DEVELOPMENT STUDIES

MODULE 2

PRODUCTION

What is production?

Production is the provision of goods and services in order to satisfy human needs and wants.

What do we produce?

The outputs of production are divided into goods and services.

Goods: These are physical products that can be seen or touched e.g. bread, furniture, sugar,
books etc.

Producer goods: These are items that can be used to make other items e.g. tractor, sewing
machine etc. They satisfy our needs indirectly.

Consumer goods: These are production outputs which give us immediate satisfaction

e.g. food, electricity, clean water etc.

Services: These are non-tangible products that meet people’s needs and wants e.g.

Teaching
Insurance
Transportation
Nursing

Give more examples of services in your country.

Why do we produce?

Human beings produce in order to satisfy their needs and wants and to increase the wealth of the
society.

Needs
Definition: They are goods and services essential for human beings to survive.

Needs may be divided into material and non-material needs.

Material Needs: These are items that can be seen and touched and are required for
survival.
The four basic needs are food, clothing, shelter and clean water.

Non – Material Needs: These are basic human requirements which cannot be seen or touched.
Examples: Security, education, health care etc.

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Wants
Definition: - These are items required for pleasure, comfort or luxury.
Examples of wants: car, cell phone, radio, entertainment, touring etc.

Non-Material Wants: These are intangible human requirements associated with pleasure,
comfort or luxury. Examples: entertainment, touring etc.

(ii) Material Wants: These are tangible items required for pleasure, comfort or luxury.

Examples: car, cell phone, radio etc.

SCARCITY, CHOICE AND OPPORTUNITY COST

SCARCITY

People’s needs and wants are unlimited but the resources used to satisfy them are limited or
insufficient.
Scarcity is the inadequacy of resources. Scarcity differs from society to society since this
depends on the level of development; e.g.

Simple societies: people are mostly concerned with acquiring basic needs hence low levels of
scarcity e.g. Basarwa became satisfied once they had killed an animal for their food.

Modern societies: they have a higher level of scarcity since they have many and diverse needs
and wants which are usually difficult to satisfy e.g. car, furniture, holiday etc.

CHOICE

Given the scarcity/insufficiency of resources, people are unable to have all things they desire.
People are therefore forced to choose what to spend the available resources on. E.g. people have
to choose whether to spend on their needs or wants.

A country or the government also has to make similar choices on how best to use the limited
resources. E.g. Whether to spend money on industrial development or social development,
(education, health) etc.

OPPORTUNITY COST

Opportunity cost is the need that is sacrificed in order to satisfy another need.
Examples
Phodiso has P100.
He needs a calculator which costs P80 and a school bag which costs P75.

The money is not enough to get him both items. He decides to buy the school bag only.
The calculator is therefore the opportunity cost.

FACTORS OF PRODUCTION

Factors of production are resources which must be there for production to take place. They are
land, labour, capital and enterprise / entrepreneurship.

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A. LAND

Land is required for the site or location of the industry and the provision of raw materials e.g.
minerals, water, vegetation, wildlife etc.

LAND OWNERSHIP

(a) Public/State Ownership

This is when land is under complete government control.

It cannot be bought or sold.
Examples of state owned land are: Mining Concessions, National Parks and Game Reserves
land for experimental and military purposes, forests and other botanical undertakings,
infrastructure development, establishment of towns and cities.

(b) Communal Ownership/Tribal Land

Land belongs to the community

The chief may share out the land to individuals. In Botswana, it is the responsibility of the
Land Boards to allocate land.

Advantages

It gives everyone in the society access to land.

The land is free.
It gives members of the community equal rights over a big piece of land.

Disadvantages

The individual users are less committed to land protection from damage caused by
overstocking or overgrazing, deforestation etc.
The land users spend very little on development due to the absence of security of ownership
of land.
The land user on communal land cannot use land as security to get bank loans.
Women are denied ownership of land in some traditional societies.

(c) Collective Ownership

This is when community members combine their resources to develop land for production
and share the profits equally.
It is found mostly in socialist countries e.g. Russia, the Ujamaa villages in Tanzania in the
1970s.

