History of Economic Growth in India
April 24, 2013 by Dushyant Gosai
Manmohan Singh, the prime minister of India during the World Economic Forum’s India Economic Summit 2009 held in New Delhi. Photo by Eric Miller
Last month, Morgan Stanly and HSBC lowered India’s economic growth forecast for fiscal years 2013 and 2014 from 5.2 to 5 percent and from 6.2 to 6 percent respectively. These numbers do not sound encouraging, but compared to a GDP growth of 4.5 percent for October-December quarter of FY2013, this news provides some encouragement for India’s economy. According to Finance Minister Chidambaram Palaniappan, India’s economy would grow 6.2-6.7 percent during FY 2014. If accurate, it would be a good economic recovery.
Although it is nowhere near the double digit GDP growth India was enjoying a few years ago, the recent news of an economic turnaround is a cause for celebration, especially when U.S. and European economies are still struggling to get back to pre-recession levels.
India’s economic journey from an impoverished country to an emerging global economy is an inspiring example for many developing nations. In order to understand India’s economic voyage, it is essential to shed some light on India’s political and economic history. After 200 years of British rule, India became an independent sovereign nation in 1947. This newly born nation faced a number of issues including a shattered economy, a minimal rate of literacy and horrific poverty. It was a mission impossible for Indian leaders, but Sardar Patel, Nehru and others transformed India into a secular and democratic nation.
Egypt Faces a Potentially Chaotic Summer
March 18, 2013 by Conn M. Hallinan
Secretary of State John Kerry meets with Egyptian Defense Minister Abdul Fatah Khalil al-Sisi in Cairo, Egypt, on March 3, 2013
When an important leader of the political opposition hints that a military coup might be preferable to the current chaos, and when a major financial organization proposes an economic program certain to spark a social explosion, something is afoot. Is Egypt being primed for a coup?
It is hard to draw any other conclusion given the demands the International Monetary Fund (IMF) is making on the government of President Mohamed Morsi: regressive taxes, massive cuts in fuel subsidies, and hard-edged austerity measures whose weight will overwhelmingly fall on Egypt’s poor.
“Austerity measures at a time of political instability are simply unfeasible in Egypt,” says Tarek Radwan of the Washington-based Atlantic Council. “He [Morsi] is already facing civil disobedience in the streets, protests on a weekly, if not daily basis, clashes between protestors and security—he does not want to worsen the situation.”
Venezuela’s More Moderate Future after Hugo Chávez
March 5, 2013 by Michael W. Edghill
Venezuelan President Hugo Chavez saluting during the Venezuelan independence bicentenary celebrations at the National Pantheon of Caracas, Venezuela. David Fernandez/EPA
Much will be written and said in the coming days and weeks about what the future of Venezuela, and Latin America for that matter, will look like following the death of Hugo Chávez. Can Chavismo survive without Chávez? Will the Venezuelan Court demand elections be called or will Vice President Nicolás Maduro retain power? If elections are called, can the opposition reorganize itself quickly enough to pose a serious challenge? While these and many other questions exist and remain to be answered, one can confidently assume that the Venezuela of the future will be a more moderate state than the current Bolivarian Republic of Venezuela that Chávez leaves behind.
This assumption stems primarily from the economic conditions that the new government, whatever form it may take, inherits. An unsustainable deficit problem, an unresolved currency dilemma, and deteriorating infrastructure along with a number of other economic challenges will force the Venezuelan government to rein in the expenditures on a number of the social improvement programs Chávez loved so much. Cuts like this are likely to erode support for the new government from Chavez’s strongest constituency. The only foreseeable financial savior for Venezuela is the oil economy that has supported the state so well in the past.
Lighting Europe’s Lamp
March 1, 2013 by Conn M. Hallinan
Silvio Berlusconi, Italy’s former Prime Minister
On the eve of the World War I the British diplomat Sir Edward Gray is purported to have said, “The lamps are going out all over Europe.” In the wake of the recent Italian election one might reverse that phrase: after years of brutal austerity, collapsing economies, widespread unemployment and shredding of the social welfare net, Italians said “basta!” “Enough!” And lamps are going on all over Europe.
Slovenians just turned out their conservative government and handed the reins to Alenta Bratusek, who compared austerity to “medieval medicine.” Tens of thousands of Bulgarian demonstrators forced their austerity-addicted government to resign. Support for the ruling parties of Spain and Portugal, which have overseen higher taxes and massive cutbacks, has dropped precipitously. German Chancellor Angela Merkel’s conservative Democratic Union took a beating in local elections. France’s Socialist Party rode an anti-austerity program to victory, and the leftist Syriza Party in Greece is now the most popular in that country.
Nowhere in Europe, however, has the austerity policies of the “troika”—the European Union (EU), the European Central Bank, and the International Monetary Fund (IMF)—taken such a thorough shellacking as in Italy. Prime Minister Mario Monte’s government of technocrats, who piled on regressive taxes, cut pensions, slashed jobs, and dismantled social programs, was crushed, while parties running on anti-austerity platforms swept the field.
