Transcript EOA611S-Unit_11final_notes-economic_development (3)

UNIT 11: Agriculture and Rural
Development
Objectives:
•Define economic development and growth.
•List indicators of economic development
•Explain the role of agriculture to economic growth
•Explain the role of trade in economic development
•List the different trade policies in developing
countries
•List the form of government interventions
•List regional trade organizations
Indicators of Economic
Development
What is development and how can
we measure it
Growth versus Development
• Economic growth may be one aspect of economic
development but is not the same
• Economic growth:
– A measure of the value of output of goods and services within a
time period( measured using GDP)
• Economic Development:
– A measure of the welfare of humans in a society( measured
using a range of social indicators)
Sustainable Development:
• Development that meets the need of the present without
compromising the ability of future generations to meet their
own needs (measured using environmental quality indicators)
What do you think
• A country should be judged on how it provides
for its most vulnerable inhabitants!
• That’s just my opinion.
Economic Growth
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This might be a common
picture……
But this could be just around the
corner!
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Using measures of economic
growth can give distorted
pictures of the level of
income in a country – the
income distribution is not
taken into account.
A small proportion of the
population can own a large
amount of the wealth in a
country. The level of human
welfare for the majority
could therefore be very
limited.
Growth
Economic Growth
Shopping Mall in Saudi Arabia
Dubai Skyline
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Copyright: zchizzerz, http://www.sxc.hu
• High economic growth fuelled through capital spending can hide a number
of underlying economic problems – how is the income and wealth
distributed? Who is doing the spending and will it ‘trickle down’ to the
poor?
National Income – Problems with
using GDP/GNP
• Quality of life?
– Can changes in economic growth measure changes in the quality
of life?
– Does additional earnings power bring with it additional stress,
increases in working hours, increased health and family
problems?
• Impact of exchange rate?
– Difference in exchange rates can distort the comparisons – need
to express in one currency, but which one and at what value?
National Income – Problems with
using GDP/GNP
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It might not be pleasant, but what he finds among the refuse could
be all he has.
Title: Sierra Leone Liberia. Copyright: Photolibrary Group
Informal economy?
Some economic activity not
recorded – subsistence farming
and barter activity, for example
Some economic activity is carried
out illegally – building work ‘cash
in hand’, drug dealing, etc.
Work of the non-paid may not be
considered but may contribute to
welfare – charity work, housework,
etc.
Indicators of Economic Development
Development
Development
• Development incorporates the notion of a
measure/measures of human welfare
• As such it is a normative concept – open to
interpretation and subjectivity
• What should it include?
Development
• Levels of poverty
– Absolute poverty
– Relative poverty
• Inequality
• Progress – what
constitutes progress?
Our definitions of progress may be highly subjective. What
has progress brought to native tribes people across the
globe?
Title: Navajos refuse casino riches. Copyright: Stock.Xchng
What is Poverty?
Romanian gypsies – is this man living in poverty?
Or is this villager in rural China?
Copyright: ghitulescu radu, http://www.sxc.hu
Copyright: Mark Forman, http://www.sxc.hu
• Poverty is a ‘relative’ term
Absolute poverty versus relative
poverty
• Those living in absolute poverty are unable to
satisfy their basic needs for survival, water,
clothing, food, shelter and basic medicine.
• World Bank figure of $ 1.25 per day
• Those living in relative poverty is poverty
relative to the rest of the population of the
country. For example below 50 % of average
earnings
Extent of poverty: proportion of the poor in total population
(Select LDCs)
Zambia
Madagascar
Mozambique
Malawi
Gambia
Chad
Mali
Niger
Eritrea
Rwanda
Bangladesh
Mauritania
Burkina Faso
Djibouti
Ethiopia
Uganda
Nepal
Yemen
Guinea
Lao PDR
Cambodia
Tanzania
Senegal
Benin
0
10
20
30
40
Percent
Source: World Bank , World Development Indicators 2003
50
60
70
80
Extent of food insecurity: percentage of population undernourished,
1998-2000 (available data for 36 LDCs)
Above 70%
30 – 49%
10 -29%
DR of Congo
Somalia
Afghanistan
Burundi
Sierra Leone
Tanzania
Central Africa R
Ethiopia
Madagascar
Rwanda
Liberia
Cambodia
Niger
Bangladesh
Malawi
Yemen
Chad
Guinea
Lesotho
Senegal
Lao
Burkina Faso
Togo
Gambia
Sudan
Uganda
Mali
Nepal
Benin
Mauritania
50 – 69 %
Eritrea
Mozambique
Angola
Haiti
Zambia
Below 10%
Myanmar
Source: FAO, SOFI 2002
Share of agriculture in GDP
(frequency distribution of 42 LDCs)
Share of Agricultural GDP in Total GDP (% )
Number of countries
20
16
12
8
4
0
below 15
15-24
25-39
percent
below 15
4
40 and
above
Development
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Other considerations of human welfare:
Political freedoms?
Sustenance?
Sustainable development?
Self esteem?
Proportion of activity in different sectors of the
economy:
– Primary
– Secondary
– Tertiary
Human Development Index
Other Measures?
Objectives of development
• Producing more life sustaining necessities
such as food, shelter and health care and
broadening their distribution.
• Raising standards of living and individual self
esteem.
