Hasnat Abdul Hye
President Reagan was a great admirer and believer of the market place. Not any market in particular but market in general. He had profound trust in the operation of the market which using its ‘invisible hand,’ solved all problems of demand and supply. He further believed that if emphasis was given on the supply side, economic growth would be ensured because supply side i.e. investment and production, was the engine of growth. As a free marketeer he was a staunch believer of the ‘magic of the market place’ and abhorred any interference with its working.
The Commerce Minister of Bangladesh appears to belong to the same school as President Reagan. The other day he told a delegation of businessmen and industrialists that the government would not meddle with the market in any way. It would not buy and sell, competing with the private sector. There will be no monitoring of the market also. To drive the point home further, he declared that the Trading Corporation of Bangladesh (TCB) would not be reactivated to do business. It is not known if the honourable minister consulted experts or his colleagues in the cabinet before the declaration was made. On the face of it, the disclaimer appears abrupt and knee-jerk kind of reaction. The commerce minister could not have forgotten the skittish manner in which market behaved during the last 4-party alliance government and the caretaker government that followed. Prices of essential items spiraled upward uncontrollably. The 4-party alliance government blamed syndicates for the anti-social behaviour of the market. But even after identifying the cause the government could do very little to control prices. To counter the profit-seeking business under the protection of the syndicate, the government started open market operation for rice and wheat. For other items it used TCB to import and sell at fair prices in the market. The BDR was also pressed into service through their fair price shops. Still prices of essential items remained high. The caretaker government continued with same policy of market intervention along with introduction of market monitoring. These steps showed some improvement though the cat and mouse game continued. It is doubtful whether in the absence of fair price shops, open market operations, TCB’s role in the market and the monitoring of the price trend, prices of essential items could be contained to the extent that it was done. Based on results it cannot be said that the intervention by the government in the market through various mechanisms was a failure. True, the market could not be fully controlled, but neither was it allowed to have runaway price hikes. The ‘visible hand’ of the government regulated the invisible hand of the market with some success.
In the aftermath of the worldwide financial melt-down, government in developed countries have tightened the regulatory mechanism and have bought shares of financial institutions that were on the verge of collapse. Less and not more regulation has been held responsible for the financial catastrophe now incarnating in the form of recession in country after country in the West. No one is questioning the role of the government in bailing out and rescuing the financial and other institutions in those countries. Rather there is demand for more intervention.
Based on our own experience of the market and seeing the havoc created by market in the rich countries, one has to be mindful about the proper combination of roles of the public and private sector. There is nothing sacrosanct about any sector and both have their strengths and weakness. Prudent economic management requires allowing both to contribute positively. Obviously, in a market economy, which now predominates all over the world including China, the private sector will play the major role. But the public sector is also needed to supplement and complement the private sector. This becomes more urgent in times of ‘market failure’. Since market failure has become common and almost chronic in respect of essential commodities in countries like Bangladesh, intervention by government is essential to compensate for the failure. Monitoring is part of this intervention and this has to be on a regular basis.
By disavowing both monitoring and market intervention through TCB the Commerce Minister has challenged the conventional wisdom and the practice in vogue both in countries like Bangladesh and developed countries. The question is, did he consider the implications of his policy statement before making it? According to news report, the Prime Minister has asked TCB to be reactivated to meet any emergency. This seems to be a more sane and prudent policy. Does it mean that there is little co-ordination among various levels of the government? Perhaps there is. It is too early for a new government having so many first timers to demonstrate maturity. As long as the mistakes are recognised in time, the public will not be too critical of such policy blunder. Market should be seen as a place of imperfect competition. There is no magic in it just as Wizard of Oz did not have real power.
Courtesy: nation.ittefaq.com
