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Analysis

To what extent is MBS’s Vision 2030 achievable?

What is Vision 2030?

Vision 2030 is crown prince Mohammed Bin Salman’s — or MBS as the western media calls him — crown jewel. The kingdom is slowly starting to tip the iceberg and moving towards a more diversified economy and developing its economy, which today is mostly selling oil. To understand the motives of Vision 2030 and evaluate its effectiveness, we must dial back in time. 


The country that is now Saudi Arabia has its origins in the 1900s when a country popped out of nowhere in the Arabian peninsula and proclaimed its independence. It was a very poor country. In fact, very poor could be an understatement. The Kingdom of Saudi Arabia was struggling to fund itself and make ends meet (Almtairi).

The discovery of “black gold”

It was during this time that British geologists started to see that the Arabian/Persian gulf had something that can power machines en masse: black gold. Across the gulf, the British had struck a contract with the Persians to let them extract oil in Abadan. Even though the initial investors were private citizens, the onset of world war one brought about changes in the British attitude about oil. Due to oil having a higher energy density than coal, and it being more reliable, the British government became the spearhead for the Anglo-Persian oil company (Lumen Learning). 


In 1938, this black gold was found in a field near Dammam by an American-owned firm. The firm saw that Saudi Arabia could have billions buried under its surface. This company was later to be Chevron (National Geographic). In the 1940s, the US started to invest in the Kingdom of Saudi Arabia and developed ties. This was when the largest oil field in the world was found, causing the country to rise to prominence on the world stage. Saudi Arabia has remained there ever since. The newly exploited black gold littered the country with investment, which was funneled into developing the country. Roads were built, pipelines were built and the people started becoming rich (Council on Foreign Relations).

The formation of OPEC

Diagram which illustrates the oil boom by Paasha Mahdavi

The steady stream of investments pouring into the country was the start of the ‘good times’. The Kingdom got richer and as the world demand for oil skyrocketed, its stage on the world stage rose, too. Saudi Arabia later formed the OPEC, an organization which consists of oil exporting countries. OPEC, economically speaking, is an example of an oligopolistic firm: colluding in the free-market to influence the price of oil. 

Diagram representing profit maximization by a price-fixing cartel.

By the establishment of OPEC, Saudi Arabia and other middle eastern nations were able to exploit the oil market by fixing prices in accordance to what they wanted. This is illegal in most countries, but on a global scale, this is very normal and common. The organization would sell their oil at a price of P1 on the market, and the quantity sold would be QPROFIT. The sketched area represents the profit made by the OPEC. Now imagine this on a global scale. This is what brought immense wealth to the Saudis; and many thought that this system would hold (National Geographic). 

However, this idea was flawed. Oil is a scarce resource and with ever growing demand, it is being exhausted quickly. However, the bigger issue is that now there are two threats to the economy: the demand for oil has tapered off in developed countries causing crashes in oil prices and secondly, oil deposits, nonetheless, are running out. This is a dilemma Riyadh faces. The country, despite being extremely blessed with oil and wealth, has started to face shortages in cash due to the falling oil prices. Falling prices mean that it is harder for oil-based countries to break even. This means that they are more likely to have deficits and build up debt. This is not in the interests of the central bank, and neither is it good for the economy in the long-run. Secondly, with the fall in demand from countries such as the US, Canada and the EU, the oil market is being over-supplied more often which, possibly increases the chances of lower oil prices. 

How Saudi Arabia has responded to decreasing oil prices

With price wars, falling demand for oil, and oil being cheaper-than-ever-before in history, Saudi Arabia has realized that this phenomenon of black gold is fading, and that they should revolutionize their economy to respond appropriately. According to MBS and the published plan, the plan is to:

  1. Turn Saudi Arabia into a powerhouse for investment.
  2. Use the Kingdom’s geographic location to diversify the economy. 
  3. Open a relatively closed-off-state to one that is open and inviting to all. 

