Facing facts with composure
Tuesday, 13 November 2007
Syed Fattahul Alim
What is the state of the economy? As if to defy the government's efforts to arrest the price of essential commodities, the prices are galloping upwards uncontrollably. Should one consider this as a failure of the incumbent government to contain the price hike of essentials? But then was not the same trend in force during the previous government? During that period, the theory that gained popularity was it is the syndicate of the unscrupulous traders that was to blame for the runaway price spiral. Hence started the hunt for the syndicate. But the then government was not successful either in taming the wild horse of soaring price hike, nor bust the unholy syndicate of traders putatively liable for the situation. The caretaker government that took office especially after the watershed of January 11, 2007 was also initially in the hot pursuit of the hoarders, trade cartels and, of course, the syndicates allegedly responsible for the price hike. But the syndicate or cartel was hardly ever in sight.
However, the failure of the successive governments to home in on the unholy nexus of unscrupulous operators in the business does not prove that there is no cartel or syndicates leaving their baneful influence on the price level of daily essentials. But that notwithstanding, one cannot also remain oblivious of the fact that the market itself may, to a large extent, be responsible for the frenzied behaviour of the essential price index. The realisation is now growingly dawning on all concerned that the bizarre behaviour of the price regime of everyday necessities as well as other consumer goods is also attributable to the rising price level in the international market where the bulk of the essential goods for the country is being imported from. And the finance adviser of the incumbent government has also admitted that the upward trend of the essentials price in the international market has its impact on the consumers' price index at home.
This new realisation has left its sobering effect on the government, the thinkers, the understanding public and other stakeholders in the economy. But soberness is no protection against the widening hole in the purse of the common man. His earning has not increased, though his cost of living as shot up irrationally. How would he now make his both ends meet?
What concerns the general public more than the current price index of the essentials is if the government has taken all the preparations to meet the contingencies of the uncertain future.
The government has on more than one occasion assured that it has enough food grain stock to meet emergencies in the near future and that the purchase of food grain from the local as well as the international market will continue. To tide over the import-cost-driven price hike of essentials, the government is also banking on the forthcoming harvest of rice. It is being hoped that once the locally produced rice enter the market, it would contribute to bringing down the prevailing price level in the food grain market.
Traders in food grain as well as some economists are doubtful about such a rosy prospect. Would the farmer be able to keep the price of his produce below the existing level of market price of food grains given the fact that meanwhile the overall cost of production in the farming sector has also gone up? However, it would be a quite different story if the food grains market is glutted by overproduction of food grains and other agricultural produces. However, neither such prospect is close by, nor would the scenario be desirable that the farmers after disposing of their harvests in the glutted market at throwaway prices are returning home empty-handed as they cannot buy other necessaries with the sale proceeds of their farm products.
The second outlook, though improbable, points to another stark reality that the man on the street will have to come to terms with. One cannot therefore unjustly expect that the farmers would continue to provide the countrymen with their produces at low prices, while the price level of other consumer goods remain forever beyond their reach. In that case, it would be a prescription for the perpetuation of poverty among the peasantry and low level of productivity in the farming sector.
Under the circumstances, it would not be prudent to think of addressing the issue of the vertical trend in the price index of rice, flour and other essentials in isolation from the entire gamut of market factors leading to the sharp rise in the cost of living in the economy.
Should the people at large and those at the helm then resign themselves to the fact that the situation is beyond repair as it has to do with the rising cost of living in the country as elsewhere in the world?
In fact there are economies where cost of living is very high compared to other countries because the income level of the consumers is also high there. Examples of advanced economies like Japan and many otherwise rich countries such as those in the Middle East can be cited on this score. The citizens of those countries do not mind paying higher price for the articles of consumption, for the economy allows for that. The average level of income in those countries is high and the public there are therefore comfortable with the high prices of articles of consumption. Even then, the citizens in high income economies will also not accept if the price level takes on a steep curve upwards.
But we are facing quite a reverse situation here in Bangladesh. So this is a double whammy for the citizens of Bangladesh, especially those belonging to the limited income bracket and those in the low income group. Neither has their incomes been keeping pace with the high price of the articles of consumption, nor are they cushioned by any social safety net against the relentless surge in the price of daily essentials.
The government, therefore, has a huge responsibility in tackling the situation judiciously.
True, economy is not also all about the price level of the consumer goods. Moreover, people are ready to face even the worst if they have any assurance or at least the hope that things will be all right in the coming days. So what prospect the overall state of the economy has in store for the future?
The situation obtaining in the economy cannot wait for any ideal time in the future for addressing. The measures taken to contain the inflationary pressure through a tight monetary policy, by putting a brake on the supply of money in the market by buying up some taka from the banks with dollars, or by way of upward adjusting taka against dollar are but attempts to attempt to deal with the symptoms and not the causes. It is now time to also to go to the root of the problem, which is the state of the economy.
The monetarist measures or other options of government intervention in the economy should be in place to shield the limited income people and the very poor against the onslaught of price hike. At the same time, all the hurdles against increased investment in the private sector have to be removed. The business must start in a full swing to create more employment in the economy. And for all these to happen, the nation have to be in a more positive and peaceable mood, so that the man in the street is willing to face up to the reality with composure.
