Determination of International Commodity Prices

Abstract

In modern times a national economy has to work within the framework of the international environment. It does not matter whether the economy is a developed one or is in a developing phase. Though an insular national economy is exceptional nowadays, it is surprising to find how much economic analysis is conducted as if a national economy were governed solely by national conditions and policies. It is natural for politicians to attribute their failures to international environments if possible, and the economic betterment of their country to the successes of their policies, irrespective of the role actually played by international factors. The parochial analytical stance taken in much academic writing is less justifiable; it becomes downright misleading when it is taken in journalistic economic writing, which in its turn is responsible for the public perception of economic conditions. The public economic debate during the period of high inflation as well as high unemployment in the 1970s and of lower inflation as well as lower unemployment in the 1980s in the developed countries mainly attributed these to the economic policies of the state itself rather than to the changing international environment to which states were reacting in their own way. A moment’s reflection should be sufficient to realise that the international economy’s role in constraining the national economy is similar to the role of national macroeconomic conditions in constraining the microeconomic situations of individual economic agents.