Market vs State Debate
-
Upload
huzefaratawala2 -
Category
Documents
-
view
121 -
download
0
Transcript of Market vs State Debate
![Page 1: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/1.jpg)
State vs Market: (Keynes vs Hayek)
John Maynard Keynes
1883 — 1946
Friedrich A. Hayek1899 — 1992
By:Arpit Jain 09Ravi Kumar Chaudhay 15Raktim Kar 32Varun Mangalvedi 41Neeraj Gaur 49Kuldeep Singh 73
![Page 2: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/2.jpg)
THEORITICAL BACKGROUND OF DEBATE State role in economy through fiscal and
monetary policy Keynes, Hicks etc favoured state role in
economy Hayek, Friedman etc favoured no state role Keynes’ Circular Flow of Income
Framework Hayek’s Means End Framework Two groups: Keyensian and Monetarists
![Page 3: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/3.jpg)
CIRCULAR FLOW OF INCOME
![Page 4: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/4.jpg)
KEYNSIAN CROSSEX
PEN
DIT
UR
ES
INCOME
ΔY
EXCESS INVENTORIES
C + I
C = a + bY
Yfe
![Page 5: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/5.jpg)
The IS-LM Curve
- Fiscal policy: increase I, increase Y -Monetary Policy: Increase M, increase Y
![Page 6: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/6.jpg)
PHILIP’S CURVE
![Page 7: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/7.jpg)
HAYEK’S THEORY
Views economics as a sequence of accidents Views economic problems as coordination
problem – in time and level dimensions Integrates three theories - Price, Capital and
Monetary Price is a communicator Capital explained by Hayekian Triangle Money supply should be market driven Deliberate injections create artificial booms
which go bust later
![Page 8: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/8.jpg)
STAGFLATION – MODIFIED PHILIP’S CURVE
![Page 9: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/9.jpg)
MAIN POINTS
KINDLY DON’T INTERFRE, MONEY
VELOCITY IS CONSTANT
HIGH INFLATION RATE COUPLED WITH
LOW UNEMPLOYMENT IS
THE MANTRA
LOOK AT STAGFLATION
!
OH, BUT I MUST! MONEY VELOCITY IS NOT CONSTANT. AT LEAST, NOT IN THE
SHORT RUN
WE WERE NEVER
MARRIED!
I WANT DIVORCE!
Monetarist
Keynsians
![Page 10: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/10.jpg)
INDIAN BACKGROUND OF THE DEBATE
• Nehru (State) v/s Patel (Market)• Nehru started 5 year plans starting from 1951 • Patel died in 1950, couldn’t draft 2nd 5 yr plan• 2nd 5 yr plan focused greatly on PSUs• Planning commission became very, very
powerful• P.C. Mahalanobis model: focus on pivotal
sector and rest will grow automatically• Results - Public sector undertakings,
investments - Core sector became paramount• Only in 1990s did the economy open up to
non governmental investment
![Page 11: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/11.jpg)
ADVANTAGE MARKETISM
Perfect competition – no state monopolies
Competition strictly on value proposition Price lower and uniform Product quality improvement Product variety improvement All in all – a complete customer
satisfaction
![Page 12: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/12.jpg)
ADVANTAGE MARKETISM
Efficiency improvement Greater productivity Competition forces technological
advancement State monopoly shield removed implies
greater customer focus in production
![Page 13: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/13.jpg)
ADVANTAGE MARKETISM
Transparency in business due to stakeholder demands
Greater disclosure norms for public Entry Barriers for new entrants limited ‘License raj’ had always hindered growth
of industry rapidly Entrepreneurship and creativity
rewarded
![Page 14: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/14.jpg)
ADVATAGE MARKETISM?
