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‘Currency wars reflect stagnation of global economy'

Special Correspondent


Current crisis is likely to be a protracted one

Financial interests opposed to proactive state


DHARWAD: Currency wars are likely to remain a recurrent feature of the global economy, and remain the only way in which some developing countries can “ameliorate conditions of severe unemployment,” Prabhat Patnaik, Deputy Chairman of the Kerala State Planning Board, said here on Thursday.

Delivering the Arjun Sengupta Memorial Lecture organised by the Indian Society of Labour Economics, Professor Patnaik said currency wars might prove counterproductive by resulting in a further contraction of the global economy, and promote greater uncertainty about investment decisions.

“The current crisis is likely to be a protracted one, an impasse,” he said. “Economists must play a far more significant role by demanding humane policies in order to come out of this crisis, whether or not they are acceptable to financial interests.”

He spoke on the theme ‘Crisis and employment in the capitalist world.'

Although it was evident that there was a need for the major world economies to cooperate to provide a stimulus to the global economy, this was hindered by the dominance of “finance capital,” Professor Patnaik said.

“Wealth holders across the world, who hold dollar-denominated assets, are against any action that will result in a depreciation of the currency because they fear an erosion of their wealth,” he argued.

He said the dominance of finance was reflected in the calls for curtailing the fiscal deficit even when economic growth was faltering and employment and incomes all over the world were in peril.

Referring to the cries for preventing China from “manipulating” its currency, Professor Patnaik said even India had taken action to prevent an appreciation of the rupee, which would hurt exports. “Beggar-thy-neighbour polices are a reflection of the stagnation of the global economy,” he said.

“Financial interests are opposed to a proactive state because it undermines the legitimacy of private capital…finance has captured even economic theory,” he said.

Lauding Dr. Sengupta, economist, teacher and chairman of a commission that examined the living conditions of workers in the informal sector, Professor Patnaik said he was an “iconoclast and played many roles in his long and distinguished career.”

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