of food security which is commonly concerned amongst nations with growing population and also the world-largest scale of government intervention in food production and distribution. 

The Public Distribution System (PDS) was once reformed into the Targeted Public Distribution System (TPDS) in 1997 due to national and international criticism of its economical and financial inefficiency, yet the problem has remained deep-rooted after the reform. Nevertheless, to make matters worse, the targeting scheme has raised a new political fear that mistargeting might cause insecure of food accessibility of the poor. 

Arguments over the economical loss and targeting accuracy of the TPDS seem to split up into two major opinions: to replace the distribution system with less market-distorting alternatives while keeping the governments intervention for food security at a minimum level; and to appreciate the contribution of the TPDS to prevention of hunger and adjust it based on the present scheme to the changing agri-food sector. 

This report first explains the outline of India’s Public Distribution System and the transition from the universal aid to the targeted aid, then introduces two different opinions from the viewpoints of politics and economics and evaluate the validity of their discussion, and finally summarizes the main claims from both sides’ arguments as conclusions. 

Overview of the PDS and TPDS

India’s national food policy consists of three different objectives: to ensure livelihood security especially for small farmers; to ensure that poor households have access to food; and to ensure food security through national self-sufficiency. For these goals, three different policy instruments has been launched, but actually they are closely rerated and interfering each other. In this chapter, primarily, it is explained what roles they played respectively in terms of achieving food security and how the interference caused a number of economic and financial inconveniences and was tried to be removed.

India’s Public Distribution System (PDS) was established primarily as a domestic food aid program for the poor in the country, which is the largest public food distribution in the developing world. In this program, the country’s essential commodities, mainly staple foods such as rice and wheat, are purchased from farmers by the Food Corporation of India (FCI), a government-authorized organization set under the Food Corporation Act 1964, and distributed at prices subsidized by the government of India below the prices at procurement so that the lowest-income family has economic access to those indispensable food products. The distribution is represented by a nation-wide network of Fair Price Shops available for everyone in the country; the PDS is universal in nature. 

In order to secure an adequate amount of calories to be supplied to the fast growing population of the country, preventing from supply fluctuation corresponding to market and production risks, the FCI maintains buffer stocks of food grains corrected from domestic grain producers and if necessary imported from other countries. The FCI’s storage costs,  as well as procurement and distribution costs, are covered by budgetary subsidies although only the expenditure filling the price gap between procurement and sale is devoted to the consumers. 

In addition to the consumer support, the PDS is linked to some of producer support programs, one of which is the Minimum Support Price (MSP): a guaranteed price that is applied to the procurement of food grains by the FCI. The MSP policy contains multiple goals, that is, price stabilization and income support; as to the former goal the guaranteed price level is set in accordance with domestic and global market conditions while buffering sudden price fluctuation; the latter one is achieved by measuring production costs and reflect them onto the minimum price with which farmers can get enough income to make their living. 

However, the PDS, the food security policy combined with price support for domestic producers, turned out to contain a number of economic and financial problems.

First, food grain transfer was carried out under corruption. Leakage of the PDS grains into the private market, i.e., illegal resale somewhere in the process of the distribution system, substantially existed. Actually, approximately 35 to 40 percent of rice and wheat supposed to be distributed through the Fair Price Shops did not reach the consumers (Srinivasan, 2003). 

Second, the FCI’s distributional operation costed too much for benefits for the poor. Srinivasan (2003) also points out that the PDS costs the central government around 4.27 rupees to transfer one rupee to the poor in the process of food subsidization. In this context, the FCI’s operational costs for procurement, storage, and distribution account for more than four times as much as the unit expenditure to make up the price gap between procurement and sale, which is the real value transferred to the consumer, or evaluated in transfer efficiency, it represents only 0.19.

Third, the PDS’s characteristic combination of consumer support and producer support makes its budgetary balance complicated. As India’s farm sector modernized, the increase in production costs has been reflected onto the MSPs, so the government needs to invest more budget into the extending price gap between the MSPs and consumer prices (Landes and Gulati, 2003). Otherwise, higher consumer prices corresponding to the rising support prices would have adverse impacts on the food grain consumption. Also as a result of agricultural modernization, annual yields of food grains has grown dramatically and expanded the scale of the buffer stock; consequently, the FCI’s storage costs for the growing stock put a more burden on the national budget.  

These problems altogether had caused the budgetary cost expanded unlimitedly even though its considerable portion did not contribute to achieving food security amongst the country’s low income population. 

In order to reshape the wasteful program into a more efficient scheme and increase effectiveness of the government expenditure, the PDS was restructured as targeted PDS (TPDS) in 1997. The TPDS attempted to differentiate consumers based on income; consumers at or below the poverty line (BPL) were entitled to access to heavily subsidized grains; on the other hand, consumers above the poverty line (APL) were given access to grains at the price including a portion of the FCI’s operation costs. 

