Why Capitalist Governments Worry More about Inflation than Unemployment?

CAPITALIST governments invariably seek to control inflation by enlarging unemployment. This has nothing to do with any belief in a stable “trade-off” between the two, namely in a stable curve that links the two. Even those who attribute inflation to other causes, such as excessive money supply (“too much money chasing too few goods”) and find the solution to it in monetary stringency, are in effect seeking to control it through larger unemployment, since monetary stringency causes larger unemployment.This raises many questions. The first question is: why is this so?

A Budget Whose Silences are Ominous

NO budget in recent memory has been presented at a time when the economy is in such dire straits: unemployment is so bad that there are job riots in Bihar and UP; wealth and income inequalities are among the worst in the world; millions more have been pushed into poverty because of the pandemic and the lockdown; and inflation is accelerating even in the midst of massive unemployment. There is an urgent need for a strategy that promotes economic revival, while providing relief to the poor, and contributing to an abatement of inflation.

The Economy on the Eve of the Budget

THE Indian economy is currently caught in a vicious spiral of inflation, stagnation, and a widening of the fiscal deficit. And this spiral is set to become even more vicious because inter alia of developments in the world economy.Even before the current omicron wave, the rate of GDP growth projected by official estimates for 2021-22 over the previous year was 9.2 per cent; but the previous year itself had witnessed a 7.3 per cent contraction because of the pandemic.

Co-Lending: Towards Recolonising the Peasantry

IN colonial times, the peasantry had to borrow from private moneylenders. According to Provincial Banking Enquiry Committee reports, these moneylenders in turn borrowed from commercial banks. But while disbursing credit to the peasants and charging exorbitant interest rates, the money lenders at least bore the whole of the lender’s risk. The banks from whom they borrowed did not bear any risk in case the peasants could not pay back the loans they had obtained from the moneylenders.

Yet Another Contradiction of Capitalism

IN the United States there are still four million persons who remain unemployed compared to before the pandemic; and yet the Biden administration’s attempt to stimulate the economy has already run into a crisis with the re-emergence of inflation not just in that country but elsewhere in the capitalist world as well. The Federal Reserve Board (the equivalent of the US central bank) is planning soon to raise interest rates (that are currently close to zero), and even the fiscal expansion will be difficult to sustain in the face of inflation.

Privatisation and the Constitution

IN a recent report the People’s Commission on the Public Sector and Public Services has rightly drawn attention to the sheer un-constitutionality of the Modi government’s plan to privatise en masse the assets of the public sector. The constitution of the country is not just a set of procedures and rules for the governance of the polity. It expresses above all a certain social philosophy which is supposed to inform the behaviour of the various organs of the State and which constitutes the foundational beliefs around which the nation has come into being.

US Inflation and India’s Economic Recovery

THE very day, December 11, when the Indian finance ministry spuriously claimed a robust recovery in the post-pandemic Indian economy, newspapers carried news of an acceleration in the US inflation rate. The inflation rate in November 2021 over November of the preceding year had been 6.8 per cent in the US, which was higher than the corresponding rate in any month over the previous 40 years; in particular, petrol prices had increased in November 2021 by 58 per cent, which was the highest for any month since 1980.

India’s Post-Pandemic Economic Recovery

THE pandemic alas is not yet over, but there are no economic disruptions in the current fiscal year in the form of lockdowns or workers’ absence. The economy’s performance therefore can no longer be attributed to the prevalence of the pandemic; whatever it is, it is caused by economic factors.Government spokesmen are busy claiming that the economy is displaying a robust recovery, and that the current fiscal year will post a double-digit growth rate.