Import dependence is causing the economic crisis
AB Siddique :
Most of the food products depend on the market system. But the market of our country does not work according to the theory of market economy.
Here, in the name of competition, an unequal playing field has been created everywhere.
The price of chicken cannot be controlled due to market capture by a few big companies.
Other small farmers are unable to compete due to the contracts of some small farmers with big companies.
Due to this tendency to capture the market by adopting strategies, leaving the entire market uncontrolled to the private sector without any control over the market, this crisis has arisen.
That’s why the government could not bring the price of oil to the previous level or tolerable level despite several meetings with the oil importers.
This deregulation is responsible for market segmentation in most products. There is no regulation. No one obeys the instructions given by the government.
The government reduced the duty on sugar; the price of sugar went up. That is, the market has become so powerful that the government is no longer able to control it when it creates an area of unequal competition in the market. As a result, profit-push inflation has started in Bangladesh.
Profit-push inflation is inflation in which the price of goods does not increase in proportion to the increase in demand or production costs; rather, if the demand and cost of production increase, the amount increases more than what is supposed to increase.
This type of inflation occurs when a few companies dominating the market take advantage of the crisis to make more profits.
Where inflation is driven by rising production costs, there is no reason to believe that raising interest rates will reduce inflation.
Inflation cannot be controlled in Bangladesh the way contractionary monetary policy controls inflation in the US economy.
Bangladesh Bank has lifted the savings interest rate limit in 2023. But the loan interest rate has remained unchanged.
Bangladesh Bank has increased their policy rate or bank rate one more time. This monetary policy may increase deposits, but it will not reduce inflation.
If interest rates are raised as in the US, this will further restrict new investment. Apart from this, it will become more difficult for those who are struggling due to financial hardship to get loans.
Due to these reasons Bangladesh Bank has not made any change in loan interest. More importantly, as seen earlier in the case of Bangladesh, contractionary monetary policy does not play a very sensitive role in controlling inflation.
It is assumed that contractionary monetary policy causes people to save more and demand for goods decreases.
When demand decreases, traders lower prices. But in the case of Bangladesh, it has been seen that while one class is saving, the other class is destroying the savings.
In the case of Bangladesh, we are seeing a decrease in savings. Inflation has never decreased like this before.
Rather, when people have to spend most of their income on daily necessities, even if the price increases, it is not possible to reduce the cost of their basic products.
Due to these reasons contractionary monetary policy does not work to control inflation in Bangladesh.
The stronger the government-business nexus, the more opportunities the government creates for businesses. It will not be possible to meet the needs of the common people of the country.
In democracy, people’s opinion, their sufferings are taken into consideration. But the relationship between businessmen and the government in Bangladesh is unprecedented.
An unequal competition market has been created by giving special advantages to some without leaving an atmosphere of competition in anything.
Some traders are making profit there. And small traders are forced to leave the business. Democracy has been taken over by mercantilism.
That is, some traders like Bashundhara Group, S Alam Group, Summit Group, etc. exert their dominance by taking loans, grabbing land, not spending in productive sectors. On the other hand, money launderers are laundering money and they are not being prosecuted.
When businessmen become more powerful and the government becomes hostage to them, the government fails to control inflation by giving them monopoly.
However, there are causes of the current economic crisis and why the government is failing to control inflation. There are so many aspects to the economic crisis that it is not possible to analyze them all together in this short article.
For example, the role of social security and rationing, the role of defaulted loans, the role of World Bank and IMF loans and foreign debt dependence, and the aspects of the agricultural sector have not been discussed in detail here. This stalemate in controlling inflation in Bangladesh was not created in a day.
Long-standing over-reliance on market systems, creating an uneven playing field, lack of regulation, import dependence in industry and food, deliberate import dependence of the energy sector – all are responsible for this impasse.
If someone says we didn’t know it would happen, then their ignorance cannot be excused. Everyone knows what to do or what to prepare in case of crisis. Today’s crisis is created because of the complete favoring of special groups despite knowing what is going on.
Transition from this situation is a big challenge for Bangladesh. However, in order for the common man to live a minimally humane life in this crisis: 1) national minimum wage should be levied; 2) a mechanism should be found to control the price of each food product without leaving it in the hands of unequal competition in the market; and 3) sufficient ration has to be given along with essential and life-saving medicines.
(The writer is a journalist.)
