Articles by Arun Ghosh

In the new world of international finance capital brave words such as 'India's fundamentals are strong' are meaningless. The gradual opening up of the country's financial market to short-term external capital as a prelude to capital account convertibility is fraught with the gravest possible dangers.

The 'puzzling failure of economics' highlighted by The Economist, London, in a recent lead article reflects essentially the underlying failure of the capitalist system. And since the socialist model of the USSR, model 1917, has also proved to be a failure, perhaps we are heading, after yet another crisis, for a revival of the 'welfare state' and each nation-state seeking its own pattern of economic development WRITING at a time when the financial experts are warily comparing the gyrations in stock markets around the world with the Black Monday of 1987, one is reminded of the cyclical nature not only of human tastes a la the length of ladies skirts but also of human beliefs. A bare few weeks back, the lead article in The Economist (August 23) talked of 'the puzzling failure of economies'. The article went on to conclude, 'This is not a failure of economics, in fact, but of modern (one might say Samuelsonian) economics". (Shouldn't The Economist have condemned John Maynard Keynes instead? Since it goes on to add that "Smith's Wealth of Nations conveyed this sense that the market, for all its 'failures', is a marvel"? But then, Keynes today is passe; Samuelson is still around and kicking.) Contrast The Economist view with the forebodings of Arthur Schlesinger, Jr in the Foreign Affairs of September-October 1997. In the lead article 'Has Democracy a Future?' Schlesinger discusses some of his deep concerns in regard to the future, "Democracy is impossible without private ownership because private property resources beyond the arbitrary reach of the state provides the only secure basis for political opposition and political freedom. But the capitalist market is no guarantee of democracy, as Deng Xiaoping, Lee Kuan Yew, Pionochet, and Franco, not to mention Hitler and Mussolini, have demonstrated. Democracy requires capitalism, but capitalism does not require democracy,,." Schlesinger goes on to conclude: 'The Computer Revolution offers wondrous new possibilities for crcative destruction. One goal of capitalist creativity is the globalised economy. One unplanned candidate for capitalist destruction is the nation-state, the traditional site of democracy ...Cyberspace is beyond national control. No authorities exist to provide international control. Where is democracy now?" One is deliberately combining (and identifying) the views of The Economist with those of Schlesinger. For, Schlesinger has categorically stated that "capitalism has proved itself the supreme engine of innovation, production and distribution. But its method ... is that Joseph Schumpeter called 'creative destruction'." Alas, nobody seems to attach any importance to Schumpeter's last great work.

Break-Up and Privatisation of SEB in Andhra Pradesh An Upcoming Scam Arun Ghosh THERE is a new proposal, mooted by the highest political authority in Andhra Pradesh, to break up the Andhra Pradesh State Electricity Board (APSEB) with a view to privatising generation, transmission and distribution. This follows the wholly incorrect and motivated advice of the World Bank to 'unbundle' infrastructure facilities with a view to their privatisation, and the ostensible excuse for this move is the report (submitted in April 1995)of the Hiten Bhaya Committee, two members of which are known to have been making good money as World Bank consultants for the power sector. Since no private party would touch distribution (except in and around the industrial belt of Hyderabad), effectively only generation and transmission of power will get privatised. The process would be wholly to the detriment of the people of Andhra Pradesh and in fact would offer enormous opportunities for private 'rent seeking' (and money making by those in authority, in a position to decide on whom to bestow favours) in regard to the sale of different generating stations in Andhra Pradesh and the existing transmission network. Apart from impeding all future development of the power sector, it would raise the cost of power to consumers and be a major set-back to the development of the state.

The main contours of the new economic policy are the withdrawal of the state from economic activities; the increasing reliance on private capital, especially external capital for development; privatisation of public enterprises and fiscal and monetary policies essentially devised to attract external capital. These policies have not only been continued by the United Front government but have received further emphasis in the Budget 1997-98.

Economics of Collaboration: Indian Shoemakers between Market and Hierarchy by Peter Knorriga; Sage Publications, New Delhi, 1996; Rs 295.
ONE should commence with a brief personal note. When I was persuaded to review a book on the (small scale) shoemaking industry in Agra, I had no idea that I was being asked to review a fascinating study which, on the one side, examines the hypotheses of modern micro-economic theory of rational expectations, of transaction costs, of organisation theory and on the other, examines (in some depth) the economic- cum-sociological impediments to economic development in a world of both increasing opportunities and increasing uncertainty. For that is what Peter Knorriga's study, full of deep empathy, is all about. It is an attempt to analyse the process of actions and operations, the motivations, the opportunities and the compulsions, in the small-scale shoemaking industry in Agra. The opportunities are clearly there; but then, so are the compulsions. One could differ as to the final conclusions we would revert to that issue later but one is left admiring the painstaking manner in which both quantitative data and qualitative assessments have been combined to get into the heart of Agra's small-scale shoe industry. The behaviour pattern of different agents' is examined in terms of the theory of rational expectations; the 'transaction costs' of different organisational modes are analysed. The compulsions of highly skilled workers- cum-entrepreneurs (belonging to the jatav community) in a situation of unrelenting labour surplus, and a background of social 'exclusion' -emerge clearly, from Knorriga's deep understanding of the sociological barriers to greater (and more productive) interaction between the ' market agents' and the skilled artisans (the producers-cum- household entrepreneurs). Finally, the procedures adopted for data collection and analysts must serve as a model for future studies of this type, relating to the myriad 'entrepreneurial workers' in diverse occupations in all developing countries.