Hunger and Free Trade

     Hunger is ravaging this planet’s populations, and all the intergovernmental agencies making predictions have come to conclusions that the world will experience severe food shortages in the near future if something is not done to change our agricultural production processes. To develop some solutions towards this scarcity, we must first define some key terms that will assist in providing solutions to the hunger crisis.

Fair Trade: Is a trading partnership, based on dialogue, transparency, and respect, that seek greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers -- especially in the South. Fair Trade Organizations, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade. 

Organic Agriculture: Is a production system that sustains the health of soils, ecosystems, and people. It relies on ecological processes, biodiversity, and cycles adapted to local conditions, rather than the use of inputs with adverse effects. Organic agriculture combines tradition, innovation and science to benefit the shared environment and promote fair relationships and a good quality of life for all involved.

Collective Bargaining: The process of negotiating the terms of employment between an employer and a group of workers. The terms of employment are likely to include items such as conditions of employment, working conditions, and other workplace rules, base pay, overtime pay, work hours, shift length, work holidays, sick leave, vacation time, retirement benefits, and health care benefits.

International Labor Rights Forum (ILRF): The ILRF is an advocacy organization dedicated to achieving just and humane treatment for workers worldwide.

      Now that we have defined some key terms that will assist in providing possible solutions to the hunger and free trade crises’ that are currently pressuring our species, we can discuss the different aspects further. A substantial impact on the hunger crisis is food waste and irresponsible agriculture practices, both of which contribute to millions of pounds of food waste each year. One simple solution to this atrocity is, when purchasing food to consume privately, consider the footprint of the food. This includes the production process, the ingredients used, and the transportation necessary to place the food on the shelf. With this in consideration I chose to review the food I consumed last night for dinner, and to find one ingredient that I was able to trace back through its production. I chose to trace the Earthbound Farm Organic salad mix, which I eat as a side to almost every meal. The results are unfortunate, but expected. Seeing that this specific brand is organic does not necessarily mean that its overall footprint is anywhere near the size necessary to reduce the environmental impacts.

• The San Juan Bautista, CA-based fresh-cut produce company’s certified organic produce is grown on more than 24,000 acres in locations from California to New Zealand and it processes and packages more than 100 different varieties of organic salads, fruits and vegetables in state-of-the-art production facilities in San Juan Bautista and Yuma, AZ.
• The company’s forward distribution centers, located in West Cranbury, NJ, Atlanta, GA and Indianapolis, IN, are instrumental in moving product to more than 74 percent of supermarkets nationwide, as well as to a growing number of restaurant and foodservice customers.
• Earthbound Farm follows the eight GAP principles, based on the U.S. Food and Drug Administration’s (FDA)
• 8 Principles of Good Agricultural Practices

• Principle 1:
   Prevention of microbial contamination of fresh produce is favored over reliance on corrective actions once contamination has occurred.

• Principle 2:
   To minimize microbial food safety hazards in fresh produce, growers or packers should use good agricultural practices in those areas over which they have some degree of control while not increasing other risks to the food supply or the environment.

• Principle 3:
   Anything that comes in contact with fresh produce has the potential of contaminating it. For most food borne pathogens associated with produce, the major source of contamination is associated with human or animal feces.

• Principle 4:
   Whenever water comes in contact with produce, its source and quality dictate the potential for contamination. Good agricultural and manufacturing practices must be considered to minimize the risk of contamination from water used for agricultural and processing purposes.

• Principle 5:
   Practices using manure should be closely managed to minimize the potential for contamination.

• Principle 6:
   Worker hygiene and sanitation practices along the production cycle play a critical role in minimizing the potential for microbial contamination of fresh produce.

• Principle 7:
   It is important to understand and follow all U.S. federal, state and local government regulations relative to established agricultural practices.

• Principal 8:
   Establish a system for accountability at all levels of your agricultural environment (farm, packing facility, distribution center and transport operation). A successful food safety program should include provisions for qualified personnel and effective monitoring and maintenance to ensure that all elements of the program are functioning correctly and to help track produce back through the distribution channels to the producer.

