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    Global Capitalist Crii:

    A Mait Pepective

    by

    m Yh

    Dm :

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    ISBN: 978-81-906218-2-3

    November 2009

    ublhd by

    Peoples Demcacy

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    CPI(M)s SuggestionsFor Protecting ndan People 072 New Contradictions and Probe 13- Sitarm Yechu

    3 The Baoon Bursts! Sitaam Yechu

    4 Neo-Libeaismn the nk ofFaiure -Prabhat Patnaik

    5. Te Paradox ofCapitalism 3

    -Prabhat Patnaik6 The End of the usion Prabhat Patnaik

    . e eat ofGobalRecession 4CPChandrasekhar

    8 Lengthenng Shadows ofGobal Recession 49- EditorialPeople s Democracy

    9 Another World Depression? Finance Capita andN eoDeationsm 5

    UtsaPatnaik1 FinanceCapita and Fiscal Decits 5

    -Prabhat Patnaik11 The Tuth About Finance and arkets 6

    Jayati Ghosh12. Is teCrisis TransfongGobaFinance? (

    CP Chandrasekhar13. eGlobalFinanciaConity 7

    -Prabhat Patnaik14 Global Trade in a Time ofCrisis

    CPChandrasekhar15 HowGeedy SpecuatorsConoComodity ces 8

    - Jayati Ghosh16 Globa and Loca Ination teContext

    ofRisng Urban Povety - UtsaPatnaik

    1 Capitaisms Logic: Prots Before Peope g EditorialPeople s Democra18 Greed asaExplanation ofCrisis 1

    PrabhatPatnaik19 How the US is Puling Down Asian Econoes 15

    Jayati Ghosh

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    . Bwn Bubbes he Bus CPCadraekar

    1. e Onon Indus Recesson 15

    ayat Go2 Cptsms Open Sece 11

    CP Cadraekar. Cono Fuds 16

    Jayat Go4. GowhFo W hom

    - dtoralPeople s Democra. ISech of Re Smuus 33

    Jayat Go6. M Smuus Pcke Bkn up e Won Tee 3 dtoralPeople s Democra

    . Govs Mus Injec Demnd no e Economy Decty 4PrabatPatak at UN

    8. Is he Pesen CssRcdn 46PrabatPatak

    9. L nd Mxs Economcs 151

    Pbat Patak3 Cn nd WodCpsCss CPCadraekar

    31 Cpts Socsm ndCss Prabat Patak

    3. Socsm nd Wefsm Praat Patak

    33. Wod Cps Css nd Gown Rcs Acks 6 Staram Ycu

    3 Chenn IeFnnce 9C PCadraekar

    35. Ies oc NoAcceptbe 1EdtoPeople s Democracy

    36. Is teGobRecesson Ove 1C P C'draekr

    3. Is e WodCpsCss Ove 19 Praat Patak

    38. FnnceCpRessts Is Supemcy AG 19Prabat Patak

    39. TheRequements of A NewResee CuencyReme Prabat Patak

    4 Te Economcs of te New Pse ofIesm Prabat Patak

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    f

    The world is into the second year of recession since the outbreak ofonomic d nancial crisis whose intesi is unpalleed sincee

    Sond World War. impssion is being creat now that e crisisis getting over. But the current world capitalist crisis is such that if itdoes not appear in one paricul fo thn it willppe in a dierentfo I essence the capitalist crisis is iherent in the system and itsvirlence is not liely to subside

    The crisis has aected the people world ove and there have been

    attempts by imperalism to shi its burden to people in the underdeeloped counes nde woring people ofe develop natiosThe CPI () trou its mouthpiece Peoples Democcy has beenanalysing the causes d shiing contours of this crisis over the last

    two ye Aseltion of such mate has been collt nis volumewih the beefat e na1sis pset h will be n id n advnge strle aganst the capitalist system.

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    IMPACT OF GLOAL ECONOMC CRSIS

    CPI(M)'s Suggestions Forrotecting ndian eople

    E CP(M) has rged pon the UPA govement to abandon ts sca fndaentast approach and nstead focs on ncreasng the prchasngpower of e conon an Ths s he only way to overcoethe adverse pact of the nfoldng global econoc crss on oreconoy and peope

    CP(M) Polt Brea eber Stra Yechry released a set of concrete sggestons on protectng ndan peope fro the global econoccrss n a press conference at AG Bhavan on Noveber 72008

    Fa1tng the nohan Sngh govement for not acowledgng thereal case of ths gobal crss -e baptcy of neolbera globalsatonYechry advsed t to at least follow the kes ofFkuyaa Sarkozy

    Merke and even baa who have a11 caled for restructurng captas He sad the fndaenta proble wth the govement s ts wrongdagnoss of the crrent crss de to whch ts wrong prescrptons arefa1ng to yeld rests They are barkng p the wrong tree The weak

    ness es wth the borrower and not ender ncresng lqdty n thesyste wll not sove the proble as ong as the borrowers capctyand solvency are ncreased And for ths the govement shold generate epoyent strengthen agrcltre and ths generate deand"

    He tered as ogc the govements reyng pon one snge polcynstrent to acheve twoocy goas controng naton and reversng growth slowdown

    echry abasted the govements refsal to brng down the prces

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    8

    of diesel and petrol by Rs 4 and Rs 2 respectively in view of the hugedrop in the intemational oil prces (fro around $40 per barrel to below $60 per barrel) He contrasted this to govements decision reducing the price of Aviation Turbine Fuel (ATF) by a whopping Rs 26

    per litre in the recent past Along with this the excise uty on AT hasbeen reduced by Rs 80 per litre. This is nothing but giving a bonanzato corporates at the expense of people" he said and announced thatthis wiIl be ae an issue in the polls to the ve state asseblies.

    Yechuy objected to pre inister eeting only the corporate bigwigs

    and bankers to discuss policy responses while not carng to interactwith either the state govements rade unions or oter organisationsrepresenting sections of the people who are facing the brunt of theadverse effects of the crsis He deanded a wide ranging dialoguewith all sections of people by the govement before takng policy decisOns

    Below we give the full text of the press release issued at the press

    conference.

    t is clear by now that the global nancial crisis has graduated into aglobal econoic crisis of serious proportions The advanced econoiesare set to experience a protracted recession and the developing countries across the wold including the ndian econoy wi11 also be adversely affected.

    The A govements responses to this evolving situation howeverhae been extreely disappointng. Ever since the govement has coeout of its initial state of denial the easures adopted by it reect on theone hand a sheer lac of coprehension of the causes behind and the

    proportions of the current crsis and on the other hand a procliviy towards appeasing yriad nancal interests and coorate lobbies. hefact that the A goveent is relying upononly one policy instru

    ent naely the interest rate to both control inlation as well as reverse the growth slowdown beays the illogic behind its policy paradig t is a rudientary lesson in econoic theoy that two policygoals cannot be achieved using a single policy insruent

    The A govement has so far chosen to eet only the cororate

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    bigwigs and bankers in order to discss policy responses; neither havethe state govements nor other political paies trade unions farers'

    organisations and other organisations representing crcal stakeholdersbeen consulted. t is indeed sange that at a tie when the neo-lieralvision of ptting corporate prots over peoples interest and relyingpon trickle down econoics is getting discredited across the worldthe econoic anagers of the UPA govement are cliging on to it Inthisbackdrop the CPI(M) is ptting forward a set of concrete sggestions in order to tackle the adverse ipact of the global recession on theIndian econy and protect he interests of the people

    Broad-based Growth through Fiscal Stimuus

    A special scal package shold be annonce by the cenalgovement directed at increasing pblic xpenditre in wayswich increases the incoe and consption of the workingpeople especialy the vulnerable sections and ensre broadbased growth.

    : is is an appropriate tie to expand the scal decit not onlyby the central govement bt also the state govements heFM Act shold be scrapped and a coprehensive debt relief schee for the stte govements adopted to encoragethe to adopt expansionary scal stances

    Protecting Existig Jobs

    : Protection of doestic jobs st be the priority of the govement n the backdrop of the globa recession

    : he govement shold annonce a oratori onob or wagects in the organised sector in the interest of the nationaleconoy since sch job or wage cts wold frther depressdeand and aggravate the sitation The extant labor lawsshold be dly invoked by the state govements to preventretrenchents and lay os .

    : e brden of cost adjsent shod rst fall on prots andexective pay which have ballooned dring the recent periodndia reqires an Incoes Policy whereby exective pay islinked to prices and the ini wage eamed by workers

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    massve scale The g

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    2

    Reglation (Amendment) Bl te State Bank of Inda (Amendment) Bi1l and increang e FDI cap in e inrance ector

    from e preent 26 per cent o 49 per cent Pnsion Rrms Penion reform old e aandoned y

    e PAgovement and te PFRD A Bill crapped Te Pen-ion Sceme for govement employee old e reworkedto

    enr minimm garateed penon

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    Ne Contradictions and Problems

    Sitaram ecu

    Intevention of Sitaam Yechy in the 10. nternatonalMeeting of the Communist and Woke's Pates

    2-23 Novembe 2008 Sao Pauo Bazi

    e uent isis of intemational nanial apital that speaheadedipeialist globalisation in the last two deades is by uh estiationfa gave than any othe isis in the histoy of apitalis. e isis isstill unfoldig d i ful1 iations will be ealised only uh late.

    Many feel that we as Maxists u feel esoundingly vindiated thatKalMaxpeneative analysis of apitalis has one again povenitself to be ue Maxists do not deive satisfation fo the vindiationof thei wold view and evolutionay analysis at the expense of the uin

    and isey of illions of vitis of this apitalist isis. AsMax hiself one said Nothing huan is alien to e" Maxists wok to ensue that e oon woking people ae not subjeted to suh inhuan epidations beingat the ey of the ule of Capital. ls shalhappen only when we hange the wo1d" not eaining satsed withthe oetness of ou ntepetation of the wold".

