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

Special IssuesSubscribe to Special Issues

Must Banks Be Publicly Owned?

Even as analysts and policymakers in the United States and Europe are debating whether nationalisation is the best option to deal with the crisis in the banking system, governments have already opted to hold a majority of ordinary shares in the expanded equity bases of leading banks. Objections aside, the scale of the crisis portends that the need to inject more capital into the system will only grow. In addition, deregulation and the transition in banking from a structure that was based on "buy-and-hold" to one that relied on an "originate-and-sell" strategy almost certainly points to the need for a publicly owned banking system to ensure the proper functioning of the private sector.

A Crisis of Distribution

This essay examines the consequences of the global economic and financial crisis for income distribution. It first discusses the distributional background of the crisis, which is followed by an assessment of the impact, again on distribution, in different countries and then outlines the policy implications.

Those Who Forget the Regulatory Successes of the Past Are Condemned to Failure

Contrasting and analysing the role of regulation and regulators in dealing with two financial crises in the United States brought on by epidemics of control fraud - the us savings and loan debacle of the 1980s and the ongoing financial crisis that first became acute in the us non-prime mortgage sector - this essay argues that there is no substitute for effective regulation. Deregulation, which relies on private market discipline does not prevent or contain such epidemics. On the contrary, it fosters a climate that encourages them.

What Is Driving Global Deflation and How Best to Fight It

While the United States' emphasis on reviving banks and public spending are both important, neither addresses directly the main source of deflation, which is that the global imbalances are no longer being recycled effectively. The basic problem is not the imbalances per se, but the unsustainable way financial deregulation and neoliberal global order absorbed and recycled them. The us has lost much of its capacity to either absorb or recycle trade surpluses generated elsewhere. So, in addition to reasserting public control over the credit creation process, the us has to be prepared in case the dollar plunges in value, and focus on how to resume the recycling of trade surpluses before contraction begins to destroy them. The global monetary standard and thus the integrity of monetary reserves need to be safeguarded, and a recycling of trade surpluses would wean world demand away from its dependence on us overspending without the world getting stuck in a depression.

The Global Meltdown: Financialisation, Dollar Hegemony and the Sub-prime Market Collapse

An exploration of the roots of the current credit crisis in the process of financialisation, where profit-making occurs increasingly through financial channels rather than through trade and commodity production. This process and the explosion of private financial flows globally helped the United States preserve and establish its pivotal place at the centre of the international financial markets after the collapse of the Bretton Woods arrangements in 1973. It argues that the mechanisms that helped sustain growing global imbalances and preserve the role of the dollar as international money are under threat in the current crisis.

The Impact of the Crisis on the Indian Economy

The effects of the global financial crisis have been more severe than initially forecast. The turning point was the decision in September 2008 to let Lehman Brothers fail, an event that had a series of ruinous cascading effects. Given the depth of the crisis in the United States and Europe, it was only to be expected that India too would be affected. But India's well-regulated banking system and adequate policy responses should ensure that the fallout, at least on the banking sector, will be contained.

Understanding the Financial Crisis

This paper attempts to understand the nature of the current financial crisis by identifying the main characteristics of the system that became vulnerable to collapse due to falling asset prices. It highlights the shadow banking system, which lacked the explicit backing of a monetary authority on the one hand, and escaped largely its regulation on the other. This system fostered a circular rather than a vertical network of credit interdependence, which had its advantages but was also spectacularly vulnerable. The financial system may be stable and flush with liquidity through injection, but in the absence of sufficient demand for liquidity from the real economy, the depressive economic conditions may continue. The politics of trying to save capitalism by saving only the financial capitalists may well turn out to be the last twist of the knife from free market fundamentalism to pave the way for a deeper and lasting recession.

Banking, Complex Securities, and the Credit Crisis

This paper describes the current credit crisis and explains aspects of its macro and micro features. In particular, it describes the mechanism by which sub-prime mortgages and securitisation products helped to exacerbate the problem. In contrast to many other descriptions, it employs no advanced mathematical techniques, allowing non-specialists to appreciate the important dynamic processes at work.

The Economic Crisis and Contemporary Capitalism

A democratic agenda for coming out of the recession must have at least five elements: first, the nationalisation of financial institutions in the leading capitalist countries where they have basically become insolvent; second, controls on cross border financial flows; third, protection introduced to defend peasants and other petty producers of primary commodities (ideally through agreements among producing countries) in the case of all commodities whose world prices are "demand-determined" (as opposed to "cost-determined"); fourth, a coordinated fiscal stimulus to the world economy provided by a group of leading countries; and fifth, a system of grants whereby the increased surpluses generated by such a stimulus are given as grants to the less (or least) developed countries on the condition that they do not merely add these to their reserves.

India amidst the Global Crisis

Contrary to popular belief, there were palpable signs of the Indian economy losing steam long before the outbreak of the global crisis. But there is little doubt that the global meltdown has seriously aggravated the problem and made the task of reversing the domestic downturn much more difficult. For an adequate appreciation of the country's ongoing economic slide, this paper considers the domestic as well as the external factors at work both before and during the crisis.

Tackling the Current Global Economic and Financial Crisis: Beyond Demand Management

This paper highlights the depth of the crisis confronting the global economy. It presents the various ways of understanding demand deficiency, which was the underlying feature of the earlier downturns in capitalist economies. A resolution of the problems faced then was possible with demand management using Keynesian tools. But the current economic crisis is different from the past ones and the lessons learnt from the past may not be applicable to solving the crisis of 2009. The arguments presented here imply that demand management alone will not work because capitalism faces a basic crisis. One implication is that we need redistribution, but that is not on anyone's agenda today.

The Fate of India Unincorporated

While evaluating the Indian policy responses to the global crisis, this article focuses on the likely extent of the spread of the crisis to India and how it will affect the domestic economy. In India, exports have declined, foreign institutional investment has fallen, and share and real estate prices have crashed. The social cost of the slowdown has been unemployment. India's policy response has so far addressed the issue of reviving the real economy but has done little to build firewalls around the financial sector and provide safety nets for the vulnerable sections. Some measures which could go a long way towards attainment of the last two objectives are outlined.

Pages

Back to Top