     As we can see from this product, the Earthbound Farm salad mixes are certified organic under USDA organic certifications -- which still allow for pesticides being used -- and are produced and shipped all around the U.S. Unfortunately this salad has quite a large footprint, but does support a variety of social equity programs. Additionally the Earthbound Farm company does not state whether or not it is fair trade, but considering the production of the product is centralized in the U.S. and Australia I would predict that fair trade practices are used seeing that developed country agricultural laws do consider those aspects.

     As long as consumers develop more awareness towards their purchasing power of food product, and more farms and agricultural business demand legislation to ban pesticides, and support fair trade and organic agriculture, then we may witness this global hunger crisis and fair trade debacle come to an end. But falter, and we are in for an experience that you would not wish on your worst enemy.

Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel

A Sustainable Scale

     As society continues its somewhat “bandwagon” sustainability initiative, we must now look at the ends and not the means, because if our ends cannot be justified with a prosperous long-term society, then the means are of wasted energy. Who then should determine the ends that are most logical? I believe it should be the most efficient entity we know of to date, planet Earth. If the ends of our means may result in less than ideal environments on Earth, then the means are not sufficient enough. To continue this critical analysis of the sustainability movement, we must first define some key terms that will help us determine means and ends that do suffice, and means and ends that do not suffice.

Command-and-Control Regulation: Flat prohibitions, quotas, or standards as opposed to monetary incentives that operate through prices or taxes.

Subsidy: A bonus or payment for doing something, the opposite of a tax.

Tradable Permits: Shares of an aggregate quota that are in some way divided up among individuals, who can then buy and sell their quota rights among themselves.

Cap and Trade: Is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth. 

Marginal Abatement Cost: Is a set of options available to an economy to reduce pollution. They are valuable tools in understanding emissions trading, driving forecasts of carbon allowance prices, prioritizing investment opportunities, and shaping policy discussions. 

Marginal Abatement Cost Curve

Arthur Cecil Pigou

      Now that we have defined the key terms necessary to continue the critical analysis of the sustainability movement, we can begin to determine the means that are necessary to create ends that are planet Earth worthy. When we view markets and the institutions within them, we have tendencies to speculate on the success or failure of the market and when it will occur. We also view market efficiency with the use of Pigouvian taxes and subsidies, which create market environments that promote environmentally steward practices -- which planet Earth approves of. Pigouvian taxes and subsidies were developed by the late english economist, Arthur Cecil Pigou, who was a diversified economist in England and leaned towards welfare economics. Pigouvian taxes and subsidies are considered as some form of market solutions that are means that do assist in sufficient ends, because with the Pigouvian tax institutions that produce externalities (mostly negative) are taxed the determined amount that the negative externality equates to. So if a company produces $150,000 in negative externalities that are not covered, then a tax amounting to $150,000 is required by the company, by this the company is paying for the negative externalities through the tax. A Pigouvian subsidy on the other hand is established when an institution accounts its own negative externalities into its bottom line, therefore creating a more efficient and environmentally conscious business, which then relays a payment back to the company for each unit by which it reduces environmental costs. With these two concepts there are market solutions presented, which can be implemented to create a more efficient market that rewards voluntary stewardship and fines markets that continue to act in non-compliance towards efficient and clean operations.

