Wicked Loans and Bad Banks C. P. Chandrasekhar

The crisis created by non-performing assets (NPAs) on the balance sheets of commercial banks, especially public sector (PSBs), does not go away. It only intensifies. An environment that triggered large inflows of foreign capital and a surge in credit after 2003 encouraged banks to explore new areas and terms of lending, which are responsible for the large exposures that are now turning bad. Having encouraged that environment with its policies, the government had been pretending that the problem is not serious enough to warrant emergency action. The reason was that it wanted to do the impossible: resolve a big problem…

Words and Music in the Romantic Imagination Jayati Ghosh

What makes for a “Romantic” sensibility? Not in the literal sense of being inclined to “romance”, but in the sense of the movement that subsequently became a tradition in 19th century literature and the arts in Europe, when this sensibility permeated much creative endeavour. Romanticism has generally been associated with an emphasis on emotion and a celebration of subjectivity in terms of the individual’s response to the world; a glorification of nature, as well as of the past; in many ways a cultural expression of the reaction to the standardisation and rule-bound socio-economic patterns created by the Industrial Revolution. But…

Interest Rates and the Use of Cash Prabhat Patnaik

Finance capital is always opposed to the use of fiscal measures for stimulating an economy. This is because any such fiscal stimulation undermines the social legitimacy of capitalism, and especially of that segment of it which constitutes the world of finance and which is peopled with “functionless investors” in Keynes’ words or of “coupon clippers” in Lenin’s words, i.e. of entities that play no role in the production process. If State intervention comes to be seen as necessary for stimulating the economy, then the question may arise in the public mind: why do we need all these entities? Why does…

Understanding economic development and demolishing neoliberal development myths Erik reinert, Jayati Ghosh and Rainer Kattel

We have recently co-edited a book (The Handbook of Alternative Theories of Economic Development, Edward Elgar 2016, also available as an e-book on http://www.ebooks.com/95628740/handbook-of-alternative-theories-of-economic-development/reinert-erik-s-ghosh-jayati-kattel-rainer/) that seeks to bring back the richness of development economics through many different theories that have contributed over the ages to an understanding of material progress. The underlying approach is based on this quotation from nearly four centuries ago: “There is a startling difference between the life of men in the most civilised province of Europe, and in the wildest and most barbarous districts of New India. This difference comes not from the soil, not from…

The Post-Neoliberal Conjuncture Prabhat Patnaik

The question of an alternative to neo-liberalism has now come on to the agenda not just as a matter of speculation or as a mere abstract means of mobilizing people against neo-liberalism, but as an urgent practical issue. This is because, for reasons I shall discuss shortly, neo-liberalism as we have known it till now has reached a dead-end. Sections I and II below discuss these reasons. Section III examines the fall-out of the crisis of neo-liberalism. Section IV discusses critically the alternative to neo-liberalism being attempted by Donald Trump in the U.S., and Section V suggests the outline of…

Budget 2017-18: The Macroeconomic Perspective C. P. Chandrasekhar

Even for those sceptical about the government’s declared policy intentions—varying from cleaning the Ganga to doubling farmers’ incomes by 2022—the subdued and insubstantial Budget 2017-18 was a surprise. The circumstances in which the Budget was presented were exceptional. In the midst of a slowdown in growth with signs of the onset of deflation[i], the government had chosen to withdraw and declare worthless more than 80 per cent of the value of currency in circulation by demonetising “higher value” notes. But new notes to replace the ones withdrawn were slow in coming and had to be rationed, because the indefensible measure…

Quarterly GDP Estimates: Curiouser and curiouser Jayati Ghosh

So maybe the demonetisation never really happened. Maybe it was all a bad dream: the late evening announcement, the subsequent cash crunch, the regulatory chaos, the deaths because people could not get medical treatment with old notes. Maybe the reporters who described all the job losses and migrant workers forced to go back home and farmers unable to get their sowing done in time and so on were all affected by a mirage. Maybe those who conducted surveys and found massive drops in sales, in consumer spending, in livelihoods of informal workers and self-employed people were similarly deluded. And of…

Stemming Illicit Financial Outflows Jomo Kwame Sundaram

International capital flows are now more than 60 times the value of trade flows. The Bank of International Settlements (BIS) is now of the view that large international financial transactions do not facilitate trade, and that excessive financial ‘elasticity' has been a major cause of recent financial crises. Illicit financial outflows  Illicit financial flows involve financial movements from one country to another, especially when funds are illegally earned, transferred, and/or utilized. Some examples include: A cartel using trade-based money laundering techniques to mix legal money, say from the sale of used cars, with illegal money, e.g., from drug sales; An…

Budget 2017-18: Social spending Jayati Ghosh

The Modi government over the past three years has not been noted for its generosity towards the social sector and spending to meet goals of improving human development. Indeed, if the past were any guide, there would be little reason to expect much increase in social sector budgetary outlays on the part of the central government. However, this year, for various reasons, analysts were led to expect that there would be at least some change from the fiscal disdain the government has shown in the past to this area. After all, the failed demonetisation has severely dented living standards of…

“Government by Discussion” Prabhat Patnaik

Professor Amartya Sen in his new book Collective Choice and Social Welfare which is a considerably expanded and updated version of his 1970 book with the same title, emphasizes that democracy must be understood as “government by discussion”. The idea of democracy being “government by discussion” really belongs to John Stuart Mill, though this particular phrase was coined by Walter Bagehot. The appeal of the idea lies in the fact that if government decisions are taken after public deliberations, then their opaqueness disappears; associated with it is a narrowing of the gap between those who “govern” and those who are…