(d) Freehold – Private Ownership

It is when land is owned and controlled by an individual or company.

The landowner has a title deed or certificate of ownership.
Land can be bought or sold i.e. land has value attached to it.
For example: commercial farming and industries in urban areas.
It is common in capitalist societies.

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Advantages

Land can be used as security to obtain a loan.

Land can be sold to raise capital.
The owner carefully looks after the land.
Anybody can buy land as long as they have money.

Disadvantages

Only the rich can own land.

It causes landlessness among the poor.
It may lead to land wastage i.e. People buying up large pieces without using them
immediately but to sell them for profit in future.

(e) Leasehold

This is when individuals or companies rent out land. The land owner is usually the
government.
Tenants use land for commercial purposes.
Landowners are referred to as absentee landlords.

Advantages

Land is used productively because the tenant has to pay rentals.

Disadvantages

The rent has to be paid whether there has been production or not.
The tenant is unable to use the land to raise capital.
The tenant may misuse the land.

LANDLESSNESS

People are said to be landless when they are unable to have access to land at all.
Landlessness is caused by:
People being too poor to buy their own land
Inadequate or limited land to cater for the existing population.
Unfair distribution of land.

B. LABOUR

Definition: It is the human effort both physical and mental used in production.

SPECIALISATION OF LABOUR

This is when people are trained for the performance of specific tasks e.g. teaching, nursing,
engineering etc.
Specialization leads to labour efficiency because people become very good at what they are
doing. For example: Farmers produce for the entire society.

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Advantages

It increases workers proficiency (mastering the task) because of repetition.

It saves skill because people choose careers that they are suitable for.
Workers are easily trained for a single task.
Makes it possible for greater use of machinery.
It increases production or saves time.

Disadvantages

Doing the same job repeatedly leads to boredom.

Increased risk of unemployment because of greater use of machinery.
Loss of craftsmanship because of the increased use of machinery.
Increased dependency easily leads to the disruption of production e.g. if one worker is absent.
Concentration in one task limits the individual’s chances to acquire other skills.

Levels of specialisation

Specialisation can divided into three levels i.e. individual, regional and national.

A. Individual Specialisation

This is when a person concentrates in one activity e.g. a teacher may teach only one subject, a
doctor may specialize in teeth problems – dentist.

B. Regional Specialisation

This is when people in an area are engaged in the production of a particular commodity or service
e.g. copper nickel in Selibe Phikwe, basketry in the North West region, phane picking in the
Central District.

C. National Specialisation

Different countries specialise in the production of specific commodities due to factors which are
unique to each country e.g. Botswana specialises in beef and diamond production, Lesotho –
wool, Malawi – fish, Zambia – copper.

DIVISION OF LABOUR

Definition: This is the breakdown of the work into simple individual tasks.

i) Traditional Societies:

- Division of labour was very simple and according to gender.

- Men hunted, looked after livestock, cleared and ploughed the land.
- Women gathered, grew crops and harvested, reared children and performed other
domestic chores.

ii) Modern Societies:

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 - Division of labour is more complex.
- Each worker contributes a small part to the whole production process. The process is
broken down into simple tasks. E.g. at BMC the production process is divided into the
following simple tasks; slaughtering, skinning, opening and removal of intestines, meat
inspection, cutting, de-boning and packaging.

TYPES OF LABOUR

Skilled Labour

These are the experts in their fields.

These are people who are highly trained in specific work related to production.
They are paid high wages and salaries.
They are also known as professionals.
Examples: engineers, doctors, lawyers, nurses, surveyors, electricians, auto mechanics,
fitters, turners etc.

Semi - Skilled Labour

These are people who are trained on-the-job for specific tasks.
They eventually gain enough experience to perform the job proficiently.
Example: a spanner boy who becomes a fully-fledged mechanic.

Unskilled Labour

These are workers who perform simple hand-on tasks which require very little training.
They are paid low wages that is the minimum wage.
Examples: farm workers, cleaners, garden boys etc.

