MODULE 2: GENERAL ECONOMICSSUB OBJECTIVE 1: justify your actions within the socioeconomic

and political context of the country

ECONOMICS AND ITS USESEconomics is in the limelight today, than at any time in history.

People are bombarded with economic news and commentary

from all sides, and they are acutely aware of the way changes

in economic conditions have affected their everyday lives.

•World Bank approves loans to nine

African Nations totaling $726.4

Million

•The National Assembly adopts the

2012 annual budget

Take a look at the following headlines

from a number of recent newspaper

articles:

Rising food prices in the country affect

the National Budget

The Ministry of Livestock, Fisheries and Animal Industries invests over 80 million in CNFZV-Jakiri

Fuel prices increase by 2% throughout the CEMAC zone

What these headlines have in

common is that they are all about

economic problems that concern

not only national policymakers but

also ordinary citizens.

As individuals, we can do two things about the

economic events that shape the world.

First, we can react to them by adjusting our

own decisions in a way that compensates for

the changing economic environment.

Second, we can try to change that environment

directly through our own efforts and through

the political process.

Either choices requires action based on knowledge

and understanding of economic problems

The purpose of the previous lesson was to

take some necessary first steps toward:

defining economics

identifying economic problems

developing a framework for analyzing

economic events

Assignment: identify an economic

problem

Identify an economic problem e.g.

unemployment in Cameroon: analyze the causes and

effects

WHAT IS ECONOMICS?

To most people the word economizing

probably brings to mind the notions of

stinginess and efficiency – the opposite of

wastefulness

Informally, economics has been defined as

the science of common sense and the

science of making a living

Economics is much broader than the two

definitions indicated above

More formally, economics is

defined as the study of how

scarce resources are and how

they can be used to satisfy

human needs and wants

Scarce resources are such things as Land (raw materials)

labor

Capital

Entrepreneur

Energy

Technology

These are used to produce goods and services to satisfy human unlimited

needs and wants.

economics also attempts to answer the

following kinds of questions

How do we determine what toproduce?

How can production be carried onwith the greatest efficiency ofresources, and costs?

What forces affect how much incomeeach person receives?

What alternatives do we have with

respect to the use of scarce resources,

and how do our choices affect our

future alternatives?

Is there any way in which the production

and distribution of goods can be changed

so that some people will be better off

and none will be worst off?

The study of economics can yield answers

to such questions for individual

consumers, for businesses, and for

nations, or for the world

Therefore, economics can be defined as a

science concerned with choosing among

alternatives involving scarce resources

WHY STUDY

ECONOMICS?

All societies are faced with a common problem – the need to decide how they

will use their scarce resources to satisfy the needs and wants of their people.

Scarcity refers to the fact that, over a given time period, things such as land, labor,

capital are limited in number or availability. Many of them occur in amounts too

small to satisfy all of people’s needs or desires.

In other words, our means arelimited, but our wants are unlimited.Consequently, choices must be made.

Economics includes a description ofhow choices are made, but it alsogoes beyond description. Economicprinciples tell us how to makechoices in order to achieve certaingoals.

4. EARLY IDEAS ABOUT ECONOMICS In ancient times, there were philosophers, monks and merchants.

They were writing about economic matters important to specific

societies or nation-states, but there was no formal discipline of

economics.

Thus we must begin our search for the origins of modern economics

by looking for ideas and for those who wrote about them.

The starting point for our study is ancient Greece, where the two best-

known philosophers Plato (427 – 347 B.C.) and Aristotle (384 – 322 B.C.),

contemplated how citizens might achieve happiness and the good life in

a just society.

Plato and Aristotle

their primary concern was the nature or form of an ideal society and

the type of government that would go with it.

What was the ideal state?

For both Plato and Aristotle it was a state in which citizens could be

free to devote leisure time to self-improvement, that is, improvement

of the mind.

It was also a state with a rigid class system; in it most physical work

was considered degrading for citizens and was therefore left to slaves.

Plato believed that the upper classes of society (rulers and

warriors) should be unconcerned about profit and should not own

property.

In the ideal state, these people would look after truth, justice and

defense while the lower classes pursued economic goals, providing

for both themselves and the upper classes.

In Aristotle’s view, citizens should accumulate property, including

slaves. It would be appropriate in an ideal state to have some

people of great wealth and benevolence.

To him, money was not wealth. Wealth was real property –

instruments – things clearly useful to the household and the state

to loan money at interest would be to take advantage of someone

else’s misfortune.

According to modern scholars in the field of economic thought, very

little was added to the economic ideas of the Greek philosophers by

either the Romans or the early Christians. These ideas waited the

attention of the Roman Catholic Church’s finest scholars during the

eleventh century and later.

St. Thomas Aquinas (1225 – 1276 A.D.) was one of many

scholar monks, known as schoolmen, who wrote about

the applications of Church doctrine to everyday life.

He devoted certain parts of his book (summa

theologica) to two issues, just price and interest. On

both of these issues he was completely Aristotelian.

It would be wrong to charge more than a just price for a

good or service, and it would be wrong to collect

interest for lending money.

To Aquinas just price meant the price commonly paid for

something – a notion similar to that of competitive

market price.

In the fifteenth century St. Antonio argued that one who

lends money could rightfully be compensated for a loss

incurred or a gain forgone; today this notion is known as

the opportunity cost principle.

Mercantilism is a name attached to a system of

government regulation of economic life that became

established in Europe during the sixteenth through the

eighteenth centuries.

It appeared at a time when international trade had

grown to be an important economic concern and when

new nation-states of Europe, particularly England,

France, and Spain, were frequently engaged in wars.

Merchants were an important and influential group,

because their activities provided both the materials and

the wealth that warring monarchs needed to counter

their adversaries.

