The Threat to Globalisation
By Gopal K Agarwal,
Few years back, globalisation was the buzzword around the world. It assumed everywhere
that with globalisation, economic development will come automatically. All
countries were looking toward means of integrating their domestic economy to
the world economy, basically US and European Economies.
How
could India be left behind, we also that the world economies have to be
integrated. We have to globalize. With the fall of communism, the path became more imретаtive. There was no alternative.
Although in hushed tone, we did talk of alternative ways, but it was not defined. The path was not clear; it was only conceptually delved upon. We were all confused. We formed the opinion that the lofty ideals of Swaraj and Swadeshi had more of a social relevance than economic foundations
We are at a crossroads now. With
failure of capitalism and current global financial crisis, we need to go in
details the pitfalls of American Economic Model and how to engage our
economy from the current global crisis.
The fundamental difference between US and other economies that the western economy works on consumerism, they are based on high consumption rate and successively increasing it to the tune of even financing it through debts. Currently US have a net debt of five trillion dollars.
What US is doing is buying Produce from
other countries by paying dollars, and this payment of dollars is being met
through indiscriminate printing of currency. They have built a system of
economic structure through mega institutions like World Bank, IMF, etc. Through this
structure, the reserves of other countries are being kept in dollars and invested
in US Treasury Bills. The currency, which was issued by US to buy produce from
other countries, comes back to US as investments in its treasury bills.
Further,
US successively resorting to deficit financing. It has huge budgetary deficit.
Annual US budgetary deficit me from 162 billion dollars in 2007 to 455
billion dollars in 2008. On one hand, it's economists' adrese other countries to
abstain from deficit financing, but it itself is nothing to deficit financing,
we need to analyze the purpose behind. Then successively devalues its currency.
Thi devaluation helps US to being down value of investments of other countries.
World
is supplying produce to US in dollars and then investing its surplus in
dollars. The money received by US being loaned to its population with nut
proper credibility assessment, which is now being called Subprime lending, in lending without proper security assessment. Which was bound to fail and has failed.
This indiscriminate lending itself was helping US to leverage its capital and
create asset bubble, which has now buried, and the world has lost trillion and
trillions of dollars in capital.
Further
US has loose regulasury pro visions with regard to bankruptcy laws and
leveraging h has accounting pro cedures and financial instrumens like Over the
Counter (OTC) products, which helps it to camondlage the identity of lender and
borrower, and helps in asod ing provisions and doclosures of mark to market losses,
till the time it chooses to do so.
On the other hand, India is a savings economy.
We save more than 35% of our GDP. We have huge domestic market and a very large
population. Sixty-five percent of our population is young and working
Non-payment of debt is a stigma our country and we have stringent anti-bankruptcy laws.
Fall
of America is very certain. Dollar is very weak, but it is holding back only
due to its being owned and bought by other countries.
We
need to understand Americisuruation and its fall and to take correc ove
measures, however difficult and hard they may be Because the konger we wait the
situation will be further worsened.
Need
of the hout in to desengage our economy from global economy Preserve out
domestic market at all cost, take up massive infrastructure development
projects, reduce merest rates, reducc indirect taxes, which form a very high
consponent.
(The writer is National Convener, BJP Economic cell.)
