Free market economy of Bangladesh
Introduction: Free market economy has become the only economic system dominating the world after the collapse of socialism in Soviet Union and other East European countries. Today, the application of market mechanism is widespread all over the world. The free flow of capital and goods throughout the world has made the world like village. Like other developing countries, Bangladesh also have introduced the free market economic system.
Free market economy in Bangladesh: The economic system of Bangladesh after liberation was neither capitalist nor socialist. Recently dramatic changes were made in the economic system of the country. policies were made to liberalize the economy where 100% foreign direct investment and same treatment for both local and foreign investment were granted.
Merits of open market economy: The positive aspects of open market economy in Bangladesh may be revealed as follows:
(i) Historical experience: Historical, after liberation the semi-socialist economy was resulted into nationalization of industries. But gradually Bangladesh also realized the need of liberalizing the economy and entering market economic system.
(ii) Entering international market: In this age of economic co-operation we have to enter the wider space of international market and expand the economic co-operation with others. It may facilitate us to find out new markets, earn more foreign exchange and to expand our economic base.
(iii) Export orientation in external trade: The liberalization policy under free market economy may result into increase in export oriented industries. Presently, a positive trend is prevalent in our merchandise trade. According to some estimate, in 1995, the share of industrial goods in our external trade has been increased to 83%.
(iv) Making the investors fit to compete: Our investors are not capable of competing in international market. So, in spite of the possibility of some risks, the open competition within an open competitive market system may help our investors to develop their managerial skill and organizing power.
(v) proper use of domestic resources: We have a vast human resources as well as natural resources. But we have no ability to utilize these resources. So, foreign direct investment will contribute to utilize our resources.
(vi) Providing employment: We have human resources which are considered by foreign investors a positive side fro their investment. So foreign direct investment will assist us to meet the problem of unemployment.
(vii) Helping the consumers: The free market economy ensures the freedom of consumers. It provides consumers with free choice to buy either local of foreign goods. So consumers can buy the foreign goods cheap rates and become benefited.
(viii) Technological advancement: To survive in a perfect competitive market local industries must adopt right kind of technologies. Besides, foreign investors also will bring advanced technologies which will result into technological advancement of the economy.
Demerits: Bangladesh, being a poor country, may have to face the following demerits of open market economy.
(i) Destruction of local industries: In a competitive free market economy, the weak local industries may be destroyed because, the foreign multi-national compete are so strong that our domestic industries are not capable to compete with them.
(ii) Decrease in the production of consumer goods: As the production of stationary goods is more profitable than consumer goods, the producers will be more interested in producing the stationary goods which will result into the sufferings of consumers.
(iii) Inequality in income: In an open market economy income inequality may be broadened. Here the influential, the corrupt and the industrialists may become more wealthy and powerful.
(iv) Economic instability: It is evident that there is no surety of economic stability in free market economy. Although primarily it may help our economy to some extent, finally it will result into serious economic instability.
(v) Economic insecurity in economy: Under free market economy, investors are more insecure. It is incorporated with the sense of insecurity for individuals, firms and the nation as a whole.
(vi) Imprisoning the economy: Though today the foreign investment is felt important for our economic development. It will result into giving the control of our economy to the foreign investors and multi-national companies.
Utilizing free market economy: With some negative effects, free market economy may bring the effective economic growth. But to acquire the fruits of free market economy we have to do the following:
a. Government regulation and patronage should be given in a limited way.
b. Measures should be taken to protect the local industries.
c. The local entrepreneurs should be encouraged to set up export oriented industries.
d. Over regulation in the way of investment should be minimized . Hence government should reduce tariffs.
Conclusion: Free market economy has both positive and negative impacts on our economy. We should be careful of maturating the concept free market economy so that our local industries are not hampered.