The Role of Markets and Governments in the World Food Economy

Probably no issue creates more political tension on the international scene than the role of markets and of governments in the world’s economy. Government intervention leads to a loss of economic efficiency, results in interference in the “natural” forces of markets in distributing income and causes the excessive politicization of economic activities. Proper form of government intervention in labour markets is the investment in formal schooling and training of the labour force. This chapter discusses the international monetary order, and the product markets or trade. The shift to a system of floating exchange rates in the presence of a well-integrated international capital market is of special significance to international commodity markets, particularly in light of the role and importance of the United States in those markets. The more general case for government intervention in markets is where there are externalities or clear divergencies between private and social costs or between private and social returns.