Londoni

From April to July 1974, Bangladesh was hit by heavy rainfall and a series of devastating floods along the Brahmaputra river causing devastation to crops. Price inflation, which started before the flooding, had already sky-rocketed rice prices, and the flooding had destroyed the only source of income for the rural non-landowners. Food hoarding became rampant amongst the wealthy and the rural and urban poor died from famine.

Matters were worsened by the new government's inability to fight the famine by importing from abroad, notably from US, who placed a food embargo at a critical time.

An estimated 1.5 million people died in one of the worst famine in world history.

Famine is a social crisis where death occurs due to starvation or starvation-related diseases.

At the official level, there were four reasons for the rise in the relative price of food during 1974: flood caused crop prices to rise, governement did not have enough foreign exchange reserve to import necessary goods, US food aid embargo, and world market shake-up.

Economics of war

The 1971 independence war had ravaged the Bangladesh economy. Since the whole country was engaged with war (with West Pakistan) there was a disruption in the economic activity. The devastation caused to the country, infrastructure and economy during the Muktijuddho two-and-half-years ago meant Bangladesh was not prepared to deal with the famine situation.

First currency of Bangladesh are Pakistani and Indian notes

After the end of muktijuddho on 16 December 1971, Bangladesh did not have its own printed currency notes (taka) when a new government was formed. The government allowed the use of inherited Pakistani currency notes, stamped with an official Bangladesh seal, as a temporary measure. This became the first 'taka' of Bangladesh.

After the surrender of Pakistani military in December 1971, Bangladesh remained under the control of the Indian occupation forces until March/April 1972 . During this period the Indian advisers played a major role in administering the country, including making decisions on economic and monetary affairs.

The government, for unkown reasons, also allowed the use of India's currency notes for transaction within Bangladesh even though the Pakistani currency notes (representing the taka) were already in circulation.

They had also set the exchange rate of the taka with the Indian rupee to be equal , i.e. one taka equalled one rupee. In addition, the government arranged the printing of the taka notes in India.

These controversial moves were to have far damaging effect on the economy in the following years when inflation - price of goods - would rise dramatically, and people would die from starvation, unable to buy the goods.

The United Nations classified Bangladesh as one of the "least developed" countries and, in 1973, as one of the "most seriously affected" by the oil shock. The World Food Program called it a "food priority country". And in 1974, US Secretary of State Henry Kissinger termed it an "international basket case". The civil war with West Pakistan had caused immense destruction of life and property. Bangladesh emerged bankrupt and totally dependent on external support for its immediate survival.

Flooding

From April to July 1974, Bangladesh was hit by heavy rainfall and prolonged and widespread flooding along the Brahmaputra river. This flooding occured during anus-crop harvesting and anam-crop planting periods and caused devastation to jute crops, a major source of employment and cash income for the rural population.

Source: Banglapedia - Flood

Three districts, Rangpur, Mymensingh and Sylhet were severely affected, and at least 40% of the country was under water.

Though floods are hardly new in Bangladesh, this was the first major flood post-independence and added to the climate of destablisation and destruction bought on by the Bhola Cyclone of 1970 and liberation war of 1971.

Floods lowered food crop production by about 15% and adversely affected planting for the next Aman. This created the fear of a large short fall in the next Aman crop. Added to this were exaggerated press reports about damage to the Aus crop. People started fearing that they'd have very little food in the upcoming months.

The newly established crop forecasting system was not yet realize enough to correctly estimate the crop damage by floods or possible short fall in the Aman crop that might be caused by the late planting. With a great deal of uncertainly among traders and public agencies regarding the evolving food supply, the time was rife for speculation.

Nurul Islam, economist

Price inflation

The signs of the famine were already there a month before the flooding. In March 1974 the price of crops more than doubled than the previous year, making it impossible for the wage-labouring households to buy them. Many labourers were unemployed after flooding of the aman crop reduced any employment opportunities and therefore they could not afford to buy the expensive crops. Widespread starvation was reported in the Rangpur district, one of the three worst affected areas.

The rise in the price of a good or service - in this case, the crops - is referred to as (price) inflation.

