A New Economics for A New World
Introduction:
- The Indian government is simultaneously balancing three economic issues:
- It is anticipated that the Reserve Bank of India will regulate interest rates, currency exchange rates, and inflation.
- Cooperating to negