ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Prabhat PatnaikSubscribe to Prabhat Patnaik

Financial Crises, Reserve Accumulation and Capital Flows

The article constructs a theory to understand a financial crisis in an open third world economy in the context of a sequence of stock equilibria, ensured by inelastic expectations. It then explores the predicament of such an economy when it "opens up" to global financial flows. In the absence of central bank intervention it has to face financial crises. But central bank intervention aimed at avoiding financial crises by stabilising the exchange rate and holding foreign exchange reserves pushes the economy to a perennial stock disequilibrium.

Re-Envisioning Socialism

T he quest for human freedom requires a transcendence of capitalism. What is important, however, is the overall vision that we have of the socialism that will emerge, one which accords centrality to human freedom, which remains continuously "open" and untainted by ossification in any form, and which constitutes an unleashing of democracy and a perennial engagement of the people with politics.

A Model of Growth of the Contemporary Indian Economy

Why has a rising share of economic surplus in output not created any serious realisation problem, and hence any consequent tendency towards stagnation in the Indian economy? Clearly, this is not because of exogenous countervailing factors, state expenditure and/or an export surplus of goods and services. The rising share of economic surplus in output has been accompanied by greater consumption by the surplus earners themselves and also by greater investment that has been stimulated by such consumption. The ability to introduce technological-cum-structural change through imitation of what prevails in the metropolis is what has kept up the level of aggregate demand in the Indian economy leading to an increase in the rate of economic growth. This article provides a simple model of this growth process and draws certain conclusions regarding its sustainability.

In the Aftermath of Nandigram

Tragedies like Nandigram are inherent in the operation of a neoliberal policy regime. These tragedies are being debated as a conflict between the needs of industrialisation and the peasantry, as if the corporate nature of that industrialisation did not matter. Nandigram should make us look beyond scapegoats at the process of "accumulation through encroachment", which neoliberalism has unleashed in the country.

Budgetary Policy in the Context of Inflation

The Union Budget 2007-08 utterly fails to appropriately respond to the social needs of a situation of profit inflation. The situation demanded an increase in government expenditure relative to gross domestic product aimed at putting transfers in the hands of workers and a financing of this through taxes on private profits. It also required taking appropriate steps to remove the basic cause of profit inflation through a revival of agriculture.

What Is Wrong with 'Sound Finance'

Concerns over large borrowings, increasing public expenditure and the fiscal deficit led the ministry of finance to push for legislating the FRBM Act in 2003. The act states that the fiscal deficit as a ratio of GDP should be brought down to 3 per cent by 2007-08. However, this proposition based on the principle of "sound finance" seems flawed as it is theoretically unsound and unrealistic in its expectations.

Diffusion of Development

The proposition that there are limits under capitalism to the spontaneous diffusion of industrial development has been supported on the basis of a number of powerful and weighty arguments. But, there is a more immediate limit to such spontaneous diffusion, namely, the unwillingness of the leading capitalist economy to sustain a growing claim upon its wealth by outsiders.

An Integrated Totality

An Integrated Totality Development with Dignity: A Case for Full Employment by Amit Bhaduri; National Book Trust, India, 2005;
PRABHAT PATNAIK The dominant discourse in economics in India today has a surreal air about it. The economy is claimed to be prospering, even though hundreds of peasants are committing suicide across the country; the rate of growth is claimed to have climbed to dizzy levels, even though the unemployment problem is becoming daily more acute; the economy is claimed to have successfully broken through the barrier of the

Level of Activity in an Economy with Free Capital Mobility

The purpose of this paper is to argue that the 'opening up' of an underdeveloped economy to free capital flows, instead of boosting its rate of growth as neo-liberals claim, would have the precisely opposite effect of unleashing ceteris paribus a tendency towards stagnation and greater unemployment. The reason for this is simple. The neo-liberal claim is based on the assumption that such 'opening up' would cause a substantial increase in the rate of productive investment in the economy. This claim, even if much direct foreign investment (DFI) were to flow in to the economy, is not necessarily valid, since such DFI inflow may well be of the sort that replaces domestic investment, and hence causes unemployment and a reduction in the level of activity ('de-industrialisation').

On the Need for Providing Employment Guarantee

It is imperative that an employment guarantee scheme should be universally operational within a specified time-horizon; it should be fully funded by the centre; it should avoid tokenism (such as very low wages in the name of enlarging the number of beneficiaries) or targeting; and it should not occasion conflicts with other workers, employees or peasants.

On Financing Infrastructure on the Strength of Reserves

If the real resources for infrastructure outlays are to come from an increase in import surplus that is met through a running down of foreign exchange reserves, then any such proposal would have two obvious flaws. We would be using short-term finance, which mainly accounts for the accumulated reserves, for long-term investment. And we would be using loans repayable in foreign exchange for investing in projects which are not foreign exchange earners themselves. These two together constitute a potent brew for precipitating a future liquidity crisis for the country


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