Fish Stock From a Fishery

     Another possible market solution that is a means towards a logical end is individual transferable quotas (ITQs). ITQs are a sustainable alternative in the fisheries industry, because previously fisheries would simply be over-fished as every fishing rig tried to exceed the amount of fish the next rig caught. This has led to severe depletion of most fisheries in recent years, even placing some species of fish on federal threatened or endangered lists. ITQ assists in designing fishery harvesting operations that are not solely based on total allowable commercial catch (TACC). This is important because initial ITQs in terms of tons of fish are awarded to fisherman in proportion to their catch history. So fisherman now need invest only enough to capture their share, based on the ITQ given to them. Along with providing a more sustainable harvesting method, ITQs would designate varied harvesting dates rather than set dates, because along with the TACC, which sets a limit of catch amounts, ITQs would require larger harvesting rigs to harvest only when populations are peaking, and smaller ITQs may be able to harvest outside of peak season, which all reduces the impact on the fishery populations by spreading harvest dates over a period of time. If society were to implement ITQs in all fishery management systems, the outcome would be varied. It all depends on the circumstances of the specified fishery, an example of this diversification that would be hard to implement ITQs in all fisheries is, ITQs tend to concentrate in the hands of the larger firms, leading to concentration of the wealth in a lucrative industry. When the TACC decreases, small-scale fisherman lack collateral for bank loans to purchase more ITQs, while large firms have other assets they can use as collateral. From this we can see that there is no perfect fit for an ITQ in a market with TACCs, but we can determine they are a logical “bridge” to the next system that will provide for a more sustainable practice that is a means to a sufficient end that is worthy of planet Earth’s approval.

    Based on the information provided here, and the plethora of information available elsewhere all relating to the sustainability movement, the critical analysis determines that before society invests their precious resources into something, being sustainable or not, we must make sure that the means are sufficient enough to match the efficiency rates of the best, planet Earth. And after this has been determined, to not stray too far from the objective (end) as we continue making a our way through this mysterious maze, which no one really has the correct route to success.

Thanks for your interest, please comment and subscribe.

Onward,

Hayden van Andel

Do we really consume too much?

    We are all guilty of it. What, you may ask, what could we as a species possibly be guilty of? There are so many answers to this question that many volumes of books could be printed solely on the kinds of detrimental acts humans are responsible for. But the largest guilt trip we ‘should’ be suffering from is our consumption habits. Human society has been “over”-consuming at amounts previously never experienced in planet Earth’s history -- all 4 BILLION YEARS. Currently the established system for determining Earth’s official overshoot day -- the day when one full fiscal year’s worth of Earth’s resources are used up -- is currently August 22, 2012. This means that in eight months and twenty-two days humans use up enough resources that require one FULL year for the Earth to replenish them, and the time span is only getting shorter. So what does all of this relate to? Well, since it has been proven that humans are unwilling to decrease their consumption habits, unless put under immediate pressure -- either financially or politically -- there are solutions that would require human society to change their habits through policy and regulation, and these changes would have immediate effect on society and on planet Earth’s resources. But, before we can continue we must first define some key terms that will assist in determining these solutions that will decrease human societies' consumption habits, either voluntary or involuntary.

Policy: A definite course or method of action selected from among alternatives and in light of given conditions to guide and determine present and future decisions.

Property Rights: Are rights beholden on an individual who can present proof of ownership towards distinguished property.

Pareto Optimality: Occurs when no other allocation could make at least one person better off without making anyone else worse off. This is also known as a Pareto Optimum.

Distributive Justice: The economic framework that each society has — its laws, institutions, policies, etc. — results in different distributions of economic benefits and burdens across members of the society. These economic frameworks are the result of human political processes and they constantly change both across societies and within societies over time.

Ecological Sustainability: The capacity of ecosystems to maintain their essential functions and processes, and retain their biodiversity in full measure over the long-term.

     Now that we have established the key terms that will assist in distinguishing the possible solutions towards decreasing our consumption rates, we may begin discussing them. When we consider consumption rates, we are assuming that all resources can reach all individuals over any span of time. An example is eating fruit in the area you live in where that fruit is not grown. Another example is water, unless you source from a well, most buildings access water through systems that source the water from treatment plants. This water is technically free, less the utility cost, but consider the current water scarcity claims proposed by most -- if not all environmental scientists -- that potable water may become a scarce resource. This is where limiting scale may play a part in reducing consumption rates by supplying less with current demand rates. If regulations were to be put in place, which established limited scales on water sourcing, that would mean that the originally “free” water most people received would become a scarce economic good. Now this doesn’t seem logical, but if it were to be implemented correctly, developments around the world that have previously sourced their water from reservoirs and rivers sometimes hundreds of miles away would have a limited scale of accessibility, even rendering the developments from existing at all. This may seem too extreme by the sounds of it, deeming Las Vegas, Nevada; Phoenix, Arizona; and other cities of the like as unsustainable in their current water sourcing and consuming practices requiring them to comply to regulated scaling proximities, but is it necessary?

