WHAT POLICY FOR COMMODITIES?
OVER the past century and a half, periods of falling commodity prices have raised great political issues. In our history, for example, they profoundly affected the age of Jackson, the era of Bryan and the Populists, and the New Deal. These ferments, so familiar in our national experience, now beset us on a world scale. Food and raw-materials prices have been drifting downward, and the underdeveloped areas which bear the brunt offer their protests in various international forums. The past year's upturn in prices has not diminished the pressures for reform of commodity policies. The less developed countries' representatives believe that current price improvements are only a temporary fluctuation around an unfavorable trend. Their concern may be exaggerated, but a review of the record and prospects shows that it is far from groundless.
In that setting, this article seeks to come to grips with two issues. First, what role can commodity policy play to help meet the less developed countries' foreign-exchange needs? Second, in light of the political and economic importance of commodity policy, how much-or how little-could international commodity agreements, aimed at raising the prices of individual commodities above current levels, contribute to those needs? Estimates of the effects of a deliberate policy of higher commodity prices are obviously approximate. They do indicate what relative part commodity schemes can play in meeting a central economic issue for the less developed countries.
Of the many causes of slow growth in those countries, we are concerned here with only one-the inadequate inflow of foreign exchange-and the evidence in that respect is straightforward enough: the exchange earnings of less developed areas are remarkably stable in the aggregate; over the last six or seven years, exports have not been increasing. The table on the next page gives the totals and shows the part played by each of the major elements: commodity exports, exports of manufactures, foreign aid and foreign private investment. The figures show that the value of exports increased
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