This price inflation combined with flooding deprived this social group (wage-labourers), and other groups to a lesser extent, of food.

Flooding not to blame for inflation in Bangladesh in 1974

Floods and droughts are part of Bangladesh's agriculture. Every year the country experiences flooding therefore agricultural shocks caused by destruction to crops are common for Bengalis. When they receive such shock, production of agricultural goods go down consequently prices rise, albeit temporarily. But subsequent good harvest reduce prices again.

Barring exceptional circumstances, it's very rare for all farm products prices to rise simultaneously to have a signifcant impact on the general price level.

Historical evidence shows major agricultural shocks are few and far between in Bangladesh. Therefore the relationship between shock and inflation is weak.

Akhtar Hossain, international economist

In light of this, it would be inappropriate to point the cause of inflation on the flooding alone".

Despite the heavy losses of food crops by floods and droughts, the per capita availability of food increased between 1972 and 1973 (non-famine years) and 1974 (a famine year) in the districts where famine was most severe. This suggests that the loss of food crops by floods was not large enough to lower the level of food availability to such a level that would have caused the sharp rise in the price of food. As indicated earlier, there was also mismatch between the time when floods occurred and the time when food prices started to rise.

Source: International Rice Research Institute

Prominent economist such as Amartya Sen argued that the 1974 Bangladesh famine was primarily 'a crisis of food distribution', rather than a crisis of food production. Though famine tend to be commonly associated with abnormal climatic conditions and natural disasters, Sen argued that they were generally associated with, if not caused by, changes of 'entitlement' to food of particular social groups and are a reflection of longer-term social changes.

The food availability approach offers very little in the way of explanation of the Bangladesh famine of 1974. The total output, as well as availability figures for Bangladesh as a whole, points precisely in the opposite direction, as do the inter-district figures of production as well as availability.

Whatever the Bangladesh famine of 1974 might have been, it wasn't a FAD (food availability decline, i.e. lack of food) famine.

Amartya Sen, in Poverty and Famines 1981

One of the underlying causes of inflation is the level of monetary demand in the economy - how much money is being spent. If the demand for a product, e.g. crop, is greater than the supply then prices will start to increase - a classic case of 'too much money chases too few goods'. This was the exact scenario in Bangladesh in 1974 where the flooding had devastated large amount of crops and excess money came in the hands of the people from neighbouring Indian customers. Therefore they had more money to buy less goods - i.e. demand was greater than supply.

'Black' money from neighbouring India causes inflation

The use of Indian currency in Bangladesh allowed Indian residents to take advantage of this unexpected monetary development in their favour. The long border between Bangladesh and India was practically open during the early months of independence. As Bangladesh itself was under the occupation of the Indian military, there were no practical difficulties in the outflow of goods from Bangladesh to India. A procession of Indian truckload bought goods from Bangladesh for India, leaving a huge quantity of India's currency notes in the hands of the people of Bangladesh. And since local and national newspapers were full of reports and rumours on the food situation, this large scale movement of trucks and barges within such short period of time went unnoticed.

It was widely reported that the Indian military itself engaged in the purchase of huge quantities of both consumer and capital goods from Bangladesh using India's currency notes and then transferred those goods to India.

The Indian military might have another advantage. During and in the aftermath of the war a large quantity of the Pakistani currency notes fell in the hands of the Indian military (after the Pakistani military and its collaborators surrendered to the Indian military). Instead of returning those currency notes to the government of Bangladesh, the Indian military might have used them as war booty and purchased goods from Bangladesh.

Akhtar Hossain, international economist

With increased money came the problem of hoarding, the storage of goods for future use.

Hoarding of rice - from feast to famine

The rich and middle class consumers of Bangladesh who now had more money feared that they were heading towards inflation and had no confidence in the ability of the government to stablise the economy. A deteriorating law and order situation, massive corruption further added to their fear. As a precautionary measure, these consumers bought more foodgrains than what they needed for present consumption. The poor working class - most of whom became unemployed due to flooding - also took part in this. But, since they had little or no money, they could only afford to buy a small portion of their future needs. They had to switch buying from non-food items to food items and sacrifice other daily necessities.