    MaxisLeninis is inheently ateialisti eative and ininsial1y

    dialetial t is hene supeely antidogati. I is a woldview thatebaes the vision of libeation d expesses eanipto ideals. is a tool fo undestanding and analysing the ultitudeof phenoenathat onstitute hanging istoial situations It is a guide to ation thatdenes pogaati 0eives fo the peoples stuggle against al1fo o exploitatio subet to the neessay adaptations as equied

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    m-

    WAs a reatve seneMarxsmLennsm dentes the tendenes and

    dretons of development dong so t provdes the possbltes forpopar ss ntventon n these developments n the pursut of establshng an explotatonfree soety

    It s hene nmbnt pon all MarstLennsts to mae a onreteanalyss of the onrete ondtons both nteatonally and domestally n eah ountry and on that bass to ha out the ourse of human

    lberaton Captalsm as Marx has shown s a system that s based onthe explotaton of n by man and naton by naton I an never be arssfree systemHene the e emanpaton of hunty om suhmseres s possble only through a lberaton from the aptalst system

    Two deades ago the aptalst world was n a state of delous euphora n the buld up to tearn down the Berln Wall Ths was aompaned by vtratve deologal offensve: nd ofHstory End ofdeol

    ogy et There was great delgt at the ollapse of ths wall thatsymbolsed n many ways the Cold War and world soalsms powerto onfront mperalsm n all respets. The ollapse of the Berln Wallhas been elsed by the vrual deleton of aptlsms so far onsdered mpregnable wall the Wall Seet he bg ve' gobal nvestment banks Bear Stes Lelnn Brothers Merrll nh MorganStanley and Goldman Sahs that ed and lorded over the world ofmperalst globalsaton have ether been lqudated or seerely emasulated

    Suh has been the gravty of the rss that the most unabashed votaryof aptalsm Economis desrbes t as aptalsm at bay". Refeng to the spate of balout pakages advaned n varous westeaptals t says that the future ponts towards a larger ole for theState and a smaller and more onstraned prvate setor and hopng

    profondly that ths wll not happen".World aptalsm has embarked on a spate of natonaltons that wouldhave surprsed the former soalst USSR. When the tme to defendaptalsm om suh a rss omes all deologal attaks aganst Stateor publ propery and natonalsaton wth the aompaned extollng of

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    hghy gobay mobe suckng in nance captal om indivdua con-tres domnated by nance captal orignatng om the advanced coun-

    ies. Further ths nance capta is more preoccupied in ts search forquick specuave gans raer han i amalmation with indusa captaleadng to economc development. t therefore try represents theparaste that thives at the expenseofreal economic growth.

    The emergence of this nance capal s an mpoant factor that explans the relativey low growth rates accompaned by hgh unemployment rates in the advanced countries. Ths happens because n order to

    appease inteational speculators there is a compettve reduction intax rates and restrctions on the sze ofthe scal dect. other wordsgovements are foced to cut back expendtures and thereby deateboth empoyment and domestc dd eadng to lower rates of ow

    Ths n u leads to a siuation where the advanced counies tu tothrd word economies and intens expotaton The mposton ofneoberal pices serves ths purpose of removng obstaces to the

    ee operation of intatonay mobie nance captal. addton tseeks to impose a new form of inteatonl division ofabou th tmenot through drect colonal occupation but through coercing third ordeconomies to dovetail to imperiaist nterests." t is the consodation ofs proess over the last decade that laid the bass for th currentcss

    Mas anayss ofcapialsm tes us that as caplism deveops theres the tendency for concentration and cenalsaton of capial As hesad over a perod of time there wl be fewer and fewer but larger

    and larger capialists". Accumuaton under captasm is thus a coer-cve process 80 is the process of technological nnovatons Withoutether ofthese the captalists cannot sive the rat race where the bigsh consumes he small sh. is ths processes that has led to theintatonalsaton ofnance capa to ntc leve\s hierto uno

    in captalsms hstory t is his process ofglobalsation that erasmutilses to seek its poltcal obecive of economically recolonisng thedeveloping counes

    Two mporant features of globalisation however requre attenton tounderstand the present crsis. First ths process has been accompaned

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    19

    Prots thus can be generated only throgh exploitation. The overthrow of capitalism is therefore not only a moral qestion t s a scien

    tic necessity if exploitation of man y man mst end if hman emancipation has to e achieved

    s Kil Marx conclding his chapter on the genesis of theindstrial capitalist states: Caital coes dripping om head to footfrom evey pore with lod and di". He tesses ths with a qotein a footnote om a worker and ade nion leader (Max conscioslydrew on the tings and expience of workers to validate his analy

    sis) T. J. Dunning: With adeqate prot capital is vey oldA certain0 per cen will ensre its employment anywhere; 20per cent will pro

    dceeageess; 0 per cent positive adaciy; 00 per cent will keit ready to ample on al1 hn laws; 00 per cent and there is not acrme at whch t wll scrple nr a risk it v n tothe chance ofits wner eing hanged is this pathological drive to maximise protsat any cost the inherent character of the capitalist system andnot the

    ndiVdaled of some or weaess of reglatory mechans that isthe root case for the present crisis

    Uner glo1isation y awisting all independent conies to emrace nancial lieaisation the avenes for sper prots were enlarged thogh hitherto own levels of speclation. ost crsis'ispresse is ond to intensiseeng eener pastes in he ird wod.S this process of gloaisation has once again shownitself to e

    simply nsstainale. Conseqentlygloalisations ideological skneo-lieralism has shown its thorogh anptcy.

    If prots were reemployed into enlarging prodctive capacities thenthrogh the conseqent employment generation the pchasing powerof the people wll grow leading to larger agegate demand which in wold give a frer mpets to inda1iztion and growth of thereal economy The gigantic accmlation of inteational nance capi

    tal however given the herent laws of capitalsm spercedes ths process eeking predatoy prots trogh specation in fact decites tis process y envelopng it der the specatve nancal leThis is similar to when monopoly caital emerging om free competition decites the latter completely

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    To suise: nder globalition with sharp decline in the purchasngpower in the hands of the majorty of te worlds popultion nancecapital in its eageess for quick prots chooses the specative routef arcialy enlargng purchasing wer by advancing cheap (subprme)loans Prots are made while these loans are spent but when repayment is due comes default ruining the loan taker also crppling thesystem. To put it simpl as seen above this is precisely what happenedon a gigantic scale Capialisms supreme diabolic irony lies in the factthat in he name of protecting those who have already been ruined the

    banks and acial institutions are bail out usng payers resources!

    ndeed privatization of prots and the nationalization of losses! thepress intensiing exploiation further

    Ma smmarises the inherent dynamics of capitalism and its historicaldirection The monopoly of capial becomes a feer upon the mode of

    pructon which has sprug up and ourished along with and uder itCenalisation of the meas of production and socialization of labour atlast reach a point where they become incompatible with their capitalistinteent This integument is burst asunder The ell of capitalistprivate propery sounds The exproprators are exproprated" n theabsence ofa powerl socialist polical altative however capitalismreemerges om every crisis through new expropriators by desoynga part of the productive forces to keep intact or create new protavenues rather than using these resources for peoples we1fare Thetre inhuman character of capitalism

    Clearly therefore the cuent phase of imperalist globalisation ad itsideologcal cosctneo-iralismaps to have its ll coseWhatever be the form and content of its resuctrng capialism isinheretly an xploiatve and a crisisrdden system This is engendered in its fundamental conadiction between its social natre of production and the indivdual nature of appropration As the CP)sProamme notes Despite the fact that the intational correlaon of

    forces favour imperalism at the end of the wentieth century an capitalism continues to deve0p productive forces with the appication ofnew scientic ad technological advaces it remains a crisis-riddensystem apa from being a syste of oppression exploitation andiustice The only system which is an alteative to capitalism issociali"

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    The ineabiiy of capiaisms coapse isno an auomaic processCapiais has o be verron erroneous undersanding ony buns

    he need o consny sharpen nd enghen he revouionary ideoogca srugge of he woring c nd s deisive inervenion underhe eadershi of a pary wedded o mLeninis he suecive facor ihou which no revouionary ransformaion is possibe. hose conries where his process is advancing ie in ain Americawe have aready seen he eecora defeas of he neoibera forces

    he absence of he adance of he revouionary moveen capia-

    ism wi reerge in a differen fon o considae is pedaory searchfor pros As Mar and Enges said in he Communist Manesto hebourgeoisie canno eis wihou consny revouionising he insu-mens of producion and hereby he reaions of producion and wihha he woe reaions of sociey"Bu such a reeergence of capiais woud be a a remendous cos. Remember he ea depression of929 aid he foundaions for he rise of fascis.

    A he effors ha we are winessing odayhe baiou pacages scapoicy measures ec as spe by he G20 sumi are effors by hecapiais cass o reform he syse and reain heir hegemony a anycos and ensure ha peope do no o a sociais aeaive. Thoughhere were saemens ade by Frce and Gey accusing US and

    Briain as responsibe for he crisis hey are ogeher in heir effos osave capiais and preven he advance of Lef The curen capiais

    crisis eingy demonsaes he vacuiy of he eeay" of capia-ism No aoun of refor of capiaism can mae i an epoiaion eesysem The ony way for hiys iberaion o his epoiaion ishe esabishen of a sociais sysem

    e objecve condiions opening up ssibiies whic we can uisein senghening he popuar movemens for ending a sysem based onepoiaon of man by an I is imperaive o uiise he objecive siu-

    aion and inevene o advance he movemen for socia emancipaionOny few days bac he enire word had obseed he 9 s anniv rsaof he Ocober Revouion The eperence of sociais in he 20hcenry demonsaes ha he disineaion of he USSR and foersociais counries in Ease Europe negaes neiher he revouionary

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    science o Mismnnism nor e pursuit o te sialist ideaa-ing om its experiences and dawing te coect lessons om its disin

    tegration we ave to cay orward te sggle or socialism Tisrequires as noted above te sapening o class struggles o advacete popularevolutionary movement. Tis advance in te mmediatecontext wi ave to be taken orwad in ea o our counies wileworng or te convergence o te worldwde antiglobaisation move-ments into a migty antiimperiaist peops movement

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    Te Balloon Burts!

    Sitaram ec1

    THE super pros beng reped y neonl nnce cpl wsoenporryed s bln h could nle o nfny The perodccrses lke he colpse of he Souh Asn Tgers" n he 990s or hecol1pse ofS hedge fund ong Te Cpl Mngemen decdego nd he nsolvences of mor nncl gns n hese yers of he2 1s cenu were l eed s mnor rupures h coul be repredlke puncres n yre Gven he unsusnble chrcer of

    glblson he bl1n hd o burs nd h dd

    ehmnBrohers Holdngs Inc. he fourh lrgesS nvesmen bnwh $613 bll of deb hs l for bnupcy. The 158 yerl hd he repuon of survvng he rl rod bnupces n he secondhlf of he 9h cenury nd e Gre Depresson of he 1930s Thefc h s col1psed now s ledng mn o conclude h hecuen crss of neonl nnce cpl s deeper hn he GreDepresson

    Th me however does no end here. Merrl1 ynch hd o enerno dsess sle wh heBnk of Amerc for $50 bllon The nsurnce n Amercn neonl Group (AIG Inc hs ued o he

    S ederl Reserve nd he se o w York for sssnce A heme of gong o press he S ederl Reserve hs greed o n $85

    b11onblou for AIG o ver possble nncl crss wordwde"Clery s slde o dsser s no gong o sop here. The crss sbound o nensfy ffecng us n Ind very seerely s wel1.

