Where non-market forces rule

A local economic think tank, the South Asian Network on Economic Modeling (SANEM), in a recent study has found that 74 per cent of low-income people in the country have been borrowing money from relatives or micro-finance institutions (MFIs) to meet their family expenses. However, of late, they are mostly looking to the MFIs for such financial support, instead of their relatives. It is out of desperation that they are knowingly falling into a debt trap. For, to them, it is better to be in debt than to go hungry.
Some of the study findings are indeed revealing. Members of the 18 per cent of households so surveyed admitted to the interviewers that on some days in the past six months (before the survey) they had nothing to eat. Needless to say, if any of the members of those families fell sick, arranging medical treatment for them was out of the question. Unable to make ends meet with what they earn, these families have stopped saving. While 35 per cent of the families, who still have some savings, are now spending from their savings. Why are low and fixed-income households in such a difficult situation? Because their buying capacity is fast eroding with the rise in inflation. And to make the matter worse, their earning has remained constant despite the inflation.
But why should essential commodity prices rise in this manner forcing low-income people to go hungry and get into debt when in the global market the opposite is happening?
Actually, due to increasing recessionary pressure on the global economy, commodity prices have been falling in the international market. Surprisingly, the international situation appears to have no impact on the local commodities market!
However, traders dealing in essential commodities both in the retail and wholesale markets have no shortage of explanations to justify the unabated price hike of the basic necessities. Their explanations are too familiar: the value of the local currency, taka, is depreciating against the US dollar, there are restrictions on imports and, of course, there is the ongoing Russia-Ukraine war. True, the government has adopted some austerity measures including restrictions on the import of non-essential and luxury goods. But essential commodities including food items do not fall under this category. What is more, food prices are on the decline in the international market. Despite the war between Russia and Ukraine --- the countries account for 28 per cent of the world's food grain production-their food grains are being transported to the international market, thanks to an agreement between those two countries brokered by Turkey and the UN.
Most importantly, the price of fuel oil, the main driver of the hike in commodity prices, has gone down in the global market.
The World Bank (WB)'s March report also corroborates this view. It shows that compared to the first quarter of 2022, commodity prices have declined by 10 to 50 per cent in the global market during February this year (2023).
But Bangladesh's commodity market defies all such positive developments in the international market.
It is important to note at this point that here the discussion is concentrated on the prices of essentials commodities in the local market vis-à-vis those in the global market. There is no reflection of the behaviour of commodity prices in the global market on those of the Bangladesh's domestic market and how that is hurting the livelihoods of the common people.
However, a fall in commodity prices in the international market is indicative of a slump in global demand. Which, in other words, means overall consumption in advanced economies is on a downward trajectory. The situation has arisen out of the measure those countries (on either side of the Atlantic) have been taking to tame rising inflation by way of raising the rate of bank interest. The fallout from this particular measure has been widespread. The resulting credit crunch has slowed down industrial activities, while consumers are buying less because high inflation has eroded their purchasing power as it is also the case in Bangladesh. However, the difference is, the citizens of those advanced economies are receiving adequate government support to survive in such difficult times. Being highly developed economies, their governments afford to be so generous. But weaker economies like Bangladesh cannot simply afford such generous compensatory measures for their citizens. Even so, in Bangladesh, for example, compensatory measures like providing low-priced essential commodities through Open Market Sales (OMS) by the Trading Corporation of Bangladesh (TCB), a wing of the country's commerce ministry, are in place for low-income people. There is also a social safety net programme for the vulnerable section of the population. But still, such measures are just a drop in the ocean when the actual needs are considered.
But when it comes to the behavior of the market, there is a world of difference between those economies and that of Bangladesh. It is pure competition driven by market forces and fair play that govern markets of the developed economies. Whereas in Bangladesh, it is the non-market forces like hoarders and an evil nexus of syndicates who are in control of the market. As a result, it is total anarchy that rules the market. Here prices listen to the dictates of the non-market forces and as a result have grown the habit of only rising and hardly ever falling.
The common consumers are only at their mercy.

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