BOOM OR BUST: HOW COMMODITY PRICE VOLATILITY IMPEDES POVERTY REDUCTION, AND WHAT TO DO ABOUT IT

The report argues that commodity price volatility creates significant economic and environmental instability for approximately two billion people and 95 developing countries. It examines five primary policy interventions: supply management, national revenue management, market-based price risk management, compensatory finance, and alternative trade initiatives. The authors conclude that while no single 'silver bullet' exists, a combination of complementary policies, private sector engagement, and a focus on income stability rather than just price stabilization is essential for sustainable development and poverty reduction.

• Commodity price volatility is a systemic issue affecting nearly a third of the global population, with 95 of 141 developing countries relying on commodity exports for at least half of their foreign exchange earnings.
• Short-term price volatility is increasing, with some commodities varying by as many as 50 per cent in a single year, and the frequency of price shocks has risen significantly since the 1970s.
• Long-term trends show that primary commodity prices have fallen relative to manufactured goods, meaning producers must increase output to maintain the same returns, a situation described as 'running to stay still'.
• Income volatility, rather than price volatility itself, is the primary driver of long-term planning failures, increased inequality, and environmental degradation.
• Supply management, such as production quotas or buffer stocks, can restore balance in buyer-driven chains but is often undermined by 'free riders' and a lack of support from developed nations like the US.
• National Revenue Funds (NRFs) can insulate national budgets from volatility by saving windfall profits during booms, as seen in Norway, Chile, and Botswana, though they require strong legislative restrictions to be effective.
• Market-based risk management tools, such as futures and options, provide short-term income predictability but are often inaccessible to individual small-scale producers due to a lack of intermediaries and technical expertise.
• Compensatory finance mechanisms, like the EU's STABEX and IMF's CFF, have historically suffered from onerous application processes and pro-cyclical disbursements, sometimes arriving after prices had already recovered.
• Alternative trade initiatives (e.g., Fair Trade, Organic) use product differentiation and minimum price floors to reduce volatility, though they currently represent a very small fraction of global sales.
• The report concludes that there is no single 'silver bullet' policy; instead, a combination of complementary tools, private sector involvement, and integration into wider rural development programs is required.

APA

Brown, O., Crawford, A., & Gibson, J. (2008). BOOM OR BUST: HOW COMMODITY PRICE VOLATILITY IMPEDES POVERTY REDUCTION, AND WHAT TO DO ABOUT IT. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/boom_or_bust_commodity.pdf

Chicago

Brown, Oli, Alec Crawford, and Jason Gibson. BOOM OR BUST: HOW COMMODITY PRICE VOLATILITY IMPEDES POVERTY REDUCTION, AND WHAT TO DO ABOUT IT. International Institute for Sustainable Development, 2008. https://www.iisd.org/system/files/publications/boom_or_bust_commodity.pdf.

Wikipedia

{{cite report |last1=Brown |first1=Oli |last2=Crawford |first2=Alec |last3=Gibson |first3=Jason |title=BOOM OR BUST: HOW COMMODITY PRICE VOLATILITY IMPEDES POVERTY REDUCTION, AND WHAT TO DO ABOUT IT |publisher=International Institute for Sustainable Development |date=January 2008 |url=https://www.iisd.org/system/files/publications/boom_or_bust_commodity.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{brown2008boom, author = {Brown, Oli and Crawford, Alec and Gibson, Jason}, title = {{BOOM OR BUST: HOW COMMODITY PRICE VOLATILITY IMPEDES POVERTY REDUCTION, AND WHAT TO DO ABOUT IT}}, institution = {International Institute for Sustainable Development}, year = {2008}, month = jan, url = {https://www.iisd.org/system/files/publications/boom_or_bust_commodity.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }