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

FinancialisationSubscribe to Financialisation

The Tax State and the Conundrums of Public Budgeting

This article elaborates on two broad trends that are shaping the public budgets of nations: (i) the tensions of globalisation and its implications on the tax state; and (ii) the process of financialisation. It shows that these two lenses can be employed to understand many of the proposals in the current Indian budget, and indeed even future budgets. They foreshadow the increasing status quoism and incrementalism that has come to mark public budgeting exercises the world over.

Today’s Mainstream Economics Is Science Fiction, Not Science

Today’s gross domestic product accounting format treats many examples of economic rent as “product,” not as zero-sum transfer payments. The result is to give rentier activities, above all, those of the finance, insurance and real estate sectors the illusion that they play a productive role rather than merely transferring income from debtors, clients, and renters to creditors, monopolists, and landlords. The contrast between productive and unproductive economic activity was central to 19th-century classical economics. The major aim of its value and price theory was to isolate economic rent as unearned income—revenue that was not an incentive for playing any productive role, but was simply a return to privileged property rights.

Monetary Economics of Fascism and a Working-class Alternative

Fascism is the usurpation of the economic process by the elite and the related decimation of the working class and the poor. This process is represented by the shrinkage of fiat money backing the production of goods and services and its substitution by financial instruments. This domestic coup is accomplished by the spread of what is generally referred to as “false consciousness.” The tools of basic economics can be fashioned to introduce students to these concepts. Mainstream economists continue to demonstrate the different ways utility functions can be manipulated.

Futures Markets

The National Agricultural Policy announced in 2000 recognised “the role of the futures markets as one that would contribute to price discovery and would help in risk management by reducing volatility in the prices.” The rationale for futures markets is that they reduce uncertainty, but with the online trading system replacing the open outcry method, there has been a large flow of investment capital. On the one hand, liquidity is required for efficient functioning of the market and on the other, it may lead to excessive speculation, therefore defeating the objectives of price discovery and reduction in uncertainty. The analysis of futures markets begs the question with respect to agricultural commodity markets: are prices determined by real supply and demand or are they affected by financialisation and presence of speculators?

Reforming the Risky Financial System

Other People's Money: The Real Business of Finance by John Kay; New York: Public Affairs, 2015; pp 352, $27.99 (hardcover).

The Changing Face of Indian Banking

Indian banking is passing through its most severe period of stress in over a decade. It is important, however, not to draw conclusions for banking policy from a snapshot of the most recent period--the totality of the post-reform experience must be taken into account. That larger experience shows that India's public sector-dominated banking system has served the economy well by improving its performance in respect of both efficiency and stability. Looking ahead, changes in governance and management are required, but it is possible to effect these within the framework of public ownership.

Fatal Flaw in Private Banking Systems

It is in the interest of banks to expand the supply of credit, and most banking regulations are designed to limit this tendency. It is in the interest of private bank managers to give in to this tendency (in self-interest) and provide credit indiscriminately, irrespective of macroeconomic considerations, as the 2007 crisis has shown. Perhaps we could all learn from India’s risk-averse public sector banks, which are stressed from time to time, but have never seen multiple bank failures. 


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