However, the reform has remained untouched as to the problems of leakage, transfer efficiency, and budget expansion although it might had considerably improved budgetary balance by targeting entitled consumers. Moreover, the reform caused the potential risk of the exclusion error, namely, whether the identification by income is really effective, and even if so, what income level is proper to be set in order to distinguish the poor family facing hunger from other households. 

Economic Inefficiency of the TPDS: Need for further reform

Given such structural defects in the TPDS remaining unsolved, a variety of literatures propose recommendation for further reform, some of which contain drastic changes in the present scheme or minimization of the government roles in assuring food security. In this chapter, a typical report which criticizes the TPDS strongly and provides with a series of effective reform is introduced. 

A World Bank report by Radhakrishna and Subbarao (1997) argues consistently for the need to change the structure of the TPDS totally controlled by the central government. Their proposition of reform consists of two columns: decentralization and food coupons. 

For the first reform option, decentralization, the literature insists that the public distribution should be operated at the state government level and that the central government’s role would be restricted into the allocation of the food subsidies as a conditional grant to the states (Radhakrishna and Subbarao, 1997). This proposal comes from the variation of grain yields amongst the states; the FCI has to manage to make ends meet in terms of food grain balance of each state, some of which have surplus, but others suffer from shortage. Under this reform, the central government would be relieved of the complex tasks, and the grain leakage and transfer efficiency could be somewhat improved but not cleared up completely.

Secondly, abolition of the Fair Price Shops and introduction of food coupons. The report suggests that the central government should distribute food coupons to the targeting agency responsible for the identification of poor households and leave retail operation to private dealers which would cash the coupons at any financial institutions (Radhakrishna and Subbarao, 1997). Under the reform, consumer support would be substantially decoupled from the MSPs, so the authorized institution could concentrate on the issue of food security without considering the link to the producer support policy.

Contribution of the TPDS to Food Security

Whereas authentic criticism and proposal for further reform are aimed at the inefficient aspects of the TPDS, the current scheme needs to be analyzed from the viewpoint of what it has done in prevention of hunger, and its advantages should be utilized in a new concept of food security that is adjusted to the changing agri-food sector of India. In this chapter, a reliable statistics which proves the TPDS’s importance amongst economically vulnerable groups in India is provided, and a new economic norm to identify the poor effectively is proposed. 

Ranjan (2007) focused on a calorie-based norm, the prevalence of undernutrition (POU), for the evaluation of the TPDS. The POU is measured as the percentage of households who are unable to meet their daily calorie requirement, e.g., in the case of the Indian poverty line for the rural and urban populations, 2400 and 2100 kilo calories per capita per day, respectively (Ranjan, 2007). The POU criterion tends to marks higher than the expenditure-based poverty estimated used as the official poverty line because the former measures hunger while the latter measures inability to buy both food and non-food necessary for survival. As a norm to estimate the risk of food insecurity, the POU seems more appropriate than the conventional expenditure-based criterion even though the monetary scheme is still useful to measure poverty comprehensively. 

The literature also suggests that a few undernourished APL households has been discovered by using the POU instead of the expenditure-based criterion. Thereby, the study shows skeptical attitude towards simply restricting the TPDS to BPL households and calls for a better targeting strategy. This consequence emphasizes the fatal defect of the current poverty line which has possibly overlooked the exclusion error amongst the APL households; however, a certain extent of accidental exclusion might be inevitable, considering costs for perfect identification of the poor. 

Based on the POU, Ranajn (2007) found that the present policy plays an important role in securing adequate amount of calorie intake amongst female-headed households in nutritionally poor states. According to the analysis, by comparing the rural calorie based POU rates in the presence and absence of the TPDS, the actual data and hypothetically calculated data respectively, statistically significant differences in the POU were observed in the calorie-poor southern states. It can be interpreted from the study that poor households in the some hungry states heavily depend on the TPDS as an anti-poverty program, so, if any reform required, the policy prescription needs to be organized properly to the changing economic circumstances of the individual states.

Conclusions

The former study, Radhakrishna and Subbarao (1997), consistently claims that a series of inefficiency of the TPDS comes from its over-grown structure. Therefore, it proposes to reshape its operational scheme of the central government into a simple function by decentralization of the FCI’s operation. In addition, its budgetary system also needs to be  reformed into an independent form from the price support policy by applying food coupons instead of the ration. 

On the other hand, Ranjan (2007), introduces a new norm, the POU: an estimator of hunger with daily calorie intake, as a better estimator of food insecurity.  As a result, the study discovered some undernourished families among the households above the conventional poverty line. Moreover, the TPDS turned out to be indispensable for some of hungry states as an anti-poverty program, so it is important to consider the impacts of reforming the national food policy at the state level as well as the nation level. 

