May

5

Department of Bad Ideas: The Rice Cartel

[From Globalisation Institute]

Written by Tim Worstall   

A recent entrant for our department of bad ideas collection, the creation of a rice cartel:

Protests erupted yesterday from rice-importing nations as Samak Sundaravej, Thailand’s Prime Minister, proposed a cartel of South-East Asian rice exporters that would seek to gain more control over the price of grain.

In the wake of mounting concern about a tripling in the price of rice, Mr Samak said that he would seek to bring together Thailand, Vietnam, Burma, Laos and Cambodia in a price-setting organisation similar to Opec.

No, really, not quite what we would like anyone to be creating at the moment, or indeed at any other time.

The first and most obvious point is the effect within those exporting countries that do sign up to be in the cartel. Their production is almost always from small peasant farmers and to restrict their freedom to sell their produce when and as they want is of course a breach of that most fundamental of human rights, the right to the produce of your own labour. For to monopolise exports from such hundreds of thousands or even millions of small farmers there would have to be a monopoly commodity board and such things have had very bad effects elsewhere they’ve been tried. The cocoa industry in West Africa for example, where the domestic price was deliberately set low so as to enrich the trade board at the expense of the farmers.

The second is that it wouldn’t actually work very well on an international basis either. Rice can be grown in too many different places for those nations to be able to be able to control supplies and thus prices on anything but a short to medium term basis. As with, say, the collapse of the coffee cartel those years ago.

The third and strongest reason against such an idea is that even if it did work we really wouldn’t like the results. To gain pricing power those countries would have to with hold rice from the international markets: just what we don’t need at a time of soaring prices. Quite simply, to enrich themselves, they would deprive others of their necessary basic foodstuff. Not a pretty idea, is it? 

It might well happen though, for the usual sad reason. All too many forget the simplest of lessons about production: the purpose of it is always consumption, not the enrichment of the producers. People will argue about that enrichment, point to the potential success of the plan in those terms and, as it will be unseen, the further impoverishment of the consumers will be overlooked. 

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