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Effect of Market Liberalisation on African Economy - Assignment Example

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The article “Effect of Market Liberalisation on African Economy” tries to find out why market liberalization has resulted in the fall of the economic development in African countries like Kenya. As per the neoclassical paradigm, free trade is the fastest way to develop…
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Effect of Market Liberalisation on African Economy
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The author compares East Asian markets like South Korea, Hong Kong, Taiwan and Singapore which have grown under the control of their respective governments. Even the US markets which promote free trade have some participation of the government. Market liberalization has resulted in adverse effects on the poor in developing countries. In such countries, agriculture is the main occupation of the majority of the population. The agriculture sector allows the import of cheap products in the local markets.

Small scale farmers of the developing countries like Ghana, Kenya are not able to sell their produce in their own countries and have to pay more for the farm needs. Free trade gives far more powers to the traders outside the country who make sure that in addition to the cheaper imports of their own products, exports of the country are bought at cheaper prices which eventually hits the local agriculture sector. This results in the exploitation of poor farmers. Small scale farmers are losing their lands to richer sections of society.

Liberalization is forcing gender inequality and unemployment. Market liberalization is also affecting the environment. Earlier crops were grown according to soil types and climate. There was a vast diversity of the crops grown all round the year and in different regions. While now the concentration is on the growth of the cash crops fit for the export. Crops that are suitable for export are grown on a large scale affecting the environment conditions resulting from soil degradation and extensive use of chemical fertilizers and pesticides.

As the government does not interfere, all the support offered by the government to the small scale farmers is also lost such as subsidies, agricultural research, price control and so on. Free trade also hampers the self-sufficiency of a nation on its own production. Traders establish a monopoly in the local markets. For overcoming this problem, governments should have selective intervention in the markets. As mentioned earlier East Asian markets like South Korea, Hong Kong, Taiwan, and Singapore have benefited from the participation of the government in controlling and managing the markets.

The government decides the policies and restrictions such as investment tariffs and various taxes to be imposed on foreign trade in order to protect the domestic trade and attain maximum benefit from international commerce. Governments tend to maintain price stability and balanced growth keeping in mind the interests of every section of the society. Some of the steps the governments can take are: open and fund government banks, promote savings, subsidized credit for the industries, investment in technological developments, promotion of export and protection from imports that can affect domestic produce.

Governments provide aid to small scale farmers and declining industries. The main focus lies in capital accumulation and labor literacy. The administration should selectively intervene to control inflation. Public and private sectors must be able to share the information. Extensive exports and huge foreign investments regulated by the government can boost up the economy. These are the steps taken by the governments of East Asian countries that resulted in their miraculous growth.

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