24 thoughts on “71. State versus Market Debate: For discussion.

  1. 1.During the 1990s many economists, disillusioned by the failure of the Public sector , the collapse of Socialism in the Soviet Union, the rise of China on Capitalist lines and the success of the US capitalism advocated that the State should hand over as many services to the private sector as possible. In retrospect what have been the gains and losses?

    1. The gains are apparent: pillaging of the natural resources -belonging to all creatures great and small- has come in the garb of economic development. The actual truth is that quality of life has taken a back-seat and materialism has come to the fore. But let us no throw the baby along with the bath water. Privatisation has delivered the goods in certain instances- e.g. telecom sector, transport.

      At the other end of the spectrum , losses too are humongous with indirect consequences such as rise in unemployment, financial losses and the most important- accountability deficit- the companies to which 2G licenses were granted never had previous experience in the telecom sector, reliance cutting down communication circles overnight, forced illegal mining by private concerns.

  2. 2.This shift from the State took place in the USA, UK and Europe. How did it proceed This shift in the relative roles of the State and private enterprise took place first in the US and UK. What is Neo Con Liberalism? What is Thatcherism?

    3.What do you think was the role of the Military Industrial Complex in this respect?

    1. 2. Margaret Thatcher & Ronald Reagan instituted economic liberal policies which came to be known as Thatcherism and Reaganomics. The State was pulled down, markets were freed, and entrepreneurship was promoted. The GDP grew inevitably, and so did unemployment. British economic growth was higher than other European powers, escorted with poorer social conditions. The wealth remain focused in a few hands as the approach was individualistic not socialistic. The beneficiaries then indirectly start affecting the governing powers, and the miseries of the poor end in a limbo.

    2. 3. Weapon manufacturing was in the hands of private industry. Encouragement to produce more weapons and spending heavily on military forces is to as Military Industrial Complex.
      This affinity towards Neo liberalisation, as it is termed, destroyed two great super powers at the same time. World’s largest international creditor rose to become world’s largest debtor, in order to assimilate the military resources, while other collapsed competing.

  3. 4. Ronald Reagan as President introduced policies and programmes that embraced the Laffer curve and cut taxes, increased defence spending to record levels, pushing the Soviet Union into economic breakdown as it tried to compete, and raised deficits to unprecedented levels. President Bush cut taxes and converted a huge budget surplus into a mind-boggling deficit.

    1. Ronald Reagan believed in the principle of the least governmental interference and hence allowed the market to decide for itself as to what it actually required. The decision was a prejudiced one as it were the capitalists who would benefit from such a move. Unbridled marketing and pricing strategies would make them the power wielders in disguise; regarding Bush, the less said the better-he was the ventriloquist’s dummy.

  4. 5. What was the Washington Consensus? How did it affect the Third World?
    Explain the components of this consensus as recommended by the WB and the IMF. What was the shift in the rfole of these institutions?

    1. The ‘Washington consensus’ represented a standard programme laid down by the IMF for countries that came to it for emergency assistance when their economies had reached such unsustainable levels of borrowing that they were unable to service their debt.

      The Third World was drawn towards adopting LPG blueprint. Thus the economy was opened to foreign investment, subsidies were removed, taxes raised, import duties cut and countries moved towards a convertible currency

    2. The World Bank and IMF were expected to:
      1. Provide cheap credit to the poorer countries.
      2. Help countries to tide over problems in their balance of payments.

      Instead they were taken over by the Neo-Liberals and became tools for exploiting the Third World

  5. 6. Account for the supremacy of the Dollar. How did privatization help the Dollar?

    7. How did the consumption levels rise in the USA and what were the consequences?

  6. 8. India remained left of the centre. What were the consequences? Describe the nature of the economy under this policy.

    9. What happened to Agriculture during the period when the State occupied the commanding heights of the economy?

    10. What are the main issues in the State versus market debate. Explain the implications of Liberalization, Privatization, Globalization.

    1. 8.India was wise enough to adopt a via media between extreme privatisation and extreme socialism. The point of contention is the degree to which a state should be liberalised. By remaining to the left of the centre we did not privatise all sectors-thanks to the leftists when the reforms were brought in, they were against total privatisation in contrast to the neo-conservatives who advocated minimal governance of the state. The consequences can be felt upto this day and are most evident today- in a time when most of the western countries are in economic tatters, we still have a robust economy with the potential to be relatively unaffected by the global crisis and a higher potential to swing back towards growth. Due to the adoption of the structural reforms, we have a mixed economy- the co-existence of public and private sectors.

