Does Government Intervention Matter? Revisiting Recent Rice Price Increases in Bangladesh

Abstract

The specter of food crisis is haunting the world again in 2011. This comes after a short period of decline in food prices since they peaked in the summer of 2008. The addition of seven point fijive million people during the 2007-08 food crisis with the estimated food insecure population of sixty-fijive point three million in Bangladesh (FAO/WFP 2008) underlines the magnitude of food insecurity in the country. In this article I trace the volatility in Bangladesh's rice market since the 2007-8 food crisis in terms of the country's deregulation of agricultural sector and the gradual elimination of market regulatory mechanisms. I demonstrate that despite Bangladesh's relatively minor dependence on the international rice market and a steady domestic supply, the lack of strong government regulation and monitoring of the market resulted in irrational rice-price increases. I argue that the alleged connections between the domestic and the international rice markets are largely hypothetical, and therefore the domestic price increases must be analyzed in terms of internal management of the market. The methodology of this article involves critical review of literature and data collected from secondary sources. Referring to Stiglitz I conclude that the Bangladesh rice market is far from developed and thus warrants a strong regulatory regime.

Is Peasantry Dead? Neoliberal Reforms, the State and Agrarian Change in Bangladesh

“…It nationalized several key industries and established a central Planning Commission, with a mandate to formulate short‐, medium‐ and long‐term economic development plans. The Commission introduced the First Five Year Plan in July 1973 (Misra ), with a special emphasis on the rehabilitation of the war‐ravaged country and an increase in food grain production to ensure food security for a rapidly growing population. It followed import‐substitution policies to protect the domestic agriculture and industrial sectors.…”

“…By May 1992, the government had successfully abolished both statutory and rural rationing programmes, two of the largest PFDS channels in the country, to encourage private‐sector participation in food grain procurement and distribution (Chowdhury and Haggblade ). This scale‐down of the PFDS gave private traders enormous control over the grain market, and their excessive profit‐seeking behaviour often resulted in artificial grain price fluctuations, putting the livelihoods of both small peasants and urban consumers at risk (Misra ). However, the severe food crisis of 2007/08, which continued into the following years amid bumper rice production, forced the government to reconsider its stance on the PFDS and agricultural subsidies, against the wishes of the World Bank and other donor agencies.…”

A systematic review on price volatility in agriculture

“…The second most frequent factors within the marketing cluster were marketing imperfections and future trading, with 43 items each. These studies were related to government interventions (Misra, 2012), market infrastructure (Shively & Thapa, 2017) related to marketing imperfection while digital trading platforms (Banker et al., 2011), and speculative behavior (Bohl et al., 2018).…”