Tormented by soaring prices
Yakub Ali Khan | Tuesday, 22 July 2008
RISING prices is now the subject of worried conversation everywhere -- at tea stalls, buses, launch terminals or any location where people come together and exchange opinion. Complete strangers when travelling together to a common destination usually discuss the weather. Not anymore. Even between strangers, in many cases these days, the first talking point turns out to be prices of basic commodities - such as prices of the rice they must consume daily or the prices of other kitchen items.
Two consequences in the main are noted from the rising prices. Firstly, the price escalations have much increased the costs of living of the ordinary people. The poor and the extreme poor comprise nearly half of the population. Understandably, price increases tend to have the unhappy effects on them and this is more the case in the present price rises as prices of mainly common but indispensable consumption items of the poor are rising. Thus, the purchasing power of the poor is getting eroded. If the present conditions of high prices persist, then the poor will be the poorer and poverty's pangs will deepen in the lives o the people.
Besides, even in their state of poverty, the poor, when they are blessed with relatively stable or improved purchasing power, they create demand for a large number of goods and services beyond food and other basic things. The production and marketing of these not-so-essential products then help to create employment and income for the people or the economy grows in the process. But with their purchasing power getting badly battered, the poor or common people are unlikely to demand such non-essential items in substantial quantities leading to fall in the market. This in turn leaves its negative consequence on the producers and sellers of those items. The fallout is even worse-increasing unemployment, stagnating economy and deepening poverty.
One reaction to the rise in prices can be reduction in consumption. Such a reaction may even lead to decrease in prices as sellers then respond to consumer reaction by lowering prices in their bids to fast dispose off stocks of goods with them. If goods do not sell at a brisk pace, business turnover declines. But in the current price increases, this strategy of foregoing consumption to put pressure on the sellers cannot apply for the simple reason that most of the higher priced goods are considered as essential items by common people. Thus, even the poor cannot postpone or reduce consumption of flour, rice, cooking oil and other kitchen items as these are their basic consumption items.
A poor person confronted with the choice of buying a shirt or eating a square meal, will likely decide to buy only food or items for preparing food in unchanging quantities, no matter what the price is. He or she might decide to forego consumption of new clothes but he or she is most unlikely to buy less rice or flour or cooking oil because the costs of these are higher. People seem not to hesitate to even, beg, borrow or steal, as the saying goes, to meet the needs of basic sustenance in the form of food. Sections of businesses -- dealing in essential consumer products -- understand too well this psychology or vulnerability of the consumers and have, as the public perception goes, been hiking up the prices thereof to squeeze out supernormal profits, under imperfect market conditions.
It needs no stretch of the imagination to realise the sufferings of the poor consumers. Even the middle classes, especially the lower middle classes in urban areas -- who would be considered to have an existence above the poverty line -- are getting affected by the price increases. The incomes of most middle class families are limited and family managers are having their back to the wall trying to balance their budgets with their modest or static incomes.
All concerned quarters are clanging their bells hard for the government to sit up and hear the noises they are making to give them relief from price rises. But so far, the response of the government to this has been rather casual. The government appears to be only paying lip service to the need for price stabilisation while it remains too preoccupied with political issues.
The free market philosophy is ascendant in Bangladesh. But free markets are found not devoid of regulatory attempts on the part of governments elsewhere, especially when the same relate to goods regularly consumed by common people with modest purchasing power. The market behaviour, on the part of many traders in Bangladesh, leaves enough room to raise questions about their unethical profiteering instincts. Investigations from the media and other responsible sources drew the attention of the government many times to alleged price manipulations by a section of the so-called business operators to rake in super profits at the expense of the miseries of common people. Market economy principles do not prohibit actions against such profiteering or the application of the laws of the land in such cases. However, so far, no application of these laws have been noted, although their skilful application would not be unjustified under the present conditions.
There has been also regular pleading in the press and elsewhere to operate or revive government's own extensive sale of essential goods at fair prices to take the wind out of the sales of the profiteers. Full revitalisation and operationalisation of the state-owned Trading Corporation of Bangladesh (TCB) was suggested to this end. The government has only recently gone for half-hearted revival of TCB operations and selling through the fair price shops of the Bangladesh Rifles (BDR) when it should have allowed full scale resumption of TCB's operations, long ago, to defeat the aims of the price manipulators. Meanwhile, reforms of the TCB are also overdue in order to rid of corruption and malpractices that are the common features of opertations of all such state-owned enterprises in the country.