To the mercantilists, who were for the most part either

merchants or government administrators, gold was

wealth, or at least the most desirable form of wealth a

nation could accumulate.

Increasing a country’s gold stock increased its

wealth, and a country without gold mines could

get more gold only through international trade.

Thus the mercantilists argued for an export

balance of trade, a form of trade under which a

nation exports more to foreigners than it

imports from them, in terms of the value of

goods traded.

Typical mercantilist policies in international trade

were import tariffs (taxes) on foreign goods, laws

prohibiting the export of gold, and navigation acts

regulating ocean shipping.

England Navigation Acts, which penalized colonial

shipping and ship-building, were the underlying

causes of the American Revolution.

As the merchants and administrator classes grew more

powerful, their regulations became more widespread and

oppressive. Even domestic commerce became highly

regulated.

Some of the later British mercantilists fought against

certain government regulations, particularly those

prohibiting the export of gold.

Its export, they argued, was necessary to facilitate the

very commerce that would assure England of an export

balance of trade.

One philosopher, David Hume (1711 – 1776), believed that free trade

was the natural order of things and was of mutual benefit to all.

The free trade doctrine was later expanded when a Scottish philosophy

professor Adam Smith, published The Wealth of Nations.

Adam Smith (1723 – 1790) is the recognized founder of the modern

discipline of economics. Smith like Hume came to economics through

philosophy.

His major philosophical work, The Theory of Moral Sentiments, was

published in 1759, in which he firmly established his belief in the

principle that an individual’s actions are governed by self-interest.

While in France as a visiting private tutor, he encountered a group of

economic thinkers known as physiocrats, who believed that all wealth

originated in agriculture. They traced the circular flow of income from

agriculture to landowners and the non-agricultural class and back again

to agriculture.

The physiocrats argued that the system would function best with

minimum of government interference. It is from the French of this

period that we get the phrase laissez-faire, laissez-passer (free

enterprise, free trade).

The physiocrats ideas meshed with that of Smith’s philosophy

and beliefs about economics, and it was

in France that smith began work on his book “The Wealth of

Nations”. His main arguments are summarized in the

following list:

People are born equal; the differences in them as adults

comes from habits, custom, and education

A principal trait of human nature is the drive to barter and

exchange one thing for another

The drive to barter and exchange gives rise, slowly and

gradually, to specialization, or division of labor

Division of labor leads to gains from trade and is the

primary source of economic growth or progress

The force of competition in a free market will

automatically determine the natural, or equilibrium,

price of both products and resources

Economic progress depends on savings, which provides the

entrepreneur with a fund to invest in the employment of

more labor and the production of greater output

Government intervention in economic life is unnecessary

and, in many cases, harmful

All of the above arguments are still heard today, and some of

them are considered to be broadly accurate. Smith

succeeded in describing an orderly economic system based

on individualism and freedom. His description of the self-

regulating market mechanism constituted an important

first word for subsequent economic analysis.

Other modern economic writers such as Thomas R. Malthus (1766 –

1834) believed that there was a natural tendency for population to

increase faster than the supply of food.

Thus economic growth could not continue indefinitely, because

there simply would not be enough food available to support the

population. If population growth continued unchecked by either

moral restraint or such as positive checks as war, plagues, or

epidemics, famine would eventually halt it.

6. ECONOMIC SYSTEMS AND POLICIES

The nature of an economic system and the

different forms of economic organization has a

profound influence on a society’s economic and

social life.

Thus, a society’s economic system determines

how a society answers the fundamental

economic questions of:

what is to be produced

how the output is to be produced

who is to get this output, and

how future growth will be facilitated, if at all.

The essential differences between economic systems lie in the

extent to which economic decisions are made by individuals as

opposed to governmental bodies or other collective groups, and in

whether the means of production are publicly or privately owned.

There are basically four general types of economic systems:

The Traditional Economy

In the traditional economy, economic matters are largely

determined based on social or religious customs and traditions.

Frequently, a class system is present, and movement from one

socio-economic class to another is usually difficult, if not

impossible.

Tradition may help a society function, but it may also inhibitchange. For example, in Africa the Fulani tribes have atraditional economy, based on cattle raising, that hasfunctioned for centuries. Everyone’s role is defined in relationto the ownership and tending of cattle. Since cattle are thechief form of wealth, families strive to maximize the size ofherds.

Thus, as the tribes have grown, so have the herds. Pastures arebecoming deserts; however, the Fulani are in danger of grazingthemselves out of existence. Still, they cling to their rigidtraditions, making no adjustments for their changing economicenvironment.

Tradition has left its mark on even the most modern economies;most countries in the Arab world are governed according toIslamic Laws and Traditions, a breach of tradition contributes toa downfall of government as was the case with the governmentof Shah Mohammad Reza Pahlavi of Iran.

Pure Capitalism

A purely capitalistic economic system is based on private ownership andthe freedom of individuals to conduct their economic affairs withoutinterference from government bodies or other groups.

Thus, under capitalism we find freedom of choice and enterprise as well asprivate ownership of the means of production. Although it is not alwayspresent, we also expect to find some measure of competition among thevarious economic entities for jobs or markets.

Potential problems under capitalism

Although a purely capitalistic economic system allows for freechoice and free enterprise, several problems may still arise thatinclude:

difference between social and personal benefits and costs

monopolization

distribution of income

dissatisfaction of workers

Command economic system

A command economy is the antithesis of a purely capitalistic economy. In a

command economic system, all of the

What

how, and

for whom

decisions are made on a collective or group basis.

There is collective ownership of the factors of production.

The group that owns the factors of production is usually the government.

The main characteristic of command economies is centralized planning.

Under such a system, the incentives of the market are replaced by

decisions made and directives issued by the collective body.

The occupation of workers, the quantities of each type of good or service

produced, and the distribution of income are determined by the central

planners.

