Saturday, September 19, 2009

Consequence of the behavioural difference

Recently S. Gurumurthy published two articles in The Business Line on the US financial crisis and implications to India. These articles are very simple and lucid but the fact is that he blames everything for all at macro level. The worthwhile one which he has mentioned is the recent Economic Survey 2008-09 lack of analysis.

Some excerpts from his first piece:

  • "After attaining freedom, India began imitating the socialist Soviet republic from the 1950s and continued it till the Soviet sunset in the 1990s. Afterwards, like most others , it began copying the US, which emerged as the icon of market capitalism as Anglo-Saxon capitalism turned into a global monologue after communism fell. But, in less than two decades, as the year 2008 closed, the US has ceased to be the icon . For many, it is an object of scorn.
  • But with socialism already in the museum, there is no live global level alternative to replace the (f)ailing US-model of capitalism. Assume that, in the 1990s, there was no US-led capitalist alternative; the socialist order may not have collapsed at all; it would have somehow pulled along, like the (f)ailing US-led global capitalism does now.
  • It was the live alternative of US-led capitalism and its political cousin, liberal democracy, that hastened the socialist collapse. If socialism was the villain then, its alternative, US-led global capitalism, is the culprit now. Worse, the mess unleashed by socialist implosion of 1990s was largely restricted to the socialist world ; now the capitalist meltdown has messed up the whole world! That is why the likes of Japan, Germany and France emphasise local and regional models. Where does India stand in this debate?
  • The unbelievable cost of saving the US financial system bears the dignified label of “stimulus”. The total fiscal and monetary stimulus which, according to Bloomberg (31.3.2009), has been “spent, lent or committed” by the US Fed and the US Government so far, is $12.8 trillion! The amount of stimulus has “approached the value of everything produced in the US” in 2008. America’s GDP last year was $14.8 trillion.
  • This works out to $42,015 for every man, woman and — note — also child in the US; it is 14 times the $899.8 billion of currency in circulation. Out of this, till March 2009, $4.169 trillion had been used up. Included in this is the fiscal stimulus and other costs borne by the US government of $1.833 trillion."

From his second article

  • The core of any economic model is the rule and the mechanism of distribution of resources, particularly money. In the socialist model, the budget is the core; in the Anglo Saxon model, the market is the core."

No comments:

Post a Comment