Rethinking the state’s price control role amid liberalisation – 4

By Prof Anna Kajumulo Tibaijuka

Over the past three weeks, I have argued that Tanzania’s economic reforms fundamentally changed the role of government. Liberalization did not remove government from the economy. It changed its responsibility: from determining prices to ensuring that markets operate fairly, efficiently and in the public interest.

Whether discussing agricultural producer prices or consumer prices for fuel and public transport, one lesson consistently emerges: sustainable prosperity depends less on governments fixing prices than on governments building institutions that enable markets to function well.

Unfortunately, public debate often concentrates on prices rather than the conditions that produce them.

When farmers complain of low crop prices, attention quickly turns to increasing official producer prices. When consumers face higher transport fares or fuel costs, the immediate demand is for government to reduce prices. Yet prices are usually symptoms rather than the underlying problem.

A farmer receiving low prices may actually be suffering from poor rural roads, inadequate storage, weak bargaining power, lack of market information or insufficient competition among buyers.

Consumers paying high prices may be affected by excessive taxes and levies, inefficient supply chains, expensive financing, inadequate infrastructure or the absence of effective competition.

Changing prices without addressing these underlying conditions often treats the symptom while leaving the disease untouched.

The experience of many countries demonstrates that prosperous markets are built upon productivity rather than administrative controls.

Farmers earn higher incomes when yields improve, transport costs decline, post-harvest losses are reduced, and buyers compete openly for their produce.

Consumers benefit when businesses compete through greater efficiency, innovation and improved service rather than through political protection.

This is where government has its greatest opportunity. Instead of concentrating primarily on price intervention, public policy should focus on strengthening the foundations of competitive markets.

For agriculture, this means investing in rural infrastructure, irrigation, research, extension services, storage facilities, reliable market information and affordable rural finance. These investments increase productivity while allowing market competition to determine prices more efficiently.

For consumers, the priorities include reliable infrastructure, efficient transport systems, transparent taxation, effective regulation of monopolies and strong consumer protection. Lower costs of doing business ultimately benefit consumers more sustainably than repeated administrative intervention.

Competition itself deserves greater recognition as a public good. In competitive markets, businesses must continuously improve efficiency, reduce unnecessary costs and provide better services if they wish to survive.

Consumers benefit through wider choice and lower prices; producers benefit from competing buyers, and the economy benefits because resources are allocated more efficiently.

Competition therefore serves producers, consumers and investors simultaneously. This explains why government should be cautious whenever policy unintentionally reduces competition.

Administrative restrictions that limit entry into markets, reduce farmers’ marketing choices or shield inefficient enterprises from competition may provide temporary relief but often reduce efficiency over time.

Equally, competition must operate within clear rules. Markets cannot function properly where monopolies abuse their dominance, businesses collude to fix prices or consumers lack adequate protection against unfair practices.

A modern market economy therefore requires both competitive enterprise and effective public institutions. The objective is balance. Too little regulation permits abuse. Too much intervention suppresses initiative. Successful economies avoid both extremes.

After nearly four decades of liberalization, Tanzania has accumulated sufficient experience to identify certain minimum standards that should guide government intervention in markets.

First, intervention should address genuine market failure rather than temporary price movements. Second, intervention should strengthen competition wherever competition is possible. Third, where competition is naturally limited, regulation should promote transparency, efficiency and reasonable returns without imposing unnecessary burdens on either producers or consumers. Fourth, the full economic cost of any intervention should be clearly understood. Policies that ignore underlying costs rarely remain sustainable. Fifth, government should always ask whether the same objective can be achieved through less distortive measures such as improved infrastructure, better market information, targeted support or stronger competition rather than direct price intervention.

These are not ideological principles. They are practical standards for good economic governance.

The purpose of government is not simply to produce lower prices or higher prices. It is to create conditions in which markets reward efficiency, protect consumers, encourage investment and expand opportunities for all participants.

The debate that began during the economic reforms of the 1980s is therefore entering a new phase. The question is no longer whether Tanzania should embrace markets. That question was answered many years ago. Today’s challenge is ensuring that markets remain competitive, transparent and fair.

In next week’s final article of this series, I will examine the institution specifically established to safeguard those objectives—the Fair Competition Commission, whose mandate extends beyond protecting consumers or supervising businesses.

It serves as the guardian of fair competition itself, ensuring that neither private enterprises nor public institutions undermine the competitive principles upon which a liberal market economy ultimately depends.

Prof Anna Kajumulo Tibaijuka is a former Tanzanian Cabinet minister and former United Nations Under – Secretary General and Executive Director of UN-HABITAT