These planners also decide what provisions, if any, will be made for future

economic growth.

In nations that have predominantly communistic economic systems find it difficult to

achieve their economic goals without market incentives to encourage productive

activity.

Mixed economic systems

Most economic systems in existence are neither purely capitalistic nor command. In

general, they are a mixture of both. A mixed capitalistic economic system has the

characteristics of a free enterprise economy in much of its economic activities.

However, it also makes some economic decisions on a collective level. Some of the

productive resources or goods are owned by a group. Frequently, the group involved

is usually the government.

Goals of a mixed capitalistic economy

economic freedom

equitable distribution of income

full employment with price stability

economic growth

The U.S. economic system of mixed capitalism has been developed

partly in response to some of the potential problems of pure

capitalism.

In mixed capitalistic economies, citizens generally wish to live in a

society where businesses and consumers have a great deal of

freedom to pursue their economic goals. In such a society,

businesses can for the most part produce what they want to

produce in any way they choose to produce it.

Also, individuals are generally free to choose their careers and

consumers to purchase the goods and services which they desire, as

long as they have the means of doing so.

Most mixed capitalistic systems make efforts to provide

an equitable distribution of income among individuals.

Most countries with mixed capitalistic systems want to

achieve full employment and price stability.

Finally, the goal of economic growth means that the

general well-being of individuals should increase over

time. This goal is often stated in terms of an increase in

income per person.

The role of government What is the role of government in achieving the four generaleconomic goals of mixed capitalism? The responsibilities ofgovernment usually include the following:

Provision of a legal framework consistent with economicfreedom but prohibiting abuses of economic power

Development of policies that adjust for costs andbenefits and ensure adequate production of publicgoods. A public good is a good whose benefits cannot belimited to those who directly pay for it.

Promotion of economic stability and growth

Promotion of an equitable distribution of income.

Other economic systems

In general, countries with a communistic approach to social and economic

organization rely much more on command than market systems to answer

the fundamental questions of production, distribution and growth.

As a result, countries such as the former Soviet Union, Poland, Bulgaria,

and china have found it difficult to coordinate the production of goods and

services with consumer demand for output. In addition, their central

planners frequently have had trouble maintaining production incentives

because profits are not always related to the market value of what is

produced.

China is attempting to build an economic system that combines central

planning with market incentives.

Whatever the economic system of a country, it is difficult to be completely

satisfactory to all of the nation’s citizens.

7.Historical, geographical and socio-

economic characteristics of Cameroon

1. Historical characteristics

The territory of present day Cameroon was first settled during the

Neolithic. The longest continuous inhabitants are groups such as the

Baka (Pygmies). From here, Bantu migrations into eastern,

southern, and central Africa are believed to have originated about

2,000 years ago. The Sao culture arose around Lake Chad c. AD 500

and gave way to the Kanem and its successor state, the Bornu

empire. Kingdoms, fondoms, and chiefdoms arose in the west.

Portuguese sailors reached the coast in 1472. They noted an

abundance of the mud lobster in the Wouri River and named it Rio

dos Camarões, Portuguese for "River of Shrimp", and the phrase

from which the name Cameroon is derived. Over the following few

centuries, European interests regularized trade with the coastal

peoples, and Christian missionaries pushed inland.

In the early 19th century, Modibo Adama led Fulani soldierson a jihad in the north against non-Muslim and partiallyMuslim peoples and established the Adamawa Emirate.Settled peoples who fled the Fulani caused a majorredistribution of population. The northern part of Cameroonwas an important part of the Muslim slave trade network.

The German Empire claimed the territory as the colony ofKamerun in 1884 and began a steady push inland. Theyinitiated projects to improve the colony's infrastructure,relying on a harsh system of forced labour.

With the defeat of Germany in World War I, Kamerun becamea League of Nations mandated territory and was split intoFrench Cameroun and British Cameroons in 1919. Franceintegrated the economy of Cameroun with that of France andimproved the infrastructure with capital investments, skilledworkers, and continued forced labour.

The British administered their territory from neighbouring

Nigeria. Natives complained that this made them a neglected

"colony of a colony". Nigerian migrant workers flocked to

Southern Cameroons, ending forced labour but angering

indigenous peoples.

The League of Nations mandates were converted into United

Nations Trusteeships in 1946, and the question of

independence became a pressing issue in French Cameroun.

France outlawed the most radical political party, the Union

des populations du Cameroun (UPC), on 13 July 1955. This

prompted a long guerrilla war and the assassination of the

party's leader, Ruben Um Nyobe, near Boumnyebel, the

village where he was born.

In British Cameroons, the question was whether to reunify

with French Cameroun or join Nigeria.

Cameroon after independence

On 1 January 1960 at 2:30 am, French Cameroun gainedindependence from France under President Ahmadou Ahidjo.On 1 October 1961, the formerly British Southern Cameroonsunited with French Cameroun to form the Federal Republic ofCameroon.

Ahidjo used the ongoing war with the UPC to concentratepower in the presidency, continuing with this even after thesuppression of the UPC in 1971.

His political party, the CNU, became the sole legal politicalparty on 1 September 1966 and in 1972, the federal system ofgovernment was abolished in favor of a United Republic ofCameroon, headed from Yaounde. Ahidjo pursued aneconomic policy of planned liberalism, prioritizing cash cropsand petroleum exploitation.

The government used oil money to create a nationalcash reserve, pay farmers, and finance majordevelopment projects; however, many initiatives failedwhen Ahidjo appointed unqualified allies to directthem.

Ahidjo stepped down on 4 November 1982 and leftpower to his constitutional successor, Paul Biya.However, Ahidjo remained in control of the CNU andtried to run the country from behind the scenes untilBiya and his allies pressured him into resigning.

