Intermediaries and high prices at consumers' end
Monday, 24 November 2008
PROPER functioning of the free market from the interactions of supply and demand does translate into a fair deal for consumers in most circumstances in all respects. But free market principle also ought not to mean a complete hands-off policy of the government to protect consumers from market distortions, deliberate or otherwise. Consumers in Bangladesh are a very oppressed lot and this exploitation of them remains unabated. Recently, a poll undertaken by one of the country's leading newspapers showed that the greatest expectation of the voters from the government to be elected next, is normalisation of prices.
This aspiration is indeed seen as paramount in the need hierarchy of some 40 per cent of the population who are poor. Research conducted by the country's think-tanks established that during the last couple of years, at least 4.0 million people have once again gone below the poverty line after overcoming poverty conditions. This has happened from their steady losing of purchasing power from uncontrolled rise in the prices of goods and services. Nothing can be more unfortunate than these findings. The tenure of the caretaker government is almost over. The coming elected government, therefore, must give highest priority to normalisation of prices.
Anarchy in the market can be showed from some examples. Rice is the price leader in the Bangladesh economy. The price of this staple food influences the prices and charges of many commodities and services respectively. Following a bumper aman harvest, new rice is arriving in the market. There is also a good stock of rice in the country. But the price of rice has not registered any marked fall, reflecting the supply-side condition in particular. This situation does in no way mean that the actual growers are getting the benefits of higher prices. Rather, the intermediaries in the market are reaping the most advantage out of this.
Meanwhile, winter vegetables are arriving in the market. This is the time of the year when from abundant availability of the same in the markets, consumers expect notable reduction in their prices. But the prevailing prices of vegetables and other perishables in the markets are found to be abnormally high. But the vegetables and poultries are bought at throwaway prices by middlemen -- and there is a long chain of them including the toll-collectors and others involved in 'extortion' -- who then bring them or facilitate their entry, to big cities and set prices arbitrarily four or five times or more above their procurement costs. There is none to check such practices. It is not that the retailers -- the ordinary traders -- are not necessarily to share the blame for the gross imperfections, largely due to dominance of all sorts of intermediaries and the play of non-economic factors in the market. This is one of the major factors responsible for the large gap between what the producers of most agricultural produce receive at the grassroots and what the consumers in the final retail outlets in the urban areas have to pay.
Removing such imperfections that distort the proper functioning of markets is a high-order priority that the government must address. The next elected government will have to take up pragmatic actions to help remedy the situation for allowing the normal market forces on both demand and supply sides to play their role without interventions by a long chain of intermediaries, mostly non-useful ones. The wholesalers as well as retailers do largely point to toll collection from them which they have to add to prices and pass on to consumers. This is a non-economic factor of consequence. No government, worth its name, can disclaim its responsibility to counter the menace of such toll-collection and other related non-economic factors, causing the upsurge of prices at the consumers' level.
This aspiration is indeed seen as paramount in the need hierarchy of some 40 per cent of the population who are poor. Research conducted by the country's think-tanks established that during the last couple of years, at least 4.0 million people have once again gone below the poverty line after overcoming poverty conditions. This has happened from their steady losing of purchasing power from uncontrolled rise in the prices of goods and services. Nothing can be more unfortunate than these findings. The tenure of the caretaker government is almost over. The coming elected government, therefore, must give highest priority to normalisation of prices.
Anarchy in the market can be showed from some examples. Rice is the price leader in the Bangladesh economy. The price of this staple food influences the prices and charges of many commodities and services respectively. Following a bumper aman harvest, new rice is arriving in the market. There is also a good stock of rice in the country. But the price of rice has not registered any marked fall, reflecting the supply-side condition in particular. This situation does in no way mean that the actual growers are getting the benefits of higher prices. Rather, the intermediaries in the market are reaping the most advantage out of this.
Meanwhile, winter vegetables are arriving in the market. This is the time of the year when from abundant availability of the same in the markets, consumers expect notable reduction in their prices. But the prevailing prices of vegetables and other perishables in the markets are found to be abnormally high. But the vegetables and poultries are bought at throwaway prices by middlemen -- and there is a long chain of them including the toll-collectors and others involved in 'extortion' -- who then bring them or facilitate their entry, to big cities and set prices arbitrarily four or five times or more above their procurement costs. There is none to check such practices. It is not that the retailers -- the ordinary traders -- are not necessarily to share the blame for the gross imperfections, largely due to dominance of all sorts of intermediaries and the play of non-economic factors in the market. This is one of the major factors responsible for the large gap between what the producers of most agricultural produce receive at the grassroots and what the consumers in the final retail outlets in the urban areas have to pay.
Removing such imperfections that distort the proper functioning of markets is a high-order priority that the government must address. The next elected government will have to take up pragmatic actions to help remedy the situation for allowing the normal market forces on both demand and supply sides to play their role without interventions by a long chain of intermediaries, mostly non-useful ones. The wholesalers as well as retailers do largely point to toll collection from them which they have to add to prices and pass on to consumers. This is a non-economic factor of consequence. No government, worth its name, can disclaim its responsibility to counter the menace of such toll-collection and other related non-economic factors, causing the upsurge of prices at the consumers' level.