Coping with Foreign Direct Investment Jomo Kwame Sundaram and Anis Chowdhury

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it "is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented". FDI flows UNCTAD's 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally…

Neo-liberalism has been a Disaster for Nepal An Interview with Prof. C.P. Chandrasekhar

Why is neoliberalism bad for India and Nepal? What are its major flaws? Mahabir Paudyal and Prashant Lamichhane from myRepublica caught up with Professor C.P. Chandrasekhar when he was in Kathmandu last week to discuss the impact of neo-liberal economic order in the two countries, and the prospects of a socialist-oriented economy in Nepal. Nepal and India adopted liberalization almost at the same time during the 1990s. Thirty years on, what kind of impact has it had in the two countries? You need to look at liberalization at two levels. Cross-country liberalization, which is a set or package of policies implemented…

Indian IT hits a Speed Dump C. P. Chandrasekhar and Jayati Ghosh

A sharp deceleration in growth and restricted employment expansion in the IT sector, India’s post-liberalisation showpiece, has implications beyond the industry’s boundaries. Indian_IT_Speedbump (Download the full text in PDF format) (This article was originally posted in the Business Line on November 20, 2017.)

Moody’s Upgrade Prabhat Patnaik

Credit-rating agencies, discredited by the collapse of the housing bubble in the United States when they had blithely endorsed all so-called “sub-prime lending”, are now crawling out of the woodwork, and the Indian establishment is predictably impressed by the sight. Moody’s have just upgraded India’s credit rating marginally and the BJP is beside itself with joy. Surprisingly, much of the media too have flashed the story of the upgrade as if India’s status being raised from Baa3 to Baa2 is a matter that calls for great jubilation. Now, the criteria used by finance capital for judging the performance of a…

GE’s Switch Stephen Maher

The resignation of General Electric CEO Jeff Immelt last month is the latest sign of the broad restructuring of political and economic power currently underway in the United States. His departure, and John Flannery’s arrival, reveals a lot about the new phase of financialization that has emerged from the Great Financial Crisis. As financial markets and institutions became a more important part of the economy in recent decades, so too did they take on a larger role within corporations themselves, even ostensibly nonfinancial enterprises. This fundamental reorganization of corporate power eroded the institutional foundations of the New Deal’s so-called corporate…

Not with a Bang but with a (prolonged) whimper Jayati Ghosh

It is probably obvious to everyone that global capitalism is in dire straits, notwithstanding the brave talking up of output recovery that now characterises almost every meeting of the international governing elite. Even so, discussions of the end of capitalism still typically seem overstated and futile, not least because those hoping and mobilising for bringing in an alternative system are everywhere so scattered, weak and demoralised. In effect, capitalism is the only game in town, which is why even in its current debilitated and even decrepit state, it fears no rivals. But maybe that is really not the point. Maybe…

Engineering a New Crisis to resolve an Old One C.P. Chandasekhar

News that the US economy grew at 3 per cent during the hurricane-blighted third quarter of 2017, close to the 3.1 per cent recorded in the previous quarter, has once more revived claims that the world economy has left the Great Recession behind. There is one reason to discount this claim. Back to back 3 per cent annualized rates of growth in consecutive quarters has been observed more than once since the 2008 crisis. In fact, as recently as the second and third quarters of 2014, rates of GDP growth in the US stood at 4.6 and 5.2 per cent…

Finance Following Growth Jomo Kwame Sundaram and Anis Chowdhury

Economists of all persuasions recognize the critical role of finance in economic growth. The financial sector's stability and depth are widely considered important in this connection. Thus, many believe that the lack of a well-developed financial sector constrains growth in developing countries. Neoliberals generally attribute this to excessive regulation, especially the role of state-owned financial institutions, interest rate limits and restrictions on short-term cross-border capital flows. It is often assumed that banks and financial markets allocate capital to the most productive endeavours, and that the financial infrastructure for credit reduces ‘information inefficiencies', such as ‘moral hazard' and ‘adverse selection'. Another…

Trumping the NAFTA renegotiation: An alternative policy framework for Mexican-US cooperation and economic convergence Robert A. Blecker, Juan Carlos Moreno-Brid and Isabel Salat

NAFTA has utterly failed from a development standpoint and Mexico and US both need a new policy regime to reverse that rising inequality, secular stagnation, and regional divergences. If done with a cooperative spirit, the renegotiation of NAFTA can be a win-win for both, but a hasty US withdrawal from it would not work in favour of the average US and Mexican citizens. NAFTA_Renegotiation (Download the full text in PDF format) (This article was originally published in the World Economics Association)

Monitoring the Evolution of Latin American Economies using a Flow-of-funds Framework Esteban Peez Caldentey and Manuel Cruz Luzuriaga

Flow-of-funds accounting permits to monitor the financial sector in terms of flows and stocks and to analyze its relationship with the real sector. Traditionally practised in developed nations, this accounting has not experienced a parallel development in developing countries. In order to fill this gap, the paper undertakes the construction of a data base of flow-of-funds account matrices for various Latin American and Asian countries, exemplifying their use for the study of financial crisis in these regions. Monitoring_Evolution (Download the full text in PDF format)