References

Landes, R. and Gulati, A. Policy Reform and Farm Sector Adjustment in India. Workshop on Agricultural Policy Reform and Adjustment Imperial College, Wye October 23-25, 2003.

Radhakrishna, R. and Subbarao, K. India’s Public Distribution System — A National and International Perspective. World Bank Discussion Paper No.380, November 1997. 

Ranjan, R. Changes in Food Consumption and the Implications for Food Security and Undernourishment: India in the 1990s. Development and Change 38(2): 321–343, 2007.

Srinivasan, P.V. Food Security and Agriculture. Paper prepared for the Roles of Agriculture International Conference, 20-22 October, 2003.

What are we to do with people “whose jobs and very way of life make little economic sense in an industry which has created such abundance”?

8. 29. 2012

Farming technologies in developed countries has been remarkably advanced during the post-war period, and now the domestic demand for foodstuffs in those economies are filled only by a small population of farmers with vast arable areas, chemicals and machines, and even genetically modified crops. Actually, according to The Economist (2005), the farming sector in the EU accounts for less than 2% of the entire workforce. Still, this figure might not be small enough because food stocks within the EU tend to be abundant, even too much about a few products like cereals and milk. This would not sound problematic if all the EU’s farmers were competitive enough to sell surplus products in the international food market, at least efficient so that they manage to earn their living by farming. In reality, however, the European rural economy consists not only of competitive farmers but also of inefficient and small-sized farmers, e.g., those who engage in mountain farming, and as The Economist (2005) says, the Common Agricultural Policy (CAP) costs over €40 billion a year, around 40% of the total EU budget, to support the rural economy. This essay answers two question raised from such an economic and political issue of the EU: first, why is that the EU supports farmers who contribute little to the food production even though the European community has even surplus foods; second, how these people should be treated in terms of the EU’s agricultural policy.

The first question is to be approached from two different points of view: an economic viewpoint, focusing on the market failure of agricultural products in the EU; and a political viewpoint, mentioning about farm lobbying in the EU. A primary incentive for the EU’s agricultural policy to support farmers is that they provide with a number of services which are not priced in the conventional market mechanism, namely so-called externalities. The Economist (2005) analyses well-protected French farmers due to their traditional performance in the country’s food culture deeply rooted in its history, such as regionally based gastronomy and country-widely held weekly street markets, and their environmental services to preserve beautiful bucolic scenery which promotes tourism in the rural region. On the other hand, another influential factor in the EU’s agricultural policymaking is participant countries’ political activities, typical one of which is farm lobbying. France’s biggest farm union, the FNSEA, has a powerful and nation-wide lobbying network ranging from local officers to parliamentarians; in fact, The Economist (2005) argues, 8.5% of senators of the country are farmers, while the country’s agriculture holds just 4% share of the workforce and 3% share of GDP. Overall, the economic grounds for the externalities performed by farmers justify the EU’s agricultural policy to support even inefficient and small-sized farms, and the political pressure from powerful farm lobbying organizations encourages or forces the politicians to implement the policy.

The answer to the second question is that if the EU’s agricultural policy really pursues the objective of evaluating the multifunctionality in agriculture, the present subsidizing scheme is not the best way. The EU’s farm aid scheme does not seem appropriate to put a price on the cultural and environmental performance farmers provide with, because the direct income support is based not on the performance value itself, but on what each farm has produced during a certain period in the past. Instead, the agricultural policy makers need to adjust the scheme so that the performance are properly estimated into the optimal size of payment for it. As an alternative, introducing concepts of environmental economics, for instance, travel cost estimation of bucolic scenery, might be useful. In addition, farmers themselves, those who make little economic sense in a country’s food production, also should switch their business basis to development and preservation of tourism resources. As The Economist (2005) mentions, upland farmers in marginal region, i.e. mountain farmers, already realize that farming alone would not feed them any more, and that combining it with other business which has synergistic effects altogether, just like the case of farming and tourism, is the only way to survive. 

In conclusion, this essay focus on two questions about inefficient and small-sized farmers whose economic performance in a country’s food production are at a minimum level amongst the agricultural industry; one is why such farmers need to be protected within the present policy scheme; another is what alternatives are to be proposed from studying the problem of today’s European farm policy. The subsidies for farmers are justified with their cultural and environmental performance that is not priced in the market; however, the present policy does not seem to work well to estimate such external value. Therefore, the economic and social adaptation are required from both farmers’ and policy makers’ sides. 

Reference

The Economist (2005). Europe’s farm follies, 10th December, pp. 25-27.

The Agri-Food Sector Is a Special Case?