The hoarding of rice was not only carried out by consumers but also by ultra-rich opportunist who viewed this as a great business opportunity. A quick way of making more money. Many of these hoarders and speculators made their fortunes through various means (legal and illegal), namely government licenses, permits, rations, and extortions. People with political connections and/or access to resources of the state were also able to make fortunes.

Looking from both the demand and supply sides of the food market, it thus appears that the food crisis was essentially a self-fulfilling prophecy.

While the behaviour of all participants in the food market was rational from an individual's viewpoint, their joint action caused panic in the food market. The food price rose sharply when rising inflationary expectations raised the demand for food while the supply of food decreased as farmers and traders released less food in the market.

By the time floods engulfed the country, there was a consumer panic. After that it did not take much time for consumers and hoarders to empty the food market. This was the time when food prices reached such a high level that it was beyond the purchasing power of the rural poor or unemployed.

Akhtar Hossain, international economist

Migration to cities

Bangladesh government's limited foreign exchange reserve and US embargo on food aid increases famine tragedy

Post 1971 independence Bangladesh had a shortage of foreign exchange reserve and food stock.

Annual floods, together with periodic natural disasters, cause crop damage and acute food shortages. As a result, Bangladesh continues to depend on food imports. It has been the world’s second largest food aid recipient (after Egypt) on a long-term basis since 1972.

Foreign exchange reserves in the first quarter of 1974 were less than half of that in the first quarter of 1973. Reserves in the third quarter of 1974 were about 25% of what it was in the third quarter of 1973. Borrowings under the International Monetary Fund (IMF) compensatory financing facility were also meagre - no more than £24 million starting in the second quarter of 1974 with £12 million and £26 million in the succeeding quarters.

By September and October in 1974, monthly imports ranged between 29,000 and 70,000 tons compared to the monthly requirement of 250,000-300,000 tons. This was mainly due to Bangladesh's low credit rating which forced suppliers to cancel their short-term commercial credit.

There was a severe reduction in public stocks starting end 1973. Which fell by more than half between 1972-73 and early 1974 when it was barely 150,000 tons. A drastic reduction in public distribution, specially the modified rationing system and the relief distribution, starting January 1974 led to the collapse of confidence in the government’s ability to stabilise the price situation in the coming months. This triggered a sharp rise in price as early as March 1974.

Nurul Islam, economist

Rice traders were generally pessimistic about the ability of the government to import foodgrains to the extent necessary to fill in the food gap created by floods. There was no convincing economic explanation from the government why the balance of payments crisis developed in the first place.

Late, inadequate and sometime inappropriate government responses made the the 1974 famine mortality higher than it need have been.

Ben Crow, analyst

Ration to the rich

Another criticism labelled at the new Government was its inability to distribute the food to the very poor. The poor internal distribution system, combined with a perceived government's preference to feed the urban middle classes added to the country's woes.

The percentage of the total public distribution devoted to modified rationing and relief grants fell from 69% in 1972-73 to 42% in 1974-75.

Source: Scholars (of) Bangladesh

It was no doubt a failure of public policy not to concentrate on the urban and rural poor at the cost of the urban middle and upper income groups. At the same time, it should not be forgotten that in the urban areas, there were also desperately poor people who were receiving food rations.

If, let us say, 50000 to 60000 thousand tons were diverted to the poorest rural areas this would not have provided a great deal of help but given the dire circumstances even a small help would have mattered. I do not recall any proposal by the Ministry of Food to the Cabinet for such redistribution to the most distressed areas/people.

The Food Ministry was closely monitoring the price movements as well as the levels of distress and starvation of deaths in different areas. Historically, food distribution in the rural areas was always a second order of priority, after the urban needs were met.

The Food Ministry acted in the traditional mode, in spite of the exceptional circumstances then prevailing. For that matter, the whole Cabinet was acting in the same vein.

The threat of political and social instability that could be created by the disaffected urban population might have been perceived to be much greater than what could be caused by the poor in distant, deprived areas.

