Theories of Growth and Debt

Theories of Growth and Debt Basically in economic literature we learn two ways in which a country can grow its economy. It can be growth which has been brought about by innovations in the process of competition, which can well be described by the dynamic completion model (Ellig, 2001). On the other hand according to Solow (1956) neoclassical model economic growth can be achieved by an expansion in the amount of investment. According to this model a country will attain economic growth if it increases its savings and investments. This automatically implies that for the least developed countries to grow economically they need to implement policies that support greater savings that will then increase investment and hence growth. To finance its activities a country has a number of options of raising the funds. It can make use of the internal sources such as taxes and fees or it can borrow if the internal source is not enough to finance the budget deficit. According to Adegbite, E et al (2008) the Dual Gap theory is a better explanation of the reason for opting for external finance as opposed to domestic financing in financing the sustainable development. According to the theory in developing countries the level of domestic savings is not sufficient to finance the needed investment to ensure economic development; since investment is a function of savings it is logical to require the use of complementary external goods and services. However, the relationship between domestic savings and foreign funds gives a guide as to how a country can borrow abroad (ibid). Also since most of LDCs are far from their steady state growth any investment injection could lead then to have accelerated economic growth. The country should borrow abroad if it is anticipated that the return on the borrowed funds will be higher than the cost, therefore we do expect a country to invest in projects having expected returns higher than the cost of foreign debt. Since if not used wisely, debt can amount to impeding the long term growth prospect of the country. External debt does not transform automatically into debt burden when a country optimally make use of the fund. According to Adegbite et al (2008) in an optimal condition, the marginal return on investment is greater than or equal to the cost of borrowing, in this case debt will show a positive impact on growth. According to the neoclassical growth theory, debt has a positive direct effect on economic growth. This is because the amount borrowed if used optimally it is anticipated to increase investment. On the other hand the indirect effect of debts is its effect on investment. The transmission mechanism through which the debt affects growth is its reduction on the resources available for investment by debt servicing. According to debt overhang hypothesis, a certain level of external debt has a direct positive effect to economic growth until a certain point where by an additional debt will have a negative effect to growth. The Debt Overhang Theory According to Krugman (1988), the debt overhang theory shows that if there is some likelihood that in the future debt will be larger than the countrys repayment ability; expected debt-service costs will discourage further domestic and foreign investment because the expected rate of return from the productive investment projects will be very low to support the economy as the significant portion of any subsequent economic progress will accrue to the creditor country. This eventually will further reduce both domestic and foreign investments and hence downsizes economic growth (Krugman, 1988, Sachs, 1989a). Claessens and Diwan (1990) argue that debt overhang is a situation in which the illiquidity effect, the disincentive effect, or both effects are strong enough to discourage growth in the absence of concessions by creditors. This is a narrow definition of the debt overhang where the impact of a high external debt that is linked to the tax disincentives argument, where any success in indebted countrys economic performance is taxed away by creditors and ultimately little is left over for domestic investment and subsequent growth (Hjertholm, 2001). According to Were, M (2001) debt overhang is much wider in that the effects of debt do not only affect investment in physical capital but any activity that involves incurring costs up-front for the sake of increased output in the future. Such activities include investment in human capital (in terms of education and health) and in technology acquisition whose effects on growth may be even stronger over time. As stressed out by Agenor and Montiel (1996), the approach to external debt is motivated by several observations. Most of which policy-oriented discussion of the debt problem were centered on the question of whether the debt crisis was one of solvency or of liquidity problem. Differentiating the two terms we can see that, liquidity problem is the inability of a country to service its debts as they fall due. That means lack of liquidity occurs when a county does not have enough cash on hand to pay current obligations. On the other hand, solvency issue relates to whether the value of a countrys liabilities exceeds the ability to pay at any time; a country is insolvent when it is incapable of servicing its debt in the long run (Ajayi, 1991). Taking this into consideration, we observe that, most of least developed countries were solvent and still they are solvent. As pointed out by Kletzer (1988), the present value of the most of least developed countries prospective resources which were measured by discounted value of the real outflows was way far larger than the debt obligations they have. In answering the question as to why the indebted poor countries had a problem of illiquidity, Jonse G. Leta (2002) in his research on external debt and economic growth in Ethiopia pointed out that although the indebted poor countries have been able to pay i.e. solvent, the willingness to pay decline for a variety of reasons. Among many factors there are domestic and external factors that responsible for this outcome of crisis. The domestic factors often cited include wrong macroeconomic policies such as fiscal irresponsibility and exchange rate misalignment, policies that deter savings such as negative real interest rates, which in turn reduce investment and encourage capital flight and financing long-run projects with short-term credits. External factors include oil shocks, deterioration in the terms of trade and rising foreign interest rates. Essentially the higher the stock of debt to the country, the higher is the current sacrifice for the sake of the future growth. The theory of debt overhang is well explained by the hypothesis of Debt Laffer curve which relates the magnitude