Monday, May 25, 2015

The problem with a bumper harvest

 Capitalism is full of contradictions. Consider the current situation in poverty-ridden Bangladesh. With a population of more than 155 million in a low-lying, riverine area the size of the American state of Iowa, Bangladesh is one of the most densely populated and climate change-vulnerable countries in the world. Bangladesh has achieved self-sufficiency in rice production. Despite these advancements, more than 45 million people continue to live in poverty, Bangladesh still has an overall food deficit, and thousands of preventable deaths of mothers and young children occur each year. Due to climate change and rapid urbanization, Bangladesh is losing up to 1 percent of its arable land every year. Bangladesh remains food deficient with diets lacking in diversity, resulting in 41 percent of children being stunted. USAID has helped more than three million small-scale farmers increase the efficiency of their rice production by introducing a new fertilizer technology and higher yielding seeds.

The production of rice has surpassed all past records. But it has in a way brought miseries to millions of farmers and others involved in its processing and marketing. The prices of paddy have come down to such a low level that farmers are reluctant to dispose of their stock. The current price level of paddy, on an average, is equivalent to 60 to 70 per cent of the cost of production of the same at the growers' level. So, the farmers find no incentive to bring their produce to the major rural procurement centres. Thus, the reduced supply of paddy has resulted in the slowdown in activities in the procurement centres and rice milling facilities. Apparently, they have decided to wait for some more time with the hope of a turnaround in the price situation. But the hope of better price could prove to be elusive.

In the meanwhile, the small and marginal farmers who cannot afford to hold on to their stocks have already become victims of the falling prices of paddy. They have disposed of a large part of their small stocks to meet other necessities and repay the money they had borrowed to finance the cost of production of rice.

The import of a substantial volume of rice by the private sector traders at cheap prices from neighbouring India is largely blamed for the slump in paddy prices. The government food silos in India are usually required to sell off old food stocks after every three years. The silos dispose of mainly the poor quality stocks at cheaper rates. The inflow of a large quantity of rice procured at cheaper prices in recent months has left an impact on the overall rice price situation.

 The government has now imposed a 10% import tax on rice. M Asaduzzaman of the Bangladesh Institute of Development Studies, said “It is too late. The damage has already been done.”

Studies done by Unnayan Onneshan and other institutions indicate that the growing numbers of people living below the poverty line and a lack of income growth in the lowest 20 percent of the population have given rise to widespread hunger, destitution, and deterioration in the quality of life in rural areas. Furthermore, inflation, particularly food inflation is known to be associated with increase in income inequality. In the last decade, inflation in Bangladesh has been 6-8 percent with a stagnant nominal wage in the urban informal and rural markets.

Capitalism cannot even cope with abundance.

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