To economist Isabela Weber, buffer stocks should be part of a toolbox for preventing economic disasters, especially in the context of food and inflationary crises. "We need a new paradigm of post-neoliberal stabilization," argues the professor.
The global economy is facing great challenges and uncertainties. It is an era of overlapping emergencies. Climate change, geopolitical conflicts, and supply chain disruptions are some of the forces that have generated significant economic shocks. Thus, the buffer stock mechanism could be an important step towards post-neoliberalism, especially in the context of food and inflationary crises.
This is the suggestion of associate professor of Economics at the University of Massachusetts Amherst/USA Isabela Weber, author of the book "How China escaped from shock therapy: the market reform debate," released in Brasil by publishing house Boitempo. "These shocks have hit systemic and significant sectors that are important for the production system, distribution of the economy as a whole and for human life, and the result is explosions in prices and profits", says the German professor, who participated in G20 parallel event States of the Future in Rio de Janeiro in July.
Inflation generated by rising food prices disproportionately affects low-income countries and the poorest populations, as a larger share of income is spent on food, further exacerbating inequality.
Rising prices in essential sectors such as food have been accompanied by record profits for companies such as ABCD (Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus). In 2022, for instance, Cargill reported a 23% increase in revenue, reaching USD 165 billion. This phenomenon - which she calls "seller's inflation" - occurs when companies take advantage of cost shocks to raise prices and protect their profit margins. Another example of this is PepsiCo, which raised prices despite falling sales, justifying these increases based on inflation.
Inflation generated by rising food prices disproportionately affects low-income countries and the poorest populations, as a larger share of income is spent on food, further exacerbating inequality.
The role of buffer stocks
In the professor's opinion, "what we need is a new post-neoliberal stabilization paradigm - which I call a 'toolbox for preventing economic disasters' - so that we can intervene beforehand and release all these rigid economic, social, and political effects."
One such instrument is the use of buffer stocks to stabilize the prices of essential commodities such as rice, corn, wheat, and soy. The idea, which dates back to the practice of storing grains in times of abundance and selling them in times of scarcity, could be applied today to stabilize price fluctuations. By buying when prices are low and selling when they are high, governments could prevent private speculation and reduce price volatility.
This system could be managed by organizations linked to the UN, and financed by countries that purchase the products through special transactions and other sources. In addition, the economist suggests implementing price control laws and taxes on extraordinary profits to contain inflation generated by large companies.
"Buffer stocks could also provide a safe market and, possibly, safe prices for the type of agriculture that needs to be developed to improve food security and the climate resilience of food systems," says Weber.
The professor emphasizes, however, that this policy is not a complete solution, but a vital step in dealing with current economic emergencies. Combined with other measures, such as transparency in private control, regulation of commodity markets, and strengthening of food sovereignty, this policy could contribute to promoting a green transition worldwide.
The Panel "Towards a Post-neoliberal Stabilization Paradigm" was attended by Nelson Barbosa, director of planning and institutional relations at the National Bank for Economic and Social Development [Banco Nacional de Desenvolvimento Econômico e Social/BNDES], and moderated by Carlos Pinkusfeld, master in Industrial Economics from the Federal University of Rio de Janeiro's [Universidade Federal do Rio de Janeiro/UFRJ] Institute of Economics, as well as CEO of the Celso Furtado Center.
States of The Future is carried out by the ministries of Management and Innovation in Public Services [Ministério da Gestão e da Inovação em Serviços Públicos/MGI]; Foreign Affairs [Ministério das Relações Exteriores/MRE]; Development, Industry, Trade, and Services [Ministério de Desenvolvimento, Indústria, Comércio e Serviços/MDIC]; by BNDES; and by the United Nations Development Program (UNDP). The organization is run by Maranta and the Organization of Ibero-American States for Education, Science and Culture (OEI) in Brasil. The Open Society Foundations and República.org support States of the Future.