     When considering over consumption human society has two clear options currently, limiting demand through increases in prices (taxes), or limiting availability (quotas). Both options have been used throughout history in numerous situations. The question is, which would be more beneficial in the long-term decrease of current consumption rates? I believe that to develop a society that exploits less and in turn consumes less, it is only possible by limiting the availability to resources, as to continue to conserve the resources necessary for survival, while developing more beneficial systems to take the place. By limiting availability of resources it will create an involuntary compliance society through policy, that will create a more beneficial society, because humans are animals, and animals naturally adapt to changing environments. This idea is very primitive in its development, but is one option of many that are possible to begin the decrease of our current consumption rates, all leading to a more sustainable human society.

     The topic of reducing consumption rates is very complex, seeing that a majority of the world’s population currently lack the basic consumption practices that are necessary for a prosperous standard of living, which should be every inhabitant’s right. But at the same time countries like the U.S., China, Europe, India, and several more countries are consuming at rates that are considerably unsustainable. So what is right? Should we instead concentrate on equitable resource allocation before limiting scales of resources, that way consumption rates may balance themselves out as basic resources are distributed equally among the more than 7 billion humans, and further tens of billions of species that inhabit the Earth.

Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel

Economic Growth < Sustainable Development

    Recently the people have spoken, the environment is more important than any other factor in an economy. This is because -- as everyone should know -- without a healthy functioning biosphere, our current economy, no matter how strong, will collapse immediately. So what constitutes a healthy environment? Presently the Earth has been experiencing depleting stocks of its natural capital, capital by the way that has been collecting in deposits for over 4 BILLION years. This is important to understand, because it is the future of which we will be a part of, whether prosperous or catastrophic is our choice. The idea that the world is always “full” of some things and “empty” of others is false. As our planet continuously changes and shifts to adapt to the changes, which we cause, the natural capital stocked in the planet varies. There is never a point at which one resource may be “full” while another is “empty”, it simply is impossible. This is mainly due to the ever smaller amounts of resources that are stocked in the Earth, they simply shrink to lesser and lesser amounts, but never reaching “empty”. Technology and relative wealth impact these concepts of “fullness” and “emptiness” by creating ever more efficient processes of extracting and utilizing resources, which theoretically increases the amount of a resource simply from the fact that we can now exploit a resource with 2x or 3x the efficiency of prior operations. This creates a new perspective on stretching non-renewable resources through technological breakthroughs instead of comprehensive reengineering of a system to design something new.

    As the world continues to deplete its stocks of natural capital, society has begun to speculate on which resource will be the first one to go, and which resource is the most important. Society has decided that potable water is the most scarce resource, along with being the most important for the survival of all species -- especially humans, who have adapted their drinking habits to avoid contaminated water. I believe this speculation is accurate. Presently we witness thousands of people dying every day simply from in-access to potable water. With water being the single most important resource consumed by humans it is important to take these speculations seriously, because no matter how much wealth you may acquire, it will not be enough for one glass of potable water when the time comes that Earth enacts its limits. Now Earth will not necessarily “run out” of potable water, but along with other slowly renewing resources it takes eons to fill fresh water aquifers, and when depleted these aquifers may become contaminated with salt water through pressure changes underground. All the same, if there is ANY type of speculation towards the depletion of potable water stocks, it is imperative that humans address this speculation seriously.

    After studying the concepts of ecological economics, I have come to a conclusion -- much the same as when I began -- that our current economic growth models and indicators are unsustainable. With this I use “unsustainable” in the context of being unable to sustain current levels of economic growth for more than 1,000 years. A sustainable economic growth model DOES NOT exist presently, mainly because of the current economic models, including neoclassical, Keynesian, free-market, and many other outdated models that worked for the short period in which we call the industrial revolution. For an economy to be sustainable it must incorporate development, not growth. With development we will see the efficient allocation of resources, as society develops its infrastructure no resource will be put to waste, because the growth of the society is not measured, just the development.