    The ehmn bnupcy hs reporedly wped off more hn Rs 2000crore from he mrke vluon of Indn compnes n whch heS

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    nanca gant made equy nvesments Mei Lynch hch hadgoba assets of aound $25 tr had R 34705 coe n Inda as ts

    assets at the end ofMarch 2007 t has been pesent n Inda snce 184and has sx mao oces empoyng ove 600 peope Its future s nounde a bg queston k

    NEVABLE ONSEQUENE

    Both Lehman and Mei Lynch succumbed to the subpime mot-gage ciss tat they heped ceate n the st pace. h css s an

    nevitabe consequence of the pa of gobasaton that s nfodng necent decades

    o mpotant feaues of gobasaton eque attenton Frst thsprocess has been accompaned by going economc nequates boith contes beeen the ich and poo and beteen the ch andthe poo countes. he Human eelopment Rort 78cons ths th ndsputabe statstcs Foty per cent of or1ds

    popuaton ng on ess than $2 a day accounts fo 5 pe cent of gobancome h1e the ichest 20 pe cent accounts for tee quaters ofo1d ncoe.More than 80 pe cent of the od popation ves ncounies here ncome dffeentas ae idenng

    Seondy gobasaton has gven ise to the phenomenon of obessoth. he oh of empoyment has aays been oe than theGDP groth ate gobay. Both these featues put togethe mean that

    thepuchasng poe of the vast maoriy of the od ppuaton hasbeen decnng. No captasm neviaby punges nto a ciss henhat s poduced s not sd Unde these ccumstances the ony aythat captasm can sustan ts ees of pots s by encouagng peopeto pocure oans hose spendng 11 mantan the eves f economcactty oeve hen the tme comes t epay these oans thee sthe neviabe defaut

    hs s precsey hat happened n the USA n e cuent subprme(oans gven at nteest ates oe than the prime ates) ciss eadngto a shap fa n housng pces th arge defauts on home oans sadvesey affected nanca s that hed deivatves on home oansSme of these have aready gone banupt and many othes ae on the

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    Britain the British Treasury under the inuence ofBritish nance capital had suaily tumed it down. Likewise all proposals for a coordinated expansion of govement expenditure across ajor counriesooted for instance by a group of Geran rade unions and also byKeynes hiself were shot down even in the idst of he Great Depression of the 1930s. deed Keynes reained a neglected gure inhis own country prior to the war Even Roosevelts New Deal whih isoen supposed to have been inspired by Keynesian ideas was a prettytepid affair n the beginning e oent an increase in pblic expenditure through a larger scal decit had started off a recovery in the US

    Roosevelt nder pressure o nancial interests cut ack the scaldecit precipitating another recession in 1937 o which the Seconoy nally cae out only when war preparations began towardsthe end of the decade.

    Notwithstanding the availability ofthe Keynesian prescription capitalis recovered o the Great Depression only through war preparations Japa was the rst to overcoe Depression throgh the re-araent drie of its ilitary-fascist regie and was followed by Gerany aer he Nazi takeover. ieral capitalist econoies overcaeDepression only towards the end of the thirties when ey began ing against the fascist threat And the reason for this persistence ofDepression lay in the ndaental opposition of nancial interests toenlarged public expenditure (an opposition overcoe only underfascis where they directly control State power in alliance ith

    fascist upstarts and where larger public expenditure is in any case forilitaris).

    The reason or this opposition lies above all in the fact that any proactive role ofthe State in operating a capitalist econoy undeines thesocial legitiacy of the capitalists: if the State can run enterprises effectively ifhe State is required for the sooth running of the systethen why have capitalists at all? is question acquires even greater

    pertinence in the case ofthose capitalists who represent nancial interests and consttute in Keynes' words functionless investors" anyway.Hence rescting the role of the State to erely prooting its owninterests (whose prootion is ade out to be necessary for society as awhole) is what nance capital always wants.

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    Ths opposition was overcome in the post-war years only because of arelative weakening ofthe psition ofnance capita The war changed

    the coe1ation of class forces in advanced capitaism: there was a certain dec1ine i the socia and pitica weight of nance capita and acoesponding increase in that ofth workng c1ass which marked theascendancy of (odsy)e Socia Democracy and pavd e way for theinroduction.fKeynesian dend management But wth the processof cena1isation of capita giving rise to the formaon ofhuge blocs ofnance and utitel to the phenomenon ofglobaition of nance"nance capia in the new garb of inteationa nance capita reacquired the strength to overcome Keynesian demand management andusher in the regme of neo1iraism and goaisation Finance capita1sopposion to ate ctivism in shor never disappeared eVen in e heyday of such activism

    APALS HARAERSEDBY PARADOXES

    This expains why inteationa nance capia een at this moment isess than happy with sca stimui in the for of1arger Sate expendiure (whch for poica acceptabi1ity at arge have to be directedowards the wefare of the peope It woud raer have the State usjngpubic nds to bai out the nancia system (without dsurbing eposiion ofe 0ers unti1 e next bubb comes ong to initiaterecovery I is insuctive in ti ontext that in ndia whi1e he gove

    ment has accepted the need for a arger pub1ic expendiure stimulus ithas de1y ied to use this stimulus for arger viabi1i gap fundingunder PPP ie for puing more pubic money in capiaists hands

    This opposition to sca stimui wi certan1y delayrecovery which wproong e disess of workers thrown out of obs and of peasants dpetty producers suffering om averse terms ofade This wi11 brnghome to people in an even more stark fashion he bier consequences

    of neoberaism snung out any remaning chances of ts mang acomeback inance capitas opposition to any abandomet ofthe neoibera tenet herefore wi11 paradoxicay undermine even furhe theprospects of sva ofneo-iberalism But then capiais not being aplanned system is aways characterised by such paradoxes

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    3

    There is an even deeper reason apar from the peasve demand forreglaton" and the fact that the crss s kely to be a proracted one

    why neo-lbera!sm has reached the end of ts tether. y capta!steconomy wth free" asset markets especaly ee" nanca! assetmarkets s rked by the foaton and brstng ofbubb!es" n schrkets Whle the foraton of bbb!es" strengthens the oom thebrstng of bbb!es" p!nges the economy nto a s!mp It recoversom the smp only when some exteal" sorce of demand e. extea!" to he regme of ee market capta!sm" tsel happens to bepresent. Troghot ts hsto therefore whenever captalsm has had

    sch an extea! crtch t has perfoed well on aerage even asbbb!es" have been formed and brst e. even throgh the phenomenon ofthe spermpston ofbbb!es" The booms n sch saonshave been prononced whe the slmps have been re!atvely short orshaow snce the extema! crtch has been sed to the system ot ofsch s!mps On the other hand whenever sch an extea! crtch sabsent the system wesses Great Smps foowng he brstng of

    bbb!es". the pre-rs word war perod captalsm had the crtch of the socalled exndng onter". Mlons ofEropeans mated to temperate regons ofwhte set!ement !ke the Unted States of Amerca Asa!a New Zea!and Canada and Soth Aica and captred !and bying away the origna abants. erdrect and ndrect dendsfor goods and services n ther new habats ncldng for nasc

    te kept p te lee! of aggregate dend n world captasm andeven gae rse to sbsanta! capta! export om the o!d captalst conies mch of t nanced throgh the exacton of srpls omopca!co!ones ke Inda

    Ths process came to an end wth the rst world wa so that the nterwar perod may be seen as one where capta!sm dd not have any schextea! crtch It had lost ts earler crtch bt had not yet deve!oped

    any new crtch. Not srprsngly t experenced the Great Depressonn ths period Wth the brstng of the 1920s bbble" the s!mp thatset n co!d not be alevated throgh reQrse to any exteal crtchsnce the old crtch dd not exst and nothng new had taken ts place

    Keynes prescrpton that Sate expendtre sho!d provde a demand

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    raso ys assumd that an ncras n th mass of goods woudvntua1y bnt vryon ls not just n hs nablty to s thantagonstc natur of th captast mod of producton and ts antago

    nstc ratonshp wth th surroundng unvrs of pttyproducrs) butalso n hs bf that captasm s a mal1abl systm whch can bmouldd n accordanc wth th dctats of rason by th ntrntonsof th tat as th rprsntatv of socty H was a bral and sawth stat as standng abov and actng on bhaf of socty as a whon accordanc wth th dctats of rason Th wor1d h thought wasrd by das; and corrct and bnvont das woud clary rans

    lat thmslvs nto re li so that th ncras n manknds productvcapacty woud gt natura1y transfod nto an nd of th conomcprobm. f th antagonsm of captalsm was pontd out to ynsh woud hav spy talkd about stat ntrvnton rstranng thsatagonsm to nsur that th bnt of th ncras n prodQctvcapacty rachd al1

    Th fact that ths has not happnd th fact that th noous ncrasn manknds capacty to produc has transatd tslf not nto an nd toth strggl or subsstnc for th words populaton but nto a plthoraof al1 kinds of goods and srvcs of ttl bnt to t om a stockplngof aamnts to an xploraton of outr spac and vn nto a systmatc promoton of wast and ack of utlzaton or vn dsucton ofproductv qupmnt only undrscors th lmtatons of th lbralworld outlook of whch yns was a votary Th sta nstad of

    bng an mbodmnt of rason whch ntrvns n th ntrsts ofsocty as a who as lbralsm bvs acts to dfnd th cass ntrsts of th hgmonic class and nc to prptuat th antagonsmsof th capalst systm

    ANAGONS N HREE DISINWAYS

    Ths antagonsms prptuat n thr qut dstnct ways th strugg

    for subsstc n whch th bulk of mand s caught Th frst cntrs around fact that th lvl of wags n th captast systmdpnds upon th ratv sz of th rsrv ay of labour And to thxtnt that th rlatv sz of th rsrv ay of labour nvr shrnksblow a crtan thrshod lvl th wag rat rns t to subsstnc lvl dspt scant ncrass n labou productty as nc