of countrys debt and the value of repayment. According to Freytag, A et al (2008) the NPV of the debt repayments increases with stock of debt up to a certain threshold point beyond which a higher face value of the debt will be associated with lower efforts and investments, lower economic growth and lower NPV of expected debt service. According to Clements, B et al (2005) high levels of debt can depress economic growth in low-income countries, external debt slows growth only after its face value reaches a threshold level estimated to be about 50 percent of GDP (or, in net present value terms, 20-25 percent of GDP). Debt overhang depresses growth by increasing private investors uncertainty about governmental action taken to meet the debt service obligations. These include increase in money supply that causes inflation, distortion of future tax policies (Clements et al, 2005). Therefore the debt overhang problem is linked to the transfer of resources from capital scarce to capital surplus countries. The debt Laffer curve argument (which was apparently introduced by Jefrrey Sachs) is derived from the tax laffer curve hypothesis introduced by Arthur Laffer (1981), who argues that if personal tax rates were raised, they generate a dreadful impact on government tax revenue. The reason is that high tax rates either simply discourages investment or leads to tax evasion. Figure 1 presents the Debt Laffer Curve of external debt, expected payments and amortizations. If the stock of external debt is small, such that from the origin to point A, then it is expected that the debtor country will be able to meet the forthcoming debt repayment in full without a problem. Under this situation the marginal expected debt repayment with relation to the debt stock is one. However, after this point the expected debt repayment expands at a lower rate in relation to the debt accumulation. A country under this level of debt stock is expected to have some difficulties in meeting the debt repayment; this can be seen from the marginal expected debt repayment of between 0 and 1 exclusive. The risk of inability to service the debt increases with the increase in debt stock. The risk may vary from country to country according to the level of their debts interest rate. At point B, the expected debt repayment reaches its maximum saturated point and then starts falling, at this point and beyond the marginal impact of debt is negative. A country under this situation is totally unable to service the debts and most of the time declared to be in debt crisis. On extending the debt laffer curve to show the contribution of external debt on economic growth on a country we can have figure 2 below. This shows the non linear relationship of external debt and economic growth as supported by Pattillo, C. et al (2002).. A reasonable level of external debt actually has a positive impact on economic growth while excessive debt stock is destructive. As debt stock increases with time growth decreases and it can sometimes reaches a negative level of economic growth. Combining the two figures we have figure 3. Here we can see that as debt increases, creditors expectations of being paid are distorted. From the figure it is easily seen that when the expected payment of the debt increases proportionally less than the debt stock, the distortions are such that extra amounts of debt start decelerating the GDP growth rate. Moreover, if the debt accumulation achieves higher levels such that the debtor starts diminishing or failing to make its regular amortizations, any extra debt increment will be translated into negative contributions to the GDP growth rate. Claessens et al, (1996) stressed out that, the other channels through which the service of a large amount of external debt obligations can affect economic performance include the crowding out effect, the lack of access to international financial markets and the effects of the stock of debt on the general level of uncertainty in the economy. The crowding out effect occurs when there is a reduction in the current debt service that lead to an increase in current investment for any given level of future indebtedness (Cohen, 1993). If a greater portion of export revenue is used to service external debt, very little is available for investment and growth. Claessens et al (1996) also argues that where foreign assistance is related to the debt and debt service of indebted poor countries, the effects of a debt overhang on economic performance is a more complex question. Debt servicing difficulties lead to a deterioration of relations with creditors, thus reducing the amount of finance indebted poor countries can access (Khan and Villaneuva, 1991). Theoretical Consideration of Impact of Debt Relief From the literature on debt overhang and its effects on growth it is evident that debt relief might have a stimulating effect on investment and economic growth. Since debt overhang exist when a country exceeds its repayment ability, it can be suggested that, expected debt service is an increasing function of countrys output level (Krugmanv1988; Sachs 1989). Therefore in presence of debt overhang, the greater percentage of benefits of an increased output brought about the debt accrues to the creditor while all the costs incurred accrue to the indebted country. The incentive mechanism suggests that, in the presence of debt overhang high debt reduces both public and private investment. In the case of public investment, the incentive to investment is discouraged when a large percentage of the return on the debt accrues to the creditor (Johansson 2010). According to Helpman (1989) the disincentive to private investment occur when a high future debt service acts as implicit tax because more will have to be raised out of the tax to help finance the debt obligations. In this situation projects with quick return will be preferred to long term because there will be high uncertainty on government actions and its policies in meeting the debt obligations (Servà ¨n 1997). High level debt increase governments disincentive to carry out reforms. As supported by Corden (1998) and Johansson (2010) that high level of debt makes economic reforms less advantageous and slows down growth because in the presence of debt overhang the growth-enhancing reforms intensify the pressure to repay foreign creditors than fuelling the growth and improving social services. Therefore when a country suffers from debt overhang, debt relief has the potential to improve economic efficiency. This can be possible by reducing the debt stock; the reduction will then spill-over its effects and reduce the debt overhang. This will then prevent the disincentive suggested. Cohen (1993) suggested that, debt service payments crowd out investments in areas such as education, health