Is it really a perfect competition? ‘Information Asymmetry’ Some customer know more than others Some manufacturers can hide information Speculative trading can be rife using
information Market manipulation using information Insider trading Share market scams
![Page 15: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/15.jpg)
ADVANTAGE STATE
Stability Return risky,
Meeting collective objectives by individual sacrifice building a heavy industry at once in an
underdeveloped economy Does not suffer from business cycles Does not experience crises of overproduction Utilities for everyone – cross subsidization Public spending for infrastructure necessary in
rural areas Financial inclusion Affirmative action for deprived sections
![Page 16: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/16.jpg)
ADVANTAGE STATE
Regulation of market necessary Market is not jungle to be left to ‘animal
spirits’ Fair market to be maintained RBI, TRAI, SEBI etc regulatory bodies
have made the markets inclusive and effective
![Page 17: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/17.jpg)
Telecom sector
Reduction in Tariff from Rs 15 in 1995 to 30 paisa /min in 2009
Competition – Resulting New services and improvement
Capital Investment ( Tower Infrastructure)
Penetration in rural India
![Page 18: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/18.jpg)
Banking
Professional approach ICICI leads to Change in
SBI working Monopoly is over Technological
Improvements Internet Banking ATMs
![Page 19: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/19.jpg)
Education
Demand Supply Mismatch in Education
No professional approach in many government institutes
Sleeping Primary school teachers
In many Higher education colleges, results are not Officially Declared even after Year
ISB Hyderabad Govt Vs Private School
![Page 20: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/20.jpg)
Telecom Sector (State Perspective)
SMS rates are set to crash - Telecom watchdog TRAI An expose by TOI on November 5 2009 that SMS
tariffs are 50 to 100 times higher than what it costs service providers.
BSNL, MTNL players in market to prevent cartelization Provide services in rural areas Provide services at low cost
![Page 21: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/21.jpg)
• Fed is the US central bank and controls its monetary policy• Some banks are too Big to Fail• Bail Out by Fed• Claim that the Federal Reserve benefits "Wall Street“ but not "Main Street."• RBI fully owned by Government of India
Banking (State Perspective)
![Page 22: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/22.jpg)
•overusing and polluting of the common groundwater, •giving toxic sludge to farmers as fertilizer,•selling contaminated soda to the citizenry, leaving Indians at risk of dehydration, starvation, and poisoning, and
CSR???
![Page 23: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/23.jpg)
RURAL TARGETING BY FMCG
FMCG companies are targeting rural Improving their lives HUL, ITC and P&G targeting rural
consumer ‘Fortune at the Bottom of the Pyramid’ Arvind Eye Hospital
![Page 24: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/24.jpg)
Clean Development Mechanism Lack of government support for climate
change mitigation Market route to clean environment Lot of focus on alternative forms of
energy Winds, biomass, hydel etc Development work at host countries China, Brazil, India and Mexico at
forefront
![Page 25: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/25.jpg)
Creativity or Cut & Paste
![Page 26: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/26.jpg)
Creativity or Cut & Paste
![Page 27: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/27.jpg)
FORTUNE AT BOTTOM OR MIDDLE?
C.K. Prahlad – Non Executive Board of Director of HUL CavinKare was the first entrant in rural markets not
HUL Annapurna salt was actually due to government
propaganda for iodised salt Arvind Eye Hospital is sustained by NGO donations Business really sustainable at present?
![Page 28: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/28.jpg)
Melamine in Chinese milkSlave-labour involvement accusations Genetically-modified organisms Bottled waterNestlé Purina in Venezuela The baby milk issue
![Page 29: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/29.jpg)
WHAT’S COMMON WITHIN AND BETWEEN THE GROUPS?
MARKET BECOMES STATE IF UNCHECKED
![Page 30: Market vs State Debate](https://reader034.fdocuments.in/reader034/viewer/2022050804/546a6fddb4af9f2a218b45b4/html5/thumbnails/30.jpg)
CONCLUSIONS
Mixed economy is perhaps a good solution The correct mix of state and market A hassle free market overlooked by the
state State retaining control of key sectors for
social welfare Performing well in Brazil, Russia, India,
China,