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    workng of the system better aer al Max who died the year Keyneswas bo saw it bt perhaps his pper ass Edwardian pbringing

    ame in the way t what does one say of pople who having seenthe destittionhigh owh dialetis in the ontemporary word stillling to the ision that the ogi of ompond interest wi overomethe eonomi problem of manind? Neoibera ideologes of orsepropond this ision eithe in its simple vesion whih is the 'iedown" theoy or in e sighty more ompex version here the Stateis spposed to ensre thogh its intervention hat the enets of the

    grown mass of goods and sevies are made avaiable o all therebyalleviating povey and easing the sggle for sbsistene

    t this ision oen appears in an altogether neognible foefey Sahs the eonomist who is weow for his adminisationof the soaed shotherapy in the fomer Soviet Union that ed toa veritable reogression of the eonomy and the nleashing of massivesffeing o milions of peope has ome ot with a boo where he

    arges that povery in large pars of the word is assoiated with ad-verse geographial fators h as droghtproneness desetiationinferie soi and sh ike He wants gobal efforts to help these eonomies whih are the vitims of sh niggardliness on the pa of natrehe fat that enormos povery exists in areas where natre is notniggardy bt on the onary bonteos; the fat that the very bonte-osness of natre has formed the basis of expoitation of he proderson a massive sae so that they are engaged in an ate srggle forexistene pre isely in e midst of penitde and hene the fat that thebk of the worlds popation ontines to sggle for sbsistene notbease of atre s niggardliness bt bease of the inbs of anexp oitative soia order are al obsed by sh analysis Keynes faith in the mirale of ompond interest wold be sti in a soialis

    order bt not in a apitalist one

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    The End of the Illusion

    rbht tnk

    EO-ERASM specalsed seg a s aey that thefettered fctg f arkets th cdy arkes ad acal arkets csttted the est ecc aageet fr a scety.hs s had ee red the 130s y the peience f theGreat epress ad y the theoetical eneaus fh MayardKeyes a Brtsh era ad Mchae Kalec a Psh Mast Bt twas resrrected t serve a specc prpse. hs resrrect had thg t d wth ay theretca desat f the valdty f theKeyesKaec prpsts re the Keyesapescton frtherescg f captals had ted t t have ee preatca asdeed e wld expect wth ay eral paacea fr catas; tths s t the sae as sayg that the Keyesa analysis f the s fcaptals had ee prved wrg. he resrrect theefre was a

    theretcal seghtf-had.

    Behd ths resect were acal terests reacqrg hegey a ew caat after the setacks faced y the drg the Depress war ad edate pstwar years Keyes had caled fr theethaasa f the reter" ad the scalsat f vestet" hsvew the asc falt f the arket echas was that t cld tdstgsh etwee eterprse" ad speclat" s that the fet

    tered fctg f arkets ade the lvelhd fthe c pepledepedet the whs f a ch f specatrs Captals whsesrvval he had wated cld t hs vew srvve fhs grevsfat was t rected thrgh the sttasat fState tervet crcal spheres reatg t s fctg Resrget ace capta ts ew gased gar startg fr the late sxtes tk ts

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    3

    revege o Keyes ad decded o p he c\ock back. sod orposed hogh ageces ke he M ad he Word Bak s free

    arke deology al arod he globe. Whle Keyes had waed ace o rea aoal so ha ao-Saes cold have he aooyo prse eploye-proog poces gobased ace forcedao-Saes o ope her doors o s feered ovees adsed by vokg he llso of a ece ee arke.

    OUOME OF SPEULAION

    hs lso s ow over wo oeos rece deveopes cog oe aer he oher have shed o hogh oly oe of hese hascagh seros aeo. Ad hs s he hrea of coapse of he USaca syse ad wh a precedeed aca crss hecapals world. B he oher was o less seos ad ha relaed ohe precedeed psrge o pces ( ad assocaed wh food

    prces) Boh deveopes are he ocoe of specao oe casespecao ha mae some nancal paper worhless he oher

    case speclao ha cause a gh from nancal paper as suhno commoes vz. ol fres (ha had a sp-over effec ofoodgas wha follows we shal ook oy a he rs of hesedeve1opes sce ha s cely focs

    hs crss a fa-o of he sbpre edg crss he Ued Saess exceedgy seros Aa Greespa he foer boss of he ederalResee cals he crss ha happes oce a cey. Hs sccessor Be Bemake has frakly aded we have o cool ayore. he op ve vese baks he US have ceased o exs her prevs fos Bear Seams go ak over hrogh govemefaclao soe e ago Mel Lych was ake over by he Bak ofAerca der he govemes be sperso Leha Brohers a vese bak wh a 8 year d hsory decaed sef bakrp ad Goda Sachs ad Morga Saey have decded o ras

    fo heseves o orday desrecevg baks. vese bakg as a pheoeo Wa Sree s over wo oher aca gasae Mae ad Fredde Mac have go aoalsed o preve hercoapse ad A he words arges srace copay has svedfor he prese hrogh he eco of fds worh $85 o o hegoveme b hs s ea oy o gve e drg whch q-

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    4

    aohr h s i hous prcs rachs a plaau h borowrs arcaugh sho To pay back hir loas may o h ar h orcd o

    sll hir propy which brigs dow propy prics. Fially h imcoms wh h valu oh asss agais which h loas ar giv isway blow h magiud o h loas hms\vs. Tis is wh hacial paprs rprsig dircly or idircy c\aims upo ralsa ar worh oly a racio o hir ac valu ad h acialwold gs io a csis.

    Th secon acor rlas o h mrgc o a vas drvaivs"

    mark loa say or h acquisiio o a pic ohousig propry isypically hough o as a bilaral arragm btw h ldr adh borrowr. a od acial scor howvr h isks associad wih ay loa ar o logr bo xclusivly by h ldr buhmslvs bcom a markabl commodiy. Ths risks ar passdo o ohrs hrough h drivaivs" rk who i u pass hm oo si ohrs ad so o ll his howvr dos o ma ha h sks

    hmslvs disappar or dimiish; wha i mas is ha hr is a sysaic udrvaluaio orisk sic obody qui ows wha h riskassociad wih his!hr porolio o asss acually is This pic o-acial iovaio" hror has h sam c as h rs acormiod abov amly i lads o a udrsimaio osk durigay boom i ass prics which maks such booms or prologdad or prooucd ad h subsqu'collaps i h ass pricsmor prcipious ad hc or calamious or h world oac.

    Th hir acor has o do wih govm irvio Whvrsuch a acial cisis ivolvig gias i h mica acial mar- loos arg o h hori h govm sps i o bail ou hsgias. Such gov acio may wll b dicad by h dsir oavoid a rcssio bu hawarss ha h gov wi prod abai\ou also orks i h dircio omag acirs rckss mak-ighm udrsima rsks ad hc promoig spclaiv bubbls

    i h asspric arks whos bursig bcos v or dbiliaig ha i acirs had b mor cauious ad lss cod o agovm bai\ou Ecooiss rr o his as h moral hazard"problm Govm irvio copouds h oral hazard"problm

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    43

    oonens ofnancia liberaisaion" noaby he Le ha shoud akecredi he goes on o add ha ndias drive owads financia

    Iiberaisaion" wi coninue Here we have an obvious cse of irresonsible bravado which becomes ossibe recisey because his sanenscary no an ioa of analysis.

    he US isef even hough he govemen is baiin ou" he nan-cial gians i wi be under oular ressure o inic some uniivemeasures uon hem in he fo of a change of managemen andossiby ownershi Bu he baiing ou" even if i manages o reven

    a severe nancial crisis wi cerainy no reven a recession whichaears o have already se in The sae of credi wi coninue o bedicul for someime o come which wi only worsen he recession.Even he nancia cisis wil no be over wih he curren baiou"ackage Aer he Bear Seas eisode evey one hough ha hewors was over bu i wasn The same erhas is ue of he resenThe sysem of course wi recover bu he fo in hic i wi do so isunikely o be he same as before nd his wi oen u newossiiiiofraxis

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    he Threat of lobal Recession

    C Chndrsekhr

    S hs arcle s beng ren expecons are ha he US Federalreserve ould cu neres raes by a quaer o half a percenage on opof an unscheduled ad unprecedened 0.75 per cen cu nnouncedrecenly. hs panc response s because of grong fears f a reces-son n he US ha ould be seeper and longer han recessons expe-renced n he recen pas. When on he 20h ofDecember as yea heUS Deparmen of Commerce released gures ndcang ha GDPoh n he US had acceleraed (o .9 per cen) dung e hrdquarer (Jul o Sepember) of 2007 he celebraon as empered.Grong evdence of a housng slump and a cred squeeze suggesedha he economy as bound o slo don n he las quarer. Bunobody as speakng of a recesson hen

    More recenly a seres of daa releases have nensed fears of a

    recesson n he US. O anua he Bureau of abour Sascsrepored ha he unemploymen rae n he US had sen o 5.0 per cenn Decmber h1e nonfam payroll employen had remaned more orless unchanged Home sales had reporedly declned by 20 per cennaonally durng he year o November 2007 and medan house prceshad fallen by 1 2 per cen n Calfoa and 0 n per cen Flordahough only 3 per cen nande. hs has begun o ell on consumerspendng hc had been spured durng he housng boom by he llu-

    son ofncreasng ealh ha rsng home prces creaed. ccordng ohe inancial mes Merrll Lynch as esed ha consume spendngcould fall by 360 bllon durng 200809.