    The influential genius R. Buckminster Fuller was famous for stating at the beginning of every conversation a question, this question was posed to create thought processes that still are not utilized properly. The question is, “what is the most important thing we can be thinking about right now?” If answered logically, this question creates further questions regarding the morality of societies current actions, and whether or not we DESERVE to have planet Earth enact limits on our irresponsibility.

    Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel

The Moral Problem With Banks

 As the U.S. economy slowly rebounds to once again express growth rates throughout the sectors, we have again come to a fork in the economic road whereby society must decide whether or not to evolve from current financial lending and spending practices, which have continuously put us in an oscillating financial uncertainty cycle. Now to continue with this discussion we must define some key terms that will help us further explain the two options of which humans can choose to evolve our economic system or continue business as usual -- where the delay oscillations will only become stronger.

Balance of Payments: The sum of the current account (exports minus imports), and the capital account (inflow of capital to the nation minus outflow of capital from the nation).

Exchange Rate: The rate at which one nation’s currency is traded for that of another nation. Exchange rates can be fixed by central banks, floating according to daily supply and demand, or some combination of the two.

Efficient Market Hypothesis: An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices.

Financial Instability Hypothesis: A period of stability induces behavioral responses that erode margins of safety, reduce liquidity, raise cash flow commitments relative to income and profits, and raise the price of risk relative to safe assets -- all combining to weaken the ability of the economy to withstand even modest adverse shocks.

Ponzi Investors: Are investors who proceed to invest in clear ponzi or pyramid schemes, while acquiring more investors whom bring more profit into the ponzi scheme. Almost always ponzi schemes and the investors behind them collapse on themselves as new investors begin to become scarce.

 Now that we have defined these key terms we can now begin to discuss these two paths of which human society must decide one of which to take -- the revolutionary path or business as usual path. Currently in economics there are signs of a shift from a more neoclassical and Keynesian economic policy structure, to a more ecological economic structure as more and more individuals are realizing exactly how deep we have been led into the rabbit hole. This is very important in relation to the understanding of financial investments, because it provides a new way of dealing with growth and development. An example of this is, how ecological economics prefers a tax on investments. This means that ecological economists believe that with investments of various sizes comes a sense of moral hazard, meaning that institutions will operate on high risk margins with the security of having insurance if they fail. This most recently occurred with the national banks in the U.S. after they had repeatedly dealt in high risk lending through subprime mortgages, which resulted in a collapse of the real estate bubble and the defaults of thousands of loans lent by banks whom had bundled these subprime mortgages into traded stock, further creating an economic collapse. Now we are finally learning something from history, and taxing investments is a way of mitigating the potential moral hazards that may be created by banks. A tax on an investment will create an environment in which high risk, high return becomes too expensive with a tax that increases as risk increases. This would create a more stable financial situation mitigating the possibility of the financial instability hypothesis.

 Along with a tax on investments I believe more regulations are necessary for the banking and finance sectors that will require more transparency, third party audits, and more diversification of both the banking and finance sectors. As we begin to stabilize from this extreme example of the financial instability hypothesis we may begin to demand from the government to extend further regulations towards creating a more balanced and investor concentrated banking and finance sector. It is in our power as citizens to demand such actions, and our money will speak for itself. As the federal reserve continues to print more money -- simultaneously becoming wealthier as a private entity -- the national banking and finance institutions continue high risk operating practices, and the credit rating companies simply being bought out to provide manipulated credit ratings for agencies, it has become imperative for society to evolve in their economic policies by demanding reform to these “too big to fail” institutions who, in reality should be “too big to exist”.

 All this culminates in the globalization of the U.S. economy with the growing imbalance of payments of our imports to exports ratio , exchange rates of our currency related to other global currencies, and the continued manipulation by our own government to create an illusion of growth, which has supported the financial instability hypothesis all while ignoring the efficient market hypothesis allowing ponzi investors to manipulate the market to swing prices for huge profits in the short-term creating an even more unstable economic market.

