Who Says Labor Laws Are “Luxuries”? Servaas Storm and Jeronim Capaldo

A Standard recommendation given to late-industrializing economies by the economic advisors of the World Bank and the International Monetary Fund has been to refrain from imposing regulations on the labor market, or if such regulations are already in place, to abolish them. If you are a policymaker in a late-industrializing country, chances are you’ve been told that your problem, what is really holding your economy back, is excessive labor regulation – it is making your exports uncompetitive and chasing away capital. Laws “created to help workers often hurt them,” stated the 2008 World Bank’s Doing Business Report. To avoid any…

Leapfrogging into services C. P. Chandrasekhar

By passing full-fledged industrialisation and depending on services for growth is not a bad idea says the International Monetary Fund. In the April 2018 edition of its World Economic Outlook, the IMF has endorsed a trajectory that India is known to have pursued in recent years. Characterised by an unusual process of structural transformation, that trajectory involves an early turn to services when the share of agriculture in aggregate output and employment declines with development. This contrasts with the traditional turn to manufacturing at relatively low levels of per capita income. In an India-type process, services rather than manufacturing would…

The Economic Survey 2017-18 Prabhat Patnaik

Like the person on the proverbial tiger, the Indian economy is currently riding a precarious course. The Government of India’s Economic Survey for 2017-18 recognizes this frankly, but its panacea is to keep one’s fingers crossed and hope that the ride continues. The macroeconomic data it presents are closer to those of the IMF’s World Economic Outlook Update prepared for the Davos meet than to the figures of the Indian government’s own Central Statistical Office. Its GDP growth estimate for the current fiscal year is 6.75 percent (compared to the IMF’s 6.7 percent and the CSO’s 6.5); and in the absence of anything untoward,…

53 Economists write to IMF Directors on approach to Social Protection

The International Monetary Fund (IMF) was formed in 1945 to ensure the stability of the international monetary system. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector issues that may bear on global stability. Since the global crisis, particularly since 2010, the IMF has tackled more and more areas. A recent 2017 proposal proposes further IMF work on social protection, continuing IMF recent reforms to social security, welfare and labour systems. Austerity or fiscal consolidation reforms are very unpopular as they have detrimental impacts on populations. In several European countries, national Constitutional Courts found IMF-supported…

Scaling up Development Finance Jomo Kwame Sundaram and Anis Chowdhury

The Business and Sustainable Development Commission has estimated that achievement of Agenda 2030 for the Sustainable Development Goals will require US$2-3 trillion of additional investments annually compared to current world income of around US$115 trillion. This is a conservative estimate; annual investments of up to US$2 trillion yearly will be needed to have a chance of keeping temperature rise below 1.5°C. The greatest challenge, especially for developing countries, is to mobilize needed investments which may not be profitable. The United Nations and others have revived the idea of the International Monetary Fund (IMF) issuing Special Drawing Rights (SDRs) to finance…

The Economy: 70 years after Independence C. P. Chandrasekhar

The defining feature of the economic programme of independent India’s first government was to accelerate the transition to a modern economy dominated by industry. Agriculture and related activities at that time accounted for around half of GDP and modern industry in the form of factory establishments for just above 6 per cent. Thus, colonial rule had made India the victim of the barriers to productivity increase typical of predominantly agrarian economies. These circumstances influenced the Nehruvian vision that made rapid diversification in favour of manufacturing the principal economic objective. The ‘big planners’ of that time did recognize that this will…

Why workers lose C.P. Chandrasekhar

A long-acknowledged feature of global development since the 1970s is that in many countries—advanced and poor—those at the bottom of the income pyramid have benefited little, if at all, from whatever growth has occurred. One empirical outcome of that tendency has been a decline in the shares of labour in national income over time. While this has been noted earlier, it has become the focus of attention recently because of evidence of a popular backlash against globalisation as reflected in the Brexit vote in the United Kingdom, the Donald Trump victory in the United States, and the rise of Far-Right…

The Illusion of an Economic Spring C.P. Chandrasekhar

While policy makers, analysts and observers paint a picture of an ongoing global economic recovery, the numbers seem to drag the optimists down. Barely days after IMF Managing Director, Christine Lagarde, declared at the spring meetings of the World Banka and the IMF that, “Spring is in the air and spring is in the economy as well,” came bad news from the US. The advanced economy that was being looked to as the one that would pull the world system out of a decade long period of sluggish growth performed poorly in the first quarter of 2017, growing at an…

Privatization Cure Often Worse Than Malady Jomo Kwame Sundaram and Anis Chowdhury

Privatization of SOEs has been a cornerstone of the neo-liberal counterrevolution that swept the world from the 1980s following the economic crisis brought about by US Fed's sharp hike in interest rates. Developing countries, seeking aid from the International Monetary Fund (IMF) and the World Bank, often had to commit to privatization as a condition for credit support. The World Bank and the IMF then attributed developing countries' inability to adjust to the external shocks of that time, inter alia, to their import-substituting industrial policy initiatives and the inefficiency of the state-owned enterprises (SOEs). Hence, their support came with conditions…