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

Ajit K GhoseSubscribe to Ajit K Ghose

Global Financial Crisis and Labour

The State of Labour: The Global Financial Crisis and Its Impact edited by Sharit K Bhowmik; New Delhi: Routledge, 2014; pp xxvii + 342, Rs 895.

The Global Dollar Glut

The developments in the global economy since the 1990s are not an outcome of a "global saving glut" as postulated by Ben Bernanke in 2005, but the consequence of fl ows from the "global dollar glut". This glut led to the 2007 financial crisis. Quantitative easing is brewing the crisis of tomorrow.

Ballooning Current Account Deficit: What Options?

The choice before the government in dealing with the widening current account deficit is not between good and evil but between the two evils of attracting foreign capital and imposing curbs on imports. If the government chooses to focus on attracting foreign capital rather than on curbing the merchandise trade defi cit, it is implicitly making a judgment that the risk of economic collapse tomorrow is to be preferred to the risk of higher infl ation (and perhaps lower growth) today. This judgment can and must be questioned.

The Crowding-Out Effect of Foreign Capital

The inflow of foreign private capital to developing countries increased rapidly in the 1990s, but the result was growth of foreign currency reserves and not investment rates. This suggests that capital inflow actually crowded out domestic investment, thereby generating a surplus of domestic saving in recipient countries. This paper seeks to explain why such crowding-out might occur. A simple open-economy model is developed to show that crowding-out can be seen as an unavoidable consequence of substantial capital inflow, and that growth of foreign currency reserves is a corollary of crowding-out. The implication is that by allowing unrestricted inflow of foreign private capital, developing countries do not augment investment. They end up undermining their domestic investors, lending their own savings to developed countries and increasing their dependence on foreign investors for sustaining economic growth. Maintaining controls on capital flows is a good policy stance.

Trade, Foreign Capital and Development

Foreign trade and foreign private capital were earlier thought to have no role to play in development. Today they are thought to have rather important roles. On the other hand, foreign aid was earlier thought to have an important role while "aid pessimism" dominates development thinking today. This paper examines afresh the extent to which foreign trade, foreign private capital and foreign aid are helpful or unhelpful for development in labour-surplus dual economies. It concludes that managed trade is generally helpful while foreign private capital and foreign aid can be helpful only under certain rather special conditions.

Reinventing Development Economics

Development used to mean a process of structural transformation associated with gradual disappearance of dualism and surplus labour. Today it simply means growth of per capita income. This change of meaning reflects a paradigm shift in development economics; the Lewis framework has yielded place to a "monoeconomics" framework. The latter assumes away the structural differences between developing and developed economies, thereby eliminating the distinction between development and growth. Development economics then becomes concerned with explaining why some countries have remained so much poorer than others. The premises of this "new" framework, this paper argues, are highly questionable. Lewis' characterisation of developing economies as labour-surplus dual economies and conceptualisation of development as a process of structural change are far sounder. The paper uses Lewis' premises and the considerable benefit of hindsight to build a fresh perspective on issues, requirements and challenges of development.

The Growth Miracle, Institutional Reforms and Employment in China

China's economy has recorded extraordinarily rapid growth for more than two decades. What have been the employment effects of this growth? And to what extent have these effects been conditioned by the institutional reforms? The paper focuses on the period 1990-2005. Rapid economic growth was indeed associated with a high-speed increase in productive employment. Surplus labour declined substantially; many workers moved from lower-productivity to higher-productivity jobs and labour-incomes increased in all types of employment. However, there have been some negative developments too. In particular, given that the formal sector had inherited substantial stocks of surplus labour from the past, economic restructuring and labour market reforms resulted in declining formal employment and growing urban unemployment for a period.

Economic Growth and Employment in Labour-Surplus Economies

The idea that growth of the modern sector alone can improve employment conditions in labour-surplus developing economies has been and remains extremely influential. It is implicit in the argument that rapid economic growth is all that is required to improve employment conditions. It is also implicit in the fact that issues of growth of the modern sector are usually presented as issues of economic growth in general while issues of growth of the traditional sector hardly ever figure in debates and discussions. And yet, this paper argues, neither theory nor real world experience supports the idea. For employment conditions to improve, growth must occur simultaneously in both modern and traditional sectors. There are important issues of growth strategy for the traditional sector waiting to be debated.

The Employment Challenge in India

What is the nature of the employment problem that India currently confronts? And what are the economic and social policies that could effectively address the problem? The core of the employment problem in India is that of the working poor and addressing this is also the most effective way of eliminating child labour and reducing gender inequality in the world of work. In principle, this can be addressed either by reducing the level of underemployment, increasing the real wage rate for casual labour or facilitating the transfer of poor self-employed persons and casual labourers to regular wage paid jobs. The priority must be to generate a steady process of labour transfer; ensuring that a substantial proportion of the newly created regular wage paid jobs are for low-skilled workers, which points to the need for a growth strategy oriented towards exports of manufactures.

Current Issues of Employment Policy in India

The growth performance of the Indian economy, though not spectacular, has been decent by the standards of developing countries. But growth has failed to improve employment conditions in the country even though the rate of labour force growth has so far been quite low. It is hardly surprising that problems of unemployment and underemployment worry policy planners of today as much as they did Mahalanobis at the time of formulating the Second Five-Year Plan. The rate of labour force growth is currently accelerating and is expected to remain high for quite some time to come. If the past patterns continue, the country will soon be confronted with an employment crisis. This paper analyses the past experience in an effort to identify the problems that must be urgently addressed. It then proposes a few ideas for future policy.

1990-91 Budget and Some Issues of Macroeconomic Policy

1990-91 Budget and Some Issues of Macroeconomic Policy Ajit K Ghose A second look at the analytical propositions guiding the 1990-91 budget proposals against alternative theoretical schemes of the relationship among deficit financing, inflation and trade balance THIS note does not attempt to provide an assessment of the fiscal measures proposed in the union budget for 1990-91. Several such assessments are already available and there is not much that can be added. The purpose of this note is to raise some questions about the analytical propositions which appear to have guided the formulation of the budget proposals. These propositions are about the short-run functioning as well as the requirements of long-run development of the Indian economy. The plausibility of these propositions is by no means established. They, therefore, need to be discussed and scrutinised not so much because the inadequacies of the present budget arc thereby highlighted as because the development of a sound analytical basis for future budgets is clearly desirable. It is in this context that this note discusses both the ideas implicit in the budget and some alternative ideas.
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