Sharp fluctuations in the prices of primary commodities seem to have been an integral part of the international economy for a long time. Keynes (1942) commented that ‘One of the greatest evils in international trade before the war was the wide and rapid fluctuations in the world prices of primary products…’ and went on to argue that a stable post-war economic order would require a scheme to stabilize commodity prices. In this context he suggested the setting up of buffer stocks from which supply could be enhanced in periods of upward pressure on prices, and into which part of world supply could be withdrawn in periods of downward pressure on prices. As is documented in Volume XXVII of his collected works, Keynes lost the political battle to introduce such a buffer stock scheme. The post-war period saw attempts at price stabilization for individual commodities such as rubber, tin and sugar, but the major attempt at a comprehensive world wide scheme covering several commodities has been UNCTAD’s 1976 proposal on an Integrated Program for Commodities. This proposal has also met with notable failure, and as things stand the case for buffer stocks on an international level seems to have lost its momentum. However, history teaches us that interest in buffer stocks is itself a cyclical phenomenon, and that concern for commodity price stabilization, particularly in the consuming nations of the North, is typically renewed in periods of commodity price booms.
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