Two consequences in the main are noted from the rising prices. Firstly, the price escalations have much increased the costs of living of the ordinary people. The poor and the extreme poor comprise nearly half of the population. Understandably, price increases tend to have the unhappy effects on them and this is more the case in the present price rises as prices of mainly common but indispensable consumption items of the poor are rising. Thus, the purchasing power of the poor is getting eroded. If the present conditions of high prices persist, then the poor will be the poorer and poverty's pangs will deepen in the lives o the people.
Besides, even in their state of poverty, the poor, when they are blessed with relatively stable or improved purchasing power, they create demand for a large number of goods and services beyond food and other basic things. The production and marketing of these not-so-essential products then help to create employment and income for the people or the economy grows in the process. But with their purchasing power getting badly battered, the poor or common people are unlikely to demand such non-essential items in substantial quantities leading to fall in the market. This in turn leaves its negative consequence on the producers and sellers of those items. The fallout is even worse-increasing unemployment, stagnating economy and deepening poverty.
One reaction to the rise in prices can be reduction in consumption. Such a reaction may even lead to decrease in prices as sellers then respond to consumer reaction by lowering prices in their bids to fast dispose off stocks of goods with them. If goods do not sell at a brisk pace, business turnover declines. But in the current price increases, this strategy of foregoing consumption to put pressure on the sellers cannot apply for the simple reason that most of the higher priced goods are considered as essential items by common people. Thus, even the poor cannot postpone or reduce consumption of flour, rice, cooking oil and other kitchen items as these are their basic consumption items.
A poor person confronted with the choice of buying a shirt or eating a square meal, will likely decide to buy only food or items for preparing food in unchanging quantities, no matter what the price is. He or she might decide to forego consumption of new clothes but he or she is most unlikely to buy less rice or flour or cooking oil because the costs of these are higher. People seem not to hesitate to even, beg, borrow or steal, as the saying goes, to meet the needs of basic sustenance in the form of food. Sections of businesses -- dealing in essential consumer products -- understand too well this psychology or vulnerability of the consumers and have, as the public perception goes, been hiking up the prices thereof to squeeze out supernormal profits, under imperfect market conditions.
It needs no stretch of the imagination to realise the sufferings of the poor consumers. Even the middle classes, especially the lower middle classes in urban areas -- who would be considered to have an existence above the poverty line -- are getting affected by the price increases. The incomes of most middle class families are limited and family managers are having their back to the wall trying to balance their budgets with their modest or static incomes.
All concerned quarters are clanging their bells hard for the government to sit up and hear the noises they are making to give them relief from price rises. But so far, the response of the government to this has been rather casual. The government appears to be only paying lip service to the need for price stabilisation while it remains too preoccupied with political issues.
The free market philosophy is ascendant in Bangladesh. But free markets are found not devoid of regulatory attempts on the part of governments elsewhere, especially when the same relate to goods regularly consumed by common people with modest purchasing power. The market behaviour, on the part of many traders in Bangladesh, leaves enough room to raise questions about their unethical profiteering instincts. Investigations from the media and other responsible sources drew the attention of the government many times to alleged price manipulations by a section of the so-called business operators to rake in super profits at the expense of the miseries of common people. Market economy principles do not prohibit actions against such profiteering or the application of the laws of the land in such cases. However, so far, no application of these laws have been noted, although their skilful application would not be unjustified under the present conditions.
There has been also regular pleading in the press and elsewhere to operate or revive government's own extensive sale of essential goods at fair prices to take the wind out of the sales of the profiteers. Full revitalisation and operationalisation of the state-owned Trading Corporation of Bangladesh (TCB) was suggested to this end. The government has only recently gone for half-hearted revival of TCB operations and selling through the fair price shops of the Bangladesh Rifles (BDR) when it should have allowed full scale resumption of TCB's operations, long ago, to defeat the aims of the price manipulators. Meanwhile, reforms of the TCB are also overdue in order to rid of corruption and malpractices that are the common features of opertations of all such state-owned enterprises in the country.