The Hindu : Tamil Nadu News : Call to reverse neo-liberal financial policies

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Thursday, Dec 14, 2006
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Tamil Nadu

Tamil Nadu

Call to reverse neo-liberal financial policies

Staff Reporter

Prabhat Patnaik deplores the phenomenon of jobless growth

ENLIGHTENING SESSION: Prabhat Patnaik, Vice-Chairman, Kerala State Planning Commission (right) and Padmini Swaminathan, Director, Madras Institute of Development Studies (second from right), interacting with students at Stella Maris College on Wednes day. — Photo: R.Ragu

CHENNAI: Global developmental divides are worsened by the lack of barriers on the flow of finances across international borders, according to Prabhat Patnaik, noted economist and vice-chairman of the Kerala State Planning Commission.

Addressing a national seminar on developmental divides organised by the Economics Department of Stella Maris College here on Wednesday, Prof. Patnaik called for a reversal of neo-liberal financial policies.

According to Keynesian demand management economics, it was interventionist government expenditure that fuelled economic growth and reduced unemployment. However, "all over the capitalist world, because of the liberalisation of financial flows, governments are forced to cut back on their spending."

Prof. Patnaik explained how international financiers could now dictate fiscal policy by threatening to move money out of a country, precipitating a liquidity crisis, if that country's government failed to curtail its expenditure. "Because financiers are international, while governments are national, they hold the upper hand."

The results of "expenditure deflation" are high unemployment, falling growth rates and a decrease in welfare state expenditure, thus increasing the divide. "It also tends to turn the terms of trade against primary commodities ... and most primary commodity producers are third world peasants," Prof. Patnaik said, pointing to another reason for the widening divide.

State governments have less money to spend on public health and education because they are vying with each other to spend more on concessions to attract foreign capital and investment, said Prof. Patnaik. He offered the recent "competition" between Tamil Nadu, Andhra Pradesh and Maharashtra to attract the Volkswagen plant as an example of this.

Transfer of land

Apart from allowing such a transfer of finance from national coffers to foreign capitalists, Prof. Patnaik said governments also connived in the transfer of land from penniless peasants to private investors — "most of these special economic zones are just an excuse to grab land" — and the transfer of assets from the State to corporates via privatisation.

Prof. Patnaik deplored the phenomenon of "jobless growth," where emerging powers such as India and China witnessed a zoom in services and manufacturing activity (largely due to the migration of such activity from developed economies), without a corresponding growth in employment rates.

Employment was also the theme of Madras Institute of Development Studies director Padmini Swaminathan's address. "We have compartmentalised our thinking about employment, education and development and that has cost us dearly," she said.

Dr. Swaminathan called on manufacturers and employers to fulfil their responsibilities by getting involved in education and committing themselves to hire the products of a vocational education system.

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