Over-Reliance on a Single Export

The question

How to approach this two-part question question

A two-part question asks two direct questions. Answer both fully, one in each body paragraph.

1. Paraphrase the topic and say how you will answer both questions.
2. Body 1 answers question one with reasons and an example.
3. Body 2 answers question two with reasons and an example.
4. Conclude with a short summary of both answers.

How to plan this answer

Structure

1. Introduction: paraphrase the reliance on a single export and state your view on whether diversification is always the best way forward.
2. Body 1: answer the first question, explaining why countries depend on one export, such as natural resource endowment, existing infrastructure and quick foreign currency.
3. Body 2: answer the second question, explaining the case for diversifying and the risks of depending on one commodity, such as price volatility.
4. Body 3 (optional): the limits of diversification, such as the cost and the time needed to build new industries, and when it may not be the best choice.
5. Conclusion: answer both questions clearly and state your position on the word always.

Idea bank

• Countries rich in oil or minerals often find that extracting and exporting a single resource is the fastest route to foreign currency.
• Coffee-producing nations may already have farms, roads and trained labour, which makes it easier to continue exporting than to start a new industry.
• Commodity prices can fall sharply in a single year, leaving a government with less revenue for schools, roads and hospitals.
• Diversification into manufacturing or services can spread the risk across several sectors, so that a fall in one price does not damage the whole economy.
• Building a new industry requires investment, skills and a stable business climate, which poorer countries may not be able to provide quickly.
• Some countries have diversified by encouraging tourism or technology services, while others have achieved stability through a sovereign wealth fund rather than changing their export base.

Useful vocabulary

• commodity: Oil and coffee are both commodities that are sold on world markets.
• price volatility: Price volatility makes government budgets difficult to plan.
• foreign currency: Exports earn the foreign currency needed to pay for imports.
• economic diversification: Economic diversification can reduce vulnerability to external shocks.
• a single point of failure: Relying on one export can create a single point of failure for the economy.
• infrastructure: Existing infrastructure makes it easier to continue an established industry.
• a sovereign wealth fund: A sovereign wealth fund can save export revenue for lean years.
• vulnerable to: A country that depends on one crop is vulnerable to bad harvests.
• it is not always the case that: It is not always the case that diversifying leads to faster growth.
• in the short term: In the short term, a single export may be the most practical source of income.

Common mistakes

• Answering the first question with a list of resources without explaining why the reliance is attractive to governments in the short term.
• Treating diversification as always beneficial, without addressing the word always in the question.
• Giving examples of countries that diversified successfully without explaining the conditions that made their diversification work.
• Ignoring the cost and time of building new industries, which weakens the case against the view that diversification is always best.
• Using the terms oil and coffee as if they were the only possible exports, instead of showing the general principle with a few examples.

Examiner tip: Answer both questions in separate paragraphs, and address the word always directly, since a qualified answer is often more convincing than an absolute one.