and infrastructure development which are direct as well as indirect impact on economic growth. To help in facilitating growth debt relief frees resources which were tied up in debt servicing enabling government to reallocate the freed resources to more productive areas. Looking into resource mechanism in detail it is evident that not just debt relief might bring about the growth due to the freed resources but other factors such as the magnitude of the relief or forgiveness, government investment decisions of the freed resources, revenue collection, new borrowing, and aids have impact on growth. As supported by Cassimon et al (2008) that since the creditors give debt relief to countries facing repayment difficulties, the resource mechanism might not create a greater fiscal space to help investment. The impact of debt relief or forgiveness on growth might be limited due to moral hazard or adverse selection (Johansson, 2010). This is because with the idea that the debt will be forgiven or relieved in future, borrowers will be encourage to take up excessive amounts of new loans, expecting that it will be forgiven when the country is in repayment difficulties (Easterly, 2002). This will push countries to rise up new loans even if there are no productive investment opportunities. In adverse selection case, creditors give relief to countries which face payment difficulties and not the ones that are willing and able to increase their investment. A country in this situation might be faced by factors such as profligate government, political instability or interest group polarization reflecting the high discounting toward the future (Easterly, 2002). He pointed out further, for the debt relief to have a positive impact on growth, good institution and governance is inevitable. This was also supported by Robinson, (2001) and Subramanian, Trebbi, (2004) because countries with better institutions and government invest more in physical and human capital and make efficient use of the resources to achieve higher growth. In absence of good institutions and governance the freed resources would not translate to productive investments. Empirical Literature Review Debt overhang, investment and Growth Milton Iyoha (1999) used macroeconometric model to facilitate the simulation of the impact of external debt in economic growth in Sub-Saharan Africa. With the use of simultaneous equation models for output and investment demand he was able to conclude that, there is a significant debt overhang and crowding out effect in Sub-Saharan Africa. In other words, the large stock of external debt and heavy debt service payments had a depressing effect on investment in SSA. He went further in simulating the implications of the debt reduction packages on economic growth. Upon simulating at different debt stock reduction levels he found that the hypothesized debt reductions assumed would increase investment and to a lesser extent the GDP on subsequent period. Simulations showed that a 50% debt stock reduction would have raised per capita gross domestic investment by over 40%, and increased GDP growth by over 3%, on average, during the 1987-1994 period. Chowdhury (1994) used a structural simultaneous equation model built to capture the interrelationship between public and private external debt, capital accumulation and production function. The models were constructed basing on the inter-relationship between the variables that is, some of the variables have characteristic of both independent and dependent nature. Using the Granger causality test on the data set for indebted developing countries in Asia and Pacific, Chowdhury showed that, the Bulow-Rogoff (1990) proposition that the external debt of the developing countries is a symptom rather than a cause of economic slowdown is rejected. Also he further found that, the Dornbusch-Krugman proposition that external debt leads to economic slowdown is rejected. But a feedback-type relationship is not rejected for two countries. The estimated results indicate that the overall effects of the public and private external debts on GNP are small and of an opposite sign, where as an increase in the GNP level raises substantially the public and private external debts. He argued that the positive estimates of the indirect effects of the public external debt on GNP obtained indicate that the capital flight generated by tax rise expectations is smaller than the contribution of public borrowing in financing investment in capital stock. Moreover, the direct and hence the full effects of the public external debt on GNP are positive and substantially large. An increase of 1% in the public external debt is likely to directly and indirectly raise the GNP level by 0.240% in the Asia Pacific countries. However, the adverse indirect effects of the external debt on GNP through lowering private investment and the overall level of capital stock are large in absolute value and substantially exceed the direct effect. Thus, the full effects of the private external debt on GNP are negative; a 1% increase in the private external debt is likely to reduce the GNP level by 0.033% during the time of study. In his estimates also, the effect of GNP on capital stock is indirectly amplified by the positive effect of the public external debt on capital stock. The overall effect of GNP on capital accumulation is positive. The marginal product of capital is also positive and there is diminishing marginal productivity of capital. Since aggregating of data across countries imposes and identical structure on all country although sometimes there are greater differences between the studied countries. Therefore it is necessary to consider the case of each developing country separately so as to study the characters deeply and suggest policies specific for that country. It is under this consideration that the study will be conducted specifically to Tanzania to explore specific characters of the relationship between external debt and economic growth and thereafter answer the key question on debt relief and its impact on growth in Tanzania. Odegbite, E et al (2008) used two models to capture both linear and nonlinear relationship of external debt in economic growth in the study on the impact of Nigerias external debt on economic development. Based on the modification of Elibadawi, Ndulu and Ndungu (1997) model Odegbite investigated the impact of large external debt stock with its servicing requirements and resulting fiscal deficit on private investment. Analysis showed that the influence of export growth on GDP growth was confirmed with a significant statistics. This has supported what Edwards (1998) claimed on the positive role of export growth process by increasing factor productivity in Nigeria. Due to the existence of debt