1. Correct Sectoral Imbalance  Problems occur when growth is uneven between agriculture (primary), industry (secondary), & services (tertiary)  If any are neglected, others can be pulled down  High dependency on one export can leave a country vulnerable (eg. tourism)

2. The Problems of Agriculture  Low price elasticity of demand & supply – (products supplied tend to be a small percentage of total production cost)  Low income elasticity of demand – as world income rises, agriculture is barely effected (primary products traded in perfect comp. but manufactured goods in monopolistic comp.)  Low productivity – low levels of mechanisation & degradation of land quality may even ↓ productivity

3. The Problems of Agriculture Cont’  Primary products are vulnerable to technological replacements (eg. nylon replacing cotton, etc.)  Uneven tariffs/subsidies – tariffs tend to be 5x higher than on manufactured goods (subsidies cost developed countries £350B; aid to developing countries:£60B)  Declining terms of trade – export prices falling but import prices (highly skilled manufactured products) rising – keeps farmers in poverty trap & indebtedness

4. Policies to Develop Agriculture Must address market failure & capital problems  Property rights extension  Disease control  Technological change  Help in provision of financial infrastructure  Abolition of marketing boards that fix prices below world prices  Raising human capital –education of women  Land improvement schemes

5. Industrialisation: Moving Away from Agriculture  Developing countries have adv. of lower wage costs  Move into more flexible markets of manufacturing (esp. clothing) BUT:  Migration to cities may leave agriculture under- resourced  Value added is mostly at packaging & distribution stages – small margins at production stage

6. Tourism: A Service Based Strategy  Attractive due to high YED; benefit from rising world incomes  Tourist spending has multiplier effects – income passed on & creates tax revenue  Can attract foreign investment (hotels, etc)  Local infrastructure catering to tourists assists local businesses (roads, trains, etc)  Encourages the tertiary sector – may correct sectoral imbalance

7. Tourism: Problems  Tourists demand imports goods (food, luxury gds, etc) creating leakage – net gain can be much less than the total cost of the holiday  International tour operators may get all the windfalls  May threaten local culture & values  Negative externalities – litter, environmental erosion, etc)  Diversion of labour may lead to shortages elsewhere  Market may be very volatile (subject to fashions, political conditions, natural disasters, etc)

8. Inward Looking Policies  High levels of protectionism (tariffs, quota’s etc.)  Subsidies for domestic producers (encourage import substitution)  Prohibition of multinational activities  Encouragement of locally acquired skills

9. Inward Looking Policies: Benefits  To encourage independency  To preserve individual culture  To nurture domestic industry while growing to compete on international market

10. Inward Looking Policies: Problems  Domestic inefficiency can occur without int’l competition  Protectionism may lead to retaliation of trading partners  New industries cannot grow due to requirement of imported inputs  Tend to favour industry at expense of agriculture (migration to cities)

11. Outward Looking Policies  Abolition of tariffs, quotas, etc  Elimination of subsidies  Encouragement of int’l capital flows & MNC’s  Allowing int’l labour mobility  Export promotion policies (eg. advertising, trade fairs, etc.)

12. Outward Looking Policies: Benefits Evidence suggests that countries that are open and outward looking have higher growth:  Welfare gains from trade & comp. adv.  Benefits from int’l comp – both incentive & knowledge  Economies of scale from increased mkt size  Benefit from other countries’ growth

13. Outward Looking Policies: Problems  Short-term - loss of local jobs & businesses  May lose local culture & tradition  May lose special local skills / products  May lose biodiversity / environment  May adopt policies which suit larger wealthier nations rather than what is best for the individual nation  Could lead to civil unrest