Commodity Supply Management by Producing Countries: A Case-Study of the Tropical Beverage Crops

Commodity Supply Management by Producing Countries: A Case-Study of the Tropical Beverage Crops

Commodity Supply Management by Producing Countries: A Case-Study of the Tropical Beverage Crops

Commodity Supply Management by Producing Countries: A Case-Study of the Tropical Beverage Crops

Synopsis

The collapse in commodity prices since 1980 has been a major cause of the economic crisis in a large part of the Third World. This book demonstrates, using new econometric models, that the producing countries could have prevented this price collapse by appropriate supply management.

Excerpt

The idea for this book arose from the analysis of post-war trends in international commodity markets in an earlier study (Maizels, 1992). That analysis showed that whereas in the decades up to 1980 the main feature of these markets had been high short-term price instability, since that date the main feature has been a marked downward trend in real commodity prices (even though a number of important commodities continue to exhibit excessive short-term instability).

This change in the main characteristic of world commodity markets has had dramatically adverse effects on the export earnings of a large number of developing countries, on the size of their foreign debt, and on their ability to achieve significant progress in their development efforts. The policy implication, argued at some length in the earlier study, was that negotiations between developing and developed countries should be given high priority with the aim of evolving a viable and coherent set of measures to raise persistently depressed levels of commodity prices and commodity export earnings of developing countries. Such measures could be a key element in a renewed international strategy to accelerate the development process, particularly in low-income commodity-dependent countries.

International co-operation to deal with the commodity problems of developing countries has, however, been seriously eroded since the early 1980s. Over this period, the major developed countries have become increasingly opposed to any intervention in the international commodity markets, even to reduce high short-term price instability, which in earlier decades had been an agreed objective of both developed and developing countries. This important policy shift was a result of the advent of governments in the main developed countries intent on promoting the virtues of market forces for the solution of economic problems. As a consequence, these countries generally withdrew their support from the negotiation of commodity agreements for reducing . . .

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