Is shadow banking a serious threat in emerging markets? C. P. Chandrasekhar and Jayati Ghosh

Everyone seems to have woken up to the fact that global debt levels are too high and portent difficulties ahead. As Figure 1 indicates, the levels of credit to GDP, which were so high as to be unsustainable and resulted in the big crisis of 2008, have increased even more since then. There was a phase of deleveraging in the advanced economies until around 2014, and in developing countries and emerging markets until 2011, but since then, credit/debt has been expanding again. So much so that the credit GDP levels in 2017 were 15 per cent higher than in 2008…

On taking sides in the RBI-Government stand-off C. P. Chandrasekhar

Unlike in the worlds of business and politics, there is little scope for gossip in the world of economics. So, when multiple signals suggested that that there was a stand-off between the government and the Reserve Bank of India (RBI), the media made the most of it, with a multitude of stories reporting and explaining the nature of the spat and its implications. Given the formal economic arguments that must enter those discussions, there is much that the lay reader cannot process to assess which of the two institutions is right in this controversy. However, the thrust of the reportage…

A Heart-Rending Episode Prabhat Patnaik

This year marks the seventy-fifth anniversary of the Bengal famine of 1943, a heart-rending episode in which 3 million persons died, and which epitomized the callousness of imperialism. The scale of devastation can be understood if we remember that in the United Kingdom, taking civilian and military casualties together, the total loss of life during the entire Second World War was just 0.45 million and in the U.S. 0.42 million. In Germany itself the loss has been estimated as anywhere between 6.6 and 8.8 million and in the Soviet Union which suffered the most at around 24 million. To say…

The Modi Government’s spat with The RBI Prabhat Patnaik

The Modi government’s spat with the Reserve Bank of India, like its sudden resurrection of the Ram temple project, indicates the desperation it feels at its dwindling electoral appeal. Having dealt a huge blow to the small-scale sector through its measures like demonetization and the GST, having aggravated through its inaction the impact on the Indian economy of the world capitalist crisis, and of Trump’s protectionism that has followed, it is now quite desperate to salvage some support for itself as the Lok Sabha elections approach. Since mere grandiose announcements such as Ayushman Bharat or doubling agricultural incomes can no…

Subverting The Central Bank Prabhat Patnaik

The Modi government’s penchant for subverting institutions has now extended to the Central Bank of the country. Not content with eliminating the Planning Commission; decimating the finest universities in India; crippling the premier public sector unit of the country, the ONGC, by interfering in its decision making; bringing the nationalized banks to grief by nudging them into sanctioning dubious loans; making a mockery of the Central Bureau of Investigation through crony appointments; and destroying the statistical system built up diligently by P.C.Mahalanobis which was the envy of  countries across the world; it has now turned its attention to the Reserve…

The Fall Of The Rupee Prabhat Patnaik

The rupee’s current tendency to fall is hardly surprising. India’s growth experience, unlike China’s, was built on the quicksand of a more or less persistent trade and current account deficit on the balance of payments. But there was always enough financial inflow not just to cover the current account deficit but even to add to our foreign exchange reserves. Initially this inflow was stimulated by the sheer fact of the economy’s being opened up to such flows: wealth-holders abroad got a chance to diversify their portfolios by buying into hitherto- unavailable Indian assets. Later, the higher interest rates in India…

Global Instability and the Development Project: Is the Twenty-First Century different? Jayati Ghosh

GLOBAL CAPITALISM TODAY: UNSTABLE, MORIBUND, OR JUST RESTING? Ever since the global financial crisis of 2008–2009, the trajectory of the world economy has been hesitant, unstable and prone to many risks. Output recovery has been limited and fragile; and, more significantly, even in the more dynamic economies, it has not increased good-quality employment or reduced inequality and material insecurity. Global capitalism as an economic regime is increasingly unable to deliver on its own promise of continuous expansion within a largely stable society. Even so, discussions of the ‘end’ of capitalism still typically seem overstated and futile, not least because those…

Another Global Financial Crisis for Developing Countries? Anis Chowdhury and Jomo Kwame Sundaram

George Soros, Bill Gates and other pundits have been predicting another financial crisis. In their recent book, Revolution Required: The Ticking Bombs of the G7 Model, Peter Dittus and Herve Hamoun, former senior officials of the Bank of International Settlements, warned of ‘ticking time bombs' in the global financial system waiting to explode, mainly due to the policies of major developed countries. Recent events vindicate such fears. Many emerging market currencies have come under considerable pressure, with the Indonesian rupiah, Indian rupee and South African rand all struggling since early this year. Brazil's real fell sharply in June, and Argentina…

Who’s manipulating China’s exchange rate? C. P. Chandrasekhar and Jayati Ghosh

A favourite trope of Northern economic policy makers – especially those in the United States – is that China systematically manipulates the exchange rate of the RenMinBi to ensure greater external competitiveness, and that this amounts to an unfair trade practice. While this has been a complaint of the US government for some years now, President Trump of the US has become a particularly strong advocate of this theory. Most recently, the recent (slight) depreciation of the Chinese RenMinBi (RMB or Yuan) relative to the US dollar has been met with howls of protest from Mr Trump and his trade…

Finance versus The People Prabhat Patnaik

Sometimes even a tiny news-item can reveal volumes about capitalism. The Indian stock market, as is well-known, is booming at present: the 30-share Sensex closed at a new high of 38,278.75 on Monday the 20th of August, and the broader-based Nifty crossed the 11500 mark for the first time on the same day. One of the financial sector executives explained the reason behind this boom as follows (The Hindu, Aug.21): “The only difference between now (versus a few months back) is that politics looks more stable---prospects of an Opposition coalition are looking a little shaky”. These financial sector executives know…