overhang and crowding out effect result shows that savings compresses output. It was evidenced that, a unit increase in debt burden as measured by the debt service to GDP ratio generates 185 units growth. However the shortcoming of the model used is it considers the public sector gap only and igno res the BOP, it also takes government expenditures and revenue, interest rate and exchange rate as given. Barfour, O (1995), in his study on Ghana, argued that debt repayment inevitably imposes constraints on a debtor countrys growth prospective since it involves the transfer of resources to other countries. Therefore, in order to adequately appreciate the problem of indebtedness, it  is essential to relate the debt with its repayments of some income resources generated by the debtor out of which the repayments could be made. Elbadawi et al. (1997) also confirmed a debt overhang effect on economic growth using cross-section regression for 99 developing countries covering SSA, Latin America, Asia and Middle East. Three direct channels in which indebtedness in SSA works against growth was identified, this include the current debt inflows as a ratio of GDP (which stimulate growth), past debt accumulation (capturing debt overhang) and debt service ratio. The indirect channel works through the impacts it has on the other channels on public sector expenditures. Empirical study shows that direct nonlinear effects of debt on growth was presented in a fixed and random effects panel estimates of a growth regression in which debt to GDP enters both in linear and quadratic form. The results imply growth maximizing debt to GDP ratio of 97 percent, which is quite high considering the average debt to GDP ratio of 70 percent Pattillo, C (2002) By linking debt and growth problem to capital flight in a relatively simple model, Calvo (1998) urged that, high debt is associated with low growth since a higher distortionary tax burden on capital is required to service the debt, leading to a lower rate of return on capital, lower investment and growth. Low debt regimes have high growth for the opposite reasons. In intermediate ranges of debt, however, the effect on growth is indeterminate. The mechanism behind the possibility of multiple equilibria is a reverse causation from growth to the tax burden: if the economy grows more slowly, then the tax rate necessary to obtain enough resources to repay a given debt will have to be higher and vice versa Pattillo, C (2002). Taking in to account the direct as well as the feedback effect of debt in his analysis of the impact of foreign debt on growth in Tanzania Mjema (1996) used simultaneous equation models. In his results he proposed that the impact of the debt service ratio on real growth in GDP is negative. However the effect of external debt found to be positive as it facilitates the growth although the negative force is greater and therefore outweigh the positive effect of debt. Amoating and Amoaku-Adu (1996) urged if a greater proportion of export revenue were used to service external debt, then little foreign exchange would be available for investment and growth. This shows an inverse relationship between debt servicing and investment and growth (Gedefa, J. 2002) A number of other studies have found the existence of debt overhang and crowing out effect in SSA when studying the relationship between debt vis a vis economic growth, investment, capital flight just to mention a few. However, most of the studies are mainly based on data across countries in disregard to each countrys uniqueness. While the findings are quite revealing, there is need for case-by-case in depth studies in view of each countrys unique characteristics. Debt Relief On reviewing a two decades of debt relief Easterly, W (2002) conducted a study aiming at answering the key question as to why did HIPCs became very indebted. Using a sample of 41 HIPCs as classified by IMF and World Bank, he found that despite their poor policies, HIPCs received more than other LDCs. He found that between 1989 1997 a total of US$ 33 billion were forgiven while their respective borrowing was US$41 billion, this shows a close association that the debt relief will be met with an equivalent amount of new borrowing. Upon running the regression for the 40 HIPCs with complete data he found a statistically significant association between average debt relief as a percentage of GDP and new net borrowing as percentage of GDP, one percentage point of GDP higher debt forgiveness translated into 0.34% of GDP new net borrowing. Going further in his analysis Easterly showed that, the average levels of current account deficits, budget deficits, real valuation and other policy indicators were worse for most HIPCs. HIPCs also were worse on the broad measure of policy which includes not only a rating of policy stance but also the institutional quality like the prevalence of corruption. One of explanation of the HIPCs heavily indebtedness is they suffered adverse terms of trade shocks, and wars which destroy countries productive assets. The findings imply that the substantial reduction in external debt projected for the countries participating in the HIPC Initiative would directly add 0.8-1.1 percent to their per capita GDP growth rates. Indeed, the positive effects of debt relief may already be reflected in some of the healthier growth rates achieved by these countries in the past few years relative to their poor performance in the 1990s. (Annual GDP growth averaged 1.2 percent in 2000-02, compared with 0.2 percent during the 1990s.) Clements, B et al (2005). BIBLIOGRAPHY Amoating, K. and Amoaku-Adu, B. (1996), Economic Growth, Export and External Debt causality: The Case of African Countries, Applied Economics, 28, pp 21-27 Barfour. O. (1995), Ghana: The Burden of Debt Service Payment Under Structural Adjustment, African Economic Research Consortium Research Papers, No 8, English press Limited, Kenya. Bulow, J. and Rogoff, K. (1990), Cleaning up Third World Debt Without Getting Taken to the Cleaners, The Journal of Economic Perspective, 4(1), 31-42 Chowdhury Khorshed (1994), A Structural Analysis of External Debt and Economic Growth: Some Evidence of From Selected Countries in Asia and Pacific, Applied Economic, 26 (12). Claessens, S. and Diwan, I. (1990), Investment incentives: New Money, Debt Relief, and the Critical Role of Conditionality in Debt Crisis, The World Bank Economic Review, 4(1). Iyoha, M. A. (1999), External Debt and Economic Growth in Sub-Saharan African countries: An Econometric study, African Economic Research Consortium Research Papers No 90, English press Limited, Kenya Mjema, G. D. (1996), The Impact of Foreign Debt Servicing in the Economy of Tanzania: A Simultaneous equation approach, African Journal of Economic Policy, 3(1).