7. 31. 2012

Government intervention in the agri-food sector is widely observed in various countries from those with high farming productivity and advanced economies to those with developing economies dependent on export-oriented farm products. Actually this economic characteristic in the agricultural and food sector frequently appears as a problem which prevents the international negotiation for trade, such as the WTO rounds, from being proceeded smoothly, while other natural resources and manufacturing products seem to be traded over relatively less trade barriers. It is true that market failure is discovered in almost all industries and therefore corrected by more or less regulations and controls by a country; however, the significance of market intervention in the agri-food sector might be accounted for not only by a matter of degree of the market failure, but rather by unique industrial structure to the sector. In this essay, it is investigated whether the agri-food sector can be distinguished from other sectors, from following points of view: efficiency, equity, and so-called ‘non-economic’ objectives. 

First, market failures in some agri-food sectors illustrate the industry-specific factors and necessity for government controls over the sectors although some complain that market imperfection is a general economic phenomenon amongst all industries. A typical example for this is inflexibility of land market. Land is the most fundamental factor of farm production; however, as MacLaren (1995) says, investing into additional land is not necessarily profitable in the long term because opportunity costs for marginal land use varies. Therefore, structural policy supports for farmland allocation can work effectively, otherwise it is difficult to improve fragmentation of farmland occurring in the process of land inheritance. Another example of market failure in the agri-food sector is imperfect competition both in the processing and retailing stages of the food chain. McCorriston (2002) reports food-firm concentration ratios in these stages amongst European countries and states the significance of high figures in the retailing sector, mentioning to the growth of their own-label products. This analysis can be interpreted as dominance over whole intermediate processes of the food chains by a few large-scale companies and so comparative intensiveness of imperfect competition in the agri-food sector.  

Second, production and market risk in the agri-food sector also characterize a country’s incentive to intervene in the sector in order to support farmer’s household and protect consumer’s welfare from price fluctuations of indispensable foodstuffs. Even though variations in production and price are not special factors in the agri-food sector and avoidable with hedging and private sector’s insurance, according to Tangermann (2011), there is a different kind of risk beyond farmer’s capacities, which is called catastrophic risk, e.g. irregular weather, epidemics of pests, and natural disasters. On the other hand, OECD (2011) criticizes that even if governments are required to involve in this risk facing farmers, they should pay attentions to the definition of the risk because covering the too wide range of risk, even where farmers have to manage on their own, can discourage them to take optimal risk management strategies. In addition, variable agricultural output lets commodity prices fluctuate from period to period and affects food consumers, especially those who live in developing countries with relatively high Engel’s coefficients. 

Finally, externalities of food production are typically taken up as one of the so-called ‘non-economic’ objectives of the market intervention by governments. As described as ‘so-called,’ some externalities in agriculture involve theoretical possibilities of being marketable and corrected by agricultural policies, in accordance with Winters (1990). This is also the case of environmental pollutions in manufacturing industries; however, it is even more complicated to internalize side effects of food production because they contain  positive externalities too, e.g. multifunctionality in agriculture.

*Conclusion omitted for a matter of space.

References

MacLaren, D. (1995). An Introduction to Agricultural Economics, Australian Economic Review, 4th Quarter: 93-108.

McCorriston, S, (2002). Why should imperfect competition matter to agricultural economists?, European Review of Agricultural Economics, 29(3): 349-356 and 367-371.

Tangermann, S. (2011). Risk Management in Agriculture and the Future of the EU’s Common Agricultural Policy, ICTSD International Centre for Trade and Sustainable Development , Issue Paper NO. 34, Geneva, pp. ⅳ-10.

OECD (2011). Agricultural Policies in OECD Countries: Monitoring and Evaluation 2011, Paris, pp. 35-48.

Winters, L. A. (1990). The So-Called “Non-Economic” Objectives of Agricultural Support, OECD Economic Studies, 13 (Winter), Paris, pp. 237-266.

Significancy of Agribusiness Concentration in Coffee’s Food System

If you are a coffee-lover, you may be interested in what processes a cup of coffee has come through to your hands. Almost all coffee beans are produced by family-managed  farmers in developing countries, such as Brazil, Vietnam, and Colombia, and pass very complicated routs between them and you: local coffee bean dealers in rural villages, exporting firms in producing countries, trading companies in your country, roasting and packing agencies, and your favorite cafes if you have some out. A chain of relevant subjects, such as those above, and correlation between them in food production and distribution are called the food system. As shown in the case of coffee’s food system, some food systems consist of worldwide networks connecting farmers in developing countries and consumers through food firms. In such international networks, as consumers are distanced from farmers in food systems, roles of agribusiness firms between them are significant because the firms need to reflect consumers’ demand for products on farmers’ production plans over boundaries. This system which benefits consumers, in turn, sometimes damages producers’ economies in developing countries, which results from a difference of bargaining power between farmers and firms. For example, in coffee’s food system, almost all intermediate businesses are concentrated on a few large-scale multinational corporations; therefore, some small-scale coffee farmers suffer from unfair contract conditions in trading with them (Tsujimura p.96). In this essay, it is investigated how such concentration of agribusiness has been built on coffee’s food systems, what effects the intensive agribusiness structure causes on the food systems in developing countries, particularly on farmers living there, and what is prospects for the globalized food systems.