Rehman Sobhan, economist

World Food Crisis of 1974

Globally, the price of food and oil also rose sharply causing food prices in Bangladesh to increase and the recovery of the economy to slow down. The sky high market value of product such as rice meant Bangladesh was not even able to import from rice-producing nations such as Thailand, a neighbouring country with large export surplus, in order to bring down rising prices. Even if Bangladesh were to be able to afford the high prices, they would not be able to ship the goods in time. There was a great demand on shipping service as many countries were desperately rushing to buy food in the face of the worldwide food crisis, as such shipping cost increased dramatically.

However, some economist believe that Bangladesh was little affected by changes in the international market during that period.

... domestic markets in Bangladesh were effectively segmented from world markets during this period. The domestic price instability is not attributable to conditions in foreign markets.

M. Ravallion, author of 'Markets and Famines' (1987)

China and Russia made large scale purchases in the world market. The only foreign source that could provide enough food aid was the United States.

US blocks 220,000 tons of food aid

The United States has been Bangladesh’s largest source of food aid, providing over £1.4 billion of food from 1972 through 1994, about 41% of the total. Of the £1.4 billion, 71% was program food aid - food sold on the open market rather than distributed directly to beneficiaries.

However, the US government - the main ally of West Pakistan during muktijuddho - cut off 220,000 tonnes food aid under Public Law 480 (PL-480) during the crucial months of September-October in 1974.

In August 1973, the Bangladesh Finance Minister, Tajuddin Ahmed, made a request for food aid in a meeting with the US Secretary of State, Henry Alfred Kissinger, in Washington. Food import requirements estimated at 2.2 million tons were to be met by commercial imports and food aid from various sources. The United States was requested to provide about 300,000 tons of food aid which were later scaled down to 220,000 tons after consultations with the USAID (United States Agency for International Development) officials.

While the Secretary, at the time of high world prices, greatly preferred commercial sales to food aid, I tried to plead on behalf of the hungry people of Bangladesh Consultations and discussions both in Washington and Dhaka continued at various levels between the two governments.

In January 1974, the Bangladesh Ambassador in Washington again took up the matter with the Assistant Secretary of State.

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Frequent meeting took place between the Bangladesh and US government in Dhaka and Washington. However, on 27 May 1974 the US Ambassador dealt Bangladesh a huge blow - he warned Bangladesh would not receive any food aid as it was exporting jute to Cuba, their local enemy. And under the US PL-480 regulations they were unable to help any country which was trading with Cuba - a little known fact which was unknown by the Bangladesh government.

The Jute Corporation of Bangladesh did indeed sell to Cuba 4 million gunny bags for US $5 million as a one-time transaction. There was no long term trade agreement for the sale of jute bags to Cuba and, therefore, Bangladesh was not in a regular business of selling jute bags to Cuba.

Secondly, Bangladesh was desperately short of export earnings and was faced with strong competition in the world markets for jute. She was badly in need of taking advantage of any possibility for marketing its principal export i.e. Jute.

Thirdly, after all, the Jute Corporation was not aware of this provision of the US law.

Fourthly, during the last two years, Bangladesh had received food aid and had singed several food aid agreements with the US government. They had a long list of complicated requirements to be fulfilled by the recipient country as required by the US law. But this particular provision of the PL-480 was never brought to the attention of the government.

Fifthly, the request for food aid under discussion had been under negotiations for almost nine months. During this long period no mention was ever made of such a provision. If we had known it earlier, we could have refrained from the sale of jute bags of Cuba.

It was not clear whether this sudden, unexpected bottleneck was the result of an act of negligence on the part of the US bureaucracy. After all, it will well known to the US government that Bangladesh and Cuba had good diplomatic relations and the possibility of their getting into trade relations was high.

I discussed this matter almost 30 years later with the concerned US official, who was then the head of the USAID office in Dhaka, now living in Washington, D.C., I asked him why we were not forewarned in 1973 when the request was first made. His reply was that neither he nor his colleagues in Dhaka office were aware of this provision. His counterparts in Washington also did not know or if they knew, did nit care to inform him about such a provision of the US law.