A Birthday Remembered Essay

Love is very complicated, not just butterflies in one’s stomach, but it also involves a lot of pain. The pain is not easy to drain. We have to confront ourselves with the pain and get over it, but that’s easier said than done. We restrain our feelings and try to forget them. This only causes an even bigger pain. That is the situation for Ellen, the main character in this short story. Ellen’s love life has been complicated, she is a lesbian and obliged to listen to people’s prejudices. Her one and only love, Jackie, dies caused by an incurable illness and she is not allowed to bury her â€Å"She has not been allowed to do this one last thing for Jackie. To be with her during the last rituals.† (l.24-25). Because of Jackie’s former husband, Roger, whom she has left to live with Ellen, but he could not accept his wife being a lesbian, because of his man-stubbornness and he even tried to declare her temporarily insane (l.15). Jackie’s daug hter on the other hand thinks that what Ellen and Jackie had was wonderful and beautiful, but you don’t know yet if she’s a lesbian herself or a heterosexual (l.102). The short story is written in third-person (l. 8) â€Å"why shouldn’t she?† The narrator is not omniscient, but we have inner-angel from Aunt El since we only â€Å"hear† thoughts from her, and not from Tobie or Warrick. (line. 104) â€Å"She felt the shock of the words†. You can’t really tell if the narrator is reliable or not, since we don’t know which connection he has to any of those in the story. Neither does he try to make anyone to seem like the â€Å"bad guy†, but the narrator is making us feel sorry for Aunt El, for her big lost Jackie. (L. 24 & 89) â€Å"She hadn’t been allowed to do this one last thing for Jackie† â€Å"but we have to get used to living without loved ones†. The language used in this short story is very well written and is very descriptive, because of all the adjectives being used, which makes the story way more â€Å"living†. (l. 12) â€Å"Roger had been furious, appalled and ang ry..† although the story is very well written it’s also a bit harsh to understand, because of some of all these adjectives and expressions. At line 37 there might be a flashback â€Å"here’s to you, Ellen Simms, on your birthday†. See more: The stages of consumer buying decision process essay The reason that this maybe could be a flashback is firstly because of the changing of the type, at only that sentence, which might give an account of her past together with Jackie before her death. One thing that was striking me was that the story is written in the preterit, but at the same time the narrator uses direct speech, which I think is a bit odd, since you normally writes the whole story in either present or the past, and very seldom a combination of the 2 indication of times. We have two main characters in this story, who’s Aunt El and Tobie: Aunt El / Ellen Simms is an old women who lives by herself. She used to be heterosexual and lived together with a man named Roger. They had a kid together named Tobie which is 15 years old. Ellen chooses to leave Roger because she’s changing her sexuality, and becomes a lesbian and falls in love with Jackie. But unfortunately Jackie died one year from now on, which leaves her alone with Tobie, and chooses to return back t o the father Roger. Ellen is a very obliging and kind person. She really misses her old flame Jackie, and cares a lot about Tobie whether her sexuality is heterosexual or lesbian (l. 83) â€Å"suppose it had been a girl? People choose who they want.† She seems considerate, when she offers Tobie and Warrick a hot cocoa, and remembers that young’s always are hungry and decides to make them some sandwiches. Tobie is daughter of Ellem Simms and the late Jackie. She’s 15 years old, but doesn’t have an abundance of friends (l. 20) â€Å"Tobie never had an abundance of friends†¦Ã¢â‚¬  She has short blond hair, had lineament from her father and a nice smile (l. 53-55). She cares about Ellen, since she’s the only one who shows up at her birthday and brings a present, which she has been saving money, for about a week. The way she earns these money is through her job in the library (l. 68) â€Å"I’m a library page after school..† helpful is also a good word, that would describe, which you can see in the story, when she offers her help to go and make cocoa together with Ellen. It seems she trusts Ellen more than her own father, since she decides to show Warrick for Ellen instead of her father. The message in this short story, is that pain will always be there, but only temporary, but at the same time hard to get over. That love is a big (maybe the biggest) part of our life and we should not regret, but remember the good times you’ve had with those you’ve loved. Don’t take anything in vain, live your life. And it doesn’t care if you are a heterosexual, lesbian or gay, just as long as you are happy. The title of this story is â€Å"a birthday remembered† which I guess is chosen because of all the emotional feelings that’s stepping in strength through this story and especially the quote from the daughters side â€Å"I hope it will be as wonderful and beautiful as what you and mom had together†.

