Back to the futures. The economics and the politics of the international commodities market governance during the 20th century

Commodity futures trade seems to belong to a grey zone for the economic historical research. On the one hand, financial history very often overlooks the financial side of commodity trade, its tools and its institutional actors, focusing its attention on monetary and stocks exchanges. On the other hand, business and economic historians only occasionally have taken into account the question of institutional markets and produce exchanges when they tackle the history of firms acting in the field of commodities. While the chronology of futures trade has been already explored, in particular for its first diffusion during the “first globalisation” and their “institutionalisation” in produce exchanges for foodstuffs and agricultural commodities during the 19th century, a real historical gap still persists in explaining the fashions and the causes that made these tool re-emerge during the 20th century. In particular, after having changing fortune during the first decades of the 20th centuries, since the 1970s, futures markets come again to the fore as essential tools. The today market economy is reshaped by a widespread acceptance of futures not only as trade devices, but also as type model for the market in general. The main ambition of this research program is to fill this gap, providing interpretations for the interconnection between economics and finance and searching into the dynamics that reshaped the international commodity trade during the “long” 20the century, exploring the causes of the decline and subsequent rise of futures markets. This research project will explore the way in which both international economic organisation and economic actors in the field of commodities (non ferrous metals and foodstuff) considered futures trading.

In the field of commodities, the study of futures trading could explain some central issues for the history of international trade. Being a hedging mechanism to cover the purchasers from the risk linked to future deliveries of goods or to cover the seller from the risk linked to changing market prices, these institutional markets dealt with the difficulties linked to both business and natural cycles in the context of an emergent industrial capitalism during the mid-19th century. At their creation, instead of being elements of instability, they were judged essential to bring back some order to a too de-regulated market by scholarly research. Using also speculative moods, they provide rules with which to tackle the process of trade in a standardised and transparent way. However, this did not exclude that, during difficult periods, produce exchanges brought about harsher variations in prices, helping speculation and causing social and economic issues. For this reason, many governments enacted legislations to tame their excess and to survey their operations and other fashions to take control over prices were often preferred (such as cartels, political prices, government controls etc.). In many cases, these financial tools were prohibited by national governments, as during the inter-war period, while during the post-1945 period their efficiency was strongly downsized by the control on capital flows and currencies exchanges, on import-export, and, above all, by the architecture of the international commodity controls that was carried out by commodity agreements and other forms of industrial cooperation.

This vision was contented during the 1970s, when the new monetary instability combined with new risks in the commodity exchanges, called again futures markets as optimal tools of governance. New stabilisation policies were not conceived to tame futures trade, but making it as the centrepiece of the regulation in commodity trade. From being judged harmful to stabilisation, this tool emerged again as methods to stabilise. The main expected outcome is to re-define the current understanding about the history of the international trade, providing explications for seizing our globalised and rather de-regulated market culture, wondering the real reach of the change of the 1970s and putting it into the perspective of a long run understanding about the written and unwritten rules of trades. It would like to provide interpretations about the transition from stability culture to instability one, which sees into the free development of produce exchanges and futures the best-way to handle the international governance of commodities. Outcomes are expected in a better understanding of the actual role of the international organisations in providing international governance and about the interconnections about institutions and economic actors. Also explanations of the process of the decline of commodity agreements and cartels in providing economic governance are expected, which can serve to implement the current studies about anti-trust and competitive economics.


Marco Bertilorenzi