Development economics

Table of Contents

1. Topic pack - Development economics - introduction
2. 4.1 Economic development (notes)
3. 4.1 Economic development (questions)
4. 4.2 Measuring Economic Development (notes)
5. 4.2 Measuring development (questions)
6. 4.3 The role of domestic factors in economic development (notes)
7. 4.3 The role of domestic factors in economic development (questions)
8. 4.4 The role of international trade (notes)
9. 4.4 The role of international trade (questions)
10. 4.5 The role of Foreign Direct Investment (FDI) (notes)
11. 4.5 The role of foreign direct investment (questions)
12. 4.6 The role of foreign aid and multilaterial development assistance (notes)
13. 4.6 The role of foreign aid and multilateral development assistance (questions)
14. 4.7 The role of international debt (notes)
15. 4.7 The role of international debt (questions)
16. 4.8 The balance between markets and intervention (notes)
    1. Balance between markets & intervention (case studies)
    2. Strengths and weaknesses of market oriented policies
    3. Case study (1)
    4. Case study (2)
    5. Case study (3)
    6. Case study (4)
    7. Case study (5)
    8. Commodity agreements: intervening in the markets
    9. Cartel arrangements
    10. Case study (6)
    11. Case study (7)
    12. Case study (8)
    13. Case study (9)
    14. Harrod-Domar Growth Model
    15. Structural Change Model
    16. Dual Sector Model
17. 4.8 The balance between markets and intervention (questions)
18. Print View

Commodity agreements: intervening in the markets

Syllabus: Strengths and weaknesses of interventionist policies

Syllabus: Strengths - Discuss the strengths of interventionist policies, including the provision of:

• infrastructure,
• investment in human capital,
• the provision of a stable macroeconomic economy and
• the provision of a social safety net.

Syllabus: Weaknesses - Discuss the limitations of interventionist policies,including:

• excessive bureaucracy,
• poor planning and
• corruption

Intervention may take the form of attempts to stabilise prices, through the operation of a buffer stock scheme or attempts to raise prices by forming a producers' cartel and restricting supply through the use of quotas. Firstly, we will consider the operation of buffer stock schemes. (Buffer Stock Schemes are not on your syllabus anymore but you may be interested)

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• What is a buffer stock scheme?

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• Buffer stock scheme - good harvest

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• Buffer stock scheme - poor harvest

Problems of a buffer stock scheme

There are a number of possible problems related to buffer stock schemes, which include the following:

• Storage, storage and administration costs and perishability, particularly if there are too many years of bumper harvests.
• Difficulty of setting appropriate floor and ceiling prices. If buffer stock managers have to intervene consistently at the floor price, they will have to keep buying and may run out of finance. If they have to keep intervening at the ceiling price, they will run out of stocks to put on the market.
• Inadequate supplies if there are too many years of bad harvests.
• Financing the buffer stock if there are too many years of good harvest - funds have to be contributed by the members.
• Keeping prices artificially high if there close substitutes are available, e.g. rubber/rubber substitutes
• Maintaining the agreement on prices if producers believe they can improve their individual position by cutting price and raising output. This is particularly the case where producers are scattered in different countries.