BLOOMING VISION

Me and my Sister did a little research and ofcourse it should have been tagged as Naren's work! As it was mine really!

The world has witnessed slowdown in the economic activities since September 2008.  Some call it as meltdown, some call it as recession and some call it as downturn.  IMF predicts the total projected losses from the global financial crisis would be $ 1.4 trillion.  It also suggests that a whopping additional investment of $ 1.1 trillion is required to arrest these losses.  The consequential job losses and shrinking of economy in many countries including India, also creates flutter among the common man. Huge amounts of bail-outs and consequential protectionisms announced by the US and respective Governments  has  created  a serious  oppositions among the nations.    This has resulted in opening up of a new chapter in the discussion on the ongoing financial crisis. 

The world has witnessed 4 major crisis in 1890, 1930, 1970 and 2009 respectively. Among these four 1930 crisis was a severe one and it was called as great depression. But Today’s ongoing financial crisis is equated with the world’s great depression in 1930’s. In   all   these crisis we witnessed a sudden slump in economic activity and loss in purchasing power of the people.  After 1970 crisis the world has witnessed a new dimension of economic activity.  Before 1970’s the world economy grew consequential growth in the manufacturing sector. But after 1970 the political economy of this phase was marked by the ascendancy of finance capital as a supranational entity.

Financial deregulation within the countries and liberalization of cross-border capital flows enabled the emergence of an international finance capital, which not only divorced itself to a large extent from the specific countries of its origin but also from the sphere of commodity production, i.e. the real economy.  Rather than seeking profits through the process of capital accumulation; i.e. capital investment in commodity production and earning profits through the appropriation of surplus value of workers in the production process; finance capital increasingly sought to make profits through short-term capital gains by indulging in speculation over various kinds of assets. Besides conventional banking undergoing a change with the emergence of new kinds of banks (investment banks), a host of new “institutional investors” like mutual funds, pension funds, hedge funds, etc., gradually came into being, which specialized in mobilizing savings and speculating over assets, making enormous profits through capital gains in the process. World economy since the 1970s, i.e., the process of globalisation, has mainly been driven by financial liberalization.  This  financialisation imparted a short-termist character to capital, whereby  it became increasingly unwilling to be locked into long-term investment projects.  It is estimated that the financial capital available in the market is 72 times higher than what is required to meet today’s entire world’s requirement. 

            In the market driven economy where finance capital  rules the roast, the economies of many countries have grown.  A sudden spurt in the consumer durables and service sector has created job opportunities in many countries.  This also paved way for some economic activities of many countries. All these gives a gloomy picture about the world economy. But all of a sudden the financial crisis originated from US has wiped out many economies and destroyed the nations.  A serious introspection required to know where the real market has gone?  What are all the  Policy decisions to be taken?

Slowdown or downturn or recession is inevitable in a  market driven economy.  During the past the world has witnessed unhindered Government intervention after the slowdown or recession. In a market economy the market is limited to a small segment of population which has got the purchasing power.   Moreover   in a market driven economy creation of market is taking place at a very very slow pace only.  The  economic  activities   shrink within this segment.   Any sudden erosion in economic activity will play havoc in the life and living of the people.  To   safeguard the interests of the market and the people we could draw some lessons from the experiences of our nation. In the background of heavy damage to the developed countries, the loss and damage to our country is minimal.

 Three main features have played a role of safety net.  First and foremost is NREGA (National Rural Employment Guarantee Act). Because of the implementation of this scheme somehow or other the purchasing power of the people has increased.  Karnataka, Punjab, Jharkand, Kerala and some states   witnessed a increase in the minimum wages of agricultural labourers.  This scheme also restricts migration of labour force from the rural areas.  Both of this has helped the economy to register a moderate growth.  This has arrested the loss that would have arisen due to the ongoing crisis.

Secondly, the role played by our public sector industries in ensuring the smooth running of our economy. On one hand it provides permanent purchasing power to its work force.  On the other hand it provides adequate financial cover to the government of India to ensure money flow  in the market. Recent achievement of our Financial Behemoth Life Insurance Corporation of India is a shining example.  Even in the turbulence days, within a short span of time it collected nearly 10,000 crores of rupees from the public by way of Jeevan Astha Policies.  At the initial period of this crisis LIC had invested a huge sum into market by purchasing debentures with higher percentage of returns.  It has not kept the entire proceed benefits for its kitty, rather it prefered to transfer the entire benefits to the thousands and thousands of ordinary small investors of this nation true to its tradition.  This also helped the nation to collect a decent volume of money for the nation building exercise.  It also helped the economy to move further.

Thirdly safety cover provided by our financial system has saved the nation from the horrible collapse of the economy.  Though many of the segments are thrown open  to foreign players the predominance of state still holds the breather.  This has provided sufficient stimulus to the economy. 

All these things are underlying one important vision.  To Protect the Market, the duty of the state is to ensure that the  more and more new segment of people are turned as a meaningful market.  Towards that direction  the policies are to be drawn and implemented.  Can we have a space for that.  Will the saner council prevail?