Is Organic Food Better? Essay

There have been many different food trends over the years. We have been told about eating low fat diets, zero carb diets, and now organic. If you are like many others, there is a good chance that you have heard that organic foods are healthier to eat. They contain more vitamins, minerals, enzymes and taste than engineered produce do. Organic foods are also free from insecticides, pesticides, growth hormones, antibiotics, fertilizers and a whole host of other toxic artificial additives, flavorings, colorings and preservatives. Organic foods are better tasting, more nutritional, better on the environment, and ethically more appealing. What does it mean for food to be organic? When food is grown naturally, it is considered organic; that is, without the use of synthetic pesticides, irradiation, artificial fertilizers, or biotechnology. The growing and tending process is what really defines a food as organic. According to the United States Department of Agriculture (USDA), the soil is thoroughly tested and must be free of chemical exposure for at least three years. The food farmers produce must be free of any chemical or genetically engineered ingredients and must not have been raised or produced with any drugs or hormones. Organic certification procedures require that the food producer and/or distributor keep detailed written records (of where, when, and how the food was produced) and keep the organic food segregated from non-organic food if working with both foods (United). The term â€Å"organic food† is not a new concept. It has been around for as long as agriculture has been on the earth. Food was organic until someone decided to change the way that food was produced. Within the last century a large supply of synthetic chemicals were introduced into the food supply. Farmers, in fear of insects, started using pesticides to kill the insects. They also used synthetic fertilizers (especially nitrogen) to make plants grow fast. Nitrogen-driven growth produces weak, watery, and overly leafy plants which are more vulnerable to insects causing farmers to use more pesticides. Pesticide spraying has contributed to serious health problems for workers on these farms. In the article â€Å"The Truth About Organic Foods,† Jessica. DeCostole writes â€Å"Some studies have linked pesticides in our food to everything from headaches to cancer to birth defects — but many experts maintain that the levels in conventional food are safe for most healthy adults. † Most of the pesticides and fertilizers run off, polluting streams, rivers, oceans, fisheries, and drinking water. Organic farming does not use as harsh of chemicals as conventional farming. This makes it better on the soil and the water supply. People who oppose organic farming argue that organic farming requires twice as much land to grow the same amount of food as conventional farming does. Organic farming may require more land, but it is not double as what conventional farming uses. While organic farming usually requires more land, it is not double. Since the soil is not being depleted, organic farmers can use their land for longer periods of time. Organic farming can also produce higher yields and profits when it is done correctly. According to Jane Goodall in Harvest for Hope: A Guide to Mindful Eating, the top 25 percent of sustainable farmers who farm without the use of chemicals have higher yields than industrial farmers in the United States (161). There’s no question that organic foods are frequently more expensive than comparable conventional foods. Some of this can be attributed to the reduced production costs that can be achieved through commercial fertilizer and chemicals. Some of the price difference can also be attributed to the economies of scale enjoyed by the large multinational food companies, but these food systems are not on a level playing field. U. S. farm policy infuses billions of dollars into the conventional food system and keeps commodity prices artificially low. In the article â€Å"Seriously, Now – Why Aren’t Organics Getting Affordable,† Christy Harrison states â€Å"Conventional crops are heavily subsidized by the federal government in the United States, making them artificially inexpensive. Couple those subsidies — which have been in place since the New Deal — with the cost of cleaning up pollution and treating health problems created by conventional farming, and we’re paying a lot in taxes in order to pay a pittance at the grocery store. † Furthermore, conventional crops have been aided by decades of public and private research and development. Organic food systems receive only a tiny fraction of the agricultural research funds. The problem is not so much that organic foods are expensive; it’s that government policy has made conventional foods too cheap and that hurts farmers, rural communities and the environment. Effectively reducing the price discrepancy requires changes in public policy and strengthened food regulations. As consumers, the best thing we can do to reduce the costs of local and organic is to purchase local and organic. As more consumers choose organic, and a larger network of organic farmers develop innovative practices, prices will inevitably narrow between conventional and organic products. The