Natural Resources and Violent Conflict - WaterWiki.net

dampening price shocks 357the agreement on natural rubber, specifically because the reference priceused as the trigger for buffer stock intervention was regularly adjustedin terms of earlier prices. But in all cases it remains difficult to single outthose aspects of international price movements that correspond to atrend and those that constitute a deviation from a trend and then toreach international agreement on financing the buffer stock required.Stabilization Funds and Marketing BoardsIn view of the high volatility of international commodity prices, andeven before ineffective attempts were made to reduce this volatility bymeans of international agreements, many exporting countries, each atits own level, implemented internal price stabilization policies. The instrumentsof these policies are known by names such as stabilizationfund and marketing board. While the use of such instruments has declinedconsiderably, for many years it did ensure some stability in theprices paid to agricultural producers.However, the effectiveness of this approach has been strongly contestedfor three main reasons. The first, but not the most general, reasonis that these organizations have had a tendency to move well beyond thestabilization function and to become instruments for agricultural interventionism:after assuming responsibility for product marketing, thedistribution of inputs and equipment, and agricultural credit and extensionwork, they often were inefficient and sometimes even predatory.The two other reasons are more general and fundamental. On theone hand, institutions of this kind were a way of taxing agriculture,with the surpluses recorded in periods of high prices largely being usedto finance public expenditure. On the other, the price paid to producerswas often stabilized without regard to the long-term market trend. As aconsequence, when the long-term trend was downward, the gap betweenthe international price and the corresponding producer price(taking transportation and marketing costs into account) graduallynarrowed and then became negative, which led to a breakdown in thesystem owing to the lack of reserves or fiscal support. Like the commodityagreements, the stabilization funds ran aground on the longtermmarket trend.Naturally, adjustment policies targeted the agricultural interventionagencies that were supported by stabilization funds as well as the excessivetaxation of agriculture. At the same time, this led to the abandonmenteven of efforts to identify institutions that might be able todampen price shocks domestically, while respecting market trends andsheltering their assets from being taken over by the public treasury.