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Globalisation of Market Economy and Small Scale Farming

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  • Dr.Y. C.Zala
    Globalisation of Market Economy and Small Scale Farming Markets – also for farm products – have become increasingly globalised. People have always engaged
    Message 1 of 1 , Sep 2, 2010

      Globalisation of Market Economy and Small Scale Farming

      Markets – also for farm products – have become increasingly globalised.

      People have always engaged in trade. Whether it was through bartering or exchanging goods between members of a community or selling then in local, regional or national markets, trade has always formed an important part of people’s livelihoods. Since the mid-1940s, however, markets have become increasingly globalised, making trade relationships more complex. Consumer products are now composed of ingredients from a wide range of producers in different places around the globe.

      In general terms, trade, travel and telecommunications have brought regions of the world closer together. This offers many opportunities, especially for consumers. Many products are now affordable because of globalised markets. People all over the world benefits from greater flows of goods and services like medicines, as well as greater exchange of information and ideas. Globalised markets lead to greater interdependence between many countries and can make their relationships more stable.

      However, this interdependence also means that problems in one part of the world have an impact on the rest of the world. A clear example of this came recently. In 2008, three different crises converged that raised prices of goods all over the world: the food price crisis (which had already started earlier in poorer countries), the fuel price crisis and the financial crisis. For some farmers connected to the global market, this had a positive impact as they could get a better price for their goods (for example, staple foods like maize and rice). However, farmers who depended on fuel and agrochemicals had to also deal with higher costs in their production. Consumers all over the world felt the impact of higher prices for their food and other purchases. As farmers are also consumers, they still had to pay more for other items, so they may not have gained much profit in the end.

      Market value chains

      Market chains can be looked at in terms of an hourglass in which vast numbers of farmers (bottom) produce for vast numbers of consumers (top) – with increasingly fewer middle actors gaining the most income from it.

      .

      When producing for global markets, small-scale farmers are at one end of a long market “value chain” which ends at the consumer. Middle actor links include input suppliers, food processors, transporters and retailers. These large-scale market chains have completely changed the way people trade. For producers (including small-scale farmers) entering into global markets offers opportunities of having more places to sell their produce. Having more marketing possibilities may allow them to get a better price than selling locally; they also can produce more than the local demand.

      Not everyone has access to global markets, however. In developing countries, 61 percent of the rural population lives in areas that have generally favourable access to water as well as medium to good market access (defined by the World Bank as: less than five hours from a market town of 5,000 people or more). However, in sub-Saharan Africa, two-thirds of the rural population lives in areas defined as “less favourable” by the World Bank, that is: arid and semiarid, or with poor market access.

      Producing for the global marketplace can also increase uncertainties. In global markets, producers have to compete much more because of demanding global rules set in trade agreements by the World Trade Organisation (WTO). Negotiations at the WTO lead to global rules on grades and standards (eg. their products have to meet specific quality, traceability and (food) safety rules). These standards act like a trade barrier for smaller-scale producers and farmers. Global rules also include the promotion of “free trade”, which means that countries that are members of the WTO must eliminate measures that protect their own industries, including tariffs and subsidies - in order to allow for “equal” competition to businesses.

      However, industrialised countries do not all follow these rules and wealthy nations such as the United States and European countries continue to subsidise their farmers, to protect them losing out to lower priced goods. These practices favour some farmers, stimulating them to supply more than is needed by the marketplace. When there is an oversupply of certain products, prices decrease, sometimes even below the cost of production. In this way, producers from less developed countries suffer from disadvantages in the global marketplace.

      Alternative trade markets that aim to offset unfair conditions for small-scale farmers include fair trade and organic or forest stewardship certification. These alternative market value chains seek a better price for farmers while also encouraging more ecologically sustainable agricultural practices.

      Lastly, another practice that aims to reward farmers for good practices is the so-called “Payment for Environmental Services” (PES), in which farmers are paid for activities such as maintaining forests intact and leaving some land to lie fallow. While these kinds of approaches are gaining greater attention, their impact is still on the margins.

      Question for Pondering: How are small-scale farmers (and consumers) in your area affected (positively and negatively) by increasingly globalised market economies?

       

      Good Day,

       

      Dr.Y.C.Zala
      Agricultural Economist,
      Anand, Gujarat, India


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