There are problems with the price of sugar apparently, so here is a modest attempt to solve those problems. Arrest anyone who tries the following: “Bangladesh Sugar Refiners Association (BSRA) moved the proposal recently by fixing themselves the maximum retail price.”
True that won't solve everything, but it'll go a long way to helping deal with most of the problems.
You may think I jest but this is not a joke. That the BSRA is detailing what the price should be means that the body is acting as a cartel. That's a group of companies that work together in order to create market power for themselves, as if they were in fact the one company that is a monopoly.
So, jail them.
For there are things we know about cartels and monopolies. One of them being that they never, ever, work to the benefit of the consumer -- instead they're for the benefit of the owners. And if we are to run a just and equitable economy then we both should and must run it for the benefit of the consumers and leave the capitalists to fend for themselves.
Yes, yes, I describe myself as a capitalist free marketeer because that's the system that produces the best results for those consumers. But it's the free market part that is important -- it's the inability of anyone to control a market which produces that benefit. So, if anyone tries to build market power at the cost of the consumers then we jail them. Ok, maybe we're a bit more polite than that, we warn them, then fine them, then if they persist a third time we welcome them into the hospitality of the state.
And again, no, this is not a joke. Allowing monopolies or cartels which creates that market power is one of those things which, in a free market system, is to be forbidden. Prevented with all the power of the state.
Ok, so once we've done this then what problems will we have solved? For a start, competition between the sugar refiners will lead to increased productivity at the sugar refineries. Simply because that's what happens. If to stay in business you've got to have lower costs -- be more efficient -- than your competitors then that's what you're going to do: Concentrate on becoming more productive.
But, of course, so are all of your competitors. Which means that, over time, the costs of refining sugar come down. The gap between that global raw sugar price and the Bangladeshi retail price comes down, benefiting consumers in the process. And, you know, who cares about what happens to the capitalists?
This being a really important point about those like me who support the capitalist economic system. It's not because it benefits the capitalists, far from it. Entirely the opposite in fact, it's those markets, the absence of cartels and monopolies, which puts the pressure on the capitalists.
Other benefits are that, if we leave things to the market -- the government's job is just to make sure that there continues to be that market competition -- then we can also do away with all of the government interference in the sugar market. If someone thinks that growing sugarcane in Bangladesh is a good idea then let them try. Or sugar beet. Or import either of those from elsewhere. Whatever seems like a good idea at the time and the best idea will win out.
Exactly the result we desire, naturally.
Another way to put this is to get both the government and the cartel out of the sugar market -- let chaos reign and see consumers benefit as a result.
We should add two little further things though. In this newspaper's report on the subject we're told: “The government cut the prices of sugar to contain its soaring prices in a situation, market watchers say, created through short supply of the item to shops. “ No, that's not going to work. Because, if we cut the price then demand will increase and so the shortages will be even greater. Which is the reason we want to get the government out of the market as well as the cartels.
And this: “On average, 150,000 tonnes of sugar is required per month. The demand for sugar is 300,000 tonnes during Ramadan, according to official data.” Therefore the price of sugar is going to rise during Ramadan. That's just one of those things we're all going to have to put up with -- demand rises, prices do as well. This not being some plot by anyone, let alone the capitalists, that's just the way the universe works.
The nutshell here is that markets do in fact work and will indeed solve most, but not all, of our economic supply problems. So, why not just let those markets work? Which means not just clearing government out of the way but also being very, very, harsh on any who try to set up cartels.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