    When he nes ges gloomy panc spreads. On he 18h of anuaryheS&P 500 closed a 1 325 don almos 65 per cen om 1 1 6 four

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    4

    days arir and om its prvious pak o 565 on Octobr 10 200.Not wanting to b sn as napping th US Fdral Re erve chairmanBn Bank told th Budgt Commi o th US Hous oRpr

    sntativs that a packag o anwhr btwn $50150 iona rathrwid margnwould b a rasonabl stimulus or a conomy bingpushd into rcssion by th housing crisis and th nancial coapsthat had accompanid it Soon thrar almost on cu prsidnt Bushannouncd a packag invoving $15 bion in ta rli or indivuasand businsss ostnsibly to provid a shot in th a or th conomyDtais oh progamm ar yt to b prodd but pcations ar

    that aking a a out o a similar packag adoptd in 2001 it woudor a ontim tax rbat to individuas and writos against invstmnt in quipmnt or businsss

    2001 and 2002 th Bush adminisation had similary sought to boostth conomy with a prsonal tax rbat that put bwn $300 and$600 in th hands o indivdual houshods and ollowd his up with taxincntivs or businsss invsting in plant and quipnt Trasury

    scrar Hnry Paulson has mad clar that th adinisration blis that hat policy not only workd but workd quicky. This s snas justiying this ampt at a rpat proanc

    REE FOR REVVAL

    Thr ar thr aturs o this rcip or rvival that nd noting.irst it hops to courag individuals and houshods t kp spding

    dspit th writ dow in th valu othir housing ad ncia asstsby giving thm a ontim ta windall. This bordrs on th optimisticinasmuch as a ot opast houshold spnding in th US had bn nacd with dbt rsuting in a stp dcin in houshold savngs ratsIndividuals may us th wndall to rpay dbt rathr than opt or additional spnding Morovr ith $360 bilion consmptn ht orcastby Mrrl Lych is anywhr nar u vn th whol oth Bushrscu pacag is inadquat

    Scond th packag is prsntd in a way which concals th rol ospculation and outrit nancia raud in riggring th cunt dowu Rathr th dowtu it is bing atd by th adminisration ason mor unavoidabl cyc undr capialism I th apologtic lan

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    LOBAL MPAT

    hese feaes of the ackage nowthsandng govemens and n

    vestos otsde he US hoe that t wod scceedn ts me ntencombatng a US ecesson Ths s becase they ghty fea that fUSdoes exeence a sha downt a goba ecesson wod foow.Some ke he ahos of the Wod Banks anna Goba EconomcPosecs o fo 2008 ae moe otmstc They age that gobagowh whch sowed fom 39 to 36 e cen between 2006 and 2007wod fa ony magnay o 33 e cent n 2008. Ths s becase o-

    bst exanson n deveong cones ay comensates fo weakeests n hghncome contes Needes o say the Bak sef sensesan eement of excessve otmsm ha deves fom assmng at theocesses of gowh n deveong and hghncome economes ae neated eang gowth n he Soth nsated fom any ecesson n theNoh esecay the US. qckIy goes on to say that: Sevea seos downsde sks cast a shadow ove hs so anng fo he gobaeconomy xtea demand fo he odcts of deveong contes

    cod weaken mch moe shay and commodtyces cod decnefhe faeng US hosng maket o fhe nanca mo wee osh he Unted States nto a ecesson Aeatvey moneay a-hoes mght oveeac o the cent cmate ofncetanty and ove-stmate the economy Ths wod beacay dangeos fo deveong cone fhe bk ofthe esng qdy wee o move nto ady gowng deveong egons ovokng the same knd of

    ovenesen condtons ha aose n the US hosng maket.Gven the oe ofhgh gowth n Chna and nda n shong gobagowth he mac of a US ecesson on the goba economy woddeend on he effects t wod have on these two cones n atca That cod be sgncant gven the deendence of gowth n thesecones o US demand Fo ove a decade ow Chnas mechandseexos to the US have amonted o a tte moe than a h of ts

    mechandse exots o the wod as a whoe And n das case whethe shae of mechandse exos o the US wee at sma eves t2002 hey ave been decnng snce and stood at 7 e cent n 2006Tese ae age ooons and a ecesson n the US s bond oadvesey affect the vome of exos and he ace of gowth n theseeconomes

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    48

    u eve hs does ot capure he whole sory As Cathere Ma ohe sttute or aoal Ecoomcs pus Cha s a vaueaddedweghsao or produco umaely dested or he Ued Saesad o a esser exet Wese Europe To some degee the exposo raregoal ade Asa s o rom home grow dema bu raherstll depeds ulmaely o exportg to the US maket Tha s Chas the ocato or he al reprocessg o capal goods ermedaesad raw mateals mported o the couy om elsewhere Asabeore beg set o to the US A sowg o expors o he US omCha would slow he aregoal tade Asa that drves he regos

    growh.

    urther das case the US s also a exeey mporat markeor s expors o sevces tha have come o accou or a large shareo ota expors om the couy. 200607 the expors o sowaread busess servces rom da amoued to as mch as 0 per ceodas merchadse expors. Aroud twothrds o these expors aredreced to the ercas especally the US. Here oo a slowdow

    the S ca hae damagg cosequeces.

    The depedece o the US rke o these wo key dee\opg cou-tryrvers o global owh sarky usaes the lcatos o a sowdow o growh the US or the world ecoomy. To e thereorethat a US recesso W parly compesated or by robust growhes coues s to re eature o global terdepedece. Nosurprsgly most goemes are wllg to dscout the mplcaosothe ush admstratos eors at combag recesso or atoalad gobal equalty so log as they serve to sta or reverse the dow-

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    engthening Shados ofGlobal Recession

    eople s Democr

    THE count s ayng a vey hgh cost fo the state of dena! ofboththe Congess and the JP on te act ofthe g!oba! econoc eces-son Md as they ae n the neo!bea! ndset both ae lvng n anlluson that the cuent ecesson s a case ofthe no! se and falI ofthe cata!st busness cyce The cuent ecesson as we had eeat

    edy shown n these cou s s caused by the stuctua! nadequacesofthe catast syste and s theefoe a css ofcatas and notdue to ack of o fau eguatons o excessve eed by a few ca-tans of nteatonal nance

    WoId ank G!obal Econoc Posects (GEP 2009 says Whatbegan sx onths ago wth a assve de!eveagng n naca ketshas tued nto one of the shaest gobal econoc conadctons node hstoy t contnues to say: Globa! GDP s exected to conact by 7 e cent n 009 whch woud be the st decIne n woldoutut on ecod

    The deceeaton n econoc gowth n lowand dde ncoe coun-tes as a gou s eected to atch the deceleaton n hghncoecountes The deveIong wod s antcated to see gowth faI fo5.8 e cent n 2008 to 21 n 2009 a do of 3 7 ecetage ontssa to the fa n hghncoe econoes (do of37 e cent fo07 e cent to nus 30 e cent) Ths hghly synchronous gwhcollapse canno be solely eplane by re lnkages but uates aso that deveong countes have been decty ht n the estc econoes by the nanca css The evesa ofcata ows

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    endng o suppor grow abroad wie eeping s own mares openo impos Te S e presen wod capiais eader smary nds s

    posion severey undermined: is unabe o sore up demand in eword y eepng s own mare open and expandng an adequaerae Despie borowng massvey from oer counries o susain simpordependen consumpion s now unabe o avoid domesic re-cession Ts s e suff of serous crsis wen e capas eader canno onger ead eecivey and ere is no subsue eader or se ofinsiuions n s 1 HE EOLOY O NEO-ELAONSM

    bove a e fundamena smary in bo cases es n e domna-on of nance over ndusry and e pursui of economc pociesfavouring nance capa a e expense of grow ofe rea eonomyparicuary e oupu ofbasic necesses required by e masses. Tedogma of baanced budges mared e domnaion of nanca ner-ess n e 1920s. Te dominaion of nance in e mode word and is

    ideoogy own as neoiberaism' as been eviden since e 1 90sWe mig as we ca i neodeaionism for e ideoogy of nancecapia aways invoves poicies deang e eve ofmss demand.

    Today a goba food criss coexiss wi unprecedened nancia co-apse and a recession wic may we u ino a depression Te roosof s conjncure of ripe criss e in e dereguaory mare orened expendedeang poicies ofe domnan neoira regimepemened for over a quaer cenury Wa is e connecion beween e dfferen crses? Te economc dogmas of nance capiawen ey sape pubic picy aways produce igy de\eerous ef-fecs on e rea economy. Faced w acuura recession and unem-poymen nance minisersin eve couny n 1929 a deaioniss oe core pressed roug w repeaed rounds of expendure reduc-ion o acieve baanced budges us raisng unempoymen furer

    reducng producon and pusing e word no depresson Bransabiiy o manain onge exea ending o e ndusaising wordad epended eavy on s appropraing dias arge expo eaingsand is abi1iyo end coapsed as e eaings decned sap maring demse of e God Sandard Keyness argumen a e eoryunderying deaionsm was wong snce i assumed fu empoymen

    L

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    and expansionary picies should be fol1owed in the actual situation ounemployment went unheeded until a great deal of damage had bendone.

    The ascendancy of nance capital from the 1 970s has seen exact1y thesame misguided expenditure deating policies with the same incoecttheoy being peddled by the Fund and Bank that pub1ic investentcrowds out pate investment which assumes ful1 emplonent -withmuch less excuse for such intel1ectual infatilism seven decades aerthe Genea eo\ than there was in 1929 States have shown an

    insensate obsession with ination targeting regardless ofunemploymentand have undetaken repeated Fundguidedcuts in public spending thuslowering the level of economic actiity in the material otput sphereTe destctive impact was strengthened by additional measures takento practice monetay austerty reduce the ratio ofscal decit to GDPput caps on wages retrench labour from enterprises devalue curencies and open up developing economies to ee tade and capital owsThe GDP growth rate of developing economies halved between the1 970s and 1 990s India saw cutbacks in investment public spendingand credit to smal1 poducers aer 1 99 1 : the textile ndusty was plgedin crisis and the food gains output growth rate fel1 om the prerefo28 per cent o 1 7 per cent in the 1990s. n the last eight years it hasgone below 1 per cent even aer factorng in last year record harvest Per capta grain output is declining faster than ever before

    ELNN PER APT ONSUMPTONMarket oriented po1icies have been atckng smal1 producers wor1dwide leading to shorages of necessities like food and tetile whilepromoting consumer cedit to e e1ites for cars whi goods and dablesmarketed by foreign coporations as the service sector boomed. Global annual gain output pe head fel1 om 33 kiloam to 3 1 0 kiloambetween 1 9808 and 20000 Texti1e spending pr head in real tes

    has been fal1ng om already low leve1s in the deve1ping wor1d whichhas seen the worst fo of rising income inequality an absolute dec1inein the real income e masses. Longte food output decline shouldhave produced ination long ago instead the ination rate was at ahistoric low until recenty. In India the Conumer Pice dex ofacultral labour ose only 1 1 percent between 2000 and 200 precisely

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    wh p had a otpt was fal ad la ra xpors tooplac Th asw ls th shap compsso of arat dmadSc th vy sam xpdt dat pols whch dc optrowth also dc aat dmad throh s mploymtad a sv sqz o ass coms th slt was dmad adst-mt to matal shotas Iato dd ot occ bcas mass p-chas pow was all fast tha otpt was fal ad th pshmt was b absobd by mllos ofpasats ad labos thlobal Soh who w mo hry ad had lss to wa ov tm

    I sbSahaa Afca dcl p had com has so dcdfooda dmad blow 135 loam p had aally wth ava calo ta of 1800 p day o lss that poplatos ca tpov to fam ay momt wth crt food pc s I Ida adCha sc p had com has b s at 6 ad 8 pct aally total a dmad p had ta both dct s as food addct s as fd shold hav s shaply Yt t has fall dastcally Ida fom 1 78 loam t th aly 1990s to oly 1 57loam by th m d 2005 Th food pa ofcal dmad p had Cha fll om20 loam to 66 loamcompa- thya avas ctd o 1992 ad 2002 wh\ th food plsfd dmad fl om 263 to 230 loam Cha has s dvso ofa ow lad to coo ad ts aboally hh svs at -cts th sqz o al mass cosmpto whch t has b yto vs th last two yas.