 You can thank yourself for the delayed reaction to this dire situation, because as Thomas Jefferson famously stated, “Every generation needs a new revolution.” And it is up to you and I to determine whether or not it happens.

Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel

Import, Export, or Domestic Policy?

 Since the creation of the monetary system nations have executed imports and exports to trade goods. We have seen countries surge in growth as their exports exceeded their imports (Japan), we have seen countries falter as they continuously import more goods than they export (Unites States of America), and we have seen nations refuse to join any form of global trade simply surviving on their own domestic production (North Korea). With all these situations we witness importing, exporting, and domestic consumption, but which is best, and for what country? To answer this question we must define some key terms that relate to global trade, and to the benefits and drawbacks each country experiences.

Less-Developed Countries (LDCs): Do not have advanced technologies that can lower production costs, a well-developed infrastructure that can lower transportation costs, or institutions that lower transaction costs or make investments particularly safe.

Export-Oriented Economy: An economy based largely on the income incurred by exports more than any domestic consumption.

World Trade Organization (WTO): The successor organization to the General Agreement on Trade and Tariffs (GATT) that seeks liberalization of international trade and investment and generally promotes globalization.

Import-Substituting Industrialization (ISI): An economic theory employed by developing or emerging market nations that wish to increase their self-sufficiency and decrease their dependency on developed countries. Implementation of the theory focuses on protection and incubation of domestic infant industries so they may emerge to compete with imported goods and make the local economy more self-sufficient.

 Now that we have defined the key terms relating to global trade, and the benefits and drawbacks towards different countries, we may now begin to delve into the exact reasons as to why there is so much debate about which system works best. Let’s begin with the drawbacks of an export-oriented economic development path for LDCs. There are always benefits and drawbacks to each system, the trick is to develop the most logical system in which the majority benefit and any minority that experience drawbacks can be compensated accordingly. For an LDC to develop an export-oriented economic policy there are many drawbacks, one being that if the LDC does not have domestic infrastructure and a strong domestic economy with proper policies and regulations, the export-oriented economic policy will wreak havoc on the domestic market, as the LDC designates the majority of its ecological resources to exporting the goods in return for more competitive global markets. This creates a slew of problems domestically for the LDC, as citizens are faced with higher prices, because of the shortage of goods, the income that is received from the exported goods is reinvested into the exporting chain to increase production, and only a minority of the LDC’s population actually benefits from the subsequent revenue streams.

 An alternative to this economic policy, is one that provides slower growth accommodated with domestic economic security, and provides for domestic development of infrastructure, institutions, and other essential elements imperative of a prosperous economy. This economic policy is known as, barter trade, and has been used since the dawn of the human species. This concept of barter trade provides for LDCs that are beginning to enter the global market to trade (import and export) with other counties, to all-the-while operate on a balanced current account. This policy provides for slow economic growth, but immediate economic development, as the basic necessities for a society are met in trade of food, infrastructure supplies, and other goods that will promote prosperity. This policy is based completely on a long-term development plan, that does not consider short-term growth important. It could be considered a policy that fits between that of export-oriented economic policy and import-substituting industrialization, both of which implement an extreme of either importing goods or exporting goods, neither of which view long-term development as an important issue. But just like any system it has benefits and drawbacks, the largest drawback being that with bartering you can only supply your domestic market with so much of imported goods. This suggests that if an imported good is imperative to standard-of-living of the domestic population, but you can only acquire so much of it the population will suffer, because with barter trade a balanced current account must be kept at all times -- meaning that there is no trade surplus or deficit allowed. This drawback may result in a lower standard-of-living while the barter between the goods is adjusted to include the larger population, but it can also be considered an indicator good regarding the overshoot level of population in relation to the necessary good, suggesting the implementation of citizen approved population control parameters.