What is the state of the economy? As if to defy the government's efforts to arrest the price of essential commodities, the prices are galloping upwards uncontrollably. Should one consider this as a failure of the incumbent government to contain the price hike of essentials? But then was not the same trend in force during the previous government? During that period, the theory that gained popularity was it is the syndicate of the unscrupulous traders that was to blame for the runaway price spiral. Hence started the hunt for the syndicate. But the then government was not successful either in taming the wild horse of soaring price hike, nor bust the unholy syndicate of traders putatively liable for the situation. The caretaker government that took office especially after the watershed of January 11, 2007 was also initially in the hot pursuit of the hoarders, trade cartels and, of course, the syndicates allegedly responsible for the price hike. But the syndicate or cartel was hardly ever in sight.
However, the failure of the successive governments to home in on the unholy nexus of unscrupulous operators in the business does not prove that there is no cartel or syndicates leaving their baneful influence on the price level of daily essentials. But that notwithstanding, one cannot also remain oblivious of the fact that the market itself may, to a large extent, be responsible for the frenzied behaviour of the essential price index. The realisation is now growingly dawning on all concerned that the bizarre behaviour of the price regime of everyday necessities as well as other consumer goods is also attributable to the rising price level in the international market where the bulk of the essential goods for the country is being imported from. And the finance adviser of the incumbent government has also admitted that the upward trend of the essentials price in the international market has its impact on the consumers' price index at home.
This new realisation has left its sobering effect on the government, the thinkers, the understanding public and other stakeholders in the economy. But soberness is no protection against the widening hole in the purse of the common man. His earning has not increased, though his cost of living as shot up irrationally. How would he now make his both ends meet?
What concerns the general public more than the current price index of the essentials is if the government has taken all the preparations to meet the contingencies of the uncertain future.
The government has on more than one occasion assured that it has enough food grain stock to meet emergencies in the near future and that the purchase of food grain from the local as well as the international market will continue. To tide over the import-cost-driven price hike of essentials, the government is also banking on the forthcoming harvest of rice. It is being hoped that once the locally produced rice enter the market, it would contribute to bringing down the prevailing price level in the food grain market.
Traders in food grain as well as some economists are doubtful about such a rosy prospect. Would the farmer be able to keep the price of his produce below the existing level of market price of food grains given the fact that meanwhile the overall cost of production in the farming sector has also gone up? However, it would be a quite different story if the food grains market is glutted by overproduction of food grains and other agricultural produces. However, neither such prospect is close by, nor would the scenario be desirable that the farmers after disposing of their harvests in the glutted market at throwaway prices are returning home empty-handed as they cannot buy other necessaries with the sale proceeds of their farm products.
The second outlook, though improbable, points to another stark reality that the man on the street will have to come to terms with. One cannot therefore unjustly expect that the farmers would continue to provide the countrymen with their produces at low prices, while the price level of other consumer goods remain forever beyond their reach. In that case, it would be a prescription for the perpetuation of poverty among the peasantry and low level of productivity in the farming sector.
Under the circumstances, it would not be prudent to think of addressing the issue of the vertical trend in the price index of rice, flour and other essentials in isolation from the entire gamut of market factors leading to the sharp rise in the cost of living in the economy.
Should the people at large and those at the helm then resign themselves to the fact that the situation is beyond repair as it has to do with the rising cost of living in the country as elsewhere in the world?
In fact there are economies where cost of living is very high compared to other countries because the income level of the consumers is also high there. Examples of advanced economies like Japan and many otherwise rich countries such as those in the Middle East can be cited on this score. The citizens of those countries do not mind paying higher price for the articles of consumption, for the economy allows for that. The average level of income in those countries is high and the public there are therefore comfortable with the high prices of articles of consumption. Even then, the citizens in high income economies will also not accept if the price level takes on a steep curve upwards.
But we are facing quite a reverse situation here in Bangladesh. So this is a double whammy for the citizens of Bangladesh, especially those belonging to the limited income bracket and those in the low income group. Neither has their incomes been keeping pace with the high price of the articles of consumption, nor are they cushioned by any social safety net against the relentless surge in the price of daily essentials.
The government, therefore, has a huge responsibility in tackling the situation judiciously.
True, economy is not also all about the price level of the consumer goods. Moreover, people are ready to face even the worst if they have any assurance or at least the hope that things will be all right in the coming days. So what prospect the overall state of the economy has in store for the future?
The situation obtaining in the economy cannot wait for any ideal time in the future for addressing. The measures taken to contain the inflationary pressure through a tight monetary policy, by putting a brake on the supply of money in the market by buying up some taka from the banks with dollars, or by way of upward adjusting taka against dollar are but attempts to attempt to deal with the symptoms and not the causes. It is now time to also to go to the root of the problem, which is the state of the economy.
The monetarist measures or other options of government intervention in the economy should be in place to shield the limited income people and the very poor against the onslaught of price hike. At the same time, all the hurdles against increased investment in the private sector have to be removed. The business must start in a full swing to create more employment in the economy. And for all these to happen, the nation have to be in a more positive and peaceable mood, so that the man in the street is willing to face up to the reality with composure.