• Expanding economic and social choice and
reducing fear.
Models of Economic development
• The production function
• The saving function
• The labour supply function (related to
population growth)
Agriculture’s contribution to Economic
Development
1. It can provide the food and fibre necessary expanding
population that is growing in income and wealth.
2. It can release workers needed for non agricultural
goods and services production
3. It can serve as a market for non farm goods and
services, thus providing a stimulus for expansion of
employment and output in the non farming sector.
4. It can provide a source of capital that can be invested
in improved productive facilities in the rest of the
economy.
Industrial Economy’s contribution to
Agricultural Development
• An urban industrial economy can contribute to
rapid development of agriculture:
– By expanding the markets for agricultural products.
– By supplying farm machinery, chemical fertilizers,
pesticides and more, that raise the level of agricultural
technology.
– By expanding productive employment opportunities
for workers released from agriculture.
– By technological change.
– By making possible improvements in the quality of
rural life by raising standards of consumption both in
urban and rural areas.
Development Components or
Imperatives
• Successful economic development involves a complex of
technological, economic and cultural changes.
• Rapid productivity changes in agriculture are becoming an
increasingly essential component in this complex matter.
• For many developing countries, particularly those that are
unable to limit the rate of population growth it may be
necessary for a yield takeoff to precede an income takeoff.
• Important as yield increases are, most of the interrelated
factors involved in agricultural development can be
grouped into “essentials” and “accelerators”
The five essentials
• Essentials are factors or conditions that are
required for increased agricultural production.
• The adequacy of these five essentials determines
the possibilities of agricultural development.
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New farm technology
Availability of purchasable inputs
Markets for products
Transportation
Incentives for agricultural producers
The five accelerators
• The accelerators are those factors that, although
not absolutely essential for agricultural growth,
can contribute to speeding up the rate of growth
once essential are met.
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Education
Production credit
Effective farm organisations or assosciations
Improving or expanding the land base
Effective agricultural planning
Development Constraint
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Environmental stress
Social stress
Income and cost impacts
Distribution of benefits
Government Intervention in Agriculture
• Government provide many important functions
such as:
– Provision of law and order.
– National defence.
– Infrastructure i.e. construction & maintenance of
highways, sanitation programs, medical programs,
education programs, communication facilities etc.
– Economic & social regulations (Providing the legal
foundation & social environment conducive to an
efficient market system, maintaining competition in
the market place, redistributing income & wealth to
accomplish specific social objectives, monitoring the
use of resources and stabilizing the economy.
Rationale for government intervention
in the agricultural sector
• Support/ protect an infant industry.
• Curb market powers of imperfect competitors
when necessary to promote social good.
• Provide for food security.
• Provide for consumer health and safety.
• Provide for environmental quality.
Form of Government Intervention
• Government intervention in agriculture required
to improve farm economic conditions have taken
many forms.
– Adjusting production to market demand
• Reduce amount of resources employed to produce.
• This is achieved by the governments renting whole farms or
paying farmers not to produce the product by requiring
them to set aside part of the land they use to plant this crop
in order to qualify for farm program benefits.
• With less land planted to this crop, supply will decline and
market prices will rise.
Form of Government Intervention….
– Price and income support payments
• For government to improve farm economic conditions is to
directly support farm prices and incomes achieved by
establishing a price floor supported through government
purchases of surplus commodities.
• If the level of production rises during the year the
government can step in and buy (and store) excess supply at
the announced floor price.
• This would prevent farm revenue from falling below
minimum desired levels.
• An alternative approach is to support farm incomes through
direct transfer payments from the government to farmers
Form of Government Intervention….
– Foreign trade enhancements
• Government can institute tariffs or tax on imports, which make
imported agricultural products more expensive to domestic consumer
or it can institute quotas, which limit the quantity of a particular good
that can be imported.
• Both actions protect producers in the domestic agricultural sector.
These actions have the effect of limiting the supply coming into the
market & raising the farm revenues of domestic producers.
• Government can enhance the attractiveness of Namibia (Team
Namibia)- produced agricultural products in foreign markets by
subsidizing their purchase, thereby stimulating the export demand for
Namibian agricultural products.
• Export credits help potential buyers to finance the purchase of
Namibian agricultural products.
• Subsidies are grants given by the government to private businesses to
assist an enterprise deemed advantageous to the public.
• Commodity assistance programs promote exports under direct food
aid or subsidized concessionary sales.
Form of Government Intervention….
• Food security
– Food safety covers a variety of issues, including the conditions
under which raw farm products are produced and the conditions
under which these products are processed and distributed to
consumers.
– Government has, in specific instances, stepped in and required
health warning on products labels.
– Perhaps the most widely known is the waning on cigarette
packaging that advises that smoking is hazardous to your health.
Consumer issues
• Namibia has probably the safest and most abundant supply of food
and fibre products of any nation in the world.
• This is not by chance, but rather by design.
• The government is actively involved at various points along the
production, processing and delivery stages of the marketing
channel to ensure a safe and nutritional food supply. There are
numerous perspectives one can take regarding the discussion of
consumer issues with respect to food and related products. Those
perspectives discussed in this unit include:
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Food safety,
An adequate and cheap food supply,
Nutrition and health, food subsidies and
Consumer interests in animal rights.
The End!!!!!
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