Responsibilities of businesses in a free market
THE free market is the economic equivalent of political democracy in many respects. Both require a high degree of commitment and ethical standard of their players to succeed. It is said that the maintenance of a democratic order requires the inculcation in leadership elements of a taboo against practices which may endanger the democratic order itself. Similarly, businesses require to maintain a high level of ethical standard as a matter of professional commitment to retain and reinforce public confidence in the free market and to prevent possible public disillusionment about it.
When the Trading Corporation of Bangladesh (TCB) is now found selling sugar and pulse from parked trucks at various spots of Dhaka and other major cities at relatively lower prices, it appears that free market is yet to take a firm hold in this country. The TCB sells sugar at Tk. 40 and pulse at the same rate per kg against the open market price of Tk. 54 and Tk. 52 per kg respectively. But that's market intervention by the government for driving down exorbitant market prices of these commodities. When members of the public complain that the TCB measures are not sufficient for whipping the market prices of sugar and pulse down, they actually express a kind of no confidence in the free market. Are our business people, who have a big stake in the free market, aware of it? As it appears, the free market in this country is not yet operational on the strength of the market forces. It has rather become functional as the effect of a global trend.
The business people and the donors have always argued with the government that it is not the business of the government to be involved in business. Now the government is again drawn in business. Does it not represent the failure of business in business? The people in trade and commerce should now go for a soul searching and ask themselves: if the TCB can sell sugar and pulse at lower prices, why not we? The free market draws its strength from a satisfactorily perfect market condition, characterised essentially by sympathy of businessmen for consumers and clients. Unreasonable profiteering and market manipulation are antithetical to the concept of a free market as these vices fast crode public confidence in its efficacy to give benefits to citizens, for whom all things within a state including the state itself are meant.
In the first half 2002 when the sugar prices were very low in the world market, newspapers were awash with news of claims by some of our businessmen that imported sugar could be sold at almost half the local market price if the government withdrew the supplementary duty on imported sugar, meant, they said, for protecting an inefficient domestic industry. They argued that consumers were actually being penalised by the government policy as they had to pay for sugar a price higher than one justified by the international price. That was also the time when the government was under pressure to fold up the TCB. Now that TCB is selling local sugar, procured from the largely incapacitated Bangladesh Sugar & Food Industries Corporation (BSFIC), at a lower price. It is also selling imported pulse at a price lower than the open market price to give some relief to the consumers and drive down market prices of these two commodities. What could the government do now had the TCB been actually closed down for good rather than helplessly receiving the beating of an adverse public opinion?
The cumulative benefits of domestic sugar production have not been yet calculated by taking into account the entire value addition chain in this country. The lands used for sugarcane growing are relatively less fertile. Its wastes, after sugar production, can be used for heating boilers to generate electricity and as raw-materials for paper production. India does all these to keep up her domestic sugar production. In fact, one of our paper mills, perhaps the one at Pakshi, now closed, used the wastes as raw-materials. The uncertainty about its availability, due to scanty production of local sugar and closure of some sugar mills in face of adverse competition from imported sugar, resulted in the closure of that particular paper mill. This year's shock from the steep rises of international market sugar prices should give us a new lesson and induce us to calculate the cumulative benefits of domestic sugar production by taking into account the entire value addition chain. We should also learn that world prices are subject to fluctuation and that in calculating benefits of domestic production of any commodity it ought to be taken into account. A thorough field study, led by prominent agriculture scientists, should do the job.
It has been found that whenever the world prices of some commodities come down, the exporting countries of those commodities and the donor agencies come up to argue with the government for making the country a level playing field and demand withdrawal of supplementary duties, meant for encouraging some vulnerable or prospective domestic industries. But was the world ever a level playing field and, if not, when will it be so? In the western world, where jobless people get unemployment benefits including municipal accommodation at nominal rent and 60-year old senior citizens get pension and some services free of charge, is life itself not being subsidised for boosting individual's purchasing power? They often buy local products at higher prices demonstrating patriotism, and they do not worry about the future while doing so. The safety net assured by the state always prompts them to buy local products unless its quality is dismally low and the price difference in relation to imported equivalent is huge. Does not the safety net lend a blanket of indirect protection to and indirectly subsidise their local industries and constitute a non-trade barrier for countries exporting similar commodities? This particular issue is not yet known to have come up in arguments on level playing field in bilateral and multilateral negotiations. The developing countries, which face it and suffer from its effect, are yet to put forth this argument as their negotiating points are usually framed on consulting arguments available in the western literatures on varied subjects, now readily accessible through the courtesy of the Internet.
What have been said are not meant to imply that free market is not good. The free market unleashes the forces of production in an economy as it harnesses one's motif to earn profit, which is known to be the greatest productive force. We need to use this force optimally to enhance the strength of our economy and the quality of life of our people. Our trade promotion bodies -- the various chambers of commerce and industry -- should set a code of conduct requiring the business community to reduce their profit margin in the local market in the event of import prices of essential commodities being unusually high. As they generally earn profit while prices are normal in comparison with the purchasing power of our people, they should show some sympathy to the consumers by making the sacrifice in order to enable the free economy to gain public trust and thus take a firm hold in our country. A move like this will not require the government to go for market intervention, which, indeed, adversely reflects on the level of commitment of our business community to the free market philosophy. The business people should also have an institutional arrangement to strongly resist hoarding and all other forms of market manipulation to create a healthy atmosphere for the free market to operate reliably.