part-time musings

Tag: developing economies

defining development

I had an interesting exchange today with Sentletse and MvelaseP on what defines a developing country.  The context was a broader discussion on how terms like Third World and developing country seem pejorative, suggesting an idea of linear ‘progress’ through which nations need to move before being regarded as First World or developed.

There was a fair amount of discussion over whether China is a developed country or not after I made the point that changes in the nature of the global economy in the last thirty years have sapped terms like developing country of their meaning because countries that have formerly been defined as developing, such as China, India, Brazil, and South Africa, are by many economic indicators doing pretty well.  Sentletse produced some interesting stats on China – e.g. China’s public debt to GDP is only around 18% and unemployment is 4.3%, both figures much lower than many developed countries.

Anyway, I began searching around for definitions of developing country, expecting I’d find a cast-iron definition that would offer us some major insights.  But it’s not as clear-cut as you might have thought.

Even the United Nations Statistical Division says ‘There is no established convention for the designation of developed and developing countries or areas in the United Nations system’. (Footnote c, Composition of Macro Geographical (Continental) Regions, April 2010).  The document, however, describes what it calls ‘common practice’ by which

Japan in Asia, Canada and the United States in northern America, Australia and New Zealand in Oceania, and Europe are considered developed regions or areas. In international trade statistics, the Southern African Customs Union is also treated as a developed region and Israel as a developed country; countries emerging from the former Yugoslavia are treated as developing countries; and countries of eastern Europe and of the Commonwealth of Independent States (code 172) in Europe are not included under either developed or developing regions. (Ibid.)

Developed and Developing Countries (Source http://commons.wikimedia.org/wiki/)

The IMF draws distinctions between Emerging and Developing Economies and Advanced Economies.  And the World Bank uses four classifications for countriesLow Income, Lower Middle Income, Upper Middle Income, and High Income countries.  This system defines countries by Gross National Income per Capita. (US$975 is low; US$11,906 is high).  Other terms that are commonly used are Newly Industrialized Countries and Big Emerging Markets.

According to these definitions, South Africa is classified as a developed country, an Upper Middle Income country, Newly Industrialized country, and a Big Emerging Market.  I can’t work out whether it’s a Third World country or not because definitions vary so much.

So there was no cast-iron definition to illuminate our discussion, only the realization on my part that countries are defined, or define themselves, differently according to the context. Probably because that’s so useful.

Mo Ibrahim Foundation’s Index of African Governance

On Monday the Mo Ibrahim Foundation published this year’s Index of African Governance. The Index ranks sub-Saharan African countries according to a set of criteria which are regarded as contributing to good governance. These include indicators of safety and security; rule of law, transparency and corruption; participation and human rights; sustainable economic opportunity; and human development.

I particularly like the criteria for sustainable economic opportunity, which go beyond the usual national economic indicators to try to give a picture of what it’s like – relative to other African countries – to operate a business in a country. So while economic growth, purchasing power parity, and inflation rates all feature, so too do indicators such as the reliability of financial institutions, electricity capacity, the state of the road network, and the number of internet users.

Based on these criteria, the index rates the top five African countries in terms of sustainable economic opportunity as: 1 Mauritius, 2 Seychelles, 3 South Africa, 4 Gabon, 5 Botswana. Read further here.

MILKING IT? Supermarkets and Farming

I noted with interest the recent full-page advertisement in the Guardian (5 September 2007) on behalf of pork producers in Britain, which accussed supermarkets of ‘squeezing the life out of pig farming’. It echoes several recent events and reports that have highlighted the opposition of some farmers to supermarkets- not only in Britain, but elsewhere too. On the surface, the argument appears to be straightforward: Farmers want the best prices for their produce. Consumers on the other hand, want low prices, which means that supermarkets want to pay the lowest farm gate prices possible in order to offer consumers low prices while still maintaining healthy profit margins. The larger retailers are accused of using their power as buyers to force produce prices down to levels that make it difficult for farmers to sustain a living.

In the UK, the Competition Commission is approaching the end of a 15-month long investigation that deals in part with the relationship between supermarkets and farmers.

In India, protests by farmers and small retailers have forced the supermarket chain, Reliance Retail to halt the planned opening of 145 supermarkets and nine distribution centres in West Bengal, while thirty of its stores were forced to close following arson attacks in Uttar Pradesh. Leaders of the anti-Reliance protests heralded this as a triumph for the region’s farmers: The BBC quotes politician Ashok Ghosh as saying that

This is a victory for the working class, the toiling peasants and the small traders involved with retail of agricultural products.

Last year, German, Canadian, and Australian farmers staged protests against supermarkets, complaining that low supermarket prices for milk were driving them out of business.

It would be wrong, however, to assume that supermarkets are bad news for all farmers.

Some farmers prefer selling their produce to supermarkets because the large procurement operations run by retail chains serve to diminish uncertainty for farmers by providing a relatively constant demand for agricultural produce. Many farmers see this as preferable to having to rely on smaller local buyers and markets where demand and prices may fluctuate on a sometimes daily basis. Farmers designated ‘preferred suppliers’ operate with understandings from supermarkets that their produce will be bought at agreed prices provided it meets specifications. (These agreements are often verbal rather than formal contracts; a survey by accountants Grant Thornton’s Agribusiness Recovery Group found that 30% of farmers prefer it this way).

Supermarkets have also encouraged some farmers – particularly in the developing world – to meet ‘export’ standards of food hygiene and quality. Supermarkets carry the responsibly (and liability) for the quality of food they sell to consumers and consequently set their own ‘private standards’, often in the absence of reliable local regulations. Some farmers – especially small scale farmers in developing countries – may struggle to meet the requirements set out by these standards. For this reason, development agencies, governments, and many of the large supermarkets themselves, have launched programmes to help farmers in developing countries understand and meet the standards of food hygiene and quality that will enable them to export.

Initiatives have also been launched to improve the organisational capacity of small producers, encouraging them to club together to benefit from economies of scale, improve access to capital, make investments in machinery and infrastructure, and offer more consistent levels of supply.

A long-term impact of the growth of supermarket demand may ultimately be to further encourage a shift from small-scale farming to large-scale commercial farming operations in developing countries. There is some debate over what this might mean for the people who become labourers on these farms, but in the best-case scenario they would have better security and social provision than they had as small-scale producers. (The Future Agriculture Consortium provides useful references on this issue).

Of course I wouldn’t wish to downplay the very serious concerns that exist about the relationship between farmers and supermarkets, but I think it’s important to keep in mind that supermarkets are benefiting many farmers, and maybe it’s a case of promoting the more positive aspects of the relationship — the question is whether this should be left to the supermarkets themselves and to the influence which consumers may bring to bear on retailers, or whether it requires the intervention of regulatory authorities.