Articles by Prabhat Patnaik

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.

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.

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.

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').

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