Biya began his administration by moving toward a moredemocratic government, but a failed coup d’etatnudged him toward the leadership style of hispredecessor.

With the reintroduction of multi-party politics in December

1990, the former British Cameroons pressure groups called for

greater autonomy, with some (SCNC) advocating complete

secession as the Republic of Ambazonia .

2. GEOGRAPHICAL CHARACTERISTICS OF CAMEROON

Cameroon is located in Central Africa, at the Bight of Biafra and preciselybetween latitudes 2° and 12° North and longitudes 3°and 16° east. Itshares boundaries with Tchad to the north, Nigeria to the West, EquatorialGuinea, Gabon and Congo to the south and Central Africa Republic to theEast.

The location of Cameroon within this range lends it to diverse climatic andecological regions, with a very humid south towards a dry and almostdesert north. Such contrast in characteristics has made most researchers torefer to it as 'Africa in miniature'.

It is Africa in miniature in the sense that almost every climatic andecological zone found in Africa can be found in Cameroon. Anotherperspective is that Cameroon has a diverse ethnic and linguisticbackground. Cameroon presents all the tropical climatic nuances: from thetropical cool type, to the tropical hot and wet, and tropical hot and drywith accompanying vegetation and animal life.

It has a surface area of 475, 442 km sq Km and a population estimated inJuly 2005 at 17 795 000 inhabitants and a population density of 37inhabitants per sq km or in other words 97 inhabitants per sq mile. Thecapital of Cameroon is Yaoundé, located between latitude 3°52′N 11°31′Eand longitude 3.867, 11.517. The largest city in Cameroon is Douala and it

Agro-ecological regions Cameroon is divided into five major geographic zones distinguished by

dominant physical, climatic, and vegetative features. The coastal plain extends15 to 150 kilometers (9 to 93 miles) inland from the Gulf of Guinea and has anaverage elevation of 90 meters (295 ft). Exceedingly hot and humid with a shortdry season, this belt is densely forested and includes some of the wettestplaces on earth, part of the Cross-Sanaga coastal forests.

The South Cameroon Plateau rises from the coastal plain to an averageelevation of 650 meters (2,133 ft). Equatorial rainforest dominates this region,although its alternation between wet and dry seasons makes it less humid thanthe coast. This area is part of the Atlantic Equatorial coastal forests eco-region.

An irregular chain of mountains, hills, and plateaus known as the Cameroonrange extends from Mount Cameroon on the coast—Cameroon's highest point at4,095 meters (13,435 ft)—almost to Lake Chad at Cameroon's northern borderat 13°05'N. This region has a mild climate, particularly on the Western HighPlateau, although rainfall is high. Its soils are among Cameroon's most fertile,especially around volcanic Mount Cameroon. Volcanism here has created craterlakes, such as the Lake Nyos. This region is known as the CameroonHighlands forests eco-region.

The southern plateau rises northward to the grassy, ruggedAdamawa Plateau. This feature stretches from the westernmountain area and forms a barrier between the country's north andsouth. Its average elevation is 1,100 meters (3,609 ft), and itsaverage temperature ranges from 22 °C (71.6 °F) to 25 °C (77 °F)with high rainfall between April and October peaking in July andAugust. The northern lowland region extends from the edge of theAdamawa to Lake Chad with an average elevation of 300 to 350meters (984 to 1,148 ft). Its characteristic vegetation is savannascrub and grass. This is an arid region with sparse rainfall and highmedian temperatures.

Cameroon has four patterns of drainage. In the south, the principalrivers are the Ntem, Nyong, Sanaga and Wouri. These flowsouthwestward or westward directly into the Gulf of Guinea. TheDja and Kadei drain southeastward into the Congo River. In northernCameroon, the Benoue River runs north and west and empties intothe Niger. The Logone flows northward into Lake Chad, whichCameroon shares with three neighboring countries.

3. SOCIO-ECONOMIC CHARACTERISTICS OF CAMEROON

THE PEOPLE OF CAMEROON

Cameroon's estimated 250 ethnic groups form five largeregional-cultural groups: western highlanders (orgrassfielders), including the Bamileke, Bamoun, and manysmaller entities in the northwest (est. 38% of population);coastal tropical forest peoples, including the Bassa, Douala,and many smaller entities in the Southwest (12%); southerntropical forest peoples, including the Ewondo, Bulu, and Fang(all Beti subgroups), Maka and Pygmies (officially calledBakas) (18%); predominantly Islamic peoples of the northernsemi-arid regions (the Sahel) and central highlands, includingthe Fulani, also known as Peuhl in French (14%); and the"Kirdi", non-Islamic or recently Islamic peoples of thenorthern desert and central highlands (18%).

The people concentrated in the Southwest and Northwestregions--around Buea and Bamenda--use standard English and"pidgin," as well as their local languages. In the threenorthern regions--Adamawa, North, and Far North--Frenchand Fulfulde, the language of the Fulani, are widely spoken.

Elsewhere, French is the principal language, although pidgin

and some local languages such as Ewondo, the dialect of a

Beti clan from the Yaounde area, also are widely spoken.

Although Yaounde is Cameroon's capital, Douala is the largest

city, main seaport, and main industrial and commercial

center.

The western highlands are among the most fertile regions in

Cameroon and have a relatively healthy environment in

higher altitudes. This region is densely populated and has

intensive agriculture, commerce, cohesive communities, and

historical emigration pressures. From here, Bantu migrations

into eastern, southern, and central Africa are believed to

have originated about 2,000 years ago. Bamileke people from

this area have in recent years migrated to towns elsewhere in

Cameroon, such as the coastal regions, where they form

much of the business community.

ECONOMIC CHARACTERISTICS

Cameroon for several years experienced an economicboom from sectors like the exportation of agriculturalproducts (Coffee, cocoa and cotton) and petroleum. Butwith a fall in world prices for primary products, Cameroonexperienced serious crises. After its budgetary year of1985-1986, its economy went into serious recession.

