Edited by Jan Toporowski and Jo Michell
Chapter 8: Commodity markets
THE STABILIZATION AGENDA UNTIL BRETTON WOODS Throughout the history of economic thought, different schools have covered the issue of stabilizing primary commodity markets in relation to the behaviour of commodity prices, more precisely to their trend and volatility. Regarding trend, the Prebisch–Singer hypothesis argues that the price of primary commodities relative to manufacturing goods tends to decrease over time with consequent loss of real income for primary commodity producer countries. The resulting policy implications are based on import substitution industrialization. However, the origins of the literature on commodity markets can be traced back to Keynes and Hayek who, from opposite political perspectives, promoted international cooperation to coordinate international demand and supply. Since the first studies, heterodox economists after Keynes concentrate on various proposals aimed at the stabilization of either prices or quantities. These recommendations are based on the idea to transfer the risk of price changes from producer and consumers to governments with direct intervention in the market (buffer stocks, export quota) or by stabilizing national income (marketing boards, compensatory financing schemes).
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