Business concentration in agricultural industries frequently appears in food systems of developing countries for three reasons: a tropical climate in low latitude areas, a remaining relation with suzerain countries in the colonial period, and an economic aid of the IMF and the World Bank since 1968. The first reason is a geographic factor in developing countries; these countries’ climate are perfect for tropical farm products such as coffee beans. Major breeds of coffee beans have their biological origin in tropical areas of African countries like Ethiopia and Congo, so cultivation of them basically requires a high-temperature and high-humidity climate. Accordingly, agribusiness of coffee production is only around low latitude areas in which most developing countries are located. The second reason is the colonial history of some developing nations. A primary purpose of establishing colonies for European countries was production of tropical foods just like coffee beans and tea leaves, and international trades of these products was traditionally monopolized by a small number of enterprises; the same custom is left over current food systems of some tropical products (McMichael p.151). Finally, economic supports of the IMF and the World Bank on developing nations in the late 20th century has unexpectedly intensified agribusiness concentration in those countries. A general goal of the support programs was improvement of poor populations’ income in developing countries, most of which engaged in the primary industry; thus, the organizations proceeded technical and financial supports in agricultural industries by means of introduction of high productivity breeds and transition to more profitable cash crops, including coffee beans as a target crop. As a result of this policy, most farmers under the supports switched their farming style from self-sufficient one to commercial one, which also created extended business chances for agribusiness firms (Araghi p.182, Toyoda p.78). These elements in a business concentration process has together helped international trade corporations to grow into a huge scale which covers a whole food system from its top to the end.

Such an intensive agribusiness structure in developing countries works against farmers in price setting process. In fact, they lost their bargaining power in  negotiations for price setting. This is because individual farmers with relatively slight amounts of supplies has no influence against large-scale corporate groups which dominate almost all stages of a food system. This phenomena is illustrated by a case study of coffee’s food system in a rural farming area of Tanzania, namely Mt Kilimanjaro and its surrounding region, by Tsujimura. A whole food system of Kilimanjaro coffee is shown in Fig.1; within Tanzania, a regional food system consists of three subjects: farmers, dealers, and exporters. In this case, all local dealers and exporters are subsidiary companies of multinational trade corporations which put their headquarters on European countries, as shown in Fig.2; consequently, the stage (2) in Fig.1 is a pure inside trade although the trade officially forms a public auction style. As an example for the stage (1), in Lukani village, a main survey field of Tsujimura, local coffee bean dealers are only three groups while 355 houses sells coffee beans individually. This transaction is completely run by the dealers; the price is decided by subtracting whole distribution costs from a selling price at the stage (3).

Figure 1: Global Food System of Kilimanjaro Coffee

Note: Green Box=Tanzania, Yellow Box=Japan (ex.)

Source: Tsujimura p.73

Figure 2: Dealing and Exporting Share of Kilimanjaro Coffee

Subsidiary	Dolmen	Taylor Winch	ACC	Olam
Parent	ED&F Man	Volcafe	Schurter	KC Group
Headquarter	U.K.	Switzerland	U.K.	Singapore
Dealing Share	20.7%	14.8%	14.6%	10.8%
Exporting Share	33.8%	15.9%	8.4%	8.3%

Note: ACC=African Coffee Company. Volcafe was merged into ED&F Man in 2004.

Source: Tsujimura p.93

In addition, the price at the stage (3) itself is unfair for Tanzania’s local farmers. Tsujimura (p.81) continues an international trade price for coffee beans is based on a futures price at the New York Board of Trade (NYBOT) where the price for coffee beans is decided mainly by an expected yield in Brazil and a speculation trend, regardless of any factors in other producing countries. Moreover, this international price fluctuates as shown in Fig.3 because of a synergy between speculation and uncertainty of Brazil’s yield like weather; for instance, if unreasonable weather in Brazil is forecasted before a cropping season, investors will flood into buying, anticipating a rise in a coffee price at the NYBOT, which expands a fluctuation range. Overall, Tanzania’s farmers have to respond to an unreasonable and changeable price which they are not responsible for.