An evaluation during this period revealed that theeconomy had experienced a brutal drop in revenue fromexportation. This drop affected petroleum as well as otherprimary products that were exported at the time. Thisdrop was estimated at about 329 billion FCFA, this beingabout 8.2 % of the Gross Domestic Product (GDP).

Degradation of the economic sector increased furtherbetween 1986-1987 due to the persistent drop in the priceof the main products exported (Petroleum, coffee, cocoaand cotton).

Economic growth rate was henceforth negative. From 1985 to 1988, exchange rated dropped by half.

To cope with this crisis, the government in a firstplace put in place a policy of internal adjustment inwhich salaries of civil servants were reduced andother costs of production. The reduction in thestandards of living and the influence of the state inthe economy did not seem to be making the situationany better. Economic indicators did not stop emittingnegative signals.

A continues decrease in revenue induced a 40% drop inconsumption per Cameroonian between the years 1985-1986 and 1992-1993. External debts incurred increasedfrom less than half to more than three quarters of theGDP between 1984-1985 and 1992-1993.

The investment rate decreased from 27% to less than11% of the GDP. To cope with the situation marked byrising tensions at the treasuries, the government optedfor salary cuts in the civil service in 1993.

From 1994, new economic policies based on monetaryadjustments were put in place; leading to a gradual changein trends. Remarkable changes were made at the level ofexportation as well as on the general scenario ofgovernment’s budget.

The government however continued to suffer from theinability to cope with internal an external pressure, comingfrom debts that could not be paid. Relations with foreignpartners equally turned to a stalemate. Two new programs ofstructural adjustments concluded with the IMF as agreementsall failed as it was with the preceding ones.

8. THE PRIMARY ECONOMIC SECTOR

The primary sector of the economy is the sector of an economy

making direct use of natural resources. This includes agriculture,

forestry and fishing, mining, and extraction of oil and gas.

This is contrasted with the secondary sector, producing

manufactured and other processed goods, and the tertiary sector,

producing services. The primary sector is usually most important in

less developed countries, and typically less important in industrial

countries.

BUSINESS OPPORTUNITIES IN THE PRIMARY SECTOR

Cameroon's natural resources are very well suited to agriculture and

arboriculture. An estimated 70% of the population farms, and agriculture

comprised an estimated 19.8% of GDP in 2009. Most agriculture is done at

the subsistence scale by local farmers using simple tools.

They sell their surplus produce, and some maintain separate fields for

commercial use. Urban centers are particularly reliant on peasant

agriculture for their foodstuffs. Soils and climate on the coast encourage

extensive commercial cultivation of bananas, cocoa, oil palms, rubber, and

tea. Inland on the South Cameroon Plateau, cash crops include coffee,

sugar, and tobacco.

Coffee is a major cash crop in the western highlands, and in the north,

natural conditions favor crops such as cotton, groundnuts, and rice.

Reliance on agricultural exports makes Cameroon vulnerable to shifts in

their prices.

Livestock are raised throughout the country; in the Northern

regions extensive cattle and small ruminant rearing are particularly

important for the livelihood of the people. Fishing employs some

5,000 people and provides 20,000 tons of seafood each year.

Bushmeat, long a staple food for rural Cameroonians, is today a

delicacy in the country's urban centers. The commercial bushmeat

trade has now surpassed deforestation as the main threat to

wildlife in Cameroon.

Until 1970, agriculture was the driving force of economic growth in

the country, later this resource has been replaced by oil which has

become the largest source of income.

The secondary sector constitutes 34% of the GDP, but the remaining

46% of GDP comes from services. The productive sectors are those

of the extraction and refining of oil, aluminum, bauxite, nickel,

uranium, gold, natural gas, food processing, textiles, cotton,

timber, millet, rice, wheat, coffee, cocoa, sugar cane, rubber,

bananas, pineapple, fish and shrimps.

Short-term prospects for the economy Cameroon foresee a gradual

expansion of non-oil sector. In particular, it provides a robust growth in

construction and in terms of material and actual execution of transactions,

due to infrastructure investment programs of the government.

Similarly there is an expansion of the forestry sector in the East and South

regions, due to the improvement of transport infrastructure and an

increase in production of aluminum in the manufacturing sector. The

southern rainforest has vast timber reserves, estimated to cover 37% of

Cameroon's total land area. However, large areas of the forest are difficult

to reach. Logging, largely handled by foreign-owned firms, provides the

government some 300 billion FCFA a year, and laws mandate the safe and

sustainable exploitation of timber. Nevertheless, in practice, the industry

is one of the least regulated in Cameroon.

Services also contribute to accelerate economic activities, particularly in

the sectors of financial intermediation, transport and telecommunications,

driven by growth in domestic demand.

15. THE CONCEPT OF RURAL DEVELOPMENT

It has become quite clear that the highly complex and interdependent

development problems in developing countries cannot be solved simply by

means of mono-sectoral or solely production-oriented measures. Instead, it

is essential to find a concept which adopts an integrated approach and,

while being geared to the account of the natural, economic and socio-

cultural conditions on hand.

Within this concept, the individual must not be merely the object of

technical assistance, but must help sustain the development process by

taking an active part in it.

Rural development involves a multi-sectoral,

interdisciplinary planning and implementation approach

aiming to develop, utilize and preserve local resources

in order to achieve a long lasting improvement in the

economic and social situation of the rural population in

a particular region.

The rural development concept is based on four

principles:

Poverty orientation

Target-group orientation

Participation

sustainability

The rural development problem

The development problem of rural communities is caused primarilyby a limited access to resources and social amenities. Thislimitation may result from an imbalance between population andavailable resources. We all know the difficulties of improving thebalance, and we know that a solution at long term will require agradual closing of the gap between economic and populationgrowth.

