June 2008; question 1(d): ‘The hope is that eventually Mali will become a major provider of agricultural goods for the whole of West Africa’ (extract from data).
Evaluate the reasons why a government such as that of Mali might wish to promote trade in agricultural goods as a development policy. (15 marks)
Plan : 15 marks = 3 points +2 eval
1) advantage of specialisation and trade eval: unfair trade rules + prebisch-singer thesis
2) promotes employment as labour-intensive eval: does not develop many new skills
3) attract FDI eval: exploitation
4) big finish
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An advantage of Mali specialising in agricultural good is that it will be able to enjoy economies of scale. This means that the cost of producing crops will fall and the farmers will be able to sell their produce at competitive rates in West Africa and ideally in the more lucrative markets of the United States and Europe. Trading with other nations will bring in much needed foreign currency and the ability to trade means that farmers will be able to re-invest profits into developing better mechanisation and irrigation, which – again – should drive down costs and hence prices. However the Prebisch-Singer Thesis states that over time the terms of trade for agricultural products worsens. In other words Mali will be have to trade more and more agricultural products for the same amount of manufactures. This might mean that specialising in agricultural products will not help alleviate poverty in the country. Furthermore trade can only benefit a country if it is not subject to other country’s protectionist measures, that there is in a sense a level playing field.
By specialising in agriculture Mali is investing in a very labour-intensive sector of the economy. This means that there will be large proportion of the population employed in agriculture. By employing such a large number in agriculture, more people will benefit from better wages and better living standards. This could be considered to be better than industrialisation, which is limited to only urban areas with the resulting urbanisation creating shanty towns, poor sanitation and a strain on resources such as electricity and infrastructure. However having so many people involved in agriculture is not going to lead to a development of their skills and expertise: farmers tend to remain farmers. At least industrialisation leads to a transfer of expertise and knowledge which can be utilised by the developing country.
Should Mali become the leading supplier of agricultural goods to the rest of West Africa, it is likely to attract investment from foreign companies hoping to exploit the supply of 3.5 million farmers willing to work for low wages. With such foreign direct investment will come investment in local infrastructure and much-desired foreign currency, which could be used by the government of Mali to further raise living standards and escape poverty. It is the fact that the government is seen to be adopting its program of ‘struggling against poverty’ that makes it such a favoured destination for foreign direct investment. This of course assumes that the multinationals locating in this country are not going to exploit the farmers by paying them low wages. If this were the case then living standards would not be raised and Mali might find poverty ineluctable.
In conclusion specialising in agriculture has many benefits: agriculture employs large numbers of farmers, which should raise their wages and hence their living standards; by trading surplus produce the country can earn foreign currency and develop the industry to further bring down costs; it will also attract FDI. However there is some doubt over if this is a successful policy to adopt, given that terms of trade for agricultural products generally worsen over time. It might be better for Mali to adopt a more balanced approach to development and not relying purely on primary products.
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