Source: International Coffee Organization

Also, it is pointed out that the food system of Kilimanjaro coffee contributes unjustly small amounts to Tanzania’s national profit in international trading. According to a statistic of 1998’s international trade of Kilimanjaro coffee with Japan, the biggest importer of the coffee, an annual disposable income in Tanzania was only 35.87 million US dollars whereas Japan got more than 1 billion US dollars (Tsujimura p.104). Even though such a disparity of income distribution is inevitable for a difference of economic scales, this gap is still unreasonable, considering that it is said 70% of coffee’s good flavor is accounted for by high quality of beans.

Finally, it is concerned that a current food system of coffee might eliminate some farmers’ incentives to produce a variety of beans with good quality; instead, the world’s coffee market might be filled with a single profitable breed in the future, and then other flavors would get beyond an affordable price for the general public. This expectation sounds even realistic in comparing annual productivity and required minimum price standards of for maintaining business between Brazilian and Tanzanian farmers. An average productivity among whole farmers in Tanzania is 172 kilograms per hectare in a cropping season while that in Brazil almost reaches at 4000; a required minimum NYBOT price for Tanzanian farmers is 150 US cents per pound though Brazilian farmers need only 50 (Tsujimura p.91). These huge gaps are explained by a distinction of their target demand. Beans produced in Tanzania are luxury goods with their original flavors, while ones in Brazil are for daily-use with reasonable quality and prices.

In conclusion, relations between concentration of agribusiness in developing countries and coffee’s food system are analyzed from three points of view: origins, present issues, and prospects for the future. Firstly, current intensive business structure of coffee production in developing nations is turned out to be due to their suitable climate for coffee production, a remaining tradition of the European colonial age, and a shift to commercial farming style triggered by international financial institutions. Then, a case study in Tanzanian coffee’s food system shows an existence of unfair contracts in coffee trading business, where a variety of beans are not appreciated well in their price setting. Consequently, such an unreasonable food system possibly causes a poor diversity in flavors of coffee. This is also your own problem if you are a coffee-lover.

References

Araghi, F.. 2000. Hungry For Profit -The Agribusiness Threat to Farmers, Food, and the Environment-. By Fred Magdoff et al.. Monthly Review Press. P.173-193.

International Coffee Organization. Retrieved July 1st, 2012. http://www.ico.org/

McMichael, P. D.. Hungry For Profit -The Agribusiness Threat to Farmers, Food, and the Environment-. By Fred Magdoff et al.. Monthly Review Press. P.147-172.

Toyoda, T.. 2001. International Development in the Age of Agribusiness -Trade of Agro-Food Products and Multinational Corporations-. Nobunkyo.

Tsujimura, H.. 2009. Economics of Coffee-Bitter Reality of Kilimanjaro-. Ota Press. 

Biased Information and Exaggeration of Dangers of GM Foods

Arguments over genetically modified (GM) foods often appears as a controversial topic in a discussion of the right and wrong of recent technologies. Those who are against the application of genetic engineering to food productions try to prove the existence of dangerous components in GM products with objective evidences, such as opinions of professionals, datas from reasonable experiments, and announcements by environmental activists. However, relying on these sources could be arbitrary in some cases; as a result, people’s attitude towards the new biotechnology would be strongly distorted by biased criticisms against GM foods: for example, professionals’ principles, overestimates of health risks, and choices of information sources with preference. Although opponents insist that their arguments is reasonable and fair, it is examined in this essay that they sometimes exaggerate the dangers of GM crops by treating the bases of their claim in a wrong way.

Opponents of the introduction of GM foods are based on some research results of scientists, which indicates that a GM crop has harmful effects on the physiology of mammals, and which implies that cultivating a GM breed interferes in regional ecosystems. However, most these studies include, more or less, sensational but unreliable aspects, just like Pusztai and Ewen (1999) and Losey et al. (1999). The former research conducted a controlled experiment with two groups of six rats; one of which are fed with conventional potatoes; another with a genetically modified one containing Lectin: a protein which attaches an insect resistance. The result shows the GM potato causes a disorder in rats’ bowels. Even though the research appeared in a famous medical journal in Britain, named the Lancet, it was turned out to be unreasonable in later inspection. On the other hand, the latter study measured an adverse effect of pollen from transgenic Bt maize to Monarch butterflies, larvae of which feed on milkweed growing around the maize. The study was also carried in a authoritative science journal, Science; nevertheless, it lacks validity in its experimental process. Both of these scientists might have had a individual belief that GM crops should be harmful to our health and ecological systems. Although these studies are recognized to be invalid among scientists, they have misguided the general public to unfairly negative images of transgenic crops because only their results was sensationally reported in the news media (Pense, p.139,264).