MBS and the team behind Vision 2030 are highly ambitious. They want to change how Saudi Arabia functions and runs. Everything mentioned in the plan are regular government-adverts for investment, however, what is striking is that the Kingdom is trying to invest elsewhere and move away from oil. This shows us that the government realizes that oil is a dying resource and is seeking to industrialize Saudi Arabia — not fueled by oil, but by pure willpower and costs. 

With COVID-19 impacting oil demand, and since oil accounts for most of the Saudi budget, it can be argued that the Kingdom has had the first major setback when it comes to Vision 2030. Nonetheless, they are making progress. MBS has been at work fixing issues and making Saudi Arabia more open. For example, the easing of visa restrictions will make it very easy to visit the nation and invest in it. However, with the advent of the pandemic, it can be questioned how effective the policy will be. Will it lead Saudi Arabia out of the oil trap, or fail to? Only time will tell.

Sources

  1. https://digital.library.unt.edu/ark:/67531/metadc503872/m2/1/high_res_d/1002775662-Almtairi.pdf
  2. https://courses.lumenlearning.com/suny-hccc-worldhistory2/chapter/the-discovery-of-oil-in-the-middle-east/
  3. https://www.nationalgeographic.org/thisday/mar3/oil-discovered-saudi-arabia/educator/

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Analysis

A look into the Big Mac Index

Introduction

The Big Mac Index is an informal measurement of PPP which was developed by The Economist in 1986. Purchasing Power Parity (PPP) is a method of comparing price levels in different countries and compares different currencies through a “basket of goods” approach. However, taking a basket of goods is quite an inaccurate way to represent the average prices of all goods and services in a country because each country has drastically varying baskets and a multitude of factors that can impact this very basket. Therefore, The Big Mac Index allows us to take a fairly standardized good — an example is a McDonald’s Big Mac, which is available in most countries — and use it to evaluate and compare currency exchange rates. 

The theory of PPP states that in the long run, exchange rates should naturally adjust and move towards the rate that would make the price of the market basket, or in this case a Big Mac, equal in both countries. You can see all the latest data for the Big Mac Index in different countries here

Calculations

The way these values are calculated are as follows:

  • Divide the price of one Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency); eg. Indonesia = 34,000 IDR & United States = 5.66 USD ∴ the implied exchange rate or PPP = 34,000/5.66 = 6007.07 
  • Compare this value with the actual exchange rate; eg. 14,125 → The difference between this and the implied exchange rate from our calculation suggests the Indonesian rupiah is 57.5% undervalued. 

“Undervalued” and “overvalued”

So what exactly do these terms “undervalued” or “overvalued” mean? An undervalued currency, for example, the Indonesian rupiah, means that the currency is worth less than its market value. This essentially indicates that the price of goods and services is lower in the target country, Indonesia, than in the base country, the United States. An overvalued currency, on the other hand, means that the currency is worth more than its market value and the exchange rate exceeds what the market is willing to pay; goods are relatively more expensive in that country. Overvalued exchange rates make imports cheaper than domestically produced goods and therefore tend to discourage domestic demand and encourage spending on imported goods. According to The Economist’s data for 2021, the countries with overvalued currencies when compared to the USD (not adjusted for GDP) are the Swedish krona, Norweigan krone, and Swiss franc. 

Problems with the Big Mac Index

Although the Big Mac Index provides a simple and casual method to assess currencies and their relative values against each other and the global market, it is not without its flaws. Firstly, the Big Mac is not available in all countries, which limits the ability for global comparisons and has subsequently caused the rise of alternative indices, such as the KFC Index for African countries. Other factors which can limit the extent to which the Big Mac Index can serve as an accurate representation of currency values include demand, accompanied by the price elasticity of demand, of Big Macs. In certain countries, it is inevitable that the demand for a product like the Big Mac would be significantly lower than its demand in the United States. The index can also be impacted by the purchasing power of domestic consumers, how many hours they must work in order to afford a Big Mac, rates of taxation, domestic competition, factor input costs, and so on.

An interesting example to note is how the Russian ruble is calculated by the BMI as one of the most undervalued currencies as the Russian Big Mac is one of the cheapest. However, Moscow is one of the most expensive cities in the world! This could be due to the fact that although domestic food factor inputs are relatively cheap, restaurants suitable for business dinners with English-speaking staff are expensive.