growing organic market will also induce more public and private investment. Some argue that organic food doesn’t necessarily taste better than conventional food. Taste is subjective though. It is one of the five senses able to detect the flavor of substances. The flavor of food in the mouth is partially contributed to taste. Smell is also a factor. â€Å"The aroma of food contributes up to 80% of what we perceive as taste† (Benefits). The difference between conventional food and organic food is that conventional food contains preservatives to make it last longer. Organic food does not. It is often produced on farms near where it is sold, so it tends to be fresher when eaten. Consumers need to be careful though when buying organic. Multi-national corporations have started to buy some of the organic lines on the market, creating organic factory farms. These farms â€Å"produce monocrops and ship the product cross-country† (Goodall 164). Shipping the food from these monocrops across the country is a bad thing for the environment. Those against organic foods argue that it is not any more nutritious than conventionally grown food. In an interview with Dan Childs of ABC News, Robyn Flipse states â€Å"There is no good evidence that organically grown plants or animals are nutritionally superior to conventionally grown. † Many studies have been attempted to determine if organic food is more nutritious to conventional food, but the problem is variability in how these studies have been conducted. It is difficult to compare findings when there is so much variability (Prosser). It is possible for organically grown fruits and vegetables to contain slightly higher levels of Vitamin C, trace minerals, and antioxidant phytonutrients. It all depends on how it is grown. Foods depend on soil and water for their nourishment, and cleaner soil and water means cleaner food. It is that simple. It is important for us to make a commitment to living a healthier life, and eating healthy is one way to do that. It isn’t just about eating more fruits, vegetables, whole grains, and good fats. We also need to consider food safety, nutrition, and sustainability. How our foods are grown and raised affects the environment as well as our health. According to Samuel Fromartz in Organic, Inc., â€Å"Buying and consuming organic food has come to be viewed not only as a means of avoiding harm, but as a benefit in itself, a personal way of aligning nutrition, health, and social and environmental well-being† (16). Clearly, more research on the possible health benefits of organic foods is needed. That is not the only reason why people are buying them, but it is an important one, and we need more data. Still, it is fair to say that critics are clearly wrong when they try to argue that there is â€Å"no evidence whatsoever† that organics are better than conventional foods. More evidence is needed, but there are some early signs that organic supporters may have been right all along. Works Cited â€Å"The Benefits of Organic Food: Why Organic Food is Better. † Natural Health Guide. Natural Health Guide, 2010. Web. 21 Feb. 2013. Childs, Dan. â€Å"Are Organic Foods Better for You? † ABC News. ABC News, 29 Nov. 2006. Web. 21 Feb. 2013. DeCostole, Jessica. â€Å"The Truth About Organic Foods. † Redbook. Redbook. Web. 21 Feb. 2013. Fromartz, Samuel. Organic, Inc. Orlando: Harcourt Books, 2006. Print. Goodall, Jane, Gary McAvoy, and Gail Hudson. Harvest for Hope: A Guide to Mindful Eating. New York: Time Warner Book Group, 2005. Print. Harrison, Christy. â€Å"Seriously, Now – Why Aren‘t Organics Getting Affordable? † Grist. Grist, 25 Aug. 2005. Web. 21 Feb. 2013. Prosser, Erin. â€Å"Nutritional Differences in Organic versus Conventional Foods: And the Winner Is†¦Ã¢â‚¬  Scientific American. Scientific American, 11 Aug. 2011. Web. 21 Feb. 2013. United States Dept. of Agriculture. National Organic Program. US Dept. of Agriculture, April 2008. PDF file. Self Evaluation I was not aware of using any of the rhetorical strategies while writing this piece. When I write, I research my topic and just write what comes to mind. It is not something that I think about when writing. As I look back at what I have written, I see that I have used a combination of these strategies. I would say that I have used ethos by using proper grammar. I am always watching my spelling and punctuation while writing. It is something that I cannot ignore. I am not like some people that just write and go back and edit afterward. I do most of my editing as I write. I have shown pathos by trying to appeal to the reader’s emotions about our health and environment. I have shown logos by the credible sources I have used, like Jane Goodall. In this piece, I mention a few of the arguments against organic food and counter them with why they are wrong. There are many who are against organic food, but their reasons for being against it do not hold up well. I was able to show sources that backed up why the reasons against organic food are wrong. I really cannot say that any of the techniques (reading responses, writerly practices, or peer reviews) helped me. The peer review for my rough draft was available for me to review for this paper. It was nice to have some feedback on my paper, though I do not feel it made a difference.