He further remarked that there were hundreds of pages of regulations in the US PL-480, all of which few USAID officials could master. This was how the lawyers made their living. Occasional lapses like this did occur.

The tragedy was that it occurred in Bangladesh at a time of food crisis.

Ali Hossain, Bangladesh Ambassador to US (1973-75)

Bangladesh Prime Minister Sheikh Mujibur Rahman, confronted with this choice agreed to the US proposal, given the magnitude of the food crisis in the country. At the same time, he had the delicate task of conveying such an unpleasant decision to the Cuban government led by Prime Minister Fidel Castro. After all, Cuba was one of the first countries to recognise Bangladesh in January 1972, when very few countries did so, and had sent an Ambassador to Dhaka. At that time, most small countries, both developed and developing, had their Ambassadors stationed in Delhi, concurrently accredited to Dhaka. When the Cuban government was informed by the Prime Minister of his predicament, they were very understanding. They assured Bangladesh that the termination of trade with Cuba by Bangladesh would not affect their relations.

When Bangladesh did cooperate with the USA by stopping jute export to Cuba it was too late for the famine victims. When US food aid came around October 1974 - a year after the initial request by Tajuddin Ahmed - the country was already in the grip of famine. Their aid would have made little difference to the suffering of the rural poor.

Only after Bangladesh gave in and sacrificed its trade with Cuba was the flow of American food resumed. By then the autumn famine was largely over.

Amartya Sen, Nobel Prize winning economist

Another reason for the US witholding the food aid was to ensure that Bangladesh abandoned plans to try Pakistani war criminals. Neighbouring India too had declined to cooperate with the government of Bangladesh.

The lack of aid increased famine and led to further speculative hoarding.

Food was then a political weapon. Food aid has now in addition become a commercial enterprise.

Devinder Sharma, food and trade policy analyst

Death by starvation

An estimated 1.5 million people died in the process and through cholera, malaria and diarrheic diseases and starvation in the following year. Inna-lillahi-wa inna illahi rajiun.

The official government figure of death was estimated to be 26,000. However, in Rangpur district alone 80,000 - 100,000 people died of starvation and malnutrition in 2-3 months.

The food supply had progressively deteriorated due to smuggling, market manipulation and corruption at all stages of the import and distribution network. Rice prices were soaring beyond the Taka 300 crisis mark. Then the floods came, engulfing 21,000 square miles or two-fifths of the total land area of the delta country during July, August and part of September. Famine and crisis stalked the land…People in the countryside began to die like flies.

Sheikh Mujib himself publicly admitted later that 27,000 people died of starvation. In the circumstances this was a very conservative estimate…Since at least 3,000,000 people were living below the starvation line, by that reckoning the death toll as a result of famine was well into six figures.

Anthony Mascarenhas, author of 'Bangladesh: A Legacy of Blood' (1986)

The poor, labourers and non-landowners were the most vulnerable as their income came solely from transplanting rice for others. The floods prevented them from earning the meagre amount that kept their families alive in most years. And since rural employment opportunities decreased drastically due to the flooding they were no longer able to buy the necessary food to stay alive.

This Bangladesh famine of 1974 is considered one of the worst in world history.

Grievance leads to rejection of Awami League governance for 21 years

One of the consequence of the Bangladesh famine of 1974 is that the political leadership has come to appreciate the political sensitivity of rice prices. The Awami League was in power from independence in 1971 until the assassination of its leader, Sheikh Mujibur Rahman, in 1975. It only returned to power in 1996 - after 21 years in opposition.

Throughout this entire period, the Awami League had been vulnerable to criticism for having lost control over rice prices in 1974. The Bangladesh experience highlights the importance of food price stability (partly ensured by food aid) in contributing to political stability.

Famine inspires Nobel Prize winning Grameen Bank

Nobel Peace Prize winner Muhammad Yunus was inspired during this terrible famine to make a small loan of US $27 to a group of 42 families so that they could create small items for sale without the burdens of harrassment from loan sharks, who may impose unfair loan terms. The profound effect on the poor people by his act of generosity provided the inspiration behind his award-winning Grameen Bank.