[Marxism] New issue of Aspects of India's Economy

["Jacob Levich" <jlevich@xxxxxxxxxxxxx>]

Comrades,

The new issue of _Aspects of India's Economy_ is out, and as always it is 
available online at http://www.rupe-india.org/ The lead article, by the 
Research Unit for Politcal Economy,  is entitled "The New Great Depression 
and India." An excerpt:


"Equally at the heart of the current crisis is the relation between 
imperialism, particularly US imperialism, and the Third World. One important 
aspect of this relation in recent years is the large capital inflows from 
Third World countries - China, other East Asian economies, and the Gulf oil 
exporters - which have sustained the US expansion. These countries 
accumulate large trade surpluses; their central banks invest these surpluses 
in the US, mainly in US government debt instruments. These flows bridge the 
giant US current account deficit (i.e., the deficit the US runs on trade in 
goods and services). These flows of capital to the US not only fund the US 
current account deficit; they are so large that they even fund the giant US 
investment abroad.8 And while foreign investment in the US is in low-return 
US government debt, US investment abroad earns high returns. As a result the 
US, despite being a huge net debtor, earns more on its foreign investments 
than it pays out on others' investments in the US. In the words of Kenneth 
Rogoff, former chief economist of the IMF, "This enormous subsidy to 
American taxpayers is, in many ways, the world's largest foreign aid 
program."9 (Part of the US investment abroad is, of course, in placed in the 
Third World. Third World central banks like India's RBI have been compelled, 
in turn, to invest some of this incoming flood in US government debt - a 
multiple bleeding.)
Why then do countries like China, other East Asian countries, and the Gulf 
oil exporters buy US government debt? This must be seen first in the context 
of US global domination (an important element of which is its overwhelming 
military supremacy). On this basis the US has ensured the continuing reign 
of the dollar as the leading international currency, and therefore ensured 
that it makes up the bulk of the foreign exchange reserves of central banks. 
The US has also used its clout as the world's biggest importer to lay down 
terms to the world's biggest exporters.

At the same time, the present pattern of trade and financial flows also 
benefits the elites of certain Third World countries. Booming exports (on 
the basis of harsh exploitation of workers) yield them rich profits. 
Moreover, the flood of funds internationally helps them in several ways. 
Foreign capital flowing into Third World countries boosts upper-class 
consumer demand and corporate profits; and in a climate of easy and cheap 
funds, global investors are willing to bankroll the global dreams of big 
Third World capitalists like the Tatas and Ambanis. Even as the fact of 
imperialist exploitation is as stark as ever, its contours and patterns are 
shifting.

The savings which certain Third World countries are exporting to the US are 
made possible by suppressing the consumption of their own working people 
(i.e., paying workers low wages, taxing and underpaying peasants). The most 
striking instance of this pattern is that of China, which saves a staggering 
half of national income in this fashion. So high are China's savings that 
despite having the world's highest investment rate it has surplus savings to 
export. In the case of other developing countries, the surplus savings which 
they are exporting are not the result of rising savings, but falling 
domestic investment under the reign of neoliberal economic policies. Indeed 
"there is a global investment shortfall, with investment trending downwards" 
even during the preceding period of high growth. Thus the relation at the 
centre of the world economy is one of parasitism."

http://www.rupe-india.org/47/depression.html















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