Improving Agricultural Market Performance:
Creation and Development of Market Institutions
34
counterbalance volatile commodity prices and stabilize food supplies and prices. Such
intervention schemes included buffer-stock schemes, buffer funds, and monopolistic
marketing boards.46
These (monopolistic) marketing boards were implemented as a tool to regulate and control
agricultural market,47 the distribution of agricultural inputs, and for political purposes,48 while
involving in all stages of agricultural market. This includes provision of inputs (e.g. fertilizers,
pesticides, seeds, and credit), guaranteed buyer for output, state-owned processing facilities,
monopoly on imports and exports, administered domestic prices, and stock-building activities.
In fact, next to export crop marketing boards, staple food commodity marketing boards
complemented the (quasi-)Government-led agricultural market system.49 Strong Government
intervention in the agricultural and food market of OIC Member Countries continued in the
1970s though many of these interventions increasingly became perceived as impediments to
an efficient agricultural market system as many market institutions, particularly marketing
boards, were ineffective, unsustainable, and heavy-handed.50
2.3 Recent Trends in the Development of Market Institutions
More recently, market institutions and their function as a market regulatory instrument have
been subject to dramatic changes in ideologies. The ebb and flow of mandates, resources, and
strategies allocated to market institutions reflected evolving thinking on the role of institutions
in improving imperfect markets and addressing inefficiencies.51
The 1960s and 1970 have been characterized by strong Government intervention in order to
address market failures. Governments were motivated to intervene in the market by means of
the development of market institutions to overcome market inefficiencies such as high
transaction costs, inaccurate contract enforcement and monitoring, and unclear property
rights.
Following the strong Government intervention, more market-orientated liberalization policies
emerged in the 1980s, particularly in response to inefficient institutions and Government
interventions, which failed to address market failures and, in fact, created distortive incentives,
thereby favoring market relaxation over state compression. Many developing countries
implemented economic liberalization policy reforms in line with loans provided by the World
Bank and IMF, which looked to overcome economic crises by restoring their fiscal balance and
public spending with a focus on the private sector. Hence, many Governments withdrew from
market interference, consequently leading to a withdrawal of market institutions which had
been set up with Government support or which were publically owned.
46 Varangis, P., Larson, D., & Anderson, J. (2002), “Policies on Managing Risk in Agricultural Markets,” The World Bank
Research Observer, 19(2), pp. 199-230.
47 Barrett, C. & Mutambatsere, B. (2008), Marketing boards, in Blume, L. & Durlauf, S. (eds.), The New Palgrave Dictionary of
Economics, pp. 2-6, London: Palgrave Macmillan.
48 Lovelace, J. (1998), Export Sector Liberalization and Forward Markets: Managing Uncertainty During Policy Transitions,
available a accessed May 2017].
49 Barrett, C. & Mutambatsere, B. (2008), Marketing boards, in Blume, L. & Durlauf, S. (eds.), The New Palgrave Dictionary of
Economics, pp. 2-6, London: Palgrave Macmillan.
50 Lundberg, M. (2005), “Agricultural Market Reforms,” in World Bank Group (eds.), Analyzing the Distributional Impact of
Reforms, pp. 145-153, Wageningen: World Bank Group.
51 Barrett, C. & Mutambatsere, B. (2008), “Agricultural Markets in Developing Countries,” in Blume, L. & Durlauf, S. (eds.), The
New Palgrave Dictionary of Economics, pp. 2-3, London: Palgrave Macmillan.