Agriculture Reference
In-Depth Information
prices are either very small or even negative (see Roumasset 2003; see also
Newbery and Stiglitz 1981; Behrman 1987; Bigman, Newbery, and Zilberman
1988; Braverman et al. 1993). Can we pick a clear-cut winner in this debate?
The answer, we contend, is “yes” but, as in most policy debates, it is a qual-
ified yes. The conditions providing the rationale for public intervention to sta-
bilize foodgrain prices, influencing both the institutions and the policies, can
change over time. That is, policies that are optimal at one time may not be so
at another. This possibility is examined in the answer to the question “when,”
which seeks to determine timing for those policy changes that are needed to
adapt to changing market conditions. Our case studies suggest that, although
price policies and parastatals did promote technology adoption, boost agricul-
tural production, and reduce poverty in the early years of the Green Revolution,
they have become increasingly counterproductive in recent years.
In fact, recent studies on Asian countries seem to echo some of the prob-
lems that the opponents of price stabilization policies had predicted. The food
marketing parastatals are becoming increasingly expensive; their operations
are being dictated by special interest groups; and too much emphasis on rice
and wheat is inhibiting key elements of market development, such as commer-
cialization and diversification. Furthermore, domestic markets seem to be well
integrated in Asian countries, most of which have significantly improved their
infrastructure (see Table 2.1) and import capacity (see Table 2.5). Thus, there
is increasing consensus that, notwithstanding past benefits, the time for change
is now.
The options for effective change are addressed within the context of the
question “how.” The messages from the case studies—in terms of benefits, costs,
and challenges of reforms—have been mixed and give rise to two very impor-
tant sets of policy questions. The first set of questions relates to public price
policies in general, and the second set deals with the institutional mechanisms
through which the policies are implemented.
The most fundamental questions in the first set are: If the conditions
justifying the policy have changed, should policies be adjusted accordingly?
Should food price stabilization continue to be important in policymakers'
agenda? Do world markets today provide a partial alternative to parastatals?
How do/should continued practices of the price control affect agriculture, espe-
cially in terms of commercialization and diversification to include high-value
crops? What persuades policymakers in some countries to retain outdated poli-
cies and implementations?
The second set of questions has two levels. First, are existing institutions
—specifically, the parastatals—and the regulations to support them the most ap-
propriate means of price stabilization? Can their costs be reduced, can/should
their role be altered, or can government institutions successfully take over the
responsibilities? How much of the burden can be carried by the private sector,
and what are the conditions that this sector must satisfy to carry out a more sup-
