Primary industries relate to the extraction of raw materials from the sea or land. These raw materials are considered natural resources. These natural resources can be further processed to create finished products. Fishing, forestry, agriculture, mining, or oil drilling are examples of primary industries because these involve acquiring raw materials.
Agriculture - An Example of the Primary Industry
Primary industries are important to support the poor communities, develop a balanced life, and ensure the survival of mankind. Some resources allow us access to food while others provide us with the ability to stay warm or make our vehicles run. Many communities rely on the primary industry to gain income, food, and energy to keep warm. However, the uncontrolled extraction of the primary resources has led to a threat to their availability. Some examples of these threats are the extinction of our fishing communities, the decline in oil resources, and pollution. The primary industries rely significantly on the availability of resources directly from Earth. If we impact the availability of these resources, it creates diverse problems from a macro to a micro level.
In this lesson, we will discuss the concept of primary industries, their importance, and their role in the economy. We will also discuss the key challenges faced by the primary industries.
First, we need to understand what the term 'industry' means. An industry relates to the work and processes involved in collecting and processing of raw materials and manufacture of goods in factories. On the basic principles of production processes, primary industries are involved in the removal of raw materials or natural resources. These raw materials are feed to secondary industries which further process these to create finished products. For example, mining is a primary industry, as it involves the removal of iron ore. This iron ore is then provided to other industries like shipbuilding, car manufacturing, and so many others.
The primary industries tend to make up a larger portion of the economy in developing countries than it does in developed countries. For example, in 2018, agriculture, forestry, and fishing comprised more than 15% of GDP in Sub-Saharan Africa but less than 1% of GDP in North America. People working in the primary industries are often referred to as working in the primary sector. It is a proven fact that as a country starts developing, its reliability on primary industry starts minimizing and dependence on secondary and tertiary industries starts increasing.
Basic types of the primary industry
1. Mining is the extraction and processing of valuable materials from the earth such as minerals, metals, gemstones, rock, salt, and clay.
2. Forestry is the practice of managing, harvesting, and conserving forests and woodlands.
3. Farming involves growing crops or raising animals for food and raw materials.
4. Fishing involves catching aquatic animals such as fish, squid, octopus, shrimp, prawns, crabs, lobsters, etc. The term fishing does not apply to the capture of aquatic mammals or the raising of fish on a fish farm.
5. Hunting involves all activities related to hunting wild animals for consumption and trade in food and fur.
6. Beekeeping: This activity is based on raising bees in order to obtain honey and wax.
The most basic example of using products from the primary industry is in our homes. The furniture that we put uses several products that are related to the primary industry, for example, lumber from trees. If you see a river full of fish or fresh produce growing on a farm, this is part of the primary industry. Other day-to-day examples of the primary industry are
Cotton is an example of a product in the primary industry, but the dress we wear is not a product of the primary industry.
Farmers, miners, and graziers are part of the primary industry workers. The farmers grow and collect food items like wheat, rice, barley, and these items are taken from the farm and made into finished food products like bread, etc. and sold in consumer markets.
The most important characteristics of the primary industries are as follows:
The activities carried out in the primary sector are important, necessary, and indispensable for the survival of the population. Farmers and stockbreeders play an important role because they are in charge of helping the production of all the raw materials that will be used, for the most part, by the secondary industries in order to create products for human consumption. Without the products produced in the primary industries, the other industries could not function properly and would not be of any use. It is for this reason that the primary industry is considered as the starting point of any economy.
The role of the primary industries has transformed, especially in developed countries. For example, agricultural industries became more technology-oriented than traditional methods of planting or picking. The use of insecticides also plays a key role to ensure higher productions in some developed countries. Adopting greater technology means a lesser workforce.
Another approach by developed countries is the use of the primary industries to enhance their wealth systems. For example, the European Union manages its inflation rates aligned with the production of agricultural products. It makes the market exceptionally competitive.
Most governments aim to keep the primary industry costs reasonable and protected from external influences. In the past and present, the primary industries struggled with extensive impacts because of war or famine. Any negative impact on the primary industries causes certain communities to live without food. Therefore, it always remains critical for developing countries to keep a balance between their primary industries and other industry sectors.
Export revenue - Making use of natural resources can be a way for an economy to gain income and export revenue. The sale of oil, gas, and other natural resources has enriched many developing economies enabling them to gain capital to invest in public services within the economy. Some oil-rich countries have successfully used the increase in revenue to save for the future, e.g. Qatar, Saudi Arabia, Norway.
Monopoly power - One problem with relying on the primary industries is that often wealth becomes inequitable distributed. For example, a small number of firms gain monopoly power over the production of raw materials and pay workers only a small fraction of the revenue gained. Many developing countries in Africa have remained poor, despite being rich in raw materials. A large percentage of the primary industries isn't sufficient on its own to lead to economic development.
Volatility - Primary products are liable to be volatile in both price and output. Commodities, such as oil and foodstuffs can see large swings in price. Demand is price inelastic. If prices fall, then countries that are based on one particular industry can see a large fall in revenue, causing problems. The EU retains significant support for its agriculture through subsidies and price support.
Dutch disease - If primary products are very profitable, then the resources will be diverted away from other manufacturing industries and concentrated on just primary industries. The problem is that when the raw materials run out or the industry declines, the economy lacks a broad diversification. This can be known as the "Dutch Disease" or resource curse.
Deindustrialization - In developed economies, we have seen a decline in primary industries, as they form a smaller share of the economy, this can lead to structural unemployment for a period. Structural unemployment is unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.