Conclusion

All in all, the Big Mac Index is an insightful and easy-to-understand method for learning the basics of currency valuation and why it is important in global markets. However, it is worthwhile to note that this data must definitely be taken with a grain of salt, or perhaps a pinch of it, for your fries…? 

Sources

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Analysis

What is soft power?

Hard power vs. soft power

In international relations, there are two main types of power: hard power and soft power. Hard power is related to the traditional image people have when they hear the word “power.” The definition of hard power is “power deployed in the form of coercion;” this can be using force, threatening the use of force, and putting in place economic sanctions or inducements of payment. Soft power, meanwhile, refers to the “use of positive attraction and persuasion to achieve foreign policy objectives.” This means that the main aim of a “soft power” foreign policy is to become influential rather than using any form of “real” (or hard) power.

The origin of soft power

The concept of soft power was first proposed by Joseph Nye in the late 1980s. Joseph Nye originally described three sources of soft power, namely political values, culture, and foreign policy. After World War II ended, the basis of U.S. soft power was the spread of ideas and values like democracy, a free-market economy, and human rights. People and countries looked up to the United States of America as a role model and wanted to be like them. Therefore, these people and countries were more willing to put these ideas like a democratic government and a free-market economy into place in their own countries as they had seen how well these worked for the USA. In the period immediately after the end of the Cold War, the concept of “soft power” caught fire among politicians, with some even claiming that soft power “defined” the period immediately after the Cold War.

Soft power today

Although hard power has been used more frequently again by countries again nowadays — an example is North Korea building nuclear weapons — China has increasingly been using soft power. In Joseph Nye’s original article on soft power, China was hardly mentioned. Nowadays, China is the world’ biggest trading country. Examples such as China’s Belt and Road Initiative — through which the Chinese government aims to encourage economic growth in other countries by providing the necessary infrastructure — serve as evidence of China’s new approach to international relations.

Sources

  1. https://softpower30.com/what-is-soft-power/
  2. https://foreignpolicy.com/2018/08/20/the-rise-and-fall-of-soft-power/
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Analysis

The economic situation of Africa in 2020-21

Africa’s growth performance and outlook to the COVID-19 pandemic situation

Economic activity in Africa was constrained in 2020 by an unprecedented global pandemic due to COVID–19. Real GDP in Africa grew by 3.4 percent in 2021, after contracting by 2.1 percent in 2020. This projected recovery from the worst recession in more than half a century will be underpinned by a resumption of tourism, a rebound in commodity prices, and the rollback of pandemic-induced restrictions. Nevertheless, the outlook is subject to great uncertainty from both external and domestic risks.

Debt dynamics and consequences

The COVID–19 pandemic has caused a surge in government financing needs in Africa. Since the COVID–19 pandemic began in early 2020, governments have announced fiscal stimulus packages ranging in cost from about 0.02 percent of the GDP in South Sudan to about 10.4 percent of the GDP in South Africa. These fiscal stimulus packages have had immediate and direct implications for budgetary balances, borrowing needs, and debt levels. However, the World Bank estimates that African governments need additional gross financing of about 154 billion dollars in 2020/21 to respond to the crisis. 

Debt resolution and the nexus between governance and growth

Debt resolution in Africa has often been disorderly protracted, with bad economic consequences. The economic consequences of sovereign debt restructuring are less severe in countries that act pre-emptively and collaboratively and in those countries where economic governance is stronger. However,  recent debt resolution in Africa has been delayed by long-lasting litigation with private and official creditors. The absence of orderly and successful sovereign debt resolution, especially with private creditors, makes the prospects of debt distress worrisome for African economies.

Adapting to climate change and building climate resilience

By 2021 The Next Generation ACBP has set out a blueprint to help Sub-Saharan African economies achieve low carbon and climate-resilient outcomes. The World Bank has used this new Climate Plan to build on a strong track record under the original plan in which the Bank supported 346 projects with more than $33 billion. In East Africa, the World Bank is also helping affected communities and households cope with the worst locust plague in decades. 

