Tuesday, August 21, 2007

Caretaker, for Whom?

ARIANA AHMED

There was a reason that the Constitution put a limit on the term and the authority of a caretaker government. Seven months into this government's caretaking, the reason is becoming apparent. While it showed a strong political stance, the military-technocracy running the country is all at sea with regard to economic and social policies.

From fright to flight
With opaque and selective criteria, the “Anti-Corruption” Commission has gone after some of the leading businessmen in the country. Whether they have defaulted on loans or not, these businessmen have built successful self-sustaining enterprises. If they have caused financial crimes, they should be prosecuted. However, arresting arbitrarily without bail, and even without specific charges (!) disrupt the daily functioning of some of the largest and most successful business ventures of the country. If such enterprises begin to fail, which may be what some of these new leaders want, foreign companies will be the only ones left, and in the present circumstances only they have security against the ACC’s arbitrary actions.

What is the main lesson for the average businessmen? If you are wealthy beyond a certain point, the only safe haven for your wealth is outside the country. Mark this prediction: as soon as emergency restrictions are lifted, there will be a capital flight that would further dampen investment and reduce economic growth.

The spiralling blame game
Politicians have given us nothing good in 36 years: this is the favourite refrain of our top brass. Yet, this authoritarian government is overseeing a price spiral that no democratic government had run. The government’s response? Blame others, as usual.

Bangladesh’s food market is enormous. It feeds 150 million people every day. In such a market, even if there are oligopolies, basic supply and demand conditions apply. The caretaker government (CTG) blames “the cartels” for the spiralling food prices. So it decided to create 200 “fair-price” markets under the armed supervision of the Bangladesh Rifles. This is basically a public-image stunt. In a market of 150 million people, 200 shops will not even make a dent. Furthermore, these special markets are shielded: BDR oversight basically means coerced pricing, and as we know from Soviet-era ideas, “fair prices” forced by the state go hand in hand with long queues. Perhaps our think-tanks should look into who the buyers are. State-run ration shops around the Third World have primarily benefited the civil service and the military while the poor have continued to languish.

But why is there a price spiral? Food is a very inelastic commodity for the fact that people need food. The demand for food has not changed. So it must be the distribution network; something has suddenly spooked it. This network consists of the middlemen, who import, export, transport, and store food. They need money to invest and most times make a profit, eventually. But showing money without receipts (really, how many of our middlemen run formal businesses with accountants and tax lawyers), and god forbid, showing profits may draw the ire of the dreaded “joint forces,” as the government has instructed them to go after middlemen. So a rational middleman, obviously, would decide to stay put, and dip into his savings for some time until the situation settles down. This is the same reason that the number of LCs (Letters of Credit—an indication of trade activity) has dramatically decreased in the last few months.

Blame the hoarders, so say the CTG. One wonders if they have read economics textbooks. According to this government, anyone who stores goods in one timeframe to sell at another is a criminal by default, especially if the timeframe of storage is not “reasonable.” However, these “hoarders” perform a very important function: temporal price arbitrage. They smooth out the price curve over time by storing goods at a time of abundance and selling them at a time of scarcity, in the hope of making a profit. The underlying risk they take (which justifies the potential profit) is that prices may not substantially increase during times of scarcity, or that their storage might encounter difficulties. But this function makes the food supply consistent, resulting in more-or-less stable prices.

The “hoarders” are staying put, and our distribution network is down, and our people are going hungry. It is the arbitrary application of thoughtless policies, not the businessmen, who are to blame.

Callous in calamity
Floods have devastated Bangladesh. Millions are homeless, seeking safe drinking water, food, and medicine. To face this calamity, the CTG first said (via Lt. Col. Firoz Rahim): “Army is already on the ground. We are ready to face any situation arising out of flood” (New Age, July 28, 2007). This comment came a day after the Flood Forecasting and Warning Centre noted that floods were likely to worsen in the coming days (New Age, July 27, 2007). But the government kept on posturing that it is fully prepared. It kept up its anti-politician approach, ensuring that political parties don’t participate or get credit for providing flood relief. It forgot that because of their grassroots organization and their interest is getting votes, parties like AL and BNP have historically been essential to extending relief countrywide.

On August 5, Mainul Hosein (Information Adviser) began to correct CTG’s misguided position: “any individual or group can conduct relief operations as no political banner is essential to perform social duties” (BSS, August 5). The next day, the Chief Adviser made an urgent appeal for everyone to step in. By mid-August, the magnitude of the disaster stood at: 10 million people in 40 out of the 64 districts affected, with a death toll over 500.

The CTG’s inability to grasp the gravity of the flood situation (even after its own monitoring center predicted calamity) is not surprising: it is an unaccountable and non-representative government, regardless of what it says in its public rhetoric.

Crime, crime everywhere
Take another example: The painful closure of jute mills. The Jute Adviser said on June 18 that 6,000 employees of four jute mills would be laid off and the mills shut down. The next day, National Relief Committee (a citizen’s organization) opened a gruel kitchen for the sacked workers of People’s Jute Mill. By evening, law enforcers came by and asked the organizers to dismantle the kitchen. The elite Rapid Action Battalion was deployed. The police reportedly visited the house of a local correspondent of a national daily in Khulna who was helping the organizers. According to family members, the police threatened them that the newsman would be put in “crossfire.”

Now, privatizing a poorly functioning mill is one matter. But preventing people from helping each other is something else. From where does this non-representative government get the right to prevent concerned citizens from providing aid to laid-off jute mill workers? With meagre wages, these workers struggle to even buy food. The government’s arbitrary intervention in shutting down the gruel kitchen showed complete disregard for basic human norms that preserve very fabric of our society.

So, politics is a crime, making money is a crime, being a middleman is a crime, selling food for profit is a crime, providing aid to flood victims is a crime, and now even feeding hungry people is a crime. This posture fits not a “caretaker” government but a paranoid unelected government (PUG?) whose favourite pastime is to blame others for everything that goes wrong. #

This article was first published in The Progressive Bangladesh, Friday, 17 August 2007
http://www.progressivebangladesh.org/index.php?option=com_content&task=view&id=75&Itemid=1

Ariana has a background in economics and lives in Texas in the United States. She currently consults with companies on improving ways to manage risk. Prior to this role, she worked for two of the most successful investment banks and fund managers on Wall Street in New York