Reasons For Optimism

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Unbelieveable. That’s the best way to describe some of the events that have occurred since my last column. The Massachusetts special election has rocked the political world and profoundly affected the prospects for health reform just when it looked like passage was a lock. Efforts are under way to put health reform legislation together again on Capitol Hill, but it will look dramatically different than the version proposed by either the House or Senate.

All of this goes to show the one thing that is certain in politics is uncertainty. Unfortunately, that uncertainty carries over into the marketplace and affects the confidence of businesses and industries, sometimes to the point that the level of business investment is hindered – which is precisely the situation we have found ourselves in recent months. However, heading into spring, several of the leading business confidence indicators reflect a more optimistic mindset on the part of business owners.

Positive Signs

The other unbelievable but good news is that the GDP has increased for two consecutive quarters and projections for GDP performance in 2010 are positive. The Confidence Board’s index of leading indicators – a composition of the top 10 indicators of the nation’s economy – has increased for nine straight months, yet another sign of an economy in recovery. But as I’ve said before, this recovery will be different than those in our most recent history in that it will be slower and therefore less likely to generate asset bubbles – and that is a good thing.

Unemployment has dropped below 10 percent and the number of temporary workers being hired is climbing – and that’s usually the first sign of recovery in the job market. While businesses responded to the recession by cutting their work forces to the bone, they will eventually have to begin hiring to increase output. That time may not be too far off. There is at least some evidence pointing in that direction already, and we should expect to see job growth return in the late spring or summer.

Last spring, bedding plants and perennials fared well in our industry and expectations are the same for this spring, providing the weather holds, of course. We are much better off economically than we were last year at this time and consumer confidence indices are nearly twice the levels we saw then. The abnormally cold weather and record snowfall events we experienced earlier this year have hopefully generated some pent-up demand for lawn and garden products and services.

Cap & Trade Breakdown

The climate change debate also took an unusual turn after the “Climategate” events last November dealt a blow that some speculate may put off any meaningful debate on cap-and-trade legislation. Last summer, the House passed a sweeping climate change bill known as Waxman-Markey, or officially the American Clean Energy and Security Act of 2009 (ACES).

The “cap” part of the policy sets a hard limit on total CO2 pollution, giving certainty to emission reduction over the years 2012-2050. The cap gets tighter and tighter over time, reducing emissions gradually. Meanwhile, the “trade” part of the policy allows firms to trade permits that allow the holder to emit CO2. “Trade” means the initial allocation of permits does not affect the total cost of reducing pollution. But the initial allocation of permits does create winners and losers, so this allocation is a key policy choice.
One option is for the government to auction the permits so the revenue can be used to implement tax cuts or to compensate those who lose. The other option is to give away permits to companies.

Global Warming Effects

The Senate had delayed discussions over its version of a greenhouse gas bill until this spring, but last November’s events changed things a bit. If you recall, hacked e-mails from an influential United Kingdom climate science lab suggested researchers there have repeatedly tried to squelch scientific challenges to what had previously become scientific consensus – that human beings are largely responsible for climate change.

The e-mails suggested many scientists around the world are concerned about the policy implications of a recent decline in average global temperatures. Although global temperatures remain among the hottest on record, they have declined since 2005 according to various measurements, and no one has sufficiently explained this phenomenon to date. Opponents of significant restrictions on greenhouse gas emissions have, of course, pointed to the disclosed e-mails as reason to pause before implementing any broad policies. But many feel this has only delayed the inevitable.

For several years, we in the green industry have heard about global warming and climate change as issues we need to address, and the debate has had arguments spanning from compelling science to just a natural cycling of weather patterns. Now, legislators all over the world have begun to amend the dialogue to one of measuring the carbon footprint. Scientists have added water to the equation and are now beginning to speak of measuring the entire environmental footprint.

So regardless of how soon climate change policies are enacted, as greater emphasis is being placed on rehabilitating the environmental footprint and combating global climate change, it is important our industry be informed and ready to proactively respond. The issues are compelling and our call to action is right now. We think of ourselves as being the original green industry, but we often fail to promote that point. Perhaps it’s partly out of a fear of the unknown.

What It Means To You

Of course, the real issue revolves around what it all means for the bottom line for our individual businesses. Will the outcomes of the legislative debate impact our businesses? Are there modifications we need to make to stay in business once the debate ends and the laws are enacted? Will our businesses remain financially solvent or will regulations force us out of business?

These are big and serious issues, and that’s one reason the theme of this year’s Seeley Conference is “Floriculture’s Environmental Footprint: An Inconvenient Truth or Consumer Opportunity?” Visit the Seeley Conference website for information on this year’s program. 

Charlie Hall (charliehall@tamu.edu) is a professor and Ellison Chair in International Floriculture at Texas A&M University.

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2 comments on “Reasons For Optimism

  1. Anonymous

    I think Charlies articles keep us on alert of the financial trends related to our industry. The trends presented by Charlie try to present the current conditions “Good or Bad it is what it is”. Thank you Charlie for you overview. Look forward to your next article

  2. Anonymous

    I think Charlies articles keep us on alert of the financial trends related to our industry. The trends presented by Charlie try to present the current conditions “Good or Bad it is what it is”. Thank you Charlie for you overview. Look forward to your next article