The Rubber Farmers’ Woes Prabhat Patnaik
Rubber prices, which had recovered a little after the fall during the pandemic, have collapsed again, with the farmers in Kerala, which grows 80 per cent of the country’s rubber crop, being badly hit. The central government has flatly refused to help the rubber growers, and the arguments it puts forward in justification of its refusal to help are totally untenable. When a group of CPI(M) members of the parliament went to meet Piyush Goel, the union minister of commerce and industry, wanting central intervention in favour of the growers through the institution of a minimum support price, he rejected…
A Common Misconception about Capitalism Prabhat Patnaik
There is a commonly-held view that while capitalism in its early stages brings about unemployment and hence an accentuation of poverty, this initial damage is subsequently reversed as it keeps growing. The unemployed get largely absorbed into the ranks of the active army of workers, and with a reduction in the unemployment rate, wages begin to rise; and they rise impressively as labour productivity increases. This view appears at first sight to be supported by historical evidence: poverty in Britain is estimated by Marxist historian Eric Hobsbawm to have increased with the onset of industrial capitalism; but certainly from the…
The Collapse of US Banks Prabhat Patnaik
There is nothing mysterious about the reasons for the collapse of the Silicon Valley Bank and the Signature Bank in the United States. There is also nothing mysterious about why the entire banking system of the capitalist world has come under a cloud: once some part of the system collapses, the other parts of it get saddled with “toxic” assets, which are nothing else but the liabilities of the collapsed part of the system, and hence become subject to a “domino effect”. The real issue is: how did US capitalism get into a situation where its banking system came under…
The “Hindu Rate of Growth”: Then and now Prabhat Patnaik
For a large part of the dirigiste period, the gross domestic product of the Indian economy grew at a rate of around 4 per cent per annum or less, which, though an improvement compared to the colonial era that had witnessed virtual stagnation, was not very impressive. This low steady growth over a prolonged period of time was facetiously referred to as the “Hindu rate of growth” by many economists (perhaps because with this rate an eternity would be required for any noticeable social transformation). After an acceleration in GDP growth starting in the 1980s and sustained subsequently as the…
Imperialism and Natural Resources Prabhat Patnaik
There is an overwhelming asymmetry between the level of “development” and the possession of natural resources among countries of the world. Take the group of most advanced countries, the G-7 comprising the US, the UK, Germany, France, Italy, Japan and Canada. This group, while accounting for only 10 per cent of the world’s population, possessed over half of global net wealth as of 2020, and roughly two-fifths of the gross domestic product of the world (I have taken for convenience the mid-point of a range of estimates that lie between 32 and 46 per cent). Its economic might is indubitable;…
Treating Infrastructure as a Holy Cow Prabhat Patnaik
There is an impression shared by even progressive intellectuals that the entity that goes by the name of “physical infrastructure” is an absolute necessity in each country, and that the actual amount of infrastructure that exists is always less than what is needed. There is in other words no such thing as “too much investment” being made in infrastructure. Because of this no objections are usually raised to the magnitude of resources that are devoted towards building such infrastructure. The criticisms that are levelled against infrastructure plans usually focus on issues such as the feasibility of the plans, whether the…
Finance Minister’s Misleading Statement Prabhat Patnaik
Finance Minister Nirmala Sitharaman made a misleading statement the other day that is not expected from a responsible member of the union cabinet. Talking about the resource transfer to the states in the recent budget, she said that the magnitude of transfer had been raised “sharply” (The Hindu February 11). Now, this statement, while creating the impression that the centre has been very “generous’’, gives absolutely no figures on any actual increase in transfer from the centre that would support the claim. An examination of the figures shows that no matter what category of transfer is considered, there is a…
“Crony Capitalism” As an Economic Strategy Prabhat Patnaik
Gautam Adani’s calling Hindenburg’s allegations of fraud against him an attack on the Indian nation is a matter of particular significance. Just before this episode, the BBC documentary on Modi had been labelled a product of the colonial mindset by the government and hence also construed to be an attack on the Indian nation. Adani would not have dared to equate himself with the nation, exactly the way Modi had done, unless he was certain that Modi would concur with such equating. Both Modi and Adani in short see their respective selves, and each other, as the embodiments of the…
Budget 2023-24: Ignoring the economy’s basic problem Prabhat Patnaik
The most outstanding feature of the Indian economy today is the sluggish increase in real consumption expenditure. Between 2019-20 and 2022-23 for instance the per capita real consumption expenditure has grown by less than 5 per cent which is less than the rate of growth of the gross domestic product. Even the meagre recovery from the depths of the pandemic in short has been investment-led rather than consumption-led. This has two obvious problems: first, such a recovery is patently unsustainable; it would simply lead to a pile-up of unutilised production capacity, of unused infrastructure, and hence of unrecoverable loans by…
The ‘Rent Good’ and Imperialism Prabhat Patnaik
Economic theory makes much of “rent goods”. A “rent good” is one whose supply cannot be augmented at will, simply through investing more on its production; its supply is subject to constraints imposed by nature, because of which there is a certain maximum rate of long-run growth which is exogenously given and cannot be altered at will. If this good is used as an essential input for the production of other goods, then the long-run growth of other goods too gets tethered to this exogenously given maximum rate of growth of the rent good. The rate of growth of the…