Pitfalls of Export-Led Growth Prabhat Patnaik
After Sri Lanka and Pakistan, Bangladesh has become the third country in our neighbourhood to become afflicted by a serious economic crisis. It has asked for a $4.5 billion loan from the IMF, apart from $1 billion from the World Bank and $2.5-3 billion from multilateral agencies and donor nations. Though the government has put on a brave face, Bangladesh is facing a growing trade deficit, shrinking foreign exchange reserves, a rapidly depreciating currency, a record inflation and an energy crisis that has necessitated massive power cuts. Ironically, Bangladesh was being hailed just a few months ago as a success…
The Q4 GDP Estimates for 2022-23 Prabhat Patnaik
The estimates of India’s Gross Domestic Product for the fourth quarter of 2023 were released on May 31. These show a growth rate of 6.1 per cent over the fourth quarter of the previous year, which is higher than the 4.4 per cent growth that the October-December quarter had recorded over the corresponding quarter of the previous year. Taking the year 2022-23 as a whole, the growth rate of GDP over the previous year comes to 7.2 per cent, higher than the 6.8 per cent expected earlier by both the IMF and the Reserve Bank of India. The fact that…
Is “De-Globalisation” Occurring? Prabhat Patnaik
Many economists these days talk of a process of “de-globalisation” taking place; some others talk of the neoliberal regime of yesteryears no longer existing. Of course, nothing remains the same forever: as the Greek philosopher Heraclitus had said “You cannot step into the same river twice”; some change in the neoliberal order therefore is inevitable with the passage of time. But the real point is: has the analytical frame used for understanding the economic reality of the contemporary world, with a view to changing it, become obsolete and hence in need of serious revision? “Globalisation”, it must be remembered, never…
Exchange Rate Depreciation and Real Wages Prabhat Patnaik
Most people, including even trained economists, fail to appreciate the fact that an exchange rate depreciation, if it is to work in reducing the trade deficit in a capitalist economy, must necessarily hurt the working class by lowering the real wage rate. A capitalist economy, looking at it differently, improves its trade balance, for which it must improve its competitiveness, by lowering the real wage rate; and an exchange rate depreciation is one way of doing so. Most textbooks in economics do not mention this fact. They are written from the point of view not only of bourgeois economics in…
The US Debt Ceiling Debate Prabhat Patnaik
Under pressure from globalised finance capital, most countries of the world have enacted legislation fixing the size of the fiscal deficit as a proportion of GDP; generally it is 3 per cent, and in India it is 3 per cent for the centre and 3 per cent for the states. The US however has no such legislation; instead what it has is a ceiling on the absolute stock of public debt that can be held at any point of time. This is a very odd procedure, for as the economy grows, this ceiling has to be revised, and, not surprisingly,…
Public Opinion and Imperialism Prabhat Patnailk
A New York Times News Service report reproduced in The Telegraph of Kolkata (May 7), discusses the findings of a global public opinion survey carried out by the Bennett Institute of Public Policy of Cambridge University. These show that the Ukraine conflict had shifted public sentiment “in developed democracies in East Asia and Europe as well as the United States of America, uniting their citizens against both Russia and China and shifting mass opinion in a more pro-American direction”; by contrast “outside this democratic bloc, the trends were very different”. For a decade before the Ukraine war, public opinion across…
The Grim Unemployment Scenario Prabhat Patnaik
The data on unemployment brough out by the Centre for Monitoring the Indian Economy (CMIE) present a grim picture. Not only has the unemployment rate increased sharply for some years now, starting from even before the pandemic, but the figure which had shot up during the pandemic has not come down much despite the recovery that has occurred in the level of GDP from its trough. The unemployment rate which was 4.7 per cent in 2017-18, rose to 6.3 per cent in 2018-19. It shot up during the lockdown associated with the pandemic: in December 2020 for instance, it was…
Threats to the Hegemony of the Dollar Prabhat Patnaik
Janet Yellen, the US treasury secretary, has finally acknowledged what has been obvious to most people for quite some time, namely that the imposition of sanctions against countries that the US is hostile to, runs the risk of jeopardising the hegemony of the dollar as the world’s reserve currency. If the sanctions were imposed on just one or two countries, then matters would be different; but sanctions these days are used by the US to target dozens of countries, and, when this happens, those countries tend to get together to form alternative arrangements for bypassing such sanctions. These alternative arrangements…
The Current State of India’s Economy Prabhat Patnaik
Government officials never tire of repeating that India is currently the fastest growing major economy in the world. What they never mention is the fact that India had witnessed perhaps the sharpest absolute drop in GDP among the major economies of the world in 2020-21 because of its draconian lockdown; and the current growth-rate is exaggerated by the low base caused by that drop from which it is being counted. If we compare 2021-22 GDP with that of 2019-20 which precedes the lockdown then it is only 1.5 percent higher; and since the 2022-23 GDP is estimated both by the…
OPEC+ and Capitalism’s Fight against Inflation Prabhat Patnaik
Except in war-time, capitalism invariably seeks to control inflation by creating a recession; and this is so even when the inflation has been caused by an autonomous increase in capitalists’ profit-margins which are downward inflexible and hence would not be reduced by a recession. This strategy is pursued because a recession invariably lowers the demand for primary commodities and hence their prices; this serves to lower inflation. Likewise a recession increases the unemployment rate and thereby reduces the bargaining strength of the employed workers, which means that the workers do not get wage increases to compensate them for the rise…