Europe’s Economic Hara-Kiri Prabhat Patnaik
The cessation of natural gas supplies from Russia to Europe in retaliation against Western sanctions imposed on Russia because of the Ukraine war, is threatening Europe not only with a winter with inadequate heating that will take a big toll in terms of lives among poor people, but also with large-scale closures of enterprises; such closures would push up the unemployment rate, and significantly increase poverty and destitution among the workers. It is not just the immediate effect on Europe that threatens to be severely adverse; capital has already started relocating away from Europe to the United States, a trend…
The Huge Danger Associated with Privatising Banks Prabhat Patnaik
There are fundamental objections to the plan of the government to privatise at least some of the public sector banks. They centre around the fact that such a move will change the pattern of deployment of credit, away from productive activities towards speculation, away from peasant agriculture towards big business (with dangerous implications for peasant viability, food security and employment), and away from domestic to global destinations. These objections are well-known and have been much discussed, and their pertinence has been underscored by the fact that Indian public sector banks were completely untouched during the “sub-prime-lending crisis” of 2008; but…
First Quarter GDP Estimates for 2022-23 Prabhat Patnaik
The estimates of Gross Domestic Product for the April-June quarter released by the government on August 31 paint a dismal picture of the Indian economy. Since the GDP in real terms (at 2011-12 prices) shows an increase of 13.5 per cent over the first quarter GDP a year ago, and since 13.5 per cent appears an impressive figure, official spokespersons have been putting a cheerful gloss over it. But a closer look reveals an economy getting further bogged down in a state of stagnation. The economy, it may be recalled, had contracted sharply in 2020-21 because of the pandemic and…
Controlling Inflation at the Expense of Working Class Prabhat Patnaik
Economists distinguish between two kinds of inflation: “demand-pull” and “cost-push”. Demand-pull inflation is said to occur when there is excess demand in a situation where supply cannot be augmented, because full capacity output has been reached in one or more crucial sectors. War-time inflation is a classic example. In India during the pre-neoliberal, dirigiste period, inflation was often the result of insufficient foodgrain output relative to demand, arising from a poor harvest. Cost-push inflation on the other hand occurs when supplies can be augmented, as the economy is nowhere near full capacity in key sectors, but one of the classes…
The Modi Government and the So-Called “Freebies” Prabhat Patnaik
A Bizarre drama is unfolding in front of our eyes. The Modi government which has been giving away hundreds of thousands of crores of rupees as tax concessions to the monopolists has expressed its opposition ironically to what it calls “freebies”, that is to handing over subsidies to other segments of the population. First, it was Narendra Modi who warned the youth against being influenced by a “revariculture”; then a BJP functionary who happens to be a lawyer moved a petition in the supreme court to prevent “freebies” from being given. Why the supreme court was dragged into the issue…
Sanctions and the Decline of the Dollar Prabhat Patnaik
The hegemony of the US dollar was based on the fact that the world’s wealth-holders considered it to be “as good as gold”, even when it was no longer officially convertible to gold at a fixed rate, as it had been under the Bretton Woods system, after the collapse of that system. These wealth-holders were of two kinds: private individuals and institutions, and central banks that held the foreign exchange reserves of their respective countries. The main reason it was considered as good as gold was because the prices of goods and services, with which the price of gold generally…
Scandinavia and Imperialism Prabhat Patnaik
There are many misconceptions about Scandinavian capitalism. A very common one is the belief that since the Scandinavian countries developed vigorous capitalist economies, without ever having acquired any colonies of their own, they constitute a clear refutation of the claim that capitalist development necessarily requires imperialism. This is an argument that I have heard for decades, but it is based on a misconception, not just about Scandinavia but above all about imperialism itself. Indeed, one may say many positive things about the concessions wrung out of capitalism by Scandinavian social democracy (although many of these are under threat in the…
“Heads I Win, Tails You Lose” Prabhat Patnaik
The craftiness of imperialism is boundless. In several countries of the world at present there are neo-fascist governments, propped up by their respective big bourgeoisies (all aligned to globalized capital), and implementing neo-liberal policies with their characteristic ruthlessness; in many other countries there are neo-fascist outfits attempting to get into power by promising to their big bourgeois patrons that they would do the same if in power. A neo-liberal-neo-fascist alliance in short has become quite pervasive. Such a neo-liberal-neo-fascist alliance has become necessary because the crisis of neo-liberalism has made the usual breezy assurance no longer credible, that “everybody would…
The Indian Economy is Heading for a Stationary State Prabhat Patnaik
Adam Smith and David Ricardo had been haunted by the idea of capitalism ending up in a “stationary state”, by which they meant a stable state of zero growth. Marx used the term “simple reproduction” to describe such a state, where there is no net addition to production capacity and the economy just reproduces itself at the same level period after period. The Indian economy appears headed for such a state. The Modi government’s propaganda machine, as usual, is working overtime to paint a rosy picture of the economy; but the reality is the very opposite. This propaganda uses a…
Neo-Liberalism and Anti-Inflationary Policy Prabhat Patnaik
Central banks all over the capitalist world are raising, or are about to raise, interest rates as a means of countering the currently rampant inflation, which is certain to push a world economy that is barely recovering from the effect of the pandemic, back towards stagnation and greater unemployment. Of course the Federal Reserve Board of the US which sets the standard in this respect for all other central banks, claims otherwise. It argues that the rise in interest rate it is decreeing will have little impact, or at the most a transitory impact, on the real economy; the recovery…