Accelerating the high-tech and digital economy

The World Bank is supporting Africa’s vision to achieve universal and affordable access to information and communications technology. In Malawi, the Digital Foundations Project complements government efforts on digital transformation by supporting improvements to the legal framework and building human capacity, promoting high-quality internet access for all, and building the government’s ability to deliver services to citizens and conduct business digitally. Across the continent, the Bank has led Digital Economy Country Diagnostics (DE4A) in over 20 countries (completed and FY20 in progress) to assess the current state of the digital economy, with 15 more countries requesting diagnostics in FY20. The World Bank also has 15 active and 29 pipeline investment operations in Africa that contribute to the operationalization of the DE4A initiative that includes a broadband infrastructure component totaling over $5.5 billion in investment.

Harnessing technological developments are key to improve access to clean and reliable energy. The Bank is supporting operations in Africa to increase access through grid extension and expansion of transmission networks, innovative off-grid electrification solutions, expansions of renewable generation capacity, development of regional power pools, and improvement of service efficiency. Across Africa, many World Bank-financed projects, such as the Azito Power Project in Cote d’Ivoire, are crowding in private capital and reducing public debt as well as lowering the overall costs of service for electricity. Furthermore, the World Bank is also supporting the development of new technologies such as solar storage solutions, smart meters, mobile utility payments, satellite mapping, and imaging, high-voltage DC transmission, and solar home systems and mini-grids.

Supporting inclusive governance and transforming economies

It is important to enable efficient and inclusive delivery of services, such as judicial courts, waste management, and safety nets, and to build institutions and systems which are resilient to economic, social, and environmental pressures. These pressures can pose challenges to the World Bank’s work on governance and inclusion in Africa. By creating sound conditions for investment and establishing continuity of state services, businesses can thrive and citizens can access much-needed services, thereby achieving greater stability. Technology has also affected how governments operate and interact with citizens, increasing transparency and service delivery. The region continues to work to connect every African individual, business, and government to the Internet by 2030.

In March 2020, Somalia began receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, which will help Somalia reduce its initial debt of $5.2 billion (end of 2018) to $557 million once it reaches the HIPC Completion Point. The Bank played a major role in helping Somalia reduce its debts by providing $140 million in Pre-Arrears Clearance Grants in FY19 and $375 million in development policy financing to strengthen state capacity, financial management, transparency, and promote inclusive private sector-led growth. Additionally, the World Bank has also provided nearly $400 million in financing since March to help tackle the urgent crises facing Somalia while planning for long-term reforms and development goals.

  

Sources

  1. https://www.worldbank.org/en/programs/africa-climate-business-plan
  2. https://www.worldbank.org/en/topic/the-world-bank-group-and-the-desert-locust-outbreak
  3. https://www.worldbank.org/en/news/feature/2020/07/23/the-secret-to-cote-divoires-electric-success
  4. https://www.worldbank.org/en/news/feature/2020/10/01/reengaging-with-somalia-for-long-lasting-development-outcomes
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Analysis

The Flaws of the Chinese Model

Historical Context

In the 1970s, Beijing liberalized the economy, opening it up to foreigners, and adopting policies that promoted free trade. These were similar to glasnost and perestroika, which were implemented in the USSR. The hope was that millions of Chinese could be lifted out of poverty and into prosperity. While Deng’s reforms started in agriculture, he slowly branched out to include industry as well. A perfect example is Shenzhen, now a bustling metropolis, back then it was a shanty-town. He decided that the Pearl River delta should spearhead the liberalization. The PRC created special economic zones with little oversight, where foreign firms could trade freely with minimal interference from Beijing. This was adopted throughout China as the try-outs were successful, accelerating China’s economic growth.