Besides the problem caused by population growth, access toresources is quite often limited for the rural poor because of thecurrent socio-political situation. Here, the limited access toresources is deliberate, and the result is, that the availableresources are underutilized because of obstacles of a socio-culturaland political nature.

There are numerous examples of such a situation. Landless peoplecannot obtain land for cultivation, while landlords use their landextensively only; subsistence farmers have difficulties in obtainingcredit; scarce means of production are supplied to certain sectorsof the population only, etc.

Development is a system of interrelated social changes

Development is a process resulting from the integration of anumber of elements, especially goals based on existing values,resources, natural as well as human, available technology, forms ofsocio-political organization.

These elements and their components are integrated in a system inwhich the elements-are closely interrelated, i.e., if one elementchanges, the whole system changes.

Components of integrated rural development

Integrated rural development is, at the same time, a goal and amethodological approach. The goal is to include the neglectedmasses of rural poor in the process of increasing the well-being ofmankind. The approach for reaching this goal is the application of abundle of well-balanced measures of economic and socio-politicalnature. In this process, by applying a system research method, theinterdependent relation of all economic, social, political, andtechnical factors has to be taken into account. Here, we have toadmit that a quantitative analysis would create many difficulties.

The content of this bundle of measures will vary indifferent cases. Therefore, any approach to ruraldevelopment has to start with the assessment ofthe current situation and the identification ofexisting bottlenecks. The following, somewhatabstract, checklist gives an idea of the internal andexternal factors to be considered:

Natural resources, agricultural and non-agricultural;

Human resources(quality and quantity);

Pattern of social organization (values, social stratification mobility,power structure land tenure system);

Economic structure (agricultural production structure, industry,market relations, etc,);

Technology in agriculture and in the non-agricultural sector;

Infrastructure (physical infrastructure, transport andcommunication, social infrastructure, spatial order);

Institutions and organizations (administration, people'sorganization, etc.);

Services (marketing, credit extension, social security);

Education and training (formal and informal).

The application of measures concerning thesectors listed above-perhaps with someadditional ones-to a specific area, will allow theidentification of the elements promoting andrestricting development possibilities, as well astheir interrelationship.

12. Economic development

Economic development generally refers to the continuous,determined actions of policymakers and communities thatsupport the standard of living and economic health of aspecific area. Such actions can involve multiple areasincluding development of human capital, criticalinfrastructure, regional competitiveness, environmentalsustainability, social inclusion, health, safety, literacy, andother initiatives.

The scope of economic development includes the process andpolicies by which a nation improves the economic, political,and social well-being of its people.

Modernization, Westernization, and especiallyIndustrialization are other terms people have used whendiscussing economic development. Most economists agreethat development is closely bound up with the evolution ofcapitalism and the demise of feudalism.

Economic development differs from economic growth.

Whereas economic development is a policy intervention

endeavor with aims of economic and social well-being of

people, economic growth is a phenomenon of market

productivity and rise in GDP. Consequently, as one economist

points out: “economic growth is one aspect of the process of

economic development.

ECONOMIC GROWTH

In economics, economic growth is defined as the increasing

capacity of the economy to satisfy the wants of goods and

services of the members of society. Economic growth is

enabled by increases in productivity, which lowers the inputs

(labour, capital, material, energy, etc.) for a given amount of

output. Lowered costs increase demand for goods and

services. Economic growth is also the result of population

growth and of the introduction of new products and services.

Even though economists consider growth of the productive capacity

of an economy to be generally desirable, rapid economic growth

may have some disadvantages:

Rapid growth entails an ever-increasing demand for resources (price

effect)*

Difficulty of maintaining environmental quality

The benefits of growth are frequently not distributed equally

among the individual citizens

GROWTH AND DEVELOPMENT

Some economists argue that poor countries have sometimes

experienced economic growth with little or no economic

development initiatives; for instance, in cases where they have

functioned mainly as resource-providers to wealthy industrialized

countries. There is an opposing argument, however, that growth

causes development because some of the increase in income is

spent on human development such as education and health.

Supply concepts

Supply function

This describes the relationship between the quantity of aproduct supplied and a set of variables that determine it.

Quantity supplied means the amount of a good or service thatproducers will make available for sale during a particularperiod of time.

Usually, this amount depends primarily on the price of thegood or service being offered for sale, but a number of othervariables are also very important: The price of inputs

Technology

Price of related goods

Expectations about future market conditions

Number of suppliers in the market

Motives or objectives regarding profit and other producer goals

Supply schedule and curve

Supply schedule

It is a table that relates the quantity of a good or service duringsome time period to the various possible prices of that good orservice

Supply curve It is a graphical representation of a supply schedule

Law of supply

It states that, other things being equal, sellers will increase thequantity of a product they are willing and able to offer for sale asthe price of that product is increased.

In the short-run, when the supply function variables otherthan price remains constant, we can expect the law of supplyto be true – for two reasons:

Production will be subject to diminishing returns

Increasing the quantity supplied of particular goods may entailreducing the output of other goods

Normally, we expect to find a direct relationship

between price and quantity supplied, especially when

the time period is relatively short and variables such as

input prices or technology are unlikely to change.

However, over longer time periods suppliers sometimes

offer more output at lower prices, because modern

technology may introduce changes that lower

production costs.

Recent examples of products whose cost and price reductions are

associated in part with technological change are electronic equipment:

mobile phones, calculators, TV sets

Each of the markets for these goods have also been affected by increase

in the number of sellers (outwards shift of the supply curve) and slower

growth of demand. Indeed,, shifts in both the supply and demand curves

could lead to falling prices over longer time periods.

