What contribution does subsistence production make to the economy?

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kipling2448 | (Level 3) Educator Emeritus

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The impact of subsistence production on the larger economy is entirely a product of the nature of that economy or, more precisely, the Gross Domestic Product of the country in question.  The wealthier the country, the less the impact of subsistence production at the macroeconomic level.  The less developed the economy, the greater the impact. 

Discussions of subsistence production, however, generally apply solely to less developed economies.  As those economies tend to be primarily agrarian and desperately poor, subsistence farming and other productive activities may represent the vast majority of the country's economic activity.  As the country develops economically, usually through industrialization or, in countries with limited natural resources and space -- city-states like Singapore come to mind -- through development of nonindustrial sectors like finances (Bahrain and Dubai in the Persian Gulf, for example) and trade (again, Singapore), reliance on susbsistence activities diminishes.  Similarly, the discovery and exploitation of natural resources, usually oil or precious minerals, can rapidly elevate a country's economic level and decrease the importance of subsistence production to the economy.

Subsistence production remains prevalent in countries with weak central governments, or with relatively strong governments that maintain control through repressive domestic policies.  In such countries, political stability is often reliant on subsistence economic activities to ensure a minimal level of public welfare and, consequently, an insurance against the growth of discontent caused by a family's inability to feed itself.  In such instances, the impact of subsistence production on the economy is substantial, and any adverse trends set the stage for political turbulence and possible revolution.

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