LABOUR EFFICIENCY

Labour Efficiency: is how productive the workers are.

Conditions that promote labour efficiency

If the level of education and training is high, then the level of productivity is increased.
Some cultures encourage hard work e.g. the Japanese and Chinese cultures.

If workers use simple technology, productivity will be lower. Workers who use advanced
technology will be more productive.

Good working conditions ensure high productivity e.g. good ventilation, lighting, safety, working
hours, décor etc.

Employers must take workers welfare into consideration e.g. giving workers medical aid, pension
schemes, funeral assistance, social and entertainment facilities, housing etc.

Workers can also be encouraged to work harder by offering them incentives such as higher
wages, bonuses, awards etc.

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HOW CONDITIONS IN BOTSWANA FACILITATE LABOUR EFFICIENCY

There is free education for all right up to the university and other tertiary institutions to
improve knowledge and skills.

There are labour laws that protect workers from exploitation e.g. minimum wage, working
hours etc.

There are pension schemes/social security for both government and private sectors workers.
There is acquisition of modern technology such as complex machines, computers etc. that
help to raise productivity.

The government is investing on the improvement of infrastructure to speed up the movement

of goods and provision of services.
There is better housing for workers e.g. institutional houses like teachers’ houses, BHC
houses and SHAA programme.

Government is spending on the improvement of health facilities such as health posts, clinics,
hospitals etc for a healthy and productive population.

CONDITIONS THAT MILITATE AGAINST LABOUR EFFICIENCY

Most people are unskilled or are without any formal training.

HIV/AIDS makes workers weak and unproductive.

Some places have narrow roads and single railway lines that make traffic move slowly as
well as poor telephone coverage etc.

The education system produces people that are ill prepared to join the job market.

There are poor work ethics such as late coming, lack of discipline, absenteeism, misuse of
telephones etc.

Most of the work is done manually and slowly e.g. agriculture, construction etc.

Workers experience poor working conditions such as low wages, long working hours, poor
safety, and unavailability of pension schemes for some private sector employees etc.

The culture works against the efficiency of labour in the following ways:
The extended family places a huge burden on the workers making them less focused at work.
There is lack of assertiveness e.g. going the extra mile.

C. CAPITAL

Definition: Capital is the money, machinery, technology and buildings that are used in
production. It is a man made resource.

TYPES OF CAPITAL

Money Capital – The financial resource invested in production.

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 Physical Capital – the tools, machines and buildings used in production.
Ways of Raising Capital

Capital for investment may be raised in the following ways

Savings: Abstaining from consumption so as to accumulate money.

Advantages

The investor is independent of any external control.

The investor gains interest especially where the money is saved in the bank.

Disadvantages

The money might be insufficient.

There temptation to spend the money.
Savings might lose value in times of inflation.

Loan: Money borrowed from a financial institution such as bank.

Advantages

The borrower may get enough finance.

The bank ensures that the money is spent as planned.
The bank may offer financial advice.

Disadvantages

Interest charges are sometimes very high.

The repayment plan is very strict or lacks flexibility.
In case of failure to repay the loan, the bank may repossess the borrower’s property.
The borrower needs security to secure a loan which is hard to come by.

Selling Shares: When the investor requests other people to contribute capital for his/her business
on condition that they will be entitled to a certain percentage of the profit made..

D. ENTREPRENEURSHIP

It means putting one’s resources to start a business with the hope of making profit.

Entrepreneur: A person who takes the risk of putting down money to start a business with the
aim of making profit.

Role of an entrepreneur:

Organisation: of land, labour and capital to produce goods or services.

Decision-making: on what to produce; how to produce and where to produce
Management/leadership: the day-to-day running of the business.
Risk-bearer: the ability to take the risk and steer the business to be a success.

Enterprise: The process of bringing together the factors of production to come up with goods
and services.

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NB. Successful entrepreneurs are very scarce (few) in most societies.

PRODUCTION IN HUNTING AND GATHERING SOCIETIES

Hunting and gathering are the earliest forms of human societies.