Market equilibrium

A competitive market is characterized by the presence ofmany independently acting buyers and sellers and theabsence of any interference by government or extraordinarilypowerful business firms.

In such a market, it is relatively easy to explain theestablishment of a market price of a particular good that willbe maintained as long as other variables of the supply anddemand functions do not change.

Such a price is called an equilibrium price, because themarket will tend to move towards it if, for any reason, someother price temporarily exists.

An equilibrium price or quantity is a price or quantity that will tendto be maintained naturally by market forces.

Disequilibrium and effects

A price that is higher than the equilibrium one will lead to a surplusof quantity supplied over quantity demanded

A price that is lower than equilibrium will lead to a shortage orexcess of quantity demanded over quantity supplied

Change in equilibrium

The equilibrium market price and quantitytraded of a good or service will not changeas long as both the demand and supplycurve for the item do not shift.

However, a shift in one or both of thesecurves will lead to the establishment of anew equilibrium position.

Shifts in demand and supply Price will rise if demand increases and supply remains unchanged, or if supply decreases and demand remains

unchanged.

Price will fall if demand decreases and supply remains unchanged or if supply increases and demand remainsunchanged.

Growth: demand and supply both increase When growth occurs, increasing both the number of consumers and the number of producers in a market, price may

either rise, fall or remain the same depending on exactly how the supply and demand curves have shifted.

Gov’t policies and regulatory framework in the domain of agro-

pastoral and rural development

A story of irrational human behavior

There is only a limited amount of fossil fuel in the world, and we are

rapidly using it up.

There is only a limited amount of arable land in the world for food

production, and we are exploiting and damaging it.

There is indiscriminate cutting of natural forest without efforts to

replant

Many metals and other materials from the earth’s crust are becoming

increasingly difficult to procure, and yet we make little effort at

controlling their use or recycling them.

What can explain such human folly? The answer lies in our economic system.

Without understanding the universal influence of short-term economics upon

our thinking, we would always be baffled at why the human race is choosing

to live on its capital. The study of human pressure on natural resources brings

into focus the conflict between short-term economic interests and long-term

human welfare. It also suggests that, over the long-term, environmental

protection and economic rationality are just one and the same thing.

Notion of sustainable development

There is much concern, in recent development thinking, with the

sustainability of farming systems.

A widely quoted definition of sustainable development is “development

that meets the needs of the present without compromising the ability

of future generations to meet their own needs.”

At the more local farm or village level, the essential concern is that

“the production system should not collapse in the foreseeable future.”

There are two possible ways in which the collapse of the system may

occur:

Chance fluctuation or shock, such as drought or flood, from which the

system may be unable to recover; if the system is sufficiently resilient

to recover, then it may be sustainable (fig. 1a)

Collapse due to a gradual decline in the stock of resources and

household income (fig. 1b)

Sustainability requires that this decline is prevented, by adequate

conservation measures.

Fig. 1: two views of sustainability

a) resilience

high resilience

Farm

household

Income

low resilience

time (years)

b) time trend

Farm sustainable

Household

Income

unsustainable

time (years)

Environmental sustainability

Tropical rural economics

The socio-economic environment

Tropical villages are often characterized as small, self-sufficient, community ofpeople linked through kinship and other personal ties.

Production, distribution and consumption all take place within the “closed”community while social and economic relations are based on the status ofindividuals as members of the village. There is strict observance of social normsand customs, including religious beliefs and practices. These establishedcustoms, laws and relationships make up the traditional institutions whichgovern the allocation and use of resources and the distribution of agriculturalproducts, which are geared to securing a minimum level of subsistence for allcommunity members.

The allocation of rights, to the use of natural resource and other villagefacilities, and duties, for the conservation and upkeep of these goods, is theresult of a system of reciprocity or sharing under the central authority of thechief or elders. The degree of inequality of income and power, between leadersand others, or between men and women, varies from one cultural group toanother.

None the less, considerable support for the weak and disadvantaged is offeredby co-operative sharing, and risk pooling, among near equals or by benevolentpatron-client relationships, and risk spreading, between landlords and theirtenants.

The spread of interregional markets

The interactions outside the traditional village society haspermitted increases in productive efficiency, increased farmhousehold incomes and a general improvement in social welfaredue to the following:

Opportunities for specialization and division of labor, with each type offarming zone concentrating on those products for which it has the greatestcomparative advantage

A wide range of choice of consumer goods for rural households

The use of manufactured chemicals, equipment and other inputs fromoutside the system

Easier movement of labor, and other resources between regions

Greater opportunities for the accumulation of capital

However, associated with the spread of markets are increasedsocial differentiation between capitalist, commercial farmers,traditional farmers and landless laborers, and changes in socialattitudes towards individual enterprise and acquisitiveness and lessconcern for mutual support. These and other factors are causes of“market failure”, which are used to justify governmentintervention in rural development.

Since the major assembly points for export commodities, thelargest retail markets for supplies of material inputs to farmers arelocated in towns, distance from these centers, or from their maintransport routes, has an important bearing on farm prices andhence farming systems.

As transport costs increase with increasing distance, the pricesfarmers must pay for their material inputs rise and the price theyreceive for their marketed commodities falls; in other words theirterms of trade deteriorate with increasing remoteness. This meansthat the profit margin earned per hectare declines and so too doesthe incentive to produce for the market.

Thus location influences the intensity of land use or level of outputper hectare and the choice of enterprise, since transport costs perunit of value vary between different commodities, depending ontheir bulk and perishability.

Clearly, the development of road network and other communicationinfrastructure, together with more widely dispersed market-places, storagefacilities and processing plants will improve the terms of trade between therural and urban areas. The problem of developing such delivery systems arebeyond the means of the rural community. Such elements of socialinfrastructure are examples of “public goods”, which are the responsibilityof the national government.

