Once More on “The Humbug of Finance” Prabhat Patnaik

The renowned economist Joan Robinson had referred to the view that the government’s budget should always be balanced, as the “humbug of finance” (Robinson 1962), namely as a false proposition with no theoretical merit which was nonetheless promoted by finance capital. These days of course the insistence is not exactly on balancing the budget as was the case during the pre-second world war years. A certain amount of fiscal deficit relative to GDP, usually 3 percent, is considered “permissible”, though it is not clear what is so sacrosanct about the figure 3 and why 3 is better than zero. 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…

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 But new notes to replace the ones withdrawn were slow in coming and had to be rationed, because the indefensible measure…

Review of Kenneth S. Rogoff – The Curse of Cash Jayati Ghosh

  Published by :Princeton University Press 2016     ISBN-10: 0691172137        ISBN-13: 978-0691172132 Kenneth Rogoff is among the more prolific and topical of US economists – and certainly no less controversial for all that. As former Chief Economist of the IMF, Rogoff was famously embroiled in a debate with Joseph Stiglitz, former Chief Economist of the World Bank, on the merits of and concerns about globalisation (of which he has been a fervent supporter). Subsequently, he has waded into many issues of current concern with a mix of theoretical and empirical analysis and strong policy conclusions. Perhaps unremarkably given the state of…

Review Of Kenneth S. Rogoff – The Curse Of Cash Jayati Ghosh

Wage and Fiscal Policies for Economic Recovery Jomo Kwame Sundaram and Anis Chowdhury

The new US census data released in late September show that 3.5 million people in the US climbed out of poverty, as the tepid economic recovery continues. Employers are finally creating more jobs and paying higher wages than seven years after the Great Recession started following the 2008 financial crisis. This progress, while modest, debunks the claims of those who predicted a dire outcome following the increase in the legislated US minimum wage, especially without a robust recovery. The data show large employment and wage gains, particularly for the lower end of the jobs spectrum. Raising the legal minimum-wage and…

An Overburdened Instrument C. P. Chandrasekhar

On August 9, RBI Governor Raghuram Rajan released the last bi-monthly monetary policy statement that would be drafted under his leadership. No changes were made: the benchmark ‘repo’ rate was kept at 6.5 per cent, the cash reserve ratio at 4 per cent and the Statutory Liquidity Ratio at 21.5 per cent. According to the RBI, growth in this fiscal is projected at 7.6 per cent because of the beneficial effects of the good monsoon and the expansionary effects of the implementation of the 7th Pay Commissions recommendations. So growth is not an immediate problem. But, in the view of…

The Impacts of the 2008 Global Financial Crisis on Developing Countries: The case of the 15 most affected countries Hasan Comert and Esra Nur Ugurlu

[Working Paper No. 03/2015] From their analysis of the impact of the recent global crisis, the authors show that the trade channel was the most important mechanism in the transmission of the crisis from advanced economies to developing countries. WP_03_2015 (Download the full text in PDF format)

The Gathering Clouds of Recession Prabhat Patnaik

The world capitalist economy has been mired in stagnation and high unemployment ever since the 2008 financial crisis. Many were predicting that a turnaround was about to occur, partly because of the fact that the U.S. economy last month showed larger job creation than of late, and also because it had grown at 3.5 percent last quarter which is higher than for some time now. But, far from recovering, the world capitalist economy now appears to be sliding into a new downturn. A recession is defined to be a situation where an economy fails to grow for two successive quarters,…

West Africa’s Financial Immune Deficiency Rick Rowden

In recent months, as the spreading Ebola emergency took center stage in Washington, the World Bank and International Monetary Fund (IMF) have pledged $530 million to help Guinea, Liberia, and Sierra Leone. And in October, at a special session with African leaders on Ebola during the IMF/World Bank annual meetings in Washington DC, IMF Managing Director Christine Lagarde said that in addition to the aid, the IMF would depart from its notorious budget austerity, and actually allow the hard-hit west African nations to increase their budget deficits: “We don’t normally say this!” she emphasized. To which the Guinean president, Alpha Conde, responded, “I'm extremely pleased…

Trapped in a Recession C.P. Chandrasekhar

When the recently held annual meetings of the IMF and the World Bank ended, the only news to report was that confusion and disagreement afflicts the leaders and institutions charged with jointly managing the international economy. The absence of certainty and agreement was specially visible with respect to one issue: whether governments should revert to using fiscal policy measures and not just monetary policy initiatives to revive a global economy poised to slip into another deep recession. Years of “quantitative easing’ or injection of liquidity into the system through bond purchases by the US Fed, and similar moves elsewhere in…