well be adversely affected. Equally there will be changes in the commodity chain for
exports. If export production is concentrated among larger farms and if export processing is
carried out by larger companies than are involved in domestic food processing, then national
income could rise, but the food security of the poorest could fall. However, export
production could also create more employment opportunities for landless labourers and have
the opposite effect on household food security.

There is one very important way in which international markets differ from domestic
markets. If a national economy becomes heavily monetised and, for some reason, one
section of the population suffers a dramatic and sudden failure of entitlements, say because
of a localised drought, then there is a national government which can step in and take action
to restore some form of food entitlement for that group. If a country suffers some major
entitlement failure, for example because of a complete failure of the coffee crop, there is no
international institution to step in and restore the country's entitlements. There have been
various attempts to provide some form of insurance, such as the EC's STABEX fund, but
these are partial and not always reliable.

None of the issues outlined above, as to why increasing export orientation and international
market integration may create problems for a country's food security are sufficient reasons in
themselves to justify withdrawal from international markets. The discussion has simply
indicated possible dangers and areas of concern to which attention must be paid when
contemplating greater international specialisation and openness to trade.

3 The Political and Institutional Environment of the Food System

3.1 The institutional context

Much of the discussion in this chapter has centred on market relationships, how people use
their resources to produce food, and how the overall food supply moves through market
channels to become available to those who have income to purchase it. In most countries
nowadays, markets are undeniably the dominant institution. Markets, however, do not
operate in a vacuum. As recent experience of liberalisation has shown, particularly in the
former communist countries of the Eastern bloc, there are a number of underlying
institutions necessary for the effective operation of the market system. The market as an
institution concentrates on the process of exchange of rights, rights to property, to labour and
to commodities. One of the first requirements for effective market operation is that there
should be a system of well defined property rights, plus a system for enforcing them.

Information is also important if markets are to function effectively. Buyers and sellers must
be able to identify one another, and have access to information as to the prices at which other
agents are transacting. For markets to be competitive, there have to be many buyers and
sellers. When markets are only emerging, it can be difficult to avoid domination by a few
wealthy and risk-taking agents. Once a few agents have developed a monopoly position in a
market, they often have sufficient power to block entry to that market by other agents.
Buyers are then forced to pay monopoly prices if they wish to undertake transactions. This
is frequently a problem in small localised credit markets.


-83 -


( 'hapilc .%