Real heroes of Bangladesh: Part 1

Disclosure: This article is not meant to show how great a person I am. I am a human being full of flaws and mistakes and this is my way to pay back some people who deserve praise. Please ignore the grammatical mistakes since I do not feel like rechecking.


Foreword

This is not going to be a really organized post. I just felt like writing something about deprived people and did not feel like collecting any data to back up the claims I am going to make. Most of the claims will be based on logic.

Before I go into the topic I want to talk a bit about myself. I am a member of the privileged class. I studied in an English Medium school and a private university because my parents could afford it (they did have difficulty and I am grateful for the education I got). But frankly speaking, if I had not received this education and had been born in a poorer family I might have ended up in the streets. It is required that people like me acknowledge that we are lucky and that we have a responsibility towards specific groups of people.

The farmers of Bangladesh

The people I want to talk about first (next parts will hopefully focus on other groups including remittance earners and workers with minimum wages) are the farmers of Bangladesh. Bangladesh is about 90% (this is just a guess) self sufficient in rice production. This is definitely a big achievement considering the land area and the total population of the country. Food is a necessity and the simple fact that we are almost self sufficient in food production has saved the country from huge macroeconomic shocks. One interesting thing about economics is somehow everything is linked. Just because of food self sufficiency I can think (If I had time I could possibly expand this list) of the following factors

1.Lower inflation: This can be proven very easily. Firstly inflation rates in Bangladesh are still single digit whereas in neighboring India and Pakistan it is much higher. Another method would to compare PPP prices of rice amongst these countries.

2.Fx reserves: We are not having to import too much rice and hence we are not losing Fx reserves. That foreign currency is being used to import raw materials, capital machinery and luxury goods.

3.Food security: The world is currently going through a tough phase. A country dependent on others for imports can easily face a situation where no one wants to export food. We have been able to avoid that problem largely.

How they are losing out (the common factors)

The problem with farmers is that when production suffers due to weather problems (or any other factor) they make losses as they cannot recover their investments. However, the same problem is again seen when they have bumper harvests. In such times also product prices fall below their costs. So either way they lose. Together with this consider the margin that is stolen by the middle men. All this is common knowledge and all of us know it. The farmers themselves know it but since they were not born in the privileged society they have to live with these problems.

What did we miss?

There are however some other factors that we did miss. Central banks usually keep target inflation rates of around 4-7%. However, inflation rates frequently cross these targets. In such periods there are people who cannot pass on the increased cost of living by increasing product prices. While I do not have backing data on this, I am quite sure that farmers lose out in inflationary scenarios. The only way they can survive is by consuming less. I read numerous news of farmers in India committing suicide because they could not bear any more losses. The funny this is that because of the monetary system that central banks run, money supply will continuously increase and inflation will continue to happen.

In this same line of thought let me talk a bit about “inflation tax”. Like most countries in the world Bangladesh has been running budget deficits. Some of the deficit was there because the government had to improve the infrastructure, provide security, healthcare and education etc. However deficits are also increased by corruption and inefficiencies. Deficits are increased by state owned institutions that run at losses (due to greedy people). Deficits are increased by government’s bailing out of the stock market and failed institutions. How do the governments finance these deficits? The easy answer (and a widely practiced method) is just simply money printing. The result is higher inflation which has the same impact as a tax because both reduce purchase power. For the greed of a few corrupt people the whole country has to suffer loss in purchasing power. And the worst victims are those whose income does not increase with inflation (real incomes decline) and farmers are amongst this category.

Conclusion

I have never worked as a farmer and thus cannot describe how hard it really is. However one of my colleague had tried working in the fields once. According to him it is three times more difficult than pulling a rickshaw. I probably did not do justice to the farmers of Bangladesh and may have missed out the most important points.

Right now people give more value to things like BMW’s and Mazda’s compared to food, but that is going to change sometime or the other. We have already seen food crisis in 2008 and once again in 2011. In fact the protests that have shaken Middle East are somewhat related to food prices as well. There are no guarantees that international weather conditions would improve anytime soon and we might see a situation where food could easily become the most expensive item in the world. If all that is true maybe we should try to ensure that our farmers live a better life and are not deprived because of our actions and misdeeds.

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