In the past few weeks, "Price Hike" has become a national issue. Soaring commodity prices are taking a toll on Bangladesh's mass people. The Trading Corporation of Bangladesh (TCB) truck selling points (temporary subsidised selling points) have become the face of the ongoing plight of the common people. This price hike, resulting from the rising inflation rate, is now a major concern for Bangladesh. According to the Bangladesh Bureau of Statistics (BBS), the inflation rate is currently around 6 per cent, while the South Asian Network on Economic Modeling (SANEM) claims that the rate is much higher, about 12 per cent. In this context, questions come to mind: is Bangladesh exclusively facing the price hike and high inflation? Or, is Bangladesh only a tiny portion of the bigger picture considering the global suffering of the mass people from the same problem?
BANGLADESH: RECENT PRICE HIKE AND REDUCING PURCHASING POWER: Within the last six months, almost all commodity prices have skyrocketed in Bangladesh, putting new economic pressure on the middle-and lower-income classes. And, the pressure is being translated into pictures of overcrowded TCB truck selling points. Though the price hike has become acute now, the root of the problem can be traced back in 2019 when Soybean prices started rising drastically.
In 2019, the price of One-liter Soybean was around Tk 105, which has now increased to Tk 180, within only two years. At the same time, the cost of commonly used energy- LPG was Tk 850 which has now reached around around Tk 1390 taka. Following the trend of these items, the prices of other commodity products have also increased drastically.
Moreover, though Bangladesh maintained economic growth during the pandemic, 22 per cent of the people have become new poor while the number was already at 20 per cent. The unemployment rate increased by 5.3 per cent, the highest in the last 10 years. These factors, coupled with a drop in income and a decrease in purchasing power, increased the common people's plight as they are now unable to withstand the soaring price. But apart from these factors, the price problem also has a global implication that needs to be addressed to get the perfect picture.
THE GLOBALITY OF INFLATION AND PRICE HIKE: Since the 1990s, the world has moved closer, thanks to the advancement of modern technology and the triumphant march of liberalism under US hegemony. After 30 years, the local economies have become an integral part of a global economy sustained by this interconnectedness, creating 'Globality', a term coined by English School scholars that refers to the world as one single space. Apart from tying the communities and economies together, interconnectedness has also spread vulnerabilities among the spectrum. Also, it has set the stage for the Chaos theory to take place on a global scale. Now, a small and unregulated change can invoke a ripple effect and impacts the whole world directly or indirectly. The financial crisis of 2008 and its impact across the globe can be examples of such claims.
However, interconnectedness plays a crucial role in the constant pursuit of food security. There is hardly any country in the world that could ensure 100 per cent self-sufficiency for its citizen. The highest was by China in 2017, when it secured 95 per cent self-sufficiency. So, states rely on the global commodity market to import or export their demand and surplus. A slight 'change' in the market creates a ripple effect on its customers worldwide. And the change could be anything such as 'increase in input cost' or 'disruption' in the global supply chain.
The beginning of the current inflation can be traced back to the US-China Trade war in 2018. The US is the largest exporter of Soybean oil, and China is the largest importer. The trade war reduced the Chinese import of Soybean by at least 35-40 per cent from the USA. Since then, the price of Soybean gradually increased in the global market due to disruption and delay. This trade war has also impacted the prices of other products. Later, the coming of pandemic and disruption in the supply chain further bolstered the crisis across the world.
Again, the recovery programme and pandemic governance also took a toll on the governments by increasing government expenditure and decreasing tax returns resulting from reduced productivity and unemployment under lockdowns. Consequently, governments around the world are falling into a debt crisis. The budget gap is limiting the state's role in ensuring economic and social security.
Even for the European Union, the impact of the pandemic resulted in decreasing growth, decreased socio-economic resilience, and increased economic vulnerabilities. In the Eurozone, the saving rates have also decreased from 20 per cent in 2020 to 14.5 per cent in 2021- a record low in near memory. During the pandemic, the inflation and price also reached an all-time high since the financial crisis of 2008 with a 4.1 per cent inflation rate. The commodity price also increased in the European economy in the last two years. Recently, the European central bank has also expressed concern over lingering inflation.
The prices of energy and raw materials have also soared dramatically in the global market. The price of iron increased 243 per cent since 2021, while the price of steel and lithium increased by 250 per cent and 98 per cent. In 2021, the price of almost all food increased rapidly.
Moreover, the latest Ukraine crisis has further impacted the global market due to disruption of the supply chain and destabilisation of production. The price of crude oil has already reached US$110 per barrel. The prices of other commodities, including wheat and sunflower, will also increase as the region provides 30 per cent and 90 per cent of the global demand.
As a result of trade war, pandemic, and the latest Russian invasion, inflation has become a global problem. The situation is not only worsening for the EU or Bangladesh. Other parts of the world, including Turkey, Argentina, Brazil, China, and the USA, are also suffering. The differences between the cases are only in relative severity.
WAY FORWARD: For the problem of inflation and price hike in Bangladesh, the 'globality' of the same is the prime reason. But, not the only one. Authorities cannot shy away from addressing the domestic factors behind the problem. Lack of market regulation, weak institutions, corporatisation of economy, political economy of cartel businesses, and absence of inclusiveness in economic growth are also fuelling inflation and price-hike.
To address the problem, while looking for alternative import destinations and reducing import tax, the government must take a vigilant role to address these domestic factors to control the soaring price in the market. Inclusive development and pro-poor economic policies should take precedent.
However, inflation and price hike as a global problem also requires time. And it will only be solved through cooperation between the governments, businessmen and mass people. As avoiding war is a precondition for a stable supply chain, diplomacy should take precedence rather than brute force. And last but not least, hegemonic rivalries should acknowledge the impact of their actions on the everyday lives of the world's ordinary citizens.
Doreen Chowdhury is a Doctoral Researcher at University of Groningen.