Ford Motor Company Free Essay Example, 750 words

Business Questions Ford Motor Company Ford Motor Company is relatively the fourth largest automotive manufacturer in terms of production capacity. The company sells vehicles under Ford and Lincoln brands. Ford’s domestic sales have been low and stagnant for quite some time, in comparison to its European operations that has increased by producing many quality acclaimed vehicles. The reason behind difference between domestic and international operations is expensive manufacturing facilities caused by â€Å"high wages and expensive health care and retirement obligations for Union Labor† (Corporate Ford, pp. 10-67). In 2008, the health care expenses for US employee and retirees were $1.3 billion and around $500 million for post retirement health care and the balance for active employee health care and other retiree (Corporate Ford, pp. 10-67). The excess capacity and introduction of new products in the key segments have pressurized the manufacturers to increase prices of their products. â€Å"The incremental new US manufacturing capacity of Japanese and Korean manufacturers have contributed, it is likely to continue pressure in US markets to increase prices† (Corporate Ford, pp. 10-67). Currency Exchange Rate Volatility can be a reason to be considering as we have witnessed that US dollar has strengthened against Euro and significantly against British pound, but weaken against Japanese Yen. We will write a custom essay sample on Ford Motor Company or any topic specifically for you Only $17.96 $11.86/pageorder now Other economic factors like increase in commodity and energy prices are also influential. In the United States, decline in residential construction spending have started since, it was 21% down in 2008 after 18% decline in prior year. This trend has two basic affect on sales and revenue directly through its unfavorable effect on GDP growth and as a contributing factor in soft demand for truck sales. Both of these factors lead to lower the light vehicles sales in United States. The financial analysis of Ford North America shows that fixed assets impairment charges has increased in 2008 as compared to 2006 and 2007 (Ford Motor Company, pp 1-6). Personnel – reduction programs, accelerated depreciation on leased facility, US dealer consolidation, supplier settlement, pension curtailment charges, variable marketing, US plant idling, job security benefits, and retirement benefits have been introduced in 2008, which has increased the deficit and resu lts in low profitability (Ford Motor Company, pp 1-6). Union Carbide In the wake of industrialization a devastated event occurred in December 1984 that is consider the worst chemical incident due to the leakage of methyl isocynate (MIC) gas in the plant of the Union Carbide India Limited (UCIL) killing approximately 3,800 people (ICFTU, pp. 15- 25) in a sweep and several thousands injured with partial or permanent disabilities. The studies showed that the gas evolved in a cloud with the cold breeze and caught the local residents, suffocating them with coughs, choking, and irritation eventually resulting in massive death tolls. UCIL launched a thorough investigation with the consent of the local and federal government of India and another independent review by experts of Arther D. Little (ICFTU, pp. 15- 25) that both indicated the same conclusion. The evidence from the effected site showed entrance of a massive amount of water in the tank containing the batch of methyl isocynate that created an impulsive reaction with the heat and pressure, which eve ntually resulted in a lethal gas that invaded the whole plant and the residential areas. The independent review also indicated that the tragedy occurred due to the deliberate action of a skilled employee who introduced the water in the tank as the plant was certified with all the safety systems working at the time of accident that clearly draw the line towards the weakness in UCIL organizational hierarchy and strategically decisions (Browning, pp. 1-15). UCIL have 50% stakes in the plant and the remaining by the Union Carbide Corporation. The company’s CEO was under arrest on arrival to India along with the other five senior Indian executives (ICFTU, pp. 15- 25). There were serious corporate criminal charges of negligence against them and due to lack of communication of reporting lines to the senior executives of the UCIL, the situation worsen as they were not aware of the exact cause of tragedy. The victims of the tragedy lack safety procedures and demonstrated that the Indian Government (Browning, pp. 1-15) should handle the crises management and medical relief that refrained towards the UCIL negligence resulting in arrest of the top management. The plant manufactures its own main ingredients, which is a highly toxic and unstable gas. Many events are indirectly link with the management infrastructure and its strategies such as in early 1984 there was a cut back in employees and restructuring, which resulted in lack of mor ale and confidence in the senior management’s loyalty. There was a cleaning scheduled on the same day of the plant and due to lack of monitoring and reporting; the deliberate negligence was countercheck when the metal barriers were not insert for protection against the water entering the MIC tank. It later on intensified with deliberate increase of water in the tank (ICFTU, pp. 15- 25). The lack of documented reporting and the ethical negligence on the part of the plant maintenance staff is a serious factor in this case, which needs to be consider. The senior management did not know the ignorance of the causes of the hazard, which is a flaw in the reporting line and delegation of duties to the lower management. There was a lack of crisis management and safety computer checks to unveil the tragedy though the plant was making a perilous component and such safety measures should be in place when operating by a surrounding of urban population (ICFTU, pp. 15- 25). Work Cited Browning, B. Jackson. †Union Carbide: Disaster at Bhopal. † Jackson Browning Report. Union Carbide Corp, 1993. Retrieved on August 22, 2011: http: //www. bhopal. com/~/media/Files/Bhopal/browning. pdf Corporate Ford. Ford Motor Company 2008 Annual Report. Ford, 2008. Retrieved on August 22, 2011: http: //corporate. ford. com/doc/2008_annual_report. pdf Ford Motor Company. Stock: Ford Motor Company (F), 2010. Retrieved on August 22, 2011: http: //www. wikinvest. com/stock/Ford_Motor_Company_(F) ICFTU. The Trade Union Report on Bhopal. International Confederation of Free Trade Unions. Geneva, 1985.