National and international aspects of commodity stabilisation schemes

Abstract

This paper sets out to show the limitations of the traditional approach in evaluating commodity stabilisation schemes. It is asserted that no definite conclusions can be drawn about the global welfare aspects of such schemes. The emphasis of the study, therefore, lies in clarifying the distribution effects of international stabilisation schemes on exporting and importing nations. Starting with rather general assumptions about demand and supply curves, an examination is made of the effects of international stabilisation schemes on the magnitude of revenue (expenditure) over time and fluctuations in revenue (expenditure) of individual countries. However, without knowing the parameters of the domestic and world supply and demand curves, definite conclusions cannot be drawn. This clearly contradicts some recent findings in the literature which were based on very special assumptions and resulted in definitive statements being made. It is not the intention to provide a conclusive solution as to whether or not international stabilisation schemes should be established. To answer this question, more information is required about a number of factors such as the probability, direction and magnitude of fluctuations in supply at both national and international levels, the total cost of the stabilisation scheme and each country's contribution, and, above all, the feasibility of finding the trend equilibrium quantity of the commodity to be stabilised.