Toward More Controls

A few years ago in Ecuador, a farmer could buy a tractor with the money from selling 50 bags of coffee; now it takes 150 bags. In Malaya, the government has lost $60 million in export duties in the past two years because of falling rubber prices. A 50% drop in cocoa prices has forced Ghana to suspend its economic development program. When a Biblical-sized storm of cotton worms descended on Egypt's cotton crop in 1961, the damage cost Egypt nearly $200 million in foreign exchange. All of these countries have one problem in common: their economies depend heavily on a single commodity.

To economists and public officials concerned with world economics, the solution of this problem has taken on critical importance. Commodity prices fluctuate wildly on world markets, and in recent years they have generally been declining. At the same time, the price of goods manufactured by Western nations has steadily risen, making it doubly hard for developing nations to finance the machinery they need for industrialization. The obvious long-term answer to the problem is diversification away from one-crop economies, but only a few developing countries--Pakistan, India and Mexico--have yet been able to do this with any success.

Loans & Agreements. Now a new attack is being made on the commodity chaos. Earlier this month, the International Monetary Fund offered special loans for as long as three years to developing nations suffering from severe commodity price fluctuations--provided that they show willingness to work on more permanent measures to solve their commodities problems.

In the most visible measure so far, many developing nations are banding together to impose controls and stabilize prices. The world's major cocoa producers have set up their own organization, and their representatives met last month in Trinidad. Peanut exporters have banded together for self-protection, and so have the world's tin-producing nations, which have set up a sophisticated and successful plan to stabilize prices. Producer-consumer organizations hold the most promise; meeting under United Nations auspices, the major coffee-consuming nations decided last summer to guarantee a set price for coffee if the producing nations will use their profits to diversify their economies.

No Better Form. Most of the industrialized nations favor more stable commodity prices because stability would increase the buying power of developing nations and make them less dependent on foreign aid. The U.S. Government, which has had some bitter experiences in this connection (the $500 million in aid that the U.S. has pumped into Brazil during the past nine years has been completely swallowed up by declining coffee prices), has given its tacit approval to commodity price agreements. "We are for such agreements," says Antonio Carrillo Flores, Mexico's Ambassador to the U.S., "because no better form has been devised."

Whether a better form will soon be devised is doubtful. And until one is, the clear and hard trend is toward more and more controls on worldwide commodity prices.

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