Demonizing State-Owned Enterprises Jomo Kwame Sundaram

Historically, the private sector has been unable or unwilling to affordably provide needed services. Hence, meeting such needs could not be left to the market or private interests. Thus, state-owned enterprises (SOEs) emerged, often under colonial rule, due to such ‘market failure' as the private sector could not meet the needs of colonial capitalist expansion. Thus, the establishment of government departments, statutory bodies or even government-owned private companies were deemed essential for maintaining the status quo and to advance state and private, particularly powerful and influential commercial interests. SOEs have also been established to advance national public policy priorities. Again,…

Factory workers in India C. P. Chandrasekhar and Jayati Ghosh

Recent data from the Annual Survey of Industries, covering up to 2015-16, provide some interesting insights into the changing nature of industrial employment in India. In the decade up to 2015-16, there was a significant increase in the number of factory workers, by around 40 per cent. This expansion can be dated from around 2005-06 onwards and especially up to 2011-12. This is to be expected, given that that was the period of India’s economic boom, in which both construction and manufacturing industry showed higher rates of investment and output growth. While the aggregate numbers still remain low for an…

Crop Insurance: Another dressed up scheme C. P. Chandrasekhar

Among the pro-farmer policies that the NDA government claims to have initiated, one often flagged is the modified crop insurance scheme titled Pradhan Mantri Fasal Bima Yojana (PMFBY). Effective as of kharif season 2016, this scheme is supplemented with the Restructured Weather Based Crop Insurance Scheme (RWBCIS). While in the former crop loss is computed by comparing actual yield in a season based on crop cutting experiments by state government agencies with an indicator of expected or ‘threshold’ yield, in the latter it is computed using leading weather indicators. Together, the schemes promise enhanced and more reliable crop insurance for…

Institutional Investors and Indian Markets C. P. Chandrasekhar and Jayati Ghosh

These are uncertain times for emerging market economies (EMEs) like India. They have been important destinations for investments financed by the cheap liquidity that was pushed into the financial system by developed country central banks attempting to address the financial crisis of 2008 and after. The result has been the accumulation of large sums of portfolio investments in their equity and debt markets. This has generated fears that, as central banks in the US, EU and elsewhere unwind their easy money policies and raise interest rates from their historic lows, this capital will exit the emerging markets. Once access to…

Global Economy Vulnerable a Decade After Jomo Kwame Sundaram and Anis Chowdhury

Ten years ago, deteriorating confidence in the value of US sub-prime mortgages threatened a liquidity crisis. The US Federal Reserve injected considerable capital into the market, but could not prevent the 2008-2009 global financial crisis (GFC). The 2008 meltdown exposed the extent of finance-led international economic integration, with countries more vulnerable to financial contagion and related policy ‘spillovers' exacerbating real economic volatility. It also revealed some vulnerabilities of the post-Second World War (WW2) US-centred international financial ‘architecture' – the Bretton Woods system – modified after its breakdown in the early 1970s. Robert Triffin, the leading international monetary economist of his…

Capitalism’s Discourse on “Development” Prabhat Patnaik

Capitalism’s discourse on “development” which has become quite influential all over the third world in the neo-liberal period proceeds as follows: (i) “development” must consist in shifting the work-force from the traditional (petty production) sector which is overcrowded with low labour productivity, and hence constitutes a repository of poverty,  to the modern (capitalist) sector which has much higher labour productivity. (ii) For this shift to occur, the modern (capitalist sector) must be allowed to grow as rapidly as possible, for which all impediments to capital accumulation must be removed. (iii) Even if, in the process of the modern (capitalist) sector’s…

The State of The Economy Prabhat Patnaik

Newspaper headlines over the last few days have highlighted three facts which point to the current abysmal state of the Indian economy. The first relates to inflation, where the June 2018 wholesale price index was 5.77 percent above that of June last year; this is the highest inflation rate witnessed since December 2013. The second is a burgeoning trade deficit: the trade deficit in June, at $ 16.6 billion, was again the highest for any month in the last five years. The third relates to the industrial stagnation that has set in: the growth in factory output in May (the…

Empty Promises C. P. Chandrasekhar

The timing of the Modi government’s announcement of a hike in the minimum support prices for kharif crops suggests that this may be another of its tall claims not backed by the financial allocations needed to deliver on them. According to a recent Cabinet decision of the National Democratic Alliance (NDA) government, a large proportion of India’s farmers are to be offered the opportunity to sell their crops to the government at a minimum support price (MSP) that covers costs and provides for a margin of 50 per cent, starting with this kharif season. Together with measures like loan write-offs…

Did developing countries really recover from the Global Crisis? C. P. Chandrasekhar and Jayati Ghosh

We are nearing the tenth anniversary of the collapse of Lehman Brothers in the United States that sparked a Global Financial Crisis,affecting every economy in significant ways. That crisis generated extraordinary monetary policy responses in the advanced economies, with low interest rates and unprecedented expansion of liquidity, in an effort largely driven by central banks to keep their economies afloat. By contrast, expansionary fiscal policy was barely used after the first initial stimulus. In the event, even with these incredibly loose monetary policies, the advanced economies have generally spluttered along, with periodic hopes of recovery dashed by repeated slowdowns –…

Will Trump’s Trade War Make America Great Again? Jomo Kwame Sundaram and Anis Chowdhury

The United States has had the world's largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion. The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of $34 billion in the 1990s. In 2017, its trade deficit with Japan was $69 billion, and with Germany, $65 billion. The US also has trade deficits with both its NAFTA partners, including $71 billion with Mexico. President Trump wants to reduce these deficits with protectionist…