Deftly practicing market economy
Wednesday, 24 October 2007
Amirul Islam
THE triumph of the market economy or free market economy is evident everywhere. The features of it are less state control, wider choice of consumers and their benefiting in terms of prices and quality from the intense competition among free market operators, greater participation of people in economic activities from the motivation created by such a market and the economic growth created as a result that is gainful from the perspectives of jobs, income and standard of living.
But free market economy is not an unmixed blessing. Under the system, the state is supposed to withdraw from mainstream economic activities, but it cannot or must not do so in all spheres or all cases because the same could then act against general economic interests. For example, even the developed countries which are the ardent advocates of minimum intervention of the government in the economy, are found liberally subsidising their farm sectors. This is done because prices of foodgrains and other agri-produces fluctuate a great deal and unless subsidies are given, farmers might lose interest to maintain the desired level of production in the backdrop of an experience of poor price received under the sheer market mechanism. Food scarcity could result thereof and the consequent shooting up of prices of a basic essential for survival causing widespread economic hardships for common people. In order to prevent this from happening, governments in those countries reserve a role for themselves and subsidise agriculture.
The same is also done in other areas where market failures or the inability of the free market to provide vital goods or services needed by people in general -- at costs they can afford -- might cause hardships. The same include education and medical care. In both of these areas, improved and adequate delivery is important and both have links to long term economic vitality. A country with its people largely uneducated or not properly trained or its population generally suffering from sicknesses will not have the human resources to expand economic activities or not have a healthy workforce to carry out various tasks with high productivity or efficiency.
Left to market forces or the private sector, education and health care can become just like commodities sold to those with the ability to pay while bypassing those who cannot pay. Thus, many would be excluded from the benefits of health and medical care and add to national liabilities in the economic sense. In order to safeguard against such a situation, governments of most of the developed countries are seen providing quality education and health care generally to their citizens mainly free of costs or charging only nominal amounts from the recipients.
The government's role in these countries also extend to operating social safety nets in the form of unemployment allowances and other monetary and services benefits to citizens . Besides, the private sector in these countries are subjected to competition policies or regulations to guard against formation of monopolies, cartels and the like that could unduly exploit consumers through arbitrary control of market shares and fixation of prices.
Governments in Bangladesh have been maintaining that they follow market economy principles. But this is a sweeping claim because production and distribution of goods and services in many sectors here are still substantially at the hands of the government. On the other hand, government's role in areas where it ought to play a role powerfully such as in health, education and social welfare, are weak or inadequate. Furthermore, government's regulatory activities in Bangladesh to properly regulate the inappropriate activities or excesses of the private sector, are also found to be weak and ineffectual. Therefore, the challenge in the Bangladesh context is to set the correct role of the government in line with what things are practiced in the developed countries that uphold the free market economy.
THE triumph of the market economy or free market economy is evident everywhere. The features of it are less state control, wider choice of consumers and their benefiting in terms of prices and quality from the intense competition among free market operators, greater participation of people in economic activities from the motivation created by such a market and the economic growth created as a result that is gainful from the perspectives of jobs, income and standard of living.
But free market economy is not an unmixed blessing. Under the system, the state is supposed to withdraw from mainstream economic activities, but it cannot or must not do so in all spheres or all cases because the same could then act against general economic interests. For example, even the developed countries which are the ardent advocates of minimum intervention of the government in the economy, are found liberally subsidising their farm sectors. This is done because prices of foodgrains and other agri-produces fluctuate a great deal and unless subsidies are given, farmers might lose interest to maintain the desired level of production in the backdrop of an experience of poor price received under the sheer market mechanism. Food scarcity could result thereof and the consequent shooting up of prices of a basic essential for survival causing widespread economic hardships for common people. In order to prevent this from happening, governments in those countries reserve a role for themselves and subsidise agriculture.
The same is also done in other areas where market failures or the inability of the free market to provide vital goods or services needed by people in general -- at costs they can afford -- might cause hardships. The same include education and medical care. In both of these areas, improved and adequate delivery is important and both have links to long term economic vitality. A country with its people largely uneducated or not properly trained or its population generally suffering from sicknesses will not have the human resources to expand economic activities or not have a healthy workforce to carry out various tasks with high productivity or efficiency.
Left to market forces or the private sector, education and health care can become just like commodities sold to those with the ability to pay while bypassing those who cannot pay. Thus, many would be excluded from the benefits of health and medical care and add to national liabilities in the economic sense. In order to safeguard against such a situation, governments of most of the developed countries are seen providing quality education and health care generally to their citizens mainly free of costs or charging only nominal amounts from the recipients.
The government's role in these countries also extend to operating social safety nets in the form of unemployment allowances and other monetary and services benefits to citizens . Besides, the private sector in these countries are subjected to competition policies or regulations to guard against formation of monopolies, cartels and the like that could unduly exploit consumers through arbitrary control of market shares and fixation of prices.
Governments in Bangladesh have been maintaining that they follow market economy principles. But this is a sweeping claim because production and distribution of goods and services in many sectors here are still substantially at the hands of the government. On the other hand, government's role in areas where it ought to play a role powerfully such as in health, education and social welfare, are weak or inadequate. Furthermore, government's regulatory activities in Bangladesh to properly regulate the inappropriate activities or excesses of the private sector, are also found to be weak and ineffectual. Therefore, the challenge in the Bangladesh context is to set the correct role of the government in line with what things are practiced in the developed countries that uphold the free market economy.