Analysis

China progressed and grew — to the shock of many economists as no country on earth had ever grown at the rates China did. This raised the net output of firms in the economy, therefore increasing the GDP. As the Chinese adopted friendlier policies, the GDP rose further as China became a lucrative investment destination ceteris paribus. Mathematically speaking, as GDP is Consumer Spending, Investment, Government Expenditure, and Net Exports (Total Exports – Total Imports) added together, as China grew its reputation on the world stage and investments from abroad grew raised the GDP, imports remained stagnant due to an uncompetitive Yuan. Meanwhile, exports also increased, raising Net Exports (Total Exports – Total Imports), having a ripple effect on the GDP too.

GDP of China [PPP] from the World Bank Database (CC BY-4.0)

 As China started to industrialize, the wages grew at rates never seen before. It looked like China had the perfect deck of cards to become an industrialized nation, which it did — as China is a newly industrialized country. However, this came with many downsides: externalities and inequality.

Externalities are a cost or benefit placed on a third party. They can be positive or — as in China’s case —  negative. The costs to produce outweigh the cost to society from the production in markets. Therefore, there is a welfare loss. As there is a welfare loss, society is worse off — this can be in the forms of pollution, increased health risks, lower life expectancies, or otherwise. The welfare loss exposes the public to harmful particles and extreme air pollution. Now, this leads us to question how well-off are the Chinese?
Even though rapid economic growth has increased wages and lifted many out of poverty, and the effect of increased GDP has had direct consequences on the Chinese, nonetheless, one result of rapid unchecked growth is inequality. As The Economist reported in 2015 and 2019, education is highly unequal. Access to education helps individuals earn more due to the development of skilled labor and allows firms larger access to a larger pool of individuals with specialized skills. However, as stated in both the articles, most Chinese schools are now jam-packed with elite, wealthy kids; and uneven wealth distribution, like in the United States, has led to the degradation of the quality of education received by rural Chinese. This can cause them to struggle in the gaokao, an all-important university exam, viewed by many rural Chinese as their only way out. However, the government has been attempting to fix this. Beijing has suggested that educational reforms are needed. There is also the big North-South divide. Farmers in the north cannot earn enough to live, so they migrate to the south to become laborers or factory workers. As they live in poor neighborhoods, this increases the chances of their children scoring poorly on the gaokao.

Conclusion

Nonetheless, China has had tremendous success in eliminating poverty. Its people — once some of the world’s poorest — are now living in a modern country. However, many challenges are facing the Chinese. The ones discussed here are scratching the surface; some others include depopulation, firms’ inefficiency, unemployment, and an overheating economy.

Sources

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Analysis

A look at Bhutan’s carbon-negative economy

An introduction to Bhutan

Bhutan is a small country in the Himalayas, located right in between India and China. It is a bit ironic that India and China are two of the most populated countries on Earth, but there are less than one million Bhutanese. A Buddhist country by constitution, Buddhism plays a central role in Bhutan. Healthcare and education are completely free, and although Bhutan is officially a democracy, the King — who is required to retire at the age of 65 — still plays a central role in Bhutan. These things all make Bhutan unique, but the way in which Bhutan’s economy is structured is also very unique.

What it means to be carbon-negative

Bhutan is the only country in the world that is carbon-neutral. Actually, Bhutan’s economy is carbon-negative, which means that the forests in Bhutan absorb more carbon dioxide (around seven million tons of carbon dioxide a year) than the country of Bhutan produces (only around two million tons of carbon dioxide a year). In fact, over 70% of Bhutan is covered in trees, and their constitution demands that at least 60% of Bhutan’s land will always be covered by forests, making Bhutan a “carbon sink.”

In addition to mandating that 60% of Bhutan will always be covered by trees in the constitution, Bhutan has taken a series of other steps to ensure that its economy will remain carbon-negative, to keep the promise Bhutan made at the United Nations Climate Change Conference in Copenhagen in 2009. These steps include banning log exports, providing free electricity for rural farmers, and using Bhutan’s many rivers to generate hydroelectric power, which is exported to Bhutan’s neighboring countries. This means that Bhutan is not only promoting the use of renewable energy sources within its own borders but also in its neighboring countries.

