The present perception of the people of Bangladesh is that the prices of essentials are going through the roofs. Interviews of consumers by private TV channels tend to bear this out. Food (especially rice) price is the point to ponder as it has historic relationship with poverty, political stability, and overall economic progress -- a topic we shall take up very shortly. Before that, a comparative picture is worth mentioning. In 2000, a wage labourer could buy 6-7 kg of rice with his daily income (say Tk.60/day). Now, less than half of that can be bought, even though the income has risen over time.

This implies that the real income of the poor -- spending 60 percent of the total income on food items -- almost halved, forcing them either to reduce per capita consumption of energy or using up whatever meagre amount was available for non-food purposes. In defending the development, the comparison of prices prevailing in some other countries should be done cautiously -- as per capita incomes vary sharply -- and it is better to estimate the share of the budget in item-wise expenses in comparable countries.

However, to add to people's miseries, some mills were closed down, creating unemployment. Informal markets were demolished to deprive the poor business community, and a number of poor-led activities faced debacles. On the other hand, political instability and uncertainties loom large on the horizon to adversely affect investments and employment opportunities. It is, perhaps, not true that the government has been oblivious of the price hike. Actually, it is concerned, but quotes the rise of prices in the international market.

The government has taken a number of steps to contain the price spiral, but the result is yet to be felt by the common people. One of the factors working against the positive steps could be a sense of "panic" prevailing among importers, businessmen, and citizens. Top government brasses and business bodies have already hinted at that. The fact remains that the government must create a congenial environment where freedom of transaction exists, so that supply is augmented in the market.

In Bangladesh, as elsewhere, politics revolves round the prices of staple foods. In this context, I intend to draw upon a research paper by C. Peter Timmer, a visiting Professor of the Stanford University, who spoke on the vital issue of "stabilising food prices and its implications." He presented it in a recent policy forum organised by the International Food Policy Research Institute (IFPRI) and the Asian Development Bank (ADB). The professor points out: "The close historical connection seen in much of east and southeast Asia between improvement in food security and reduction in poverty has been a result of government efforts to link market-led economic growth to interventions that improve food security at both household and national level…. Food security at both levels enhances the prospects for rapid economic growth, poverty reduction, and broad-based participation by citizens in higher living standards.

"Raising poor households above the poverty line does not guarantee their food security if food supplies disappear from markets or prices rise beyond their means. All government leaders recognise the impact of rice prices on the poor, and most countries stabilised their rice economy by keeping domestic rice prices more stable than border prices. Economic growth, poverty reduction and stability are linked to each other through a set of 'virtuous circles.' Greater stability in food prices means a reduction in political instability."

Meantime, projections on world prices tell us that world commodity prices may go up by 20-40 percent within a couple of years. Especially, the already thin rice market might look thinner in the wake of demands from China and Indonesia, who are faced with lower output. Thus, Bangladesh needs to keep an eye on these developments to devise policies. The devastating flood has damaged rice fields (amon and aus), which is an ominous sign. But, hopefully, the government's efforts at supplying seeds, fertilizers, and credit in due time and appropriate doses will heal the wounds to a large extent. A bumper crop, in tandem with associated help, might keep us cool for a while. In this process, the government has to address two vital fronts: helping augment agricultural post-flood rehabilitation and opening up income earning opportunities (such as road maintenance, food for work) to increase the food entitlements of the poor.

Prof. Timmer argues -- and I paraphrase -- that as a commodity rice is different and the difference has powerfully influenced economics and politics throughout much of Asia. The differences are seen in three ways: First, rice is the dominant food staple throughout the region, often accounting for more than half of normal energy intake. Daily access to rice is essential for survival, especially for the poor. Second, rice is predominantly grown by small holders who have been adept at adopting new technologies when market signals were favourable. In many countries, rice farmers are the single largest identifiable voting group, and catering to their interests has been important even in non-democratic societies.

Third, international rice markets have historically been thin and unstable, causing all Asian countries to buffer their farmers and consumers from fluctuating world markets and, thus, making the fluctuations worse in an even thinner market. These characteristics of rice based food systems forge a strong link between politics and economics, a link that policy makers, elected or not, see as a public mandate to deliver food security in the form of stable access to rice. Without understanding this link, it is difficult to understand Asia's economic progress.

Bangladesh needs to develop a more pro-poor and pro-agricultural strategy to grapple with its food problems. Recent years have revealed the weaknesses in the agricultural and rural development strategies adopted. Some of them are worth mentioning: budgetary allocation to agricultural science and technology has been reduced, and within the food sector, non-rice commodities witnessed less of technological innovations; subsidies to irrigation, fertilizer, and other inputs were drastically reduced; rainfed areas are still lingering due to the lack of appropriate technologies. By and large, greater investment in rural human capital, to improve labour productivity and mobility; more diversified and higher valued rural economies that provide the commodities needed by modern supply chains and domestic super-markets, and more efficient rural financial markets etc. should constitute a package to deal with the problem of prices.

Abdul Bayes is a Professor of Economics at Jahangirnagar University.