They depended on products of the natural environment that is, wild animals, vegetation and
water.
They hunted wild animals, collected insects and gathered wild plants and fruits. E.g. the
Basarwa of the Kgalagadi desert.

Production Activities

Gathering: done mostly by women and children. They gather water-bearing plants like the
tsama melon and makatane, nuts, fruits, edible roots and tubers and morama beans.
Hunting: done mostly by men. Hunt big and small game e.g. eland, kudu, hares, duiker etc.
Used simple weapons like bows and poisoned arrows, clubs. They also used traps, e.g. pit
traps, snares. They mostly hunted as individuals or groups (communal hunting).
Animal Products: meat for food; skins for clothing; bones to make tools e.g. knives; animal
bladders used to make containers.

Labour

Labour is provided by clan members.

Division of labour is according to gender i.e. men hunt while women gather.
Work is mostly devoted to the production of basic needs. No luxuries or surplus.

Land

It is communally owned.
There are specific hunting territories.
All resources belong to the group.

Capital

The hunter – gatherers own little because they are unable to produce surplus.
Possessions consist of weapons, clothes and containers.
Shelter is temporary because of the nomadic lifestyle.

CHANGES IN THE LIFESTYLE OF THE HUNTING AND GATHERING SOCIETIES

IN BOTSWANA i.e. THE BASARWA

The Basarwa are now abandoning the nomadic, hunting and gathering way of life for a more
settled life because of a number of factors.

There is provision of clean water by the government e.g. boreholes

Pastoral farming grows towards wildlife areas
Overgrazing has depleted edible plants
Construction of cordon fences disrupts migratory routes of wildlife
Increased production reduces the land available for a nomadic life

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 Government resettlement programmes such as the Remote Area Dwellers (RAD) programme
create a fast growth of permanent settlements.
Increasing levels of education among the Basarwa take them away from their hunter-gatherer
lifestyle.
Anti-poaching laws prevent Basarwa from hunting.

TECHNOLOGY

Technology is the combination of tools, skills and machinery used in production.

TYPES OF TECHNOLOGY

There are three types of technology i.e. simple, intermediate and complex.

a) Simple Technology
It is the labour intensive production tools which are usually traditional. e.g. hoes for weeding,
knives for cutting etc.

Advantages

It is cheap.
It is easy to use/repair
Tools can be made with local materials leading to self reliance.
It creates a lot of employment opportunities because it is labour intensive.
It causes little damage to the environment.

Disadvantages

It is a very slow method of production.

Poor quality goods are produced.
It is strenuous i.e. tiresome and back - breaking work.
It is outdated.

b) Intermediate Technology

This is the use of simple machines in production. E.g. sewing machine, animal drawn ploughs
and carts, windmill water pumps, cement blocks machines, etc.

Advantages

It is relatively faster than simple technology.

It is cheap.
It is easy to use and maintain.
It produces good quality goods.
It creates employment because it is labour intensive.
It causes little damage to the environment.

Disadvantages

It is strenuous to use because it requires a lot of human effort.

It is slow compared to complex technology.

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 It produces low quality products.

c) Complex Technology

This is the use of sophisticated machines for production.

Some of the machines are automatic
E.g. automatic teller machines, factory machines, computers, telephones etc.

Advantages

It produces high quality products.

It is fast and efficient.
It makes goods cheaper/affordable due to mass production.

Disadvantages

It is expensive to buy and maintain.

It increases dependency on developed countries which produce it.
It causes a lot of damage to the environment e.g. pollution and depletion of raw materials.
It can lead to unemployment because of the use of automatic machines e.g robotic arms
replacing human hands assembly industries.

APPROPRIATE TECHNOLOGY
Definition: Production tools and machines that are best suited to a particular a society.

