Market Analysis and Growth Models
1) Early and new models of growth: Early growth models had an emphasis on the indispensable role capita played in the growth of economies. They, however, provided no room for technological advancements and its part in this growth. Industrialization and government roles were considered important in achieving growth, with no faith in the roles markets played in this regard. New growth models, on the other hand, recognize and appreciate technological progress as both an input and product of economic activity. Additionally, knowledge is inevitable in achieving growth. Knowledge together with technology exhibit increasing returns that drive the process of economic growth. New models deemphasize the role of the state in growth.
Both new and early models pay little attention to equity and distribution which is important in any economy as well as seeing the economy as one integrated system.
2) Market failures: Markets should operate with efficiency and so each participant benefits without hurting the other. Going by the world food prices, it is clear that they do fall short of this in several ways. First, the market divides people into two facets, the poor and the rich. Market liberalization is as well seen to affect prices of staple foods that surprisingly cause stings to the poor. The corrective mechanisms put in place to suit a particular condition spin into extension and bring negativities into one other sector. Imposition of tariffs onto food exports to tame domestic prices coils back to hurt the farmers through meager returns while benefiting consumers. Market liberalization has increasingly created traded platforms for free trade, but poor countries can`t compete favorably with developed countries as the cost is relatively different.
3. Government failure: Governments are responsible for the welfare of their citizens and functionality of their operations regardless of the type of systems they run; capitalism or communism. Cushioning them from economic shocks is constant in all cases. First, that there are two divides of people regarding economic wellbeing is a shortfall to governments of developing countries. Governments are supposed to create equity at worst. Otherwise, there should be equality. There is the poor who face the brunt of the increase in food prices and the rich who are not talked about in this sorry state. The government should put in place policies that safeguard food security of their citizens. This may be through the provision of subsidies to farm inputs, so that food prices are reduced, benefiting both consumers and producers. In eliminating this all state, the governments have failed to increase the incomes of the poor people to increase their capability of managing their states in all states of shocks.
4. Banking sector and forms of savings: The banking sector plays an integral indispensable role in so far as the financial system of any country is concerned. Banks provide loans and in the process `create new` money whose multiplier effect goes depths in spinning economic activities. By them being under control of central banks of countries in consideration, they are used to control interest rates through the use of base lending rates as well as minimum deposit requirements. Banks also provide forms of savings through deposits. Moreover, they sell bonds and other securities like money market instruments and capital market instruments that are avenues for not just savings but investments as well. It is through savings that investments are made.
5. Lewis model of structural change: The Lewis model of structural change asserts that the focal point of economic development is rapid capital accumulation. It is only through an increase in capital across the nation and among people as well as industries that there can be realized economic growth. There are two times of economies which are; the developed and the developing economies. Developed economies are those that can be considered to have realized remarkable capital accumulation. Contrastingly, those that are developing can be categorized into two; the traditional/subsistence sector and the modern industrial/capitalist sector. The former is seen to have thrived relative to the latter. But economic growth is mostly achieved through the capitalist sector. In growing the modern sector, therefore, there is continuous labor transfer from the subsistence sector, as people are attracted by the 30% more pay that the modern sector pays. As such, there is a continuous transfer of labor from the subsistence sector to the modern sector. This leads to expansion of the modern sector with time as more and more labor is supplied from the subsistence sector. The increased labor supply drives up productivity in the modern sector. The demand for the goods and services produced in the modern sector as well drives up its growth and expansion. This is made possible as well by the fact that all the profits generated by these industrialists are saved and reinvested.
6.) Food security/food insecurity: Food security is that state where the availability of food is remarkably higher than the demand for the same. Insecurity, by contrast, is where the demand surpasses availability. This situation arises from two factors; production that is to credit for self-sufficiency and external intervention where importation and related policies swing in. Food security is achieved where there is sufficient production that is motivated by the reduction in costs of inputs and farming. The resultant effect is the satisfaction to the producers and reduced prices to consumers. In cases where production is low, the short-term solution is to impose exportation tariffs on agricultural products so that enough is left at the disposal of the country for consumption. The same can be done on imports where tariffs are relaxed on food products. This is just however short term, and the effects may extend to hurt other economic systems. The best way, therefore, is to raise the income levels of people through increased productivity and investment in the agricultural sector for self-reliance.
Market Analysis and Growth Models