 No system is perfect as we have witnessed throughout history, but logically adjusting systems as soon as possible to avoid oscillated delays is the best way to naturally adjust to incorporate the shifts in the system. Reform is continuously necessary within a system, and finding an equilibrium within the system can prove to be improbable, but not impossible. Consider the many systems within our complicated world, many of which have ceased to experience reform since their creations, resulting in many problems now surfacing as a result of the oscillated delays we did not, and could not register due to our mis-educated ignorance.

Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel

Are We Mobile Capital?

 Have you ever heard the term, competitive advantage? How about, comparative advantage? Mobile capital? What about the IMF or the World Bank? I am sure some of these terms light up in your minds, like candles seen off in the distance. Unfortunately for a large population of Earth’s human species these terms contain no meaning. Now, not everyone has had the opportunity to study the concepts that relate to these terms, however these terms (besides the IMF and World Bank) play integral roles in the operation of our spaceship Earth. So let’s begin this discussion by defining these key terms listed above and the how and why they relate to your lives.

Absolute Advantage: A country has an absolute advantage if it can produce the good in question at a lower absolute cost than its trading partners.

Comparative Advantage: If it can produce the good in question more cheaply relative to other goods it produces than can its trading partners, regardless of absolute costs.

David Ricardo: Was a British political economist and stock trader. He was often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill.

International Monetary Fund (IMF): An international financial institution composed of member nations and created at Bretton Woods, New Hampshire, in 1945. Originally designed to focus on short-term balance of payments financing to promote international economic stability, in recent decades it has strayed from its charter.

World Bank: An international financial institution composed of member nations and created at Bretton Woods, New Hampshire, in 1945. Originally designed to focus on long-term lending to promote the development of underdeveloped countries, in recent decades it has strayed from its charter.

 Now that we have defined these key terms we will be able to continue our discussion. When we discuss comparative advantage between countries, we never seem to consider the capital that is invested. This capital is usually considered mobile capital, but with comparative advantage between individuals capital mobility is detrimental to this perceived advantage. This is because as an individual who holds a comparative advantage over another can complete whatever tasks more efficiently than the other, mobile capital suggests that the productive energy and capacity of the less efficient individual can be transferred to the absolutely more efficient individual. This is not the case in situations of comparative advantage, where capital must be immobile for advantages to be expressed. An example of a productive resource that is not mobile would be, human capital in the form of labor without the skills. With just the labor aspect human capital cannot become mobile capital seeing that different jobs require different skills, which require trainings and education. The example of human capital being immobile does not prove the last statement wrong in relation to comparative advantage and capital immobility, because if you look at it, one nation that produces sugar more efficiently than another nation which produces coffee more efficiently than the last, the two nations cannot have capital mobility with their human capital seeing that only a limited number of workers can produce both coffee and sugar, the capital becomes immobile as long as comparative advantage is in effect.

 Continuing along with the concepts of comparative and absolute advantage, we can now see a pattern growing within global trade and expansion. There are two terms that are used to discuss global trade, one is globalization the other is internationalization. Internationalization refers to the increasing importance of relations between nations: international trade, international treaties, alliances, protocols, and so on.The basic unit of community and policy remains the nation, even as relations between nations, and between  individuals in different nations, become increasingly necessary and important. Globalization refers to global economic integration of many formerly national economies into one global economy, by free trade, especially by free capital mobility, and also, as a distant but increasingly important third, by easy or uncontrolled migration. Globalization is the effective erasure of national boundaries for economic purposes. National boundaries become totally porous with respect to goods and capital and increasingly porous with respect to people, viewed in this context as cheap labor or in some cases cheap human capital. The importance of these two separate concepts is, with internationalization we simply trade across borders but continue a strong national protection, whereas globalization calls for complete unity and transparency of all borders. This leads to economic unity, governmental unity, and ecological capital unity, and example of this is the E.U.

 With all the global trade, advantages, mobile and immobile capital, and continuing diversification of national borders, it is becoming relevant that we must decide what is best for a prosperous society and planet, internationalization or globalization?

Thank you for your interest, please comment and subscribe.

Onward,

Hayden van Andel