Factors that determine appropriate technology.

a) Level of development: developed societies tend to concentrate on complex

technology while developing societies use simple and intermediate technology.
b) Education and Skills: Complex technology needs highly educated and skilled
people to operate and maintain it while simple and intermediate technology need
less skills and education.
c) Capital/Affordability: Complex technology is expensive to buy and maintain
therefore only the rich countries can afford it. L.D.Cs are poor hence can only
afford to use simple and intermediate technology.
d) Employment Creation: Developing countries like Botswana have high levels of
unemployment hence need simple and intermediate technology that are labour
intensive. Complex technology would be inappropriate because it would lead to
high levels of unemployment.
e) Environmental impact: Sometimes people deliberately use simple technology to
save the environment e.g. cycling to work instead of driving because cars
produce fumes which contribute to global warming.

Advantages of using appropriate technology.

It is relevant to the community that uses it.

Development of Appropriate Technology in Botswana

Botswana is one of the developing countries that recognize the importance of the use of
appropriate technology for development. This is indicated by efforts by Botswana Technology

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Centre (BOTEC), Rural Industries Promotion (RIP) and Rural Industries Innovation Centre
(RIIC). The primary aim of these organisations is to assist the people of Botswana identify
appropriate technology choices for development. They create and promote technologies best
suited or appropriate to Botswana’s conditions particularly to rural areas in Botswana.

The following are examples of technologies created and adapted by BOTEC and RIIC in their
attempts to encourage the use of appropriate technologies in Botswana.
Solar Cookers/Bakers: The solar cookers are developed by RIIC and they operate by converting
the sun’s energy into electricity. This technology is appropriate for Botswana because there is
abundance supply of the sun and therefore the technology is cheap, easy to use and repair. It also
assists the Batswana to reduce dependence on the already disappearing firewood which leads to
deforestation and other environmental impacts like soil erosion and land degradation.

Rural Electrification: The Photovoltaic Power Station at Motshegaletau Power Station is

another example of how the sun can be used to generate electricity that is cheaper and affordable
by the rural community. It uses solar panels to convert solar energy into electricity.

Solar Aid: BOTEC has invented a solar aid for the hearing impaired people. It combines solar and
hearing aid technologies to make a solar rechargeable hearing aid that does not need replacement
batteries.

Water Tanks: RIIC has designed water tanks that are used for rainwater harvesting. This is an
appropriate technology for the drought prone Botswana with unreliable rainfall.
Animal Drawn Pumps: RIIC has also designed animal drawn pumps which do not require fuel to
run. They are suitable for rural areas with water problems, they are cheaper and easier to use.

Farming Implements: RIIC has designed farming implements such as ploughs and planters which
are simple, cheap and easy to use and are thus appropriate for local subsistence farmers who lack
capital and modern skills.
Other examples include technologies such as the Basic Windmill developed by RIIC to pump
water and generate electricity, Sorghum grinding and threshing machines and the rim oven. The
rim oven is another invention by RIIC made from two truck rims welded together. It stands on
three legs and has a hinged steel door. It uses firewood and can bake a batch of nine loaves in an
hour. It is appropriate for rural communities.

All the above appropriate technologies show that Botswana is indeed making efforts to try and
encourage Batswana to use appropriate technology for development. We commend organizations
such as RIIC and BOTEC for their good efforts because Batswana have less money and skills to
use expensive and complicated technologies.

METHODS OF PRODUCTION

Labour Intensive Production

- It relies heavily on the use of appropriate technology and manual labour.

- It mainly uses unskilled labour.
- Examples are: cutting grass using slashers; transporting sand with wheelbarrows; digging
trenches with picks and shovels.

Advantages

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 - Little capital needed.
- Low labour costs.
- Creates a lot of employment opportunities.
- It is environmentally friendly i.e. destruction and pollution of the environment is very
limited.

Disadvantages

- Poor quality work/products.

- Slow method of production.
- Low levels of production.
- The work is strenuous therefore people get tired.

CAPITAL INTENSIVE PRODUCTION

This refers to the use of advanced or complex machines to speed up production. E.g. using a
mechanical digger to dig a trench, vehicles to transport goods etc. it needs trained or skilled
people to operate and maintain.

Advantages

- Efficient and fast method of production.