Opponents also insist that GM foods are still dangerous because they contain recombinant DNA (rDNA) and toxic compounds like cyanide included in transgenic flax. Firstly, all GM crop inevitably have rDNA; however, it is not considered as a material which can damage our health in any countries’ regulation. Secondly, most toxins in those crops are decomposed in processing and cooking, yet there is still a possibility of intaking them accidentally. In order to estimate such a risk, McHughen (p.109) calculate, as an example, an amount of cyanide in genetically modified flax CDC Triffid intaken annually per capita in Britain. The estimated amount is 5.7 microgram, which is clearly at an acceptable level as compared with an amount of cyanide in a cigarette: 138 microgram. More important, McHughen (p.112) continues that every food, whether it is genetically modified or not, contains slight amounts of poisonous substances from cyanide to arsenic; therefore, people’s attention should be payed not to whether foods has toxins, but to whether amounts of toxins in them are permissible. 

Finally, opponents refer to a large number of environmental activist groups that criticize giant biotechnology corporations which invent new transgenic animals and plants day after day, as well as the regulation authorities in their own country whose controls on GM products are not enough strict for the activists. Opponents say activists are much more trustworthy than greedy big companies trying to dominate a crop market with their GM products and also than corrupted regulation panels pursuing personal interests in collusion with a GM food industry. Even if so, depending only on activists for information about GM foods prevent people from fair judgement on the right and wrong of transgenic technology. According to McHughen (p.126), comparison of information sources on GM foods between  Britain and the United States provides with a useful suggestion for an interpretation of public attitude towards transgenic products in both countries. As a result of a public opinion poll, most British citizens trust information from anti-GM activists, while the U.S. citizens put the best trust in home doctors, followed by scientists in universities and governments; just 5% of them trust activists. This fact reflects a certain amount of Britain’s sensitiveness to GM foods in comparison with America’s indifference to them.

In conclusion, opponents’ arguments against genetically modified foods are proved to be invalid, and turned out to be exaggerated by arbitrary points of view. First of all, scientists whom opponents’ claim are based on have guided the general public to unfair views on GM foods. Even though their distorted researches include inexact experiments and lead unreasonable results, those results have corrected unnecessary attention through inappropriate reports. Valuing for data itself can also result in a misunderstanding of transgenic foods. Certainly, every GM crops contains rDNA and toxic compounds; nevertheless, these materials do not necessarily damage our health because some of them are not harmful, and, if so, amounts of them in GM foods are extraordinary small. Finally, biased choices of news sources may cause exaggeration of GM products. In order to maintain a fair and objective viewpoint, it is important to reject prejudice and keep a  distance from one-sided articles.

References

Losey, J. et al.. 1999. Transgenic Pollen Harms Monarch Larvae, Nature, 399:214.

McHughen, A.. 2000. A Consumer’s Guide to GM Food -from green genes to red herrings-. Oxford University Press.

Pence, G. E.. 2002. Designer Food: Mutant Harvest or Breadbasket of the World?. Roman & Littlefield Publishers, Inc.

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2012. 6. 16

China’s Talent War

TIME Magazine. May 28, 2012. Page 44-48.

Introduction

In terms of the labor market, China and Japan enjoy completely different situations in which for China it is a typical seller’s market for skilled people, but, in contrast, in which for Japan it is a rare case to change jobs so frequently for better pays even among top university graduates. What does this difference cause in recruiting styles of each nation?

Briefing

In China, companies, especially in tech industries, are always looking for talented employees, and it is usual for such workers to stay in one place for less than a few years. According to the article, an ICT firm in Beijing reported the industry-wide annual turnover rate of labor at 35%; in individual company, the figures for some reach at 50%.

Every CEO in China has concerned about a problem of poaching arisen from the shortage of well-experienced businessmen. For employers, it is not acceptable to lose human-resources who has been educated in their own companies. Furthermore, some job swappers leaves their companies, carrying important documents for their new employers.

All company tries to retain proficient workers by means of offering stock options, promotions, and even attracting them with corporate cultures. However, they can not change the structure of the job market, and, after all, throw up their hands.

Opinion

Contrarily, Japan’s job market is not as circulating as China’s; annual turnover rates among industries do not exceed 20% except service sectors; it is the lowest in the energy and water supply industry, followed by finance and insurance, and manufacturing.

Clearly, high rates among service industries are not resulted from poaching, but, rather, retiring probably because of too hard working schedules, too cheap salaries for required performance, too poor working environments, or so. In these business fields, every employer tries to find workers with reasonable skills at the cheapest cost.

Overall, China and Japan has the same feature in recruiting: high turnover rates in the industries where employers strongly need better labors; however, ironically, China needs high-quality ones whereas Japan needs economical ones. 

