Beyond the ‘State Vs Market’ Mould
IMF has revised the growth estimates upward only in the case of emerging Asia to 5.5 per cent, otherwise revisions are downward in the case of Latin America, CIS, Africa and Middle East countries. In India, growth declined to 7.3 per cent in 2008, down from 9.3 per cent in 2007. Government estimates are for 6.5-7.5 per cent growth in 2009, but the current IMF forecast is for growth to fall to 5.1 per cent. Contagion of bankruptcy, closure, uncertainty, credit freeze and finally vast number of relative surplus population either explicit in the form of open unemployment or disguised, spreading across the globe at a much faster rate than before, marks the perils of globalization.
Countries those are relatively more exposed to global markets are hard hit for obvious reasons and perhaps this seems to be the other side of the joy they realized during boom. Comparing Asian countries, manufacturing exports comprised more than 140 per cent of Singapore’s GDP, 70 per cent in the case of Malaysia and around 30 per cent in China, Vietnam, Philippines and Korea respectively. However in the case of India and Pakistan, manufacturing exports comprises of less than 10 per cent of GDP. Since most of these exports are directed towards advanced countries, the obvious question that arises is if the growth in advanced countries continues to falter, would it be possible to trigger an autonomous trajectory of recovery for the world as a whole by high-growth emerging economies in Asia. And secondly, even if the temporary saviour might be public intervention, bailouts and coordinated fiscal expansion that IMF proposed to be 2 per cent of the global output, once this tapers down, where will the additional demand materialise that were earlier sustained by financial bubbles.
This draws our attention to the longer term perspective of the systemic crisis that emerges in capitalism either as declining profitability in the creation of surplus in the realm of production -- or in the process of circulation in the form of a crisis of realization. The post-War scenario of Golden Age and state sponsored welfare finally led to declining profitability. In the post 1970s, capitalism entered into the era of neo-liberalism characterized lower level of state intervention, greater reliance on markets and ascendancy of finance capital. This finally led to a situation where claims on surplus were higher than the amount of real surplus created and with the bursting of the finance backed bubble, the world plunged into deep recession. The realization crisis that was although incipient and somehow displaced by bolstering speculation finally reared up its ugly head.
By way of depreciating and destroying existing capital stock, capitalism gets its way out of the crisis but this in any case is linked with massive stress and depreciation of human lives. Unemployment in advanced countries has peaked to unprecedented levels. In Euro area, unemployment rate is 9.4 per cent in June, 2009 accompanied by youth unemployment rate at 19.5 per cent. Similarly, unemployment in US is 9.5 per cent and in Japan 5.2 per cent. According to ILOs baseline prediction, global unemployment rate would be 6.1 per cent in 2009 and in a pessimistic scenario, this might reach up to 7.1 per cent with unemployment in the developed world going up to 7.9 per cent. However responses in labour markets in Asia and developing countries have been historically different from developed countries. Here, shocks are absorbed more by declining real wages instead of declining employment. In developing countries the net effect would be a sharp rise in the share of working poor and vulnerable in the work force. This means swelling of the poverty sharing in the informal segment of the economy. As estimated by ILO in 2009, South Asia is expected to be the region where extreme working poverty would increase the highest of all marking a rise of 13 per cent over 2007. In Asia even if unemployment rate is predicted to be 5.9 per cent in 2009, vulnerable employment would rise by nearly 21 million and the number of extreme working poor would climb by over 52 million. We are in the midst of a peculiar kind of economic arrangement where both growth and decline are accompanied by the same joblessness, albeit for different reasons and in different degrees.
Developing Asia is hard hit by decline in exports, fall in remittances as well as decline in consumption and investment in the domestic economy. The total fiscal stimulus in this region to address the demand gap amounted to 3.9 per cent of total GDP. The size of the stimulus package in China is the highest, 6.9 per cent of GDP in 2008 and that in the case of India it is the lowest in the region that is 0.7 per cent of GDP. Despite the fact that the necessary amount of stimulus depends on the impact felt as well as on the fiscal space that one country had before the recession has set in, but effectiveness in terms of employment creation really depends upon the nature of the stimulus. Investment in infrastructure, direct modes of cash transfer and targeted subsidies to credit starved small and medium enterprises are often prescribed channels of activating direct and indirect multipliers. Needless to say that these immediate responses are required to face the current episode but this also brings in the opportunity of putting forth the much larger question once again.
One can argue that swinging between state and market is nothing new in capitalism. There seems to be no noble cause in bringing back the state once again except in healing up the ailments caused by the free fall of asset prices and clean up the toxic assets by the visible hands of public intervention. The interesting fact put forward byMartin Ravallion, Director Development Research Group, WB is that the total sum of money that would bring everyone in the world up to that poverty line per year, if nothing else changed, is just under $200bn and this is less than one quarter of the $800bn fiscal stimulus passed by the US government alone. Instead of rumbling on the issues of fiscal stimulus and get enmeshed into the murky debate between state and market, it is rather necessary at the moment to get out of the mould and question the system that breeds the seeds of crisis. In one way or the other, the burden is to be borne by the people who would be even compelled to sell productive assets in order to survive or embrace a de-humanizing livelihood with reduced endowments. For the incipient crisis at one time capitalism would blame the overarching state and in some other occasion the unregulated market and would provoke a never ending quest for a proper balance between the two. Given the fact that such a balance is a contradiction in terms in capitalism, any real move to get rid of the crisis in the longer run should start from questioning the system itself.
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