Transaction costs

A key requirement for markets to function effectively, is that all potential buyersand sellers should have perfect information regarding the states of supply anddemand and prevailing prices. This is manifestly not the case for mostagricultural inputs and product markets since the majority of farmers are widelydispersed and communications are difficult. Thus the costs of acquiringinformation, negotiating contracts and enforcing them, together known as“transaction costs”, are too high. In some situations, the transaction costs are sohigh, in relation to the value of the items to be traded, that no market develops.

Over time, communications and information systems have improved, but in someof the remoter areas the level of transaction costs may prevent the developmentof competitive markets for farm inputs.

Imperfect competition

As a result of high transaction costs, an individual, a group of people or acommercial company can gain unfair advantage at the expense of others. Thissituation is particularly likely to arise because of the high costs establishing adistribution and delivery system to large numbers of widely dispersed ruralfarmers. The average cost of distribution, per unit of the good or service, mustdiminish as deliveries increase. Thus there are economies of scale. Once onesupplier has established such delivery system, it would be uneconomic forcompetitors to enter the market. The sole supplier has a “natural monopoly.”

The farmer’s production choices

The farm household as both producer and consumer

The tropical farm household systems are relatively complex,involving both production (of crops, livestock and off-farm income)and consumption (of food, other basic needs and some leisure).

The allocation of productive resources and the choice of activitiesare the result of decisions made by members of the farmhousehold.

In a survey of 150 farmers in Bendel State – Nigeria (1991), showedthat they identified six main objectives and ranked them, onaverage, in the following order of priority

Food: provide food for the family from own farms

Educate: provide for the education of own children

Debt: strive to repay debts and avoid more

Profit: make the most profit from farming

Employ: employ family members on own farm

Leisure: arrange work so as to have more hours off farm work (Akatugba1992)

It seems reasonable to suppose that for most of these items, except debt and

perhaps employment, the farmers would prefer more than less. Like every other

person, their wants are not fully satisfied and they seek to improve their well-being

or utility.

However, their scope for decision-making is restricted by the range of possible

alternative activities that can be undertaken and the constraints imposed by the

limited availability of land, labor and capital resources.

Constraints and the feasible set

The idea of a limited set of production alternatives, from which the farmer has

to choose, may be illustrated by a simple example . Consider a farmer who has

the choice of growing two alternative crops, one (maize) for food and

(groundnuts) for cash. The constraints on production of these crops are land,

which is limited to 2ha, and labor in two busy periods of planting and weeding in

each of which 36 man-days are available. Each ha of maize requires 6 man-days

for planting and 20 man-days of weeding. Each ha of g’nuts requires 24 man-days

of labor for planting and 10 man-days for weeding.

The data can be used to determine the feasible set of combinations of the two

crops, subject to the three constraints of land, planting labor and weeding labor

as illustrated in the figure below.

Activities and constraints determining the feasible set

activities

Constraints maize Groundnuts Constraint level

Land (ha) 1 1 2

Planting labor

(man-days)

6 24 36

Weeding labor

(man-days)

20 10 36

Constraints and the feasible set

Risk avoidance Uncertainty in agriculture

A farmer, when he embarks on any productive activity, is uncertainwhat the actual outcome will be. Uncertainty has three main causes:

Environmental variations causing production and yield uncertainty

Price variation causing market uncertainty

Lack of information

All of these are significant in tropical agriculture, where unreliablerains and pest and disease outbreaks cause wide variation in resourceavailability and in crop and livestock yields. Human diseases arefrequent, unpredictable and costly to treat. Ill health or injury of afamily member in a critical period may cause serious loss of productionand income.

Generally, there are wide seasonal variations and unpredictablefluctuations in market prices, while information on alternativetechnologies or market situations outside the immediate locality isoften lacking. Hence the farmer cannot plan with certainty; hisdecisions are subject to risk.

There is general agreement that most people, especially farmers are risk-averse.This means that they are willing to forego some income or face extra costs inorder to avoid risk. They are cautious in their decision-making.

Sequential risks

In practice, the final outcome of a risky decision generally depends upon a

sequence of events. Thus the crop yield obtained depends upon several

confounding factors. In so far as farmers do take precautions against risk,

they will differ in the extent of their risk aversion. This may cause income

and wealth disparities between households.

Multistage decision-making

In practice the farmer does not make all his decisions at one point in

time, then wait for nature to take its course. Rather, decision-making is

a sequential process. The final yield obtained is the outcome of a series

of decisions of when and how much seed to plant, when to weed and

how much labor to use, when to harvest and so on.

Thus the farmer consequently adapts and adjusts to a changing

environment.

Action – outcome - action – outcome

probability

Rural resource economics Type of capital

Everything used in the production process, which is not a giftof nature but has been produced in the past, is calledcapital. It includes all machines and tools but also buildings,roads, footpaths, drainage ditches, growing crops, livestockand stock of food, seed, fertilizers and other materials

It is particularly difficult in rural agricultural production todifferentiate between productive and consumer capital, wherethere is close links between farm and household

Capital growth

Investment and saving

It means adding to the stock of capital i.e. foregoing currentconsumption. This can be achieved in three ways:

By savings

By creating capital assets

By purchasing capital assets

Return on capital

Most rural families in much of Africa keep a few sheep and goats that are often

left to forage for themselves in free-roaming village flocks with minimal

management. Labor and other costs are very low, but mortality is quite high. The

sheep and goats kept for breeding are clearly capital assets. They have been

produced in the past and will contribute to future output by producing young

ones.

This example is used to illustrate the concept of return on capital, which is

defined as the surplus over and above the initial cost of investment.

Land

Physical properties

Land tenure systems

National requirements

Communal tenure

Implications of the tenure systems on agricultural development

Labor

Categorization and roles of actors in the agro-pastoral

sector