Boom or Bust

The report examines the 'commodity price problem,' characterized by extreme short-term volatility and a steady long-term decline in real prices relative to manufactured goods. While high prices can provide windfall revenues, the authors argue that dependence on primary commodities creates a 'resource trap' that undermines fiscal planning, exacerbates social inequality, and encourages environmental degradation. The document concludes that because developing countries lack the resources to hedge against these risks, the international community should focus on income stabilization through mechanisms such as compensatory financing, national revenue management, and risk management instruments.

• Commodity prices exhibit extreme short-term volatility, sometimes fluctuating by as much as 50 per cent within a single year. This volatility is driven by diverse factors including weather patterns, business cycles, price speculation, political conflict, and the breakdown of international commodity agreements.
• There is a documented long-term downward trend in real commodity prices, estimated at one per cent per year between 1862 and 1999. This decline is attributed to productivity increases, structural oversupply, subsidies in developed nations, the development of substitutes, and market concentration.
• Commodity dependence creates significant fiscal planning challenges for developing governments. While some countries like Chile and Botswana have used profits for diversification, others have engaged in over-optimistic spending on unsustainable projects, leading to high-interest debt when prices inevitably crash.
• Price volatility disproportionately harms the poorest producers and smallholders who lack the resources to diversify or hedge risks. This economic insecurity can widen income inequality and, in extreme cases, exacerbate social tensions that contribute to conflict, such as the Rwandan genocide of 1994.
• Environmental stewardship is often sacrificed during both price booms and busts. High prices incentivize intensive production—such as clearing forests for sun-grown coffee—while price slumps can lead to land degradation or the bankruptcy of mining companies before environmental remediation is completed.
• The report argues that the primary goal should be income stabilization rather than price fixing. Proposed solutions include compensatory financing, national revenue management laws (such as 'rainy-day' funds), commodity-price risk management instruments, and the development of niche markets like fair trade and organic networks.

APA

Brown, O., & Gibson, J. (2006). Boom or Bust. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/security_boom_or_bust.pdf

Chicago

Brown, Oli, and Jason Gibson. Boom or Bust. International Institute for Sustainable Development, 2006. https://www.iisd.org/system/files/publications/security_boom_or_bust.pdf.

Wikipedia

{{cite report |last1=Brown |first1=Oli |last2=Gibson |first2=Jason |title=Boom or Bust |publisher=International Institute for Sustainable Development |date=October 2006 |url=https://www.iisd.org/system/files/publications/security_boom_or_bust.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{brown2006boom, author = {Brown, Oli and Gibson, Jason}, title = {{Boom or Bust}}, institution = {International Institute for Sustainable Development}, year = {2006}, month = oct, url = {https://www.iisd.org/system/files/publications/security_boom_or_bust.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }