CfSC warns on market-based economy

Lilongwe-based Centre for Social Concern (CFSC) has cautioned against leaving the economy to market forces, calling on government to intervene in the market in some critical circumstances.

The faith-based centre has triggered the warning shot in its May 2013 Basic Needs Basket (BNB) dubbed ‘The purpose of the market is to serve people.’

“CfSC believes that the government ought to have a hand in the markets. After all, left to their own devices, markets serve no one but markets! On their own, markets are not ideal mechanisms for resource allocation,” says grouping.

The organisation’s statement comes on the back of a 2013/14 budget speech by Finance Minister  Ken Lipenga who reiterated government’s commitment to upholding a market based economy.

According to the minister, the key objective of the 2013/14 budget is to restore macro-economic balance and a market-based economy that will consolidate ‘the bold’ economic reforms that the government embarked on in 2012.

But, according to the CFSC analysis, on their own markets are not ideal mechanisms for resource allocation.

The institution cites an example of the global market system, saying the current recession that has firmly gripped North America and Europe is a direct result of market failure.

Market failure is a notion within economic theory in which the allocation of goods and services by a free market is not efficient.

The existence of market failures has often been used as a justification for the need to have government intervention in a particular market.

Since rising to power in April this year, the Joyce Banda administration has left some key markets such as the exchange rate market, which has been floated, to be ruled by forces of demand and supply of foreign currencies.

Another recent economic reform by the new administration is the automatic pricing mechanism (APM) in the fuel price build-up and electricity to reflect full cost recovery by fuel importers and investors.

CfSC says it is in the interest of society for government to intervene in the market which it says can be done by regulation, market creation and influencing supply for goods, among other factors.

Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa, in a recent interview, also cautioned government not to put “too much faith” in the market, arguing past experience shows that markets do fail.

“Government should not put too much faith in the market because experience has shown that markets do fail and the effects are always disastrous to any economy,” said Kubalasa.