- Mass production of goods that makes them cheaper.
- High quality goods produced.
- Work becomes lighter and more enjoyable because of the use of machines.
- Creates a lot of skilled manpower.
- Improves the countries infrastructure and technological base.

Disadvantages

- Expensive to buy and maintain.

- Higher labour costs since it employs a lot of skilled and semi-skilled manpower.
- High rates of unemployment because most of the work is done by machines.
- Causes environmental damage e.g. pollution, deforestation etc.

STAGES/SECTORS OF PRODUCTION

There are three stages of production.

a) Primary Production

This involves the extraction of natural resources directly from the earth’s surface.
The physical appearance of the product remains unchanged during the production process.

Examples
o Mining – the extraction of minerals from the ground/ earth.
o Fishing – Catching fish in water.
o Forestry – the growing and cutting down of trees for timber.
o Agriculture – production of crops and livestock

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The products are primary products; they are raw i.e. they are in their natural sate. They are
generally unusable because they need further processing.

b) Secondary Products

This involves the transformation of raw materials into semi-finished and finished products.
There are three types of secondary production:

i) Processing: Transformation of raw materials into more usable goods.

e.g. Cattle into beef (BMC Abattoir); hides into leather (BMC Tanner); Maize into mealie
meal (Sefalana); Copper ore into copper metal (BCL).

ii) Manufacturing: It involves the transformation of raw materials into some specific and
usable goods. These goods can be used directly by the consumers/public.
For example: Leather into shoes, belts, jackets, hats etc.; cloth into clothes; steel into
doorframes, tools, arts etc.; chocolates from milk, cocoa and sugar.
iii) Construction: The building of houses, dams, roads, bridges etc. Construction uses both the
products of the primary and manufacturing industries.
For example: To come up with a complete building the following are needed:
- Quarry stones, river sand, pit sand and cement from mining.
- Timber for roofing from forestry.
- Nails, window and doorframes, plumbing material, plate glass, electrical components etc
from the manufacturing industry.

c) Tertiary Production

It involves the provision of services that help in the transfer of finished products from the
factory to the consumer.
It is now a major employer in most of modern economies. It involves both commercial and
direct services.
i) Tertiary services:

 Warehousing – storing of goods in bulk in large buildings.

 Wholesaling – the selling of goods in bulk to shops and supermarkets.
 Retailing – the selling of goods directly to the public through shops and
supermarkets etc.
 Transportation – carrying of goods and people using vehicles e.g. cars, trains,
aeroplanes, ships etc.
 Advertising.
 Insurance services.
 Banking and finance.

ii) Direct Services

Mainly aims at serving people directly. For example:

 Health services.
 Education and training.
 Entertainment e.g. music, sports, cinema etc.
 Lawyers/legal services.
 Architects/architecture.
 Security e.g. police, security firms etc.

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d) Quaternary Production

This refers to the stage that deals with information technology (IT) and professional knowledge.
Telecommunication and computer network have become important tools for the exchange of
knowledge in the modern world.

ECONOMIC SYSTEMS FOR ORGANISING PRODUCTION IN SOCIETIES

There are three economic systems namely
Capitalism/Market Economy
Socialism/Planned Economy
Mixed Economy

An economic systems determines the following in a society

 Who own the means of production.
 Who controls production i.e. what and how much to produce.
 Who benefits from production.

A. Capitalist or Market Economy

Definition: This is an economic system whereby the means of production are owned and
controlled by individuals or the private sector.
The emphasis is on the private ownership of capital or property.
Examples: In Africa: Kenya, South Africa, Malawi etc.
Others: USA, Japan, Germany etc.

Main Features/characteristics

Private property: Individuals have the right to own and control the means of production i.e. land,
labour and capital.
 Freedom of choice: People are free to choose what to produce, how much to produce and
where to produce.
 Freedom of enterprise: People are free to start businesses of their choice.
 Self Interest: people are motivated by the need to make profits for themselves.
 Competition: Businesses compete against each other.
 Price Mechanism: The economic principles of supply and demand determine the prices of
goods and services.
 Government Role: there is minimal government interference in the running of the
economy.