GDP vs. GNH

Bhutan’s GDP was roughly 2.5 billion US dollars in 2019, but this is not the most important indicator for the Bhutanese government. Instead, Bhutan focuses on “Gross National Happiness,” GNH for short, which is defined as “development with values.” Although economic development is important to the Bhutanese government, sustainable economic growth and ensuring the happiness of their population is equally, if not even more important to Bhutan. With mental health issues on the rise around the world, introducing the concept of GNH to other countries could be an important step. 

Conclusion

Bhutan is unique in many different ways. Although it is a very small country and actually one of the smallest economies in the world, Bhutan has big ambitions for the future. Bhutan is hoping to produce zero net greenhouse gas emissions and to produce zero waste by 2030 and was aiming to export enough electricity produced by hydropower to offset 17 million tons of carbon dioxide. If you are interested, I strongly recommend you to watch the TED talk at the link below (the second source).

Sources

  1. https://www.gvi.co.uk/blog/bhutan-carbon-negative-country-world/#:~:text=Bhutan%20absorbs%20roughly%20seven%20million,millions%20of%20tons%20each%20year.
  2. https://www.youtube.com/watch?v=7Lc_dlVrg5M

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Analysis News

The US Department of Defence’s Plans to Win the War on Global Warming

Who is the Department of Defence?

The Department of Defence is an executive branch of the department of the federal government, charged with coordinating and supervising all agencies and functions of the government directly related to national security and all the United States Armed Forces.

Global Warming and how the US is affected by it

Currently, the US contributes around 15% of the world’s greenhouse gas emissions through a variety of activities including industrial activities, the burning of fossil fuels, and many more. The question remains, will the USA’s future plans allow this figure of 15% to be reduced significantly? The United States is a region of the world that is highly susceptible to natural hazards, which have only been intensified by the developing issue of climate change. Therefore, the US has a strong need and desire to reduce the impacts of climate change. In 2019, over 90 natural disasters were reported in America alone. Although the US is a developed, High Income Country (HIC), these natural disasters cost the US government billions each year, money that authorities can’t afford to lose, but more importantly the hazards can destroy whole communities and livelihoods. For example, in 2017, the government spent a record $306 billion following three hurricanes, extreme wildfires, flooding, tornadoes, and droughts – each of the 16 disasters exceeded a billion dollars in reparation costs.

The Plan of Action

The US Department of Defence has developed a ‘huge appetite’ for renewable energy sources, as described by POLITICO.com. President Biden, working alongside the Department of Defence, has assured the media that over $2 trillion of the governments’ budget will be directed into the expansion of clean energy, aiming to reduce carbon emissions and build resilient facilities over the next four years. However, the ambitious plan will need the approval of Congress, an audience that is likely to show resistance to the plan, due to the strong views of the Republicans, who aim to block any ‘green’ plans. The Department of Defence is one of the United States’ biggest contributors to carbon emissions and that is why this plan of action is imperative. Many people believe that the way to reducing climate change is by individually reducing our own carbon footprint. While this may be true, there is a limit as to how much individuals produce as companies and organizations such as the Department of Defence produce the vast majority of the world’s greenhouse gas emissions. Although the Department of Defence’s plans are not yet complete, their aims and intentions are in favor of helping reduce climate change, a plan that may take many years, but a small step today is still a step in the right direction.

Sources

  1. https://en.wikipedia.org/wiki/United_States_Department_of_Defense#:~:text=The%20United%20States%20Department%20of,the%20United%20States%20Armed%20Forces
  2. https://www.activesustainability.com/environment/top-5-most-polluting-countries/
  3. https://oceanleadership.org/natural-disasters-cost-u-s-record-306-billion-last-year/
  4. https://www.politico.com/news/2021/01/04/biden-pentagon-climate-change-454404
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Analysis News

The UK’s Fossil Fuel Move

The Background

In late 2020, the UK government announced plans to completely ban the sale of petrol and diesel vehicles by 2030 – previously aimed at 2040. These efforts are a step towards Boris Johnson’s 10-point environmental “green industrial revolution” plan and are part of a global effort to phase out fossil fuels. This plan is approximated at £12 billion and aims to create over a quarter of a million jobs nationwide. Apart from the fossil fuel vehicle phase-out, it also vows to quadruple offshore wind farms (which essentially increases the UK’s wind power capacity to power all households), boost hydrogen production, invest in small and advanced nuclear reactors, and several other efforts to curb the climate crisis. 