      9. The state was committed to such an extent towards protecting the interests of the farmers that it was a crime not to write off loans. So, it was a taken-for-granted attitude that prevailed amongst the people. Hence agriculture productivity was dismally low- one of the reasons why the green revolution was ushered in. ut the irony is that it has not changed much even after liberalisation. Our agriculture growth lingers around 2%.

      10. One point nails it: a via media. But the tricky question is to what degree? positives of the LPG mode are development of the middle and affluent classes bu the flip side of the same coin is that it has come about at the expense of the poor. Better education and higher employment opportunities for those who already have them- RTE is still opposed by private instituions

  7. 11. How did this affect the Welfare State? Discuss the disappearance of subsidies,

    12. How did these policies affect our foreign exchange position?

    13. India produced many billionaires. Foreign goods flooded our markets. What were the consequences? Explain the terms Conspicuous consumerism, disinvestment, and the rich-poor divide.

    1. 11. Drifting away from the welfare state resulted in reduced collection of taxes from the people and consequently a reduction of welfare activities such as financial assistance in the form of subsidies, unregulated market prices of essential commodities, and obnoxiously expensive health care. To this day, Americans cannot survive without an insurance scheme. But it is highly pitiable that the same government which lets millions go to bed hungry considered bailing out Kingfisher- Privatisation.

      12. Though the LPG model is filled with inherent disadvantages, it did bring us out of the financial mess that we were in the early 1990s. Today’s forex reserves amount to over $300 billion in comparison to 1991.

      13. The LPG model is designed and sugar coated to make the rich richer by making the poor poorer- and this holds good at the local and international level. The developed countries not satisfied with the materialistic lifestyle they are used to, turned to the developing countries under the guise of helping them to lead an even better lifestyle. The same story holds good for the people who turned billionaires overnight in our country. Or else how do you account for the rich-poor divide that we see all around. You get down from a flight- rich , but hire a porter to carry your luggage. This is development in which sense? Or Mukesh Ambani building a 4000 crore apartment next to slum in Mumbai.
      Foreign goods have flooded the Indian market. Even tender coconut comes in a tetrapack- heights of consumerism.
      Conspicuous consumerism is the idea of spending/ buying relentlessly which tends to boost your social esteem. The so called management gurus are the ones which promote this because all that matters to them is PROFIT- does not matter at what cost it is achieved. Disinvestment is the process of selling away industries or part of industries owned by the government to private players. This is usually done for 2 reasons:
      a) The failing PSUs are usually white elephants- therefore by including private organisations, management, responsibilities and profit can be shared.
      b) Government can use the revenue so generated for welfare programs

  8. 14. We have become an economic super power? How and in what sense?

    15. What did Polyanni mean when he said tSociety should determine Economy?

    16. What is Keynesian Economics?

    1. We have become an economic superpower only in terms of GDP. We are the fourth largest in the world. But that does not translate into everyone having enough to live with. There are more number of poor people in India as compared to sub-Saharan Africa. We rank 134th in the Human Development Index. The rich-poor divide is there for everyone to see- it is screaming at us.

      1. 15.The society should determine the economy and not the market. A simple example would explain this- recently there was a protest in New York named “Occupy Wall Street” where thousands gathered with boards and placards stating that 99% of the population cannot and will not sacrifice their earnings for the lifestyles of the remaining 1%. Ironically, the 1% make up the market and they have been let to decide on the type of economy the country deserves.

  9. 17. Explain the problem of farmer suicides in India. What were the causes?

    18. Which sections benefitted most from the IMF policies?

    19. What did Margaret Thatcher mean by saying TINA?

  10. 23. What part has the Public sector played in India? Have you any good words to say about it?

    24. Why did they fail in some cases?

    25. Can we do without it?

    26. How does Neo Con Liberalism affect the working classes?

  11. 27. What is this controversy between GDP and Gross National Happiness?

    28. What is the Hunger Report?

    29. How far do you prefer FDI?

    30. How has Globalization helped us and how has it harmed us?

  12. 31. How is accountability ensured by the Private Sector and the Public Sector?

    32. Has Black money increased with privatization?

    33. Enumerate the areas which cannot be handed over to the Private sector.

  13. 3. Weapon manufacturing was in the hands of private industry. Encouragement to produce more weapons and spending heavily on military forces is to as Military Industrial Complex. This affinity towards Neo liberalisation, as it is termed, destroyed two great super powers at the same time. World’s largest international creditor rose to become world’s largest debtor, in order to assimilate the military resources, while other collapsed competing.

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