World Prices

the monetary expression of international production prices, as formed on the world market. International production prices are determined by production conditions for the main bulk of a given commodity going into world trade. Under modern capitalism, major commercial export and import transactions, regular in nature and payable in freely convertible currency, are conducted at world prices.

The transition of capitalism from free competition to monopoly and state-monopoly capitalism caused domestic prices within the capitalist countries to diverge from foreign trade prices. Domestic prices in industrially developed capitalist countries typically exceed world prices. There are many reasons for this; most important are domestic price boosts imposed by monopolies where the domestic market is more highly monopolized than the foreign market, and protectionist measures adopted by capitalist governments. The present-day capitalist state maintains the price levels and ratios set by the monopolies for the domestic market through such measures as tariffs, import quotas, commodity dumping, currency regulations, and taxation.

Monopoly influence and state intervention are much weaker in the world market. As world prices are formed under conditions more acutely competitive than those found in domestic markets, a “purification” of domestic prices from tariffs, taxes, subsidies, and other distorting factors takes place. Because of one-sided specialization in the production of a few commodities, domestic prices in the developing countries are lower than world prices; this enables the monopolies to appropriate a significant part of the difference. In practice, world prices for finished goods are the export prices charged by the companies that are the principal suppliers of the particular type of article. World prices for some raw materials are the prices charged in the most important exporting or importing countries, but for other raw materials the world price emerges only in exchange transactions, commodity auctions, and elsewhere within the major international trading centers.

At the current stage of the general crisis of capitalism and influenced by both economic and noneconomic factors, price differentiation in international trade is becoming more intense. The increased activity of various governmental and semigovern-mental organizations of the capitalist countries after World War II, the influence of currency factors, and the growing role of international monopolies in the world capitalist economy have led to the formation of a number of differing types of world prices, aside from world market prices. These include prices for standard commercial transactions when payment is made in currency not freely convertible; prices charged in clearing agreements; prices for aid programs and other special transactions; and transfer prices employed for transactions within a single corporation. The powerful international financial-industrial complexes formed by monopolies from different countries convert a significant portion of the commodity exports and imports of particular countries into planned intracorporate transactions; in this case, export and import prices become internal accounting prices, set entirely by the companies themselves.

The prices charged on the world socialist market cannot be formed in isolation from world prices. Trade between socialist and capitalist countries is carried on according to world prices; such prices also provide a basis for the formation of prices in trade between socialist countries. In this case, world prices are adjusted to remove as thoroughly as possible all the effects of long-term factors that have caused these prices to deviate from the world price of production—for example, various types of monopolistic deals—and to eliminate the influence of any situational or speculative factor.