With Ramadan ongoing, and inflation still affecting most if not all Bangladeshis, especially with regard to making the price of Ramadan essentials out of reach, it is important to be cautious and wary of the temptation to resort to price controls as a quick fix.
While the intention behind such controls is usually noble -- to make essential goods more accessible to the masses is indeed something those in charge should always be looking to address -- the reality of such measures is often far from the desired outcome.
Price controls, whether in the form of ceilings or floors, disrupt the natural equilibrium of market forces. When a price ceiling is imposed below the market equilibrium, it creates a scenario where demand exceeds supply, resulting in shortages. After all, it is only natural for consumers, lured by artificially low prices, to increase their demand, which strains the already limited supply and thus, creating a cycle of scarcity and shortages.
Thus, while the appeal of price controls as a means to mitigate economic hardships is understandable, their long-term repercussions outweigh their short-term benefits.
A far more prudent and useful approach would be to address the root causes of high prices and for Bangladesh to have a long-term strategy in place that fosters competition, improves productivity, and reduces overall production costs. It is being pro-active in reacting to shocks in the market, together with weeding out nefarious parties that are oftentimes responsible for market failures and incessant inflation, that need to be embedded as far as policymaking is concerned.
Bangladesh’s need to address its inflation is a necessity, but resorting to measures that go against fundamental principles of our economic system is not the way.