Carbon Taxes Versus Emissions Trading: A Comparison of Two Greenhouse Gas Policies

     As the world faces a growing threat of the climate change, the role of environmental policies in industrial countries becomes more and more important. How to approach against a prevention or mitigation of effects from the climate change is different from countries; however, every country aims to reduce emissions of a greenhouse gas (GHG), represented by Carbon Dioxide (CO₂), because an increasing concentration of a GHG in the air is the largest contributor to the climate change. Emissions of a GHG is basically delivered by energy consumptions in economic activities from driving a car to refining steel, so a country’s environmental strategies tries to control such activities with regulations and, consequently, promote technological innovations by which its economy can run with less energy. Among a number of methodology in regulations of GHG emissions, carbon taxes and emissions trading are major GHG policies implemented by some industrial countries; the former is introduced by some European countries like Germany; the latter’s famous example is the European Union Emission Trading Scheme. In this essay, these GHG policies are compared and contrasted with following four criteria: efficiency of emissions reductions, policy operation costs, promotion of technical innovations, and equity among policy objects. 

     First of all, concepts and structures of each political methods need to be briefly explained before proceeding to a comparison. Carbon taxes are imposed on consumptions of whatever goods emit a greenhouse gas, for example, gasoline, and its policy structure is similar to other taxation; a fixed tax rate is fully operated by a government and provide it with revenue. On the other hand, emissions trading is oriented to major GHG emitters, such as power plants or automobile companies. Once a government assigns an emissions unit to each of those emitters, a right to pollute can be traded between them, and a price for the unit is decided by a market mechanism.

     From a viewpoint of efficiency of emissions reductions, both carbon taxes and emissions trading are effective, although there are differences in how each policy works. If a country’s government implements a carbon tax policy, a certain percentage is added on fuel prices, based on the carbon content of fuels, and results in saving fuels in both industrial and individual level. Furthermore, tax revenue can be devoted to its own operation or other environmental policies. In emissions trading, GHG emissions reductions can be achieved with a minimum cost because the unit of emitters whose costs to reduce emissions are relatively low will be sold to other emitters for whom emissions reductions are difficult like thermal power plants (Baumert).

     Both policies are also similar in their inevitability of operation costs. In taxation, a new correction system needs to be designed into a suitable form for the fuel distribution; also, it is difficult to estimate an appropriate tax rate which can promote saving fuels without causing serious stagnation. Similarly, emissions trading needs investigations on GHG emissions histories in each major polluters in order to allocate the maximum amount of emissions fairly among them.

     However, when it comes to promotion of technical innovations, carbon taxes are more advantageous than emissions trading in a long-term observation of policies. According to Stiglitz, in carbon taxes, costs for GHG emissions are fixed, which provides people with permanent incentives to improve productivity in use of fuels and accordingly stimulate investments into energy technology. In contrast, the price for a right to pollute is floating in emissions trading because, firstly, it is determined by balance of demand and supply, and secondly speculation makes it less stable. This suggests no matter how much you invest on green technology, once the price get down, you can just buy some emission units to meet a government’s request (Stiglitz, par. 3).

     Contrarily, emissions trading secures equity among policy participants, if assumed that emissions units are fairly allocated, while carbon taxes work differently from taxation objects. In the former system, current emissions of each players are considered, and players can adapt their behaviors corresponding to their ability to reduce emissions: buy or sell. In comparison, the latter system imposes a progressive burden corresponding to contributions of GHG emissions, which means disadvantageous for some business fields like the steel industry.

     Finally, consider these factors comprehensibly and evaluate feasibility of both policies. In terms of efficiency of emissions reductions and operation costs, there is no significant difference between carbon taxes and emissions trading; however, carbon taxes are slightly more favorable because they work not only on industries but also on individuals and create an additional budget for a government. In promotion of innovations, taxes are advantageous as well. Nevertheless, carbon taxes are expected to face a strong opposition by some industries with inevitability of emitting a large amount of greenhouse gases. For example, Australian government had struggled in introducing a carbon tax act until its parliament succeeded to pass it in 2011, because coal and steel industries are strong in the country (Curran & Brindal). 

     In conclusion, this essay analysed two policies related to GHG emissions mitigation: carbon taxes and emissions trading, focusing on four argument points and later putting them together into consideration. As a conclusion, carbon taxes are more effective than emissions trading in three criteria except equity, but it seems a controversial policy in the economy where mineral industries are dominant.

References

Baumert, K. 1998. Carbon Taxes vs. Emissions Trading. Retrieved May 11, 2012. 

     http://www.globalpolicy.org/component/content/article/216/45883.html

Stiglitz J.E. 2010. Overcoming the Copenhagen failure. Retrieved May 11, 2012. 

     http://host.madison.com/ct/news/opinion/column/article_a43e6c32-ef98-5c38-9a64-ae22b5732127.html

Curran, E. and Brindal, R. 2011. Australia’s Carbon Tax Clears Final Hurdle. Retrieved May 11, 2012. 

     http://online.wsj.com/article/SB10001424052970204554204577025153789673004.html