Advantages

- The economy responds quickly to people’s needs and wants.

- Entrepreneurs always try to use resources as efficiently as possible in order to get the
most profits out of them.
- High quality goods and services because of competition.
- Entrepreneurs are always motivated to make a success of their businesses because they
want to make profit.
- Highly productive because of the use of mass productive methods.
- Capitalist countries have achieved the highest levels of development in the world e.g.
USA and Japan.

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 - Anybody has the chance to become rich provided they have business skills.

Disadvantages

- It is unable to meet the basic needs of the people since the emphasis is on profit.
- Businesses overcharge since there is little government control.
- Damage to the government goes unchecked in the pursuit of profits e.g. deforestation,
pollution etc.
- Inequalities in the society widen with the rich becoming very rich and the poor poorer.
- Workers are exploited by their employers e.g. low wages, long working hours, violation
of labour rights etc.
- Uncontrolled competition may lead to overproduction and lowering of prices thus leading
to a collapse of the economy e.g. the economic depression of 1929 in America that even
affected Europe and the rest of the world.

B. Socialist or Planned Economy

Definition: it is an economic system whereby the means of production are owned and controlled
by the state for the benefit of the whole society. Private ownership of property is prohibited. The
government controls all production, distribution and consumption.
Examples: Africa: Mozambique, Angola, Ethiopia and Tanzania.
Others: China, Cuba, North Korea and Vietnam.

Main features/characteristics

- State ownership: All means of production are owned and controlled by the state.
- State entrepreneurship: The government is the only entrepreneur.
- Collective Interest: All citizens are expected to work for the good of the society.
- Price Control: All prices are set and controlled by the state.
- Central Planning: Decisions on what and how to produce are made by the central
government.

Advantages

- It satisfies all the people’s basic needs i.e. food, shelter, clothing etc.
- Benefits of production are distributed equally among citizens.
- Everyone has the right to work/employment.
- Goods and services are made available at low prices.

Disadvantages

- It is difficult to plan for the whole country and this results in a lot of mistakes.
- It suppresses the individual’s freedom to think and act.
- State appointed managers are inefficient because managers are appointees rather than
entrepreneurs.
- Technologically inefficient because managers are prohibited coming up with new ideas
or making changes.
- Very few luxury goods are produced hence people’s lives are uncomfortable.
- A very limited choice for consumers since all goods and services are produced by the
state.

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 - Low productivity levels because of over-employment, inefficient management and
morale of the workers.
- N.B. However most of the socialist states are moving towards the Capitalist mode of
production.

C. Mixed Economy

Definition: It is an economic system whereby there is both private and state ownership of the
means of production.
- It is a mixture of both capitalism and socialism.
- There is state planning, control and businesses operating alongside a private sector.
- Most countries of the world are now mixed economies.
Examples: Botswana, Zimbabwe, Zambia etc.

Main features/Characteristics

- There is both state/public and private ownership of means of production.

- There is freedom of enterprise.
- The government also operates enterprises e.g. state cooperatives or parastatals.
- The government also plans for the economy e.g. the National Development Plans.
- The government interferes in the running of the economy through the following ways.
 Taxation
 Legislation e.g. company laws, labour laws etc.
 Quality control e.g. through the Botswana Bureau of Standards.
 Price Monitoring.
 Provision of basic infrastructure e.g. roads, power, railways, water etc.
 Government provides social services to the people such as education, health,
sanitation, social welfare etc.

Advantages

- It redistributes the benefits of production through the taxing of businesses.

- Helps the poor through welfare services.
- The government provides basic needs of the people.
- The government protects the government from exploitation.
- Consumers obtain quality goods and services.
- The environment is protected from unnecessary damage by laws.
- People are free to establish enterprises of their choice.

Disadvantages

- The government may discourage investment through tough laws and heavy taxation.
- Government always ends up in debt because of public expenditure.
- The welfare system encourages people to be lazy and irresponsible.
- State enterprises are inefficient and a drain to the economy.

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