Natural Resources and Violent Conflict - WaterWiki.net

chapter 8Dampening Price ShocksPatrick Guillaumont and SylvianeGuillaumont JeanneneyTHE INTEREST RECENTLY SHOWN IN GLOBAL policies on natural resourcesand raw materials in the effort to improve governance and reduceconflicts is shedding light once again on the long-standing problem ofthe international price fluctuations affecting developing countries. Thisrenewal of interest comes after a lengthy period during which the veryidea of a global policy for dealing with price shocks was out of favorbecause of measures that failed to take due account of market mechanisms.During this period, the magnitude of international price shocksdid not diminish, and indeed increased, and a number of countriesobviously remain vulnerable to them. In consequence, after two decadesof market liberalization, the question of determining how the internationalcommunity might contribute to dampening price shocks has onceagain come to the fore.The purpose of this chapter is to examine global measures thatmight be taken efficiently in order to help developing countries overcomeprice shocks while avoiding past errors—that is, while respectinglong-term market trends. We first review the reasons why dampeningprice shocks has once again become a reasonable objective of developmentcooperation policy. We then indicate why the measures takenpreviously proved inadequate. Finally, we examine the rationale forinternational mechanisms to provide insurance or guarantees againstprice shocks, perhaps in connection with external debt management.353