Lecture- 19

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Lecture- 19 20 Globalization Free Market
Economy in Bangladesh

• Objectives
• To Define Globalization Open market Economy
• To Discuss Merits Demerits of Open Market
  Economy

• Presented by Abul Kalam AzadSenior Lecturer,
  GEDNorthern University BangladeshE-mail
  kalamadd_at_gmail.com

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Introduction

• No matter who coined it first, globalization
  as a concept, as a slogan, as a term is used more
  frequently than any other terms. After a hesitant
  start in the mid-1980s, Bangladesh moved
  decisively to embrace the wave of globalization
  in the 1990s. At the dawn of the 21st century,
  globalization is being designated as a hot topic.
  Some tend to see globalization a non-stopped
  train crushing everything in its path and great
  challenge for developing countries like
  Bangladesh, others see benefit in getting on
  board the train towards economic growth and
  modernization. Since our concern is the economic
  aspect of globalization, we can equalize this
  concept with open or free market economy.

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• Globalization means different things to
  different people. Daniel T. Griswold defines
  globalization as
• "the growing liberalization of international
  trade and investment, and the resulting increase
  in the integration of national economies." The
  Blessings and Challenges of Globalization, 2006,
  Internet
• Through this process, the path of free market
  economy has been clear, no doubt. That is, both
  concepts involve the following aspects
• Individual ownership and management
• Open competition and survival of the fittest
• Price determination through interaction between
  demand and supply
• Free flow of capital and goods with limited state
  regulation.
• We can characterize them with some following
  elements as follows

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Policy Environment
Social Conditions and Organizations
Environmental Conditions
Economic Development
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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 investors were granted.

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Merits of open market economy

• 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.
• Export orientation in external trade The
  liberalization policy under Open 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.

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• 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.
• 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.
• Providing employment We have human resources
  which are considered by foreign investors a
  positive side for their investment. So, foreign
  direct investment will assist us to meet the
  problem of unemployment.

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• Helping the consumers The free market economy
  ensures the freedom of consumers. It provides
  consumers with free choice to buy either local or
  foreign goods. So, consumers can buy the foreign
  goods in cheap rates and become benefited.
• Technological advancement To survive in
  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 country.
• Increasing foreign exchange After we have
  taken the policy of free market economy, there is
  a positive trend in our foreign exchange reserve
  and trade gap.

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Demerits of Free Market Economy

• Destruction of local industries In a
  competitive free market economy, the weak local
  industries may be destroyed because foreign
  multi-national companies are so strong that our
  domestic industries are not capable to compete
  with them.
• 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.
• 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.

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• Economic instability It is evident that there
  is no surety of economic stability in free market
  economy.
• Economic Insecurity Under free market economy,
  Investors are more insecure.
• Imprisoning the economy Though today the
  foreign investment is felt important for our
  economic development, with the course of time
  Bangladesh will be the prisoner of foreign
  investment. It will result into giving the
  'control of our economy to the foreign investors
  and multi-national companies.
• Utilizing free-market economy Inspite of some
  negative effects, we can acquire the fruits of
  free market if we do the following

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Conclusion

• Government regulation and patronage should be
  given in a limited way.
• Measures should be taken to protect the local
  industries.
• The local entrepreneurs should be encouraged to
  set up export oriented industries.
• Over regulation in the way of investment should
  be minimized. Hence government should reduce
  tariffs.

• Globalization and Free market economy has both
  positive and negative impacts on our economy. We
  should be careful of materializing the concept
  free market economy so that our local
  industries are not hampered.