Problems with Lobbyists

Although the plan may seem like a massively scaled initiative to accelerate the move towards sustainable development, many are not too pleased with the efforts made. Firstly, the car industry has been lobbying the government this month to urge a delay in the implementation of this ban; this is not surprising at all. Major car manufacturers such as BMW, Ford, Honda, Jaguar Land Rover, and McLaren all argued against these bans in written submissions, and BMW stated that there is “no scientific evidence to support such ambitious market uptake in the UK” for the previous 2040 ban, let alone this new and earlier date. The Society of Motor Manufacturers and Traders (SMMT) is a UK lobby group, which aims to support and promote the interests of the automotive industry. SMMT calculated that this ban would cause a drop in car sales from £2.3m in 2025 to only about 800,000. Furthermore, SMMT’s chief executive is also worried that 9 years is not enough time to convince the public to switch to the greener electric vehicles and believes that many drivers would find it much more convenient and cost-efficient to stick to their regular way of life. However, moving this ban date to 10 years earlier would make the UK the fastest G7 country to do so. Although it would reduce the UK’s emissions significantly earlier than initially planned, it also severely impacts the marginal costs and research & development plans of several car manufacturing firms. It also puts them in a difficult position in terms of developing their supply of different vehicles and being able to adapt to changing market conditions and demand.

Apart from the car industry, other parties are dissatisfied with the announcement of this plan – including the Labour party. They claim that this plan is deeply disappointing in ambition, and say that it won’t effectively mitigate the current environmental concerns or the unemployment caused by COVID-19. Labour is striving for a green stimulus package, and is referring to Johnson’s 10-point plan as a “pale imitation” of what the country really needs.

Conclusion

Despite the divergent views on this new announcement, it is undoubtedly a step towards a greener future. This ban still works to catalyse the country’s plans to net-zero emissions and the phase-out of fossil fuels. What will actually provide assurance, however, is proper evidence to the public that Downing street and the UK government will pledge and commit to turning these ambitions into a transformative, yet urgently needed reality to curb the harrowing effects of climate change and also provide the UK with the jobs they need.

Sources:

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Analysis Discussion

Spatial Inequality – A Conversation That We Need To Start

Introduction

By definition, spatial inequality is the unequal distribution of resources and services across different areas or locations, such as healthcare, welfare, public services, household income, and infrastructure. The distribution of such characteristics over space can be described in terms of proximity, distance, clustering, and concentration, according to Wikipedia.

Why Spatial Inequality is a Problem

Over time, spatial inequality has led to strong divisions, not only across borders but also within local communities. Currently, in Nairobi, over 60% of the population lives on less than 5% of the land- creating large economic disparities. The poorer population lives with inadequate living standards, which includes minimal access to important services such as healthcare and education. Most would agree that this is a direct result of colonialism, where colonizers segregated people by race, level of income, and many more factors. 

Causes of Spatial Inequality

However, it is arguable that income inequality and economic disparities have been one of the main driving forces behind spatial inequality. In Nairobi, for example, more than 65% of the population (around 3.5 million people) live within the informal sector. The advantage of the informal economy is that it provides income and employment to people, regardless of education and experience. These are qualities that the formal economy is deemed to be reliant on. However, the informal economy has costs, also. Many of those who are forced to work within the informal sector — in jobs such as street vendors, flea, and food markets — have had to rely on this unstable source of income, a result that can be traced back directly to unequal access to services such as education. 

The densely populated slum communities within Africa are the home of millions of citizens throughout the continent. However, since these homes have been set up quickly, without building regulations and without being previously planned by the city councils, important services were not set up. These important services could potentially cater to the new settlers, educating them so that one day they can acquire a job within the formal sector, thus removing them from this constant cycle of poverty.

