Prabhat Patnaik’s Blog

A distinguished Ugandan social scientist of Indian origin, whom I happened to meet earlier this month at an academic conference, told me that Modi’s demonetization reminded him of the Ugandan dictator Idi Amin’s fiat in 1972 that all Asians should quit Uganda within a period of three months. His analogy of course would be considered inapposite for an obvious reason: expelling people from their places of domicile, as Amin did, is certainly a more inhumane act than snatching away people’s purchasing power as has happened in India; and this remains true, even when the victims in the former case are…

We are seeing in India at present a remarkable inversion of reason. The more the common people suffer from the impact of Modi’s demonetization, the more he is lauded for the “courage” shown by him in undertaking it. An economic measure should be, and normally is, judged on the basis of how it benefits the people, and any measure that brings distress to the people is derided for that reason. What we find in the present case however is just the opposite: the more demonetization brings distress to the people, the more it is applauded for its wisdom and courage.…

Spokesmen of the ruling party are busy these days spreading another falsehood, namely that, because of demonetisation which has brought in huge amounts of cash to their coffers, banks would be so keen to lend that their lending rates are going to fall, and that such a fall will act as a stimulus for the economy. This is completely wrong, and banks’ lending rates can never fall for this reason. They may of course fall because the monetary policy announced by the Reserve Bank of India is so altered as to cause such a fall. But that could happen anyway;…

A bizarre argument is doing the rounds these days. It states that the cash which gets disabled in the “black economy” because of the government’s demonetization measure, would enable the government to undertake an equivalent amount of expenditure with impunity; it can therefore spend more on infrastructure and other essential areas, or simply provide cash transfers to the people. BJP spokespersons who have been putting forward this argument, are promising transfers to everyone, in a manner reminiscent of Modi before the Lok Sabha elections, when he had promised that “black money” from Swiss Banks would be brought into the country…

So many lies are being spread by the government which is currently busy wrecking the Indian economy in the manner of a bull in a china shop, so many spurious economic arguments are being trotted out by it, that one has to be extremely vigilant not to be swept away by this tide of unreason. In the current article, and the two subsequent ones to follow, I propose to examine some of the more persistent assertions that are being made by government spokesmen. The most persistent assertion of course is that demonetization is a measure against “black money”. In an…

A secondary justification for the demonetization of 500 and 1000 rupee notes, apart from its presumed deterring effect on “black money”, is that it ushers in a move towards a “cashless” economy. This argument too, however, like the perception that “black money” is just held in the form of a hoard of currency notes, is staggering in its simple-mindedness. All money constitutes a liability of the banking system. (The only exception was the one-rupee note which was a liability of the Government of India, but its amount, always small, has now dwindled into insignificance). What we call “currency” is the…

Narendra Modi went on national television at 8 p.m. on November 8 to announce that from midnight of that very date, i.e. in a mere four hours’ time, 500 and 1000 rupee notes would cease to be legal-tender. The justification advanced for this bizarre move was that it would strike at “black money”. An additional argument was thrown in, to the effect that fake currency notes used by “terrorists” would now cease to be effective; and some particularly enthusiastic supporters of the government even went to the extent of calling it a “surgical strike against terrorism”. I shall come to…

  The post-war restructuring of capitalism involving decolonization, the introduction of Keynesian demand management, and the institution of democracy based on universal adult suffrage, represented concessions made by the system to ward off the Communist threat which the enhanced prestige of the Soviet Union, the march of the Red Army across Eastern Europe, the sacrifices made by the Communists in the anti-fascist struggle all over Europe, and the Chinese Revolution had brought to the fore. True, the Yalta agreement had bound the Soviet Union into not supporting Communist ascendancy in Western Europe, in countries like France, Italy and Greece, in…

I feel greatly honoured that I have been asked to deliver the Harold Wolpe memorial lecture for the year 2016. Harold Wolpe was an outstanding thinker who combined political activism for the liberation of the South African people with deep insights into the economic basis of apartheid. I am indeed grateful for this opportunity to pay my tribute to this remarkable person who in my view constitutes a role model for anyone aspiring to be a social scientist. Since a good deal of Harold Wolpe’s theoretical work was concerned with the value of labour power, and hence by implication with…

The term “infrastructure” covers all sorts of things, from ports to roads to canals to bridges to building railway lines. Because it covers such a range of things, many of which appear to be useful, most people look upon “infrastructure” development as an indubitably desirable thing under all circumstances. Questions are scarcely asked about its worthwhileness when the government allocates larger resources for the “infrastructure” sector, or when it instructs public sector banks to give larger loans for “infrastructure” development. This way of looking at “infrastructure” however is grossly misleading. What is covered by the term “infrastructure” typically varies with…