The Push for Privatizing Banks Prabhat Patnaik

From the very beginning there has always been a demand for undoing bank nationalization in India. This demand naturally gathered momentum with the adoption of neo-liberal policies. It was completely unacceptable to international finance capital that the bulk of the banking sector in a country like India should remain under public ownership. Accordingly, “friends” of the Wall Street working in the U.S. administration like Tim Geithner and Larry Summers would visit India and demand of our government that, even if it could not privatize the entire banking sector, at least it should send a “signal” by privatizing the State Bank…

The Modi Government’s “Achievement” Prabhat Patnaik

The Modi government is celebrating four years in office with great fanfare. The fact that these four years have unleashed an unparallelled process of social and political retrogression in the country is well-known and need not detain us here. Our purpose here is to examine what these years have meant for the living standards of the bulk of the Indian people. Here however one immediately comes across a hurdle. For a very long time India had one of the finest statistical systems in the world, with a National Sample Survey collecting data from a large sample of households, larger than…

Can Banking Recover? Jayati Ghosh

The bank frauds involving Punjab National Bank (PNB) and the companies associated with businessmen Nirav Modi and Mehul Choksi as well as the Rotomac case couldn’t have come at a worse time. The Indian banking system is already reeling under the pressure of growing NPAs, or non-performing assets (less politely known as loans that are not going to be repaid), which will touch nearly ₹10 lakh crore by March this year. This does not include the ₹6 lakh crore already written-off. This has already caused a slowdown in disbursal of bank credit, in turn affecting productive investment. Failure at many…

The Nirav Modi Scandal Prabhat Patnaik

Nirav Modi, and his uncle Mehul Choksi, are the latest additions to the list of the so-called “entrepreneurs of new India” who have looted public money and decamped with the loot. The Punjab National Bank, the second largest bank in the country, kept giving them loans without any collateral (which is basically what happened through the complicated procedure of the so-called “Letters of Undertaking”); and one fine day Nirav Modi simply left the country with his immediate family, to be followed by his uncle a few days later. Several characteristics are shared by all these decamping “entrepreneurs” whose list includes…

The Budget and Education Jayati Ghosh

Forget the massive and overblown promises to farmers and on health insurance, which were not covered by any budgetary provisions.  Ignore the supposed increases in rural development spending, which are all to be met through “extra-budgetary and non-budgetary sources”. Disregard the declared concern for rural areas, the poor and women, which has translated into next to nothing in terms of actual allocations. The real story of this Union Budget is not to be found in the verbose rhetoric of the Finance Minister’s speech or in the supposedly “big ticket” items, which amount more to a manifesto of the ruling party…

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…

Privatization the Problem, Rarely the Solution Jomo Kwame Sundaram

Privatization has been one of the pillars of the counter-revolution against development economics and government activism from the 1980s. Many developing countries were forced to accept privatization as a condition for support from the World Bank while many other countries have embraced privatization, often on the pretext of fiscal and debt constraints. Privatization generally refers to changing the status of a business, service or industry from state, government or public ownership to private control. It sometimes also refers to the use of private contractors to provide services previously delivered by the public sector. Privatization can be strictly defined to include…

The Neoliberal Counter-revolution in Retreat? Jomo Kwame Sundaram

The US Wall Street crash of 1929 was followed by the Great Depression, which in turn engendered two important policy responses in 1933 with lasting consequences for generations to come: President Franklin Roosevelt's New Deal and the Glass-Steagall Act. While massive spending following American entry into the Second World War was clearly decisive in ending the Depression and for the wartime boom, the New Deal clearly showed the way forward and would have succeeded if more public money had been deployed consistently to revive economic growth. Although Michal Kalecki and others had anticipated some of his work, it took a…

Public Enterprises in Mixed Economies: Their Impact on Social Equity Andong Zhu

[Working Paper No. 04/2007] The underlying theoretical argument of Privatization, as a crucial component of the neoliberal policies, is that state-owned enterprises (SOEs) are inherently inefficient, and therefore bad for social equity, besides hindering economic growth. However, the existing literature falls short of providing a solid theoretical basis for this argument. This study improves upon the existing literature through utilization of a panel data set of more than 40 mixed economies for the period 1960s to the 1990s. By applying the fixed effects techniques, this study empirically explores the impact of SOEs on income equality. The conclusion arrived at, is…

Privatizing the World Bank?

In a recent article entitled Reforming the World Bank: Creative Destruction (Foreign Affairs, January/February 2006), Jessica Einhorn, dean of the Paul H. Nitze School of Advanced International Studies (SAIS, Johns Hopkins University), called for the disbandment of the International Bank for Reconstruction and Development (IBRD). Addressing her remarks to the World Bank's new president, Paul Wolfowitz [1] and its major funders, she called for an end to the bank's lending to middle-income countries, and for a focus instead on the poorer countries which have little or no access to private capital markets as credit sources for development financing. Einhorn, who retired in…