    Both th ocosvatv Go Bsh ad th possv PalKma a ths coct say that casd total dmad foa om wch Cha ad Ida accots fo th ctfood prc s. th coay p had cal dmad has fall both cos dastcally whl th wolds hhst ra cosm -mas th S th aly 900 loam p had No dobt wth chad com dstbto dmad wold hav s shaply A d-

    mad pocto fo da to 2020 by Bhalla Hazll ad K (pblshdby th Itatoal Food Polc Rsach Isttt) assm 993com dsrbto vs s a total t cal dmad of 29 moto by 2007. Bt acal dmad was a massv 62 mlo to lowow to loss of mass pchas pow

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    lending Iceland has nce again laid dwn igh mney (8 percenineres rae) and expendiure cus as cndiins and wil d he samewih akisan ungay and aine.

    ROW MORE OO AMPAN NEEE

    The peri 9934 has seen sharp rise in unemplymen raesin bhrura nd urban India accrding N daa. Wih he sar glbal recessin Indias exprs gds and serices will reduce unemplymen rise urher and incmes decline in all ecnmic secrs wheher i is he cee grwer he diamnd prcessr r he garmensexprer. H mney uw has already led rupee depreciain andrising dmesic eriliser and uel prices are canceling u any benerm price rise r peasans. Millins wage and small alay eaersare reeling uner d price inain

    Bere he siuain deeriraes urher measures uner he adverse rends need be inrduced. Firs we need a urgen Grw

    mreFd campai because ur grain upu per head has allen dras-ically. s is as impacing upu livesck prducs badly byraising eed cs s we see sharp inain in milk and animal prducsprices. ecnd we need large scale public invesen in rms whchwil/ a o he supply 1basic necessiies The prime miniser is he mark in alking inrasucure invesmen a presen by which hemens wide rads big bridges and airprs. This will have he sameeec as prducing guns adding he burden n he peple while n

    adding he supply necessiies whse prces are sckeing. rdhe FC and he cmmdiy bards need g in r eecve markeinervenin sabili price bh he prducer and cnsumer. Furhgenuine implemenain he NRG wih a leas Rs crresannual allcain and wrks aimed a assured irrgain wil help revive mas demand r d and exiles and subsue a grwingineal marke r a alering exeal ne. Fih nce here is gd

    riddance h mney urher hemrhae capal shuld be sppedby insiuing capial cnls.

    recessinary imes he capialis wrld has always needed a leadingcuny which eiher lends abrad keep up demand r keeps ismarke uly pen he inw disess gds. Far rm lending he

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    US is he words arges debo. Soe bourgeois eonoiss are wisfuy reuesing China with is ounainous reerves o he he US.u sine Chinas exea exosure hrough rade o e industrial wordis vey large he reesson wi affe i bady and evenually ay weedue is aaiy o end As regads keeing is arkes oen heUS wih is seel ariff and nuerous nonaiff aiers has uedroeionis soe ie ago The residenee unde he pressure ofising doesi job osses has roised o enalise ousoring andkee jobs a hoe The risisridden word aiais eader is no ongeraable ofeaing and here is no new leade o ake on is funions

    nohing i sees an ave word deression or an he buden ofadjuen oninually be assed on o he globa Souh whose asseshave been ushed down oo far aready o go down fuher whoufaine and iv srife

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    Finance Capital nd Fiscal Deficits

    rb k

    ONE oh cn rdoxs n conomc hoy rs o h hosyh nnc nrss n mod cs conomy sysmcydsy ords ny cy o nrgd S xndur nncd yrong vn hough such xndur ncrss css rosnd h.

    L us suos h h govmn undks rgr oongnncd uc xndur rogrmm nd h orrong s romdomsc sourcs. Thn cosondng o h ncrs n govmnoong hr mus n quvn ncrs n h xcss o rv svngs ovr rv nvsn Snc rv nvsmn xndur s or or ss gvn n ny rod rsu o s nvsndcsons s n govmn orrong crs n quvnncrs n rv svngs. Snc such svngs dnd uon osx

    ros surus) hr mus rs n osx ros (surus);nd h s mor hs rs s som mu oh rs n govmnorrong

    xm cry h on I sy onh o osx vros (surus) s huy svd hn rs n govmn oo-ng y Rs 100 s cs \ rs rv suus y R 200 srcs n ordr o gnr Rs 00 o rv svngs o nnc s.

    Ths \ hn n suon oss hn u moymn hrough nncrs n ouu nd moymn h h s rcs hmsvsrmn mor or ss unchng n suon o u moymn(suy consrn) hs hn hrough ro non squzngou orcd svngs rom h orkrs e capa a a who

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    other wrs ea an aitiona amount that is mutpe o theinrease in goernment borrowin

    ATONAL PROT

    hs book How to Pay or the War the welown nlsh econo-mst John Myn Keynes h cle ths tonl pot ofthe cp-tlsts booty" tht fe nto the p He ws tkn bou nceseovement borown to nnce w expentue n stuon wheethe scope fo sn output n empoyent ws lmte n he wsssumn tht the whoe ofthe tonl pots ccrun to cptlstsws sve. such cse f ovement expentue ose by Rs 100then thee wou be nfton tht woul squeee wokes' consumpton n smutneously boost prots. Hence whle the ctul esourcesfo meetn w expntue cme fom the wokes whose consump-ton ws euce by n equvent mount the capitasts weath increase by J espite their haing one nothing t s s f theovement sntche wy Rs 100 fom the wokes put t n the lpof

    the cptlsts n then boowe these Rs 100 om them The escfce" fo he w n othe wos ws me by the wokes whecptlsts weth went up tutously. The unfess" of ths hpompte Keynes to ue tht even f the ovement h to sntchwy Rs 100 fom the wokes the cptlsts must not be hne thsmount s booty" .e. w expentue must be nnce thouhtxes.

    Keynes exmpe supples cou not be ncese n hence thesen pofts occue throuh nton. ut f suppes cn be ncesethen le ovment boown st nceses the mntue ofpof-ts but thou n ncese n ouut not prices. e ovementborown n shot nvby boosts cptsts pots n weth.

    WHY NSST OR SOUN NANE

    But ths bns us bck to the queston tht f boownnncencese n ovement expentue hns ove booty" to the cptsts tht s some mupe (ete thn o equl to one) tmes thsexpentue ncese then why e the nnc nteests opose tosuch n ncese? Why fo nstnce o they fvou the pncpe of

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    soun nance an insist on the passage of Fisca Resonsibiityegislation everywhere to imit the size ofthe sca ecit

    One can give cetain obvious economic explanations The rst is thear oiaio. Larger govement expeniture by raising the levelof aggregate man wi cause ination which wil lowerthe rea valueof a nancial assets something which nance capita obvously is-ies. his explanation is not without weight but it fails to explain whythe opposition to borrowingnance govementexpeniture shoulpersist even in the mist of a Depression when the increase in aggre-

    gate eman is liey to cause almost exclusive output ajustment withvey ittle impact on prices

    Te same hols for the other possible economic explanation for theiropposition namey a ar of worsening of baance of payments anhence of a epreciation of the currency which again wou ower thevaue ofnancia assets but in te of other currencies A whole lot ofmeasures however ranging from impor contols to increase extea

    borrowing are available to the govement that is stimulating theeconomy Tese measures can eep the fear of any uency epre-ciation at bay. Te fear of currency epreciation therefore cannot alsobe an aequate expanation

    t foows then that economicexplanations for the opposition ofnanceto increae borowingnance govement expeniture are ina-equate. e rea basis of the opposition is poliical As the Maxisteconomist Michae\ Kaeci ha once reare pros are not evey-thng for te capitalists; their cass instincts too are imporant An theseclass instincts tel nance capital that a proactive expenitue poicy ofthe State even for the purpose of eman management is eimentato the ongte abiiy ofthe system in genera an ofthe nanciaclass in paicular

    The myhologypropagate by capitaism is that the unfettere fctioning of the system gives rse to a state of full employment where theresources are ecienty locate This myh of course cannot be sus-taine since even the most iehar believer in the ieology ofcapital-ism cannot eny the reaife existence ofperioic Depressions an thevruay perennia state of emanconstraint that aict the system.

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    appear a rs sg as sizeae sca simulus packages. u e acuasmuus in e Unie aes a leas as isnc from e ncrease n

    scal ec cause y e manenance ofgoemen penuen he face ofa ecne n a eenue s quie smal s s ecausemuc ofe increase in feeral goemen expeniure announce ye Oama aminsraon as pa of s smulus package wll mereyoffse e curailmen n goemen expeniure in e arous saesofe U on accoun ofe eclne n eir ax reenues

    y conras e al ou" package o e nancial sysem n e Unie

    aes is esimae o excee $ 1 0 rilon Te sraegy a presen ere-fore seems o e o susain e nanca sysem an wa for e nexue o appearraer an o reie e al economy irelyougsca smul. Te consequence of is sraegy wi e a prolongeperio of recession an unempoymen wi muc un sufferng; uis only unerscores e power of e nancial ineress n onemporary capalsm were een a crss ofs magnue engenere yeir funconng leaes s power unnise.

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    The Truth AboutFinance nd Markets

    t Ghosh

    THIS is nt bes fimes fr se w make a ivg ut fbeingnancia itermediaries Recen imes ave seen mre an an appar-en medwn in sme majr nancial markets suc as a fte UedSates ey ave as witnessed an unprecedened amunt f anaysis

    f w nancia markets day actuay wrk and en devastaingexpse feir man aws And sme ftis anaysis mes n nyfrm se w are we wn t be critica f awing t muceedm t nancia agents but as frm e practiners temseves.

