Yields

Summer 2019

Northwest Farm Credit: Rural, Real Estate, Operating Loans; Farm Loans; Country Home Loans; Lot Loans; Equipment Financing; Young and Beginning Producers; Crop Insurance; Business Management Education; Property Appraisals

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15 Northwest Farm Credit Services outside expert I have taught at the Graduate School of Banking at Louisiana State University for over 30 years, and one course I teach is called "Interpreting Economic Change." This year's senior-level course was composed of bankers, Farm Credit lenders and regulators from 22 states and Mexico. I co-facilitate the course with Dr. Tom Payne, Dean of the College of Business at Tennessee Tech University. Each year we attempt to integrate emerging trends in the U.S. and abroad into these soon-to-be graduates' strategic thinking. Let's examine some of the trends that will shape the pulse of the globe over the next decade with an orientation toward agriculture and rural areas. Interpreting Economic Change: The Global Pulse Dr. David Kohl, CISSP • Professor Emeritus, Virginia Tech Government and Social Policy Government and social policy with the law of unintended consequences will be a global force impacting economics both here in the U.S. and abroad. The challenges center on global political uncertainty, new leadership and various agendas with the new leaders. The evolvement of the swing from capitalism to socialism and populism with free trade, tax and regulatory issues, often fueled by social media and information, will create extremes in volatility. The Wall Street Journal published an article entitled "The Rise and Stall of Globalization," which provides a brief history lesson on the subject. Economic cycles have been a part of life for centuries. However, since the end of World War II, the GATT agreements, the jet age and the use of air conditioning shifted economic powers and demographics not only in the United States, but around the world. The rise of the industrialized Asian rim in the 1970s, China's market-based reforms in the late 1980s, and the fall of the Berlin Wall each accelerated globalization. Add on NAFTA and the European Union, and the acceleration of many of these economies around the world with free trade as the outcome. Now, the shift toward socialism and populism in rich nations is being demonstrated in the U.S., Brexit referendums and overall threats of tariffs and trade sanctions. This shift in thinking could be a dangerous procedure, similar to the populist movement of the late 1920s. During that era, world trade declined from $5.3 billion to $1.8 billion in a matter of five years, which was one of the major factors behind the Great Depression. The 2020 presidential elections in the U.S., economic shifts toward populism in both Mexico and Canada, and the elections in Germany and France need attention to determine if the economic shifts will be sustainable. Rise of Asia Since 1990, the rise of the Asian rim as an economic power has caused a significant shift in global forces. Measured in world output, Western Europe's share has declined from 31% to 22% in this decade. China's growth has been stellar over the period with a rise from 2% of the world output to 14%. Some of these gains came from the United States, which has observed a 2% decline in output. Trade agreements, such as the Trans-Pacific Partnership (TPP), are vital for trade access to the Asian region, where three out of every seven residents have increased buying power. Chinese infrastructure building fueled increased growth, but growth has since moderated. The Belt and Road Initiative could impact world competition over the next decade. Since 2013, China has invested $248 billion in 68 countries building infrastructure and they have earmarked up to $1 trillion from now until 2025. This initiative is designed to fuel trade into the Asian region and will create direct competition to North America as alternative trade partners for the Asian rim will be in Central and South America, Eastern Europe and Africa. Food and Fiber Trends The food and fiber industry will be turned upside down over the next decade. An article in The Economist magazine entitled "Breakfast in 2030" caught my attention and challenged my paradigm. "Imagine this: Your morning croissant comes from a 3D printer, your sugar-free ginger cake is soft and sweet, the roast beef on your sandwich is plant-based and your entire diet is perfectly tailored to your lifestyle. Can you picture it?"

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