Efforts to Combat Spatial Inequality

Currently, schools that have sprouted within slum settlements are being bulldozed, as the local government aims to rid cities of “informal settlements.” Unfortunately, they are failing to do so miserably. In 2018, the headline “Schools for 2000 children in Kenya’s Kibera slum bulldozed to the ground” hit the media and news outlets, showing the world that rather than helping combat income and spatial inequality, governments were willing to destroy livelihoods in an attempt to rid the city of the ‘problem’ — namely, the informal sector.

Conclusion

It is important to understand the risk and the impact that both spatial and income inequality can have on the livelihoods of those who live within these make-shift settlements. It is imperative that we combat this issue, in similar ways that one would address racial or gender inequality. I hope that one day we can live in a world where no parent has to worry about being able to feed their children; a world where children can dream about what they want to be when they grow up; a world where home is not a temporary shelter, but a place where love and happiness can thrive.

Sources

  1. https://www.google.co.uk/amp/s/gemreportunesco.wordpress.com/2018/08/10/schools-for-2000-children-in-kenyas-kibera-slum-bulldozed-to-the-ground/amp/
  2. https://en.wikipedia.org/wiki/Spatial_inequality
Categories
Analysis

Why Indian Farmers Have Hit the Streets in Protest Amidst a Global Pandemic

In September of 2020, the Parliament of India passed a set of three farm bills outlining the new changes to the national framework of agriculture and farming. These new bills were signed into law by the Lok Sabha (the House of the People), the Rajya Sabha (Council of States), and Ram Nath Kovind, the President of India. Less than a month following the assent of the bills, and despite the current health crisis, headstrong farmers from across the country began protesting on the highways of Delhi and demanding repeal of the new changes – why this unrest?

To understand the motives of the farmers, we must first understand the previous framework for farmers before the introduction of the 2020 bills. For decades, the government has supported farmers through Minimum Support Pricing (MSP), accompanied by the ‘mandi’ system of the Agricultural Produce Marketing Committee (APMC). MSP is set on several crops by the central government, and these minimum prices guarantee insurance for farmers when they sell their crops. These crops are then procured from the farmers by government agencies at these promised MSP prices which cannot be altered. The concept of MSP safeguards the revenues of farmers across India and protects them from situations where crop prices fall drastically. The mandi system, essentially, is a system of agriculture markets established by states – called ‘mandis’ – which is the only place where agricultural commodities can be auctioned and sold. As we can see, the pre-farm bill system protected farmers to a certain extent, and given that 60% of the Indian population works in agriculture, the new proposed bills caused unease amongst the large farmer population, leading to the ongoing protests swarming India. 

The new farm bills are composed of three individual provisions. These include the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, and lastly the Essential Commodities (Amendment) Act. In short, they expand the scope of trade areas, allow farmers to sell to anyone at any price, and end the imposition of stock-holding limits. Prime Minister Narendra Modi states that this gives farmers more freedom to sell directly to buyers without a middle man, and sell to other states or large grocery chains. Supporters of the bills also say that farmers will get better prices through competition and cost-cutting on transportation, and allows farmers to enter agreements with agri-businesses or large retailers on predetermined prices. The root of the protests lies in the fear amongst farmers that this will dismantle the current MSP and mandi systems in place and work against small farmers. In the long-term, large firms may have the upper-hand and be able to dictate terms and drive down prices. 

Although the government persistently affirms that these new laws will accelerate industry growth, attract private investment, and increase farmer incomes due to market competition, the thousands of farmers protesting on the streets of India readily disagree, and are fighting for legal assurance of protection against large corporate firms. The key demand of the farmers, who are setting up blockades around New Delhi and going on hunger strike, is the withdrawal of these three laws which deregulate the sale of their crops. The response of the government so far has been to suspend the imposition for up to 18 months, in hopes that the farmers may “come to the negotiating table with confidence and good faith”.

Despite what is being discussed within the government behind the scenes, the powerful cohorts of farmers from the states of Punjab, Haryana and more will continue to persevere with their “Delhi Chalo” demonstrations, and won’t cease until repeal. 

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