    Tus severa recen bks ave drawn n e persna experince fe autrs describe and criique e acua wrkings f differennanial markes especiay bankng and sck marke activity. It s

    ut ta despite al e ak f cient akets" nancia marketscntinue t suffer m mst fe imperfectins a ecnmic erydescrbed several decades ag Ofese e many prbems reaing tasymmeric (r uneveny disbuted infrmatin ut t be e mstviruent and create cnditins were ncil marke arent nlyprnet euen faiure but are as deeply ineuaising

    Tw bks in particular are wr ning Piipugarwred frmre

    tan 20 years wit w Brtis securities rms as an inteainal in-vesment banker interacing clsely wi Wa Seet. His fascinaingbk e Gee Mechants How the Investment Ban Plye theee Maet Game (Penguin Bks 2006 is full f a e detaiedinsigts a nly an insider cud ave prvded

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    George Soros is if anything an even more famous nance insider chaiman of a highly successful ineaional invesmen fund and he

    acowledged guru of invesors and fund managrs across he worldHis mos recen book is e New Paradigm or inanial Markets:e Credit Crash o 8 and a it Means (ublic Aairs NewYork2008)

    NHERENT RALTY

    The exaordinary hing is ha boh books make remarkably similar

    oins abou he inheren fragiliy conic of ineres and need for regulaion of nancial markes Thus hey boh conadic quie songly herevailing esablishmen wisdom even in he face of evden crisis.

    Augar noes ha inequaliy lies a e hea of he mode ee mar-ke" His book focuses on some inadequaely discussed feaures e dark coers of recen invesmen banng hisoy" ha incudehe very high es ha accrue o a small number of large banks

    desie he varable qualiy ofheir advce. Augar exlains his in emsof he sae of comeiion in he indusy which he see as highlyigoisic d he inegaed model of invesmen bang ha givssome large m a srong comeiive edge. addiion exible man-agemen and a rhless aroach o cusomers comeior and regu-laions" has allowed a few of he large banks o rea exaordinarilyhigh ros which are camouaged o some exen because some a

    ofhe ros i s shared as excessivey high emloyee comensaionA morar ofhe roblem is ha bank and oher nancial insiionsnow offer moe han he sandard range of roducs such as bankoans commodiies and urncy dealings rme bokerage servcesreal esae nancing and rorieary rading and invesmen in nancialasses They also end o offer advice on deb and equi share issuesmergers and acquisiio and nancial resucurng research on equi-

    ies and equiy dervaives sales and ading for insiuional invesors(including hedge funds); and he same for bods and bod derivaives

    This geeraes huge coics of ineres beween he differen funcions ha invesmen banks have ken on in rcen imes There areconics of ineres beween he invesmen banks and he regulaors

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    between the nancial interests and the media and so on. nd heseconcts are seldom or inadequately regulated. This has enabled a few

    corporations and indivduals not only to exer inordinate iuence overboth business and govement but also to acquire immense wealth inthe process And this has essentialy been at the cost of capital issuersand smal investors including workers who have saved for he futreby puttng ther money nto penson funds.

    80ros extends such arguments by using his heo of"reexivy which

    is based on the understanding that business decisions are never basedon complete owledge and that these decisions themse\ves affect theenvironment which has been taken into account in mang them

    The housing bubble in the U8 which has led to the current nancialproblems of jor banks resulted rst from such a eexve conection since the willingness or incentive to lend to less-prefeed (or subprime) borrowers inuenced the value of the colateral (n this case

    houses. But the recent cycle is also different om those om thepast even if not completely unique This in t al0wed the development ofwhat 80ros cals he longer-term super bubble. This was sti\lbased on credit creation even if it involved may more sophisticatednancial instruments. This rend gained momentum ad continued aslong as it did because ofthe basic misconception that rets are perfect and should be regulated as little as possible themselves. 80 80rosargues that rket ndamentalism (which can be dated to the 19s)generated the super bubble.

    ASYMMETR STRUTURE

    Things get worse because of the moral hazrd generated by govement picies. Every time the banking system is endangered or arecession looms the nancial authorities intervene bailng out theendangeredinstitionsandingtostiIate theeconomy

    -

    Sofiplayers do not suffer om their own mistakes and are temptedherefore to repeat them. AI this is made worse by the globalisation ofnancial markets the progressive removal ofnancial regulations andthe acceerating pace of nancial inovations

    80ros argues that globalisation maters because it has asmmeric

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    Is The Crisis TransfrmingGlobal Finance?

    C Chdrsekhr

    TER muc diering 1s fig drama and muc effr t avid teineviabe fr fear a i wud saigacket capitaism gvementsin te deve1ed indusia1 cunes ave aken e rs ar neces-sa step t begin resving te nancia crsis. Tey ave eective1ynatinaised a 1arge pa f te privae banking sysem e prcessbegan in te K were e Grdn Brwn administatin sepped be

    ynd wat Bs ws wiing d and annunced at it wu1d resrt an equity inecin" buy rdinay and preference sares wt 37bilin in tree fte biggest banks in te cuny: Rya1 Bank fSct1and L1yds TSB and HBOS.

    Exising sare1ders ave te ptin fbuying back e rdinary saresm e gvement. But if tey d nt as seems ike1y en e gv-men wud ave a stake 60 per cen in BS and 435 per cen in

    te cmbined entity a wud emerge aer te nging merger fyds TSB and HBOS. Tis c1ear1y amunts t State akever wicbrngs wi i new bigatins Te ree banks wil1 nt be ab1e paydivdends n rdinary sares uni tey ave repaid in fu te 9 biinin preference sares tey are issuing e gvemen. Te Treasuywud appit 3 new RBS diectrs and 2 diects t te bad fecmbined L1ydsHBOS versee te gvement interests. And

    ere wud be resictins n executive salaries and bnses a adbaned durng e years f e specutive bm

    e decisin natinaise was frced n e U gvemen becausei rea1ised at te prb1em fcing segmens ft bankng sysem wasnt us ne f inadequate iquidity resuting m e frzng" fedit

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    makets due to feas geneated by the subpme css. Rathe cedmakets had ozen because the enttes that needed lqudty most weethose faced wth a solvency pobem because ofthe huge voume ofbad assets they caed on thei baance sheets. To end to o buy intothese entties with small doses of money was to sk loses snce thatmoney woud not have coveed the osses nvolved n ceanng up thebalance sheets and yet keepng these banks viabe. 80 money was hadto come by. his s dsastous fo a bank because umous of its vune-ability tgge a un that devasate ts aeady damaged nances.

    STATE TAEOVERWhat was needed was a lage necton of equty to ecaptaise thesebanks ae aking account of losses. Wheeve the sum invoved wassmal a pivate secto buye coud play the ole othewise the Sttehad to step n. Thus n the case of some banks ecaptasation thoughnationalsaton as unavodable because as U chancello Alistaialng put it this is the only way when makets ae not open to

    cetan banks they can get the captalisaton they need". Othes suchas Baclays hope they can atact pivate nvestos so as to avoid bengabsobed by the govement. expects to ase 66 b1ion om pi-vate investos but the pospects ae not cetan given the fact hat ithas decded not to pay a nal divdend n 008 so as to save b1ion.That may not be the best sgna to send to pospectve inestos.

    What needs o be noted howeve is that natonalisaton s not the end

    ofthe mae. addton the U govement has chosen to guaanteeall bank deposits independent ofthe sze to pevent a t has asodecided to guaantee intebank boog to keep cedt lowng aswhen needed.

    Once the decided to ake this adca and compehensive outeothes wee quick to ead the witing on the wa. What foowed was adeluge Gemany with an estated bll of 470 bllion an wth30 bllon and othe govements wth as yet unspeced amountspitched in wth plans to ecapitalise banks wth equy iectonsbesdes guaanteeng deposits and intebank lendng. he bankingsystem was being saved hough State takeove not just wth Statesupo

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    med epnding ced especive sk pckgng suc debsn pucs nd seng e sscied eus nd sks Te pcess

    ensued g es in e m ees nd cmmssns wc cme be me mpn n nees ncme Te ne esu s ws endency n e p pes beeve ey wee ee esk becuse i d been nseedeven ug bncese smem d mde uge eveged nvesens n se knds ssesTis dsese s iced e cnvenin bnng sysem wic wsisking e mney depss ug is nvvemen diecy indecyn sges e specuned epnsn. Wen e bubbe

    bus e bnks wee ced w cpse nd depss' nds -gee w e mpn e e bnks need py in md-e ecnmy we imped eenng deep ecessin depes-sn n e e ecnmy.

    We s e s ced gvemens dp e necnsevive bs gns Se wnesip nd mkes eed gve-men inevenn n e sw ppuded suc cin e e ecessn s n eceded Even i e bnks e se ug eeis n denie gnees ye ee e mny e nsuns vyingm edge nd muu unds pensin unds ve sueed ugesses b m e subpme sc nd e sck mke cs edng e we mny. Te eecs we esn n ies-men nd cnsumpn demnd e nynw unveng indicigee is muc be d in is sy s ye.

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    The second process is the eercise ofpeerpressure Finance ministersgoveors of cenal banks top nancial bureaucrats belonging o dif-ferent coutries when hey mee end increasing to consiue whatsomeone has described as an episemic community". They begin in-creasinglyo speak he same language share the same world vew andsubscrbe o the same prejudices he same humbug of nance" (touse Joan Robnsons telling phrase Those who do not are under e-mendous pee pressure to fal in line; and mos eventually do Pepressure y e buressed by he more mundane emptations tha Leninhad descrbed ranging om saighfoard brbes o lucaive offers

    ofposreireen employment bu whatever he meho used confonism o the humbug" that globalised fnance dishes ou as rueeconomics becomes a mark of respectabiliy"

    But even pee pressure requires ha here should be a oup of coreideologues of nance capial who er and manipulate his pressure.The peers" hemselves are not eeloaing indivduals but have to begoaded ino sharng a beliefsystem There has o be herefore a set of

    key intellecuals ideologues hinkers and sategiss tha promoe thisbelief system shape ad broadcast he ideology of nance capial andgenerally look aer the interests of globalised nance Tey are notnecessarly caialis or magnaes; but hey are close o he nancialgnates and usal1y share the spoils The nancial olirchy properconsising ofthese magnaes together wih hese key ideologes andpubliciss ofnance capital can be called the global nancial commu-

    nity". e funcion ofhis global nancial comuniy is o promoe andperpeate he hegemony of inteationa nance capial And here themost critical ssue conces the relationsh 1 this global nancial community to the politics 1particular countries

