ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Commodity Earnings Instability-A Modest Proposal

Commodity Earnings Instability A Modest Proposal J D A C IT is no secret these days that commodity prices fluctuate wildly in the face of variations in demand and supply, The great commodity price boom of 1973-74, which caused a run-up in the prices of primary commodities (other than petroleum) exported by the poor countries by 100 per cent, was succeeded by the great commodity price crash of late 1974 and 1975, which by the end of June had knocked close on 37 per cent off the peak prices for these commodities.1 Ah, you will say, but petroleum prices, which rose by 400 per cent, have not come down by much; and you will be right. But petroleum prices are dominated by politics and the power of the petroleum producers' cartel. And there is very little likelihood indeed that producers will be able to form sufficiently powerful cartels in other commodities to exert more effective pricing power. Study after study has shown that only for a few minor metals is such action likely to be capable of success.2 So, for all major commodities but petroleum, it is the bumps and grinds of the world's markets which will continue to determine their prices. And these have been none too beneficial to the poor countries, even in recent years. For plain, prices are not very revealing. As inflation has made only too clear recently, the purchasing power of money is declining fast. And so even with price boom of 1973-74, the average purchasing power of primary commodities exported by developing countries (excluding petroleum) has in. creased over the fifteen years since 1960 by one-half of one per cent per an- num.3 These stark figures point to the need for urgent action to protect the purchasing power of the commodity earnings of the poor countries. One way of doing this would be through the regulation of commodity markets, by commodity agreements including such devices as buffer stocks, export quotas and production controls. A programme for such control is presently under active discussion in UNCTAD. Another way might be the indexation of commodity prices to prices of manufactured goods. But, as a major and path-breaking study by the UNCTAD secretariat shows, such indexation would be impossible without effective control of the market
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