Prabhat Patnaik’s Blog

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,…

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 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…

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…

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…

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…

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…

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…

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…

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…