Ever since
the global recession in 2008, the world output in merchandise trade has shrunk
to 5% down by 0.8 points of global trade index (IMF data). Albeit the Asian
markets have shown the signs of recovery are once again gone back to bearish
trend due to Euro zone crisis. Who will revive the gloom in the world economy…….Is
it G-20, World Bank, IMF? Or one should
expect the resurrection of Keynes?
The
fundamental reason for this bleak scenario in world economy is due to the new
structure of capitalism. I am neither a Marxist nor using the language of Marx.
Today we need a Nationalist capitalists rather than Neo-capitalists. A
nationalist would like to invest in a stock with an objective of improving the
long term productivity of the company. The neo capitalists on the other hand
prefer to invest in stocks, actively influencing a company’s decision making,
They can enhance their wealth only by buying and selling their stock in
anticipation of fluctuations in its value .As a result the productivity is
unlikely to improve unless these neo capitalists invest to enhance long term productivity
rather than to simply maximizing short term profits.
Ireland for
example opened its doors for international investors to invest in their
companies. Almost all MNCs in the world have a corporate office in Ireland. The
global recession has proved their policy wrong with the flight of capital from
their country. What it has given Ireland is petty clerical jobs, forced the
country to join the club of PIGS (PORTUGAL, IRELAND, GREECE, SPAIN) which are
deep down in economic slump. China on the other hand encouraged the short term
investors to invest manufacturing companies let it is Toys to Toyota and
strengthened a strong manufacturing base to support employment for millions. The
policy makers are more on improving the productivity in the economy .No doubt
china’s manufacturing sector also has slowed down but considering its future
prospects it is far ahead from others.
In India the
flaws began at the policy level itself, how can one expect a drastic turn out
in the revival of the economy? We speak loud at all global platforms regarding
the adaption of policy for renewable energy as a part of greening ones economy (Green
GDP) but in reality what we do…..let me give an example
Andhra
Pradesh has set up a prestigious renewable energy power plant to make power out
of rice husk at Rajahmundry. Initially there were no contracts the power can be
sold freely. But recently APTRANSCO has made the mandatory contract with the power
plant that it has to sell the power at 3.5 rupees per unit in order to bring
down the cost. The cost of production itself takes 4 rupees per unit how can
one expect the power plant to operate; it has shut down due to non viability. The
fundamental flaw lies in the policy not allowing the power plant company to
freely operate until it stands competent to stand with conventional power Discoms,
later the government can impose restrictions to bring down the price of unit power.
The small
and medium manufacturing companies let it be the foundry clusters of Madurai,
manufacturing clusters of Virudachalam, Automotive clusters of Vijayawada has
little support from the government. Unless these clusters and many more in the
county are pushed to a level of manufacturing hubs we cannot strengthen our
manufacturing base.
The so
called Short term strategic investors have made the global economy in a state
of six and seven. Today the need of the hour is bigger investments, long term investments
and the policies that support to improve the productivity. The government must
not let the doors of investment in PSUs just only to makeup the fiscal deficit.
These steps will only exacerbate the situation. None of the Generation Y’s like
me will oppose FDI in retail but Priority should be given to attract FDI in
MSMEs. “The difficulty lies not so much in developing new ideas as in escaping
from old ones”……John Maynard Keynes
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