TWELVE THESES ON AGRICULTURAL PRICES 25
Fallacy: Most developing countries are characterised by underformed or interlinked markets in the rural areas, in which the behaviour of the agents is severely circumscribed both by non-economic factors including political power, as well as the nature of involvement in other markets. Under such conditions, markets achieve stable and satisfactory outcomes in the most puerile sense, and typically involve enormous amounts of waste, particularly of human resources. Ultimately the behaviour of rural markets reflects differential bargaining power of different groups, which is fundamentally affected by the initial asset position as well as other factors like the degree of mobilisation, the strength of political organisations and their influence, the backing of state institutions for particular groups, etc. The basic flaw in the market-state dichotomy (which is therefore fundamentally misconceived) is that it ignores the fact that the functioning of both the government and markets is socially and historically embedded, and reflects the particular class configurations as well as the power positions and bargaining strength of different groups. In this bargaining, both state and market institutions provide the initial conditions and are also further employed in the struggle to alter these positions.
Proposition 12: World (border) prices are the 'right* prices. Fallacy: International prices simply reflect the aggregate of traded prices across nations, and in no sense can such trade today be described as 'free*. Prices are controlled and manipulated not only by different governments but also by large corporations and major international investors. In the sphere of primary commodities, the degree of control over markets by players in the developed countries is too well documented to require further substantiation, and there is increasing evidence to show that similar patterns prevail internationally in the pricing of manufactured goods and services. Agricultural prices are not only the outcome of significant interventions by various governments, they are also subject to sharp and unpredictable fluctuations because of variations in supply and occasionally erratic demand. It is not clear how they could be seen as the 'right* prices in terms of allocating resources, particularly for developing countries. Since prices, whether local or international, reflect power positions and the struggle over the distribution of resources and incomes, there can be no 'right* prices independent of implicit or explicit aims regarding such distribution.