    To say ha the World Bank and the F are he main breeding oundfor hese key gures who are pa of he global nancial couniyand mediate he relation between paricular counes and globalised

    nance is to sate the obvous rue the Fund and he Bank are no heonly instiutions there are sundry business schools and deparents oeconomcs ofbusness admston and ofance in psgousnglo-Saon universiies Bu even for the products ofhe aer instituionshe Fund and he Ba

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    TANSOME EATONSHP

    The reatio etwee the key ideoogues o ace capita ad the

    govemets o the varous couries has itse udergoe a maoasormatio i the more recet peri Eari these ideoogues were tras-pated rom the Fud ad the Ba as part o a impicit coditioaityto the miisries o ace i dieret coutries ad the whoe eowas to esue that they uctioed to pomote the iteests o itea-tioa ace capita whie remaiig ee om poitica itervetioThey operated i short as caree ureaucrats; govemets might comead go eectios might make peope throw oeoibera" ruers adrepace them with the critics oeoieraism" who had hitherto occupied oppositioa space But eoiraism" persisted owithstad-ig such chages i govemet ecause key ureaucratic positioscotiues to e occupied y emers o the goa acia commu-iy" either the same oes sevg ever ew govemets or ew oesthat came with govemet chage ut om the same ock d therewere varous isumets devised to esure that the ew govemets

    coudot iterere i their uctioig such as the Fisca Resposiiiyegisato that tied the hads ogovemets or the socaed idepe-dece othe cetra ak that took a whoe rage o ecoomic poiciesoutside the purvew o eectedgovemets or the sheer hardse osoethig caed deveopmet" that was ust a euphemism or theeoiera age

    But with the Fud ad the Bak getig icreasigy margiaised as

    iteatioa eders ad hece as the genarme o iteatioa -ace capita owig maiy to the pauciy ouds at their disposa thispacigFudBakempoyeesiacemiisries srategy thoughstiI practiced has eeded to e suppemeted y more orthrght measures wherey memers othe goa acia commuiy are directyiducted ito poitica appoitmets Fom occupyig ureaucratic posi-tios withi a overarchig pitica process they have started movg

    directy ito poitica positosTHE ASE O OBAMAS AMNSTATON

    Oama political appoinees c\ude peope ike Rui Geitherad Summers who are iduitay memers o the goa cia

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    wee potcs dmedy eeco potcs s ke vey seosly bye peope The cse ofMmo Sg s oo weo to be e

    coed ee bt ecet yes membes ofte c commyve bee smgged hog e Rjy Sb oe o te ospotcs d kep edess fo mpott pocl postos. oe oftem s eve ptcpted y pocl ctvt; oe of tem seve wo eleco o e bss of pop mdte; d oe oftem s eve eve bee pcy oy to te pcl py wcomes tem oeeess ey emege s key poltc ges dpomoe eve w sysem mked by vesl dt sffge eeess ofo ce cpl.

    Sml exmpes c be ced om ost of oe coes. veywee membes ofte gobl cl commty e mped poe pcl pocess o look e ecoomc s" wc mes topomote d poect te teess of teol ce cptl byesg tt te eobel pces e ced o. Ths deccl

    ecto betwee do pocs o te oe d d e membes ofte cl commy mpted po t o he oe costes oe of e mos sgc spects of coempoy bogeoslfe

    Mxss we ey spek of bogeos democcy e oe ccsed ofesotg to ypebole Democcy" e ll s democcy";wy tlk of bogeos" democcy d peoples" emoccy? Te

    oe ms eve poopoo bogeos democcy sce of ll e possbe foms of bogeos le t s e oe t gves e peope tewdest possbe scope fo ogsg emseves to foce of esstce. B e lmos of bogeos democcy e sm t ebogeose s foeve etg to edce to e eqy plpble.T cou pese egged emkble electo execseb oce e ess e ot e jockeyg o ese t te ecoomcleves 6fe coy cote o em e ds ofte membes ofe globl c commty w be eqly ese. I is s f ee people ve spoke te e gme wll beg to ese ewods cot fo ohg Wg eectos s o eog defeg hsposelecto gme cqes eve gete sgcce

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    ived demd o the iput t deet tge othe poductio ch pedig the eect o the eceio goby iy trde

    ibeitio h emoved qutittive ectio d educed mpordutie cohebod i mot coue. Depedg o the extet otde ibeito the etive impotce o the dometc mket dvg goh h decied to deet degee i dieet coutreTh mpe tht ue coutre te the degee o potecto theyeo to ug the dometic maket o gt the eect o decie i tade i dicut to eue Ad optg opotecto t timeo ci woud oy vite etatoy ctio om rde pae

    Thee tue ode gobied wod impy ht deyncrotioedig to ome coure ervg hock bobe eve ouceo timui o gowh deped o the degee o gobto d

    ito ite h mpe tht emet o the extet odeychoitio cnot ey meey o evdece o the deetdiibuo othe owdo i GDP goth o icee uempoymet but mut exme chge i the te o goh d ptte owod de we

    SHARP RO N MPORTS AN SERVES

    Tde d t gob eve i eeed with g whe comped wthdt o GD d the ce o ome coure eve whe compewithempoet d uempoymet dt. Not uprigy t w oyi Juy ht the dt o itetio tde ed duig the t queo009 i the G7 couie d the wod ecoomy w eeed by theOECD Secetat d the Wod Tde Ogitio epectvey Toec whie the ump i poductio i the deveoped courie hbee w u ce the ed o007 t w i the t que o008 dthe t qute o009 tht the c w mot tee Ad whteveevdece we he bout the cri modetg d eve poby bot-tomig out come om he ecod qurte o the ye. So the mot

    ecet evidece o teto de ed et to the peod whthe eceio w poiby i it mot iteive phe.

    A the WTO Wol Tae Repot ote: Sig o hpdeteioto i the gob ecoomy wee evdet i the ecod h o008 d the t ew moth o009 wod de ow gged d

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    produion sumped rs n deveoped eonomes and hen in deveopng ounres. Ahough word trade grew by 2 per en in voume erms

    over he ourse of2008 apered off in the as six monhs of he yearand was we down on he 6 per en o1ume nrease posed in 2007"The mos imporan rend he evidene pons o s he sharp onraionn impors ino (and of ourse expors om) he G7 ounies. Thedene in mpo growh re\ave o he preous quarer whh was1se o 6 pe en in he 1as quarer of2008 jumped o 05 per enn he rs quaer o2009 Ths trend seems o be generaised arosshe G7.

    The onaon in impor growh on a year on year basis was evensharper The quareron-previousquarer and yearonyear raes ofgrowth of mpors sood a -9.5 and 233 per en for Geany and -1 .8 and - 9 per en n he as of he S Wh he G7 ontresaounng for 40 per en f goba merhandise impots hs mushave had a severe onaionay impa on goba eonomi ay.

    The sowdown was no resed o merhandse ade 1ne. Compared wih he prevous quarer he va1ue of imports of goods and servies no OECD ounries measured n seasonay ased urrenpre S dors dropped siian1 in he rs quaer of2009evenifess sharpy hen he voume ofgoods mports. The gre fe by 5.2per en O a year-on-year basis he vaue of mpors of goods andserves de\ined by 279 per en. hus he sharp drop obseved in Q4

    2008 oninued in Q 2009 thou bohoisons gs fe muhmore sharpy a abou we he raes than hose of seves

    MPA O HNA AD NDA

    The effes ofhis sowdown on ontries ike China were visib1e in2008 ise1 Chnas merhandse expots n onsan pes whh ewby 22 and 195 per en respevey in 2006 and 2007 oapsed o 25

    per en nresng1y he mpa on ndaa ount muh ess dependen on merhandse exports for growtas far 1ess dramaiwh he growh raes sandng a 3 and 7 per en respeivey

    The mpa on Chnas expors was pariuarly sharp in etain produaegores Epors of oe and e1eom equpmen fe by 7 per en

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    8

    n the fourth quarter of2008 as comared wth the same erod oftherevous year Ths occued deste the fact that these eorts grew atan average rate of 7 er cent durng the rst three quaters of 2008Accordng to the WTO eorts oths category of tems to the UntedStates fell even more sharly regsterng a 3 er cent declne n thefourh quarer (of2008) aer growth of 0 er cent n the thrd quarerOverall eorts of Chnese manufactured goods to the Unted Statesncreased ust er cent over the revous year aer growh of 4 ercent n the thrd quarter

    Ths s sgncant gven he role of ths roduct grou n the htechmanufacturng sector n Cna In the md 980s the htech sector wascomletely domnated be Rado televson and communcaons equment subsector whch accounted for almost twothrds of all htechmanufacturng value added Snce then the roducton of Oce andcomutng machnery has been rsng radly so that by 2005 t accounted for 39 er cent of h-tech value added whle that of Radotelevson and communcatons eqment had fallen to 43 er cent sum nfoaton technology hardware s central to Chnas htech eort success and an mortant contrutor to ncrementa manufacturng GDP

    Indas roducton andeort sucture s derent ar das ostensble reslence n the face of the global crss relected n a muchsmaller rooronate declne n ts GDP n 200 (4 ercenage onts

    on 93 ercent) relatve to Chna (29 ercenage onts on 9 ercent) aears to be because of ts much smaller eort deendence onmanufacturng In recent years Indas eort deendence has beenmuch more n owledge ntensve servces than manufacturng Butths per se does not make the coun mmune to the effects of theglobal downtu World morts of commercal servces recorded anncrease n annual growth rates om 2 er cent n 2006 o 8 er centn 2007 ony to see a decne n that rate to er cent n 2009 And

    Indas rncal market the Unted States recorded a delne n the rateof owth of morts of commercal servces om 2 er cent n 2006to 9 er cent n 2007 and rther to 7 er cent n 2008 MoreoverIndas nteest s n the ade n commercal servces (as oosed toanso and ave seces) and here the rates of growth n these

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    thee yea wee 6 22 and 10 e cent eectvely That even theobal tade n evice hay lown down n aea n whch da

    ha an nteet. Yet th bette than the aboJute conacton n thevolume omechande mot

    The ea on that exot n eneal and theeoe the exot oevce conttute a much male ooton o GDP n Inda anmechande exot conttute n hna GDP ence t not Indale daman eoce n the exot aea that would count but theeomance o the dometc maket and dometc demand

    UNLELY O SPUR REOVERY

    Seen n th ht the aument that even the G7 econome ee-cay the US ontnue to bouce aon the bottom e loba economycan ecod a cant ecovey becaue o a e to h owth nChna and Inda doe not eem to have much ba Th ould equen the t ntance a ha