BRICS, the United States and Africa
February 6, 2013 by Scott Firsing
South Africa’s President Jacob Zuma speaks during a joint news conference at the BRICS Leaders Meeting in Sanya, Hainan province, on April 14. Nelson Ching/Reuters via The Christian Science Monitor
Eyes are currently focused on South Africa, as it will soon host the fifth BRICS Summit from 26-27 March 2013 at its coastal city of Durban. The big expectation is the launch of the ‘BRICS bank,’ an important global political and economic development that also has bilateral and multilateral implications for the United States, which recently expanded its economic engagement in Africa.
Europe’s Perpetual Crisis
February 2, 2013 by Conn M. Hallinan
Defaced Bank of Greece sign referencing austerity demands being made by Germany. Milos Bicanski/Getty Images via Foreign Policy.
Back in the 1960s, the U.S. peace movement came up with a catchy phrase: “What if the schools got all the money they needed and the Navy had to hold a bake sale to buy an aircraft carrier?” Well, the Italian Navy has a line of clothing, and is taking a cut from a soft drink called “Forza Blu” in order to make up for budget cuts. It plans to market energy snacks and mineral water.
Things are a little rocky in Europe these days.
The Errors of Austerity: The Blanchard Prescription
January 9, 2013 by Binoy Kampmark
IMF chief economist Olivier Blanchard. Stephen Jaffe/IMF
Economists were created and feted to make witchdoctors respectable. The harm that economists can produce, while still not quite in the vicinity of those of doctors, can be extensive. Errors are tolerated, fictions propagated. Dangerous doctrines become impenetrable and the mainstay of governments.
It was therefore interesting that the IMF’s chief economist Olivier Blanchard, along with his colleague Daniel Leigh, made a confession in a recent paper that, “Forecasters significantly underestimated the increase in unemployment and the decline in domestic demand associated with fiscal consolidation”. Last October, they were already busy at work seeking to pull the carpet from under the very organisation they are employed by, taking issue with the orthodox school of austerity. The calculations upon which the austerity measures were then inflicted upon such countries as Greece were deemed inaccurate.
America’s Deceptive 2012 Fiscal Cliff
December 28, 2012 by Michael Hudson
Capitol Hill in Washington, DC. Bjoertvedt/Wikimedia
When World War I broke out in August 1914, economists on both sides forecast that hostilities could not last more than about six months. Wars had grown so expensive that governments quickly would run out of money. It seemed that if Germany could not defeat France by springtime, the Allied and Central Powers would run out of savings and reach what today is called a fiscal cliff and be forced to negotiate a peace agreement.
But the Great War dragged on for four destructive years. European governments did what the United States had done after the Civil War broke out in 1861 when the Treasury printed greenbacks. They paid for more fighting simply by printing their own money. Their economies did not buckle and there was no major inflation. That would happen only after the war ended, as a result of Germany trying to pay reparations in foreign currency. This is what caused its exchange rate to plunge, raising import prices and hence domestic prices. The culprit was not government spending on the war itself (much less on social programs).
But history is written by the victors, and the past generation has seen the banks and financial sector emerge victorious. Holding the bottom 99 percent in debt, the top 1 percent are now in the process of subsidizing a deceptive economic theory to persuade voters to pursue policies that benefit the financial sector at the expense of labor, industry, and democratic government as we know it.
Reality Economics: Review of the Economists and the Powerful
December 20, 2012 by Michael Hudson
Economists and the Powerful
by Norbert Häring and Niall Douglas “Whom the gods would destroy, they first make mad.” And if they would destroy economies, they first create a wealthy class on top, and let human nature do the rest. The acquisition of power soon leads to its abuse, to economic and social hubris. By seeking to protect its gains, perpetuate itself and make its wealth hereditary, power elites lock in their position in ways that exclude and injure those below. Turning government into an oligarchy, the wealthy indebt and shift the tax burden onto the less powerful.
It is an ancient tale. The Greeks got matters right in seeing how power leads to hubris, bringing about its own downfall. Hubris is the addiction to wealth and power, an arrogant over-reaching that involves injury to others. By impoverishing economies it destroys the source of profits, interest, capital gains, and even recovery of the original savings and debt principal.
This abusive character of wealth and power is not what mainstream economic models describe. That is why economic theory is broken. The concept of diminishing marginal utility implies that the rich will become more satiated as they become wealthier, and hence less addicted to power. This idea of progressive satiation returns gets the direction of change wrong, denying the basic thrust of the past ten thousand years of human technology and civilization.
Peru and the OAS: Seeking a New Way Forward
December 10, 2012 by Patrick Hall
Ollanta Humala, the president of Peru. Image via Peru’s government
Discontent throughout Peru’s rural communities over exclusionary government policies and expanding corporate intrusion was the backdrop for a December 6th and 7th Organization of American States (OAS) meeting in Lima. In the exhaustively titled, Meeting of Government Experts on the Management of Socio-Environmental Conflict for the countries of Central America and the Andean Region, representatives throughout the region sought new strategies to “strengthen the institutional capacities of governments in addressing socio-environmental conflicts through the exchange of information and the presentation of institutional mechanisms used to bring about solutions to these problems”.
