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

Abstract

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 five million people during the 2007-08 food crisis with the estimated food insecure population of sixty-five 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.