Central governments throughout South America have struggled to placate indigenous and rural communities; populations that suffer disproportionately during economic contractions and are easily marginalized when markets expand. Many politicians have achieved the presidency by running on a populist platform; however, most have found it nearly impossible to fulfill the promises made to the people while attempting to grow the country’s markets. For many in South America, foreign investments are needed to reinforce social programs and modernize infrastructure, but these finances typically have caveats that undermine the livelihoods of the very populations they were intended to assist.
Long-term Peace in Gaza Depends on Egypt
November 26, 2012 by Anthony Pusatory
The newly elected President of Egypt, Muhammad Morsi, confronted his greatest challenge to date in brokering a cease-fire between Hamas and Gaza last week – and by almost all accounts, he passed with flying colors. The agreement ended nearly two weeks of intense violence on both sides, which resulted in more than one hundred and fifty deaths and thousands of wounded. Conducted under the auspices of the Egyptian government, the cease-fire between Hamas and Israel will provide welcome relief to both sides of the conflict. However, it still remains only a temporary measure.
The issues at the heart of the conflict – the Israeli imposed siege of Gaza and the rampant smuggling operations caused thereby – have not yet been addressed.
How Neoliberal Tax and Financial Policy Impoverishes Russia
November 26, 2012 by Michael Hudson
IMF chief economist Olivier Blanchard. Stephen Jaffe/IMF
Russian poverty is unnecessary. Like all poverty in today’s high-productivity age, it is the result of bad policy. There is no technological need for it, nor is Russia lacking in a full spectrum of natural resources and economic potential. So future historians no doubt will puzzle over how the nation was convinced to de-industrialize its economy and impoverish much of its population in favor of exporting fuels and minerals, and to impose more regressive taxes on labor and industry than existed anywhere in the West – having been assured that this would streamline growth, not stifle it.
Neoliberal advisors promised that Russia would become more efficient and affluent by following an almost diametrically opposite path from that which Britain, the United States, Germany, Japan and modern China took to raise themselves to industrial power – the policies that classical 19th-century liberals endorsed to reduce the power of rentiers over the economy and government. Instead, post-Soviet polarization between rich and poor over the past twenty years has seen falling living standards and a dismantling of manufacturing, education and public infrastructure go hand in hand with creation of a new class of instant billionaires at the top of a steeper economic pyramid than exists in Western industrial powers.
Eritrea’s Regional Relations
August 17, 2012 by David H. Shinn
AMISOM soldier looks out over an IDP camp. Photo by Laura Heaton/Enough Project
The UN Security Council in December 2009 imposed an arms embargo, severe travel restrictions, and an asset freeze on Eritrean political and military leaders because of Eritrea’s support for extremist groups in Somalia. This step helped solidify the growing political isolation of Eritrea.
African Union
Eritrea has long considered the African Union as a tool of Ethiopia and treated it accordingly. Following the outbreak of war between Ethiopia and Eritrea in 1998 and the closure of the Eritrean embassy in Addis Ababa, Eritrea no longer had a representative to interact routinely with the African Union in Addis Ababa. Girma Asmerom was the last Eritrean ambassador to Ethiopia and the African Union; he left in 1998.
Greece is being kept alive by the ECB’s Emergency Lending Authority
August 10, 2012 by Marshall Auerback
Mario Monti, Mario Draghi and Angela Merkel in Brussels. Image via European Council
Greece has moved off center stage, as Spain has become the preoccupation de jour for Europe’s increasingly embattled authorities. But one has to wonder how the Greek banking system has managed to sustain itself over the past several months, given widespread deposit flight and the country’s ongoing solvency challenges. Well, we now have a better idea, courtesy of a leak to the German weekly news magazine Der Spiegel, which has published information about ECB plans to keep Greece on its feet until the next tranche of European Union-International Monetary Fund aid is paid out.
Financial Predators v. Labor, Industry and Democracy
August 3, 2012 by Michael Hudson
Euro currency and houses. Image via Images Money
The Eurozone lacks a central bank to do what most central banks are supposed to do: finance government deficits. To make matters worse, the Lisbon Agreement limits these deficits to 3% – too small to pull economies out of depression by offsetting private-sector debt deflation. Even if central banks could monetize higher levels of deficit spending, there are good reasons not to subsidize unfair tax systems and tax cuts on the real estate and financial “free lunch” windfalls that classical economists urged to be the tax base.
Under classical tax policy, Europe would not have had a land-price bubble in the first place. “Free lunch” economic rent would have become the tax base, not capitalized into bank loans to be paid out as interest. Government budgets would have been financed in a way that kept down property prices.
But bank lobbyists have blocked the Eurozone from creating a true central bank to finance public budget deficits. They also have reversed classical tax policy, un-taxing real estate and finance while putting the burden on labor, corporate profits and consumers by the turnover tax (VAT). These twin financial and fiscal policies have strengthened the wrong sectors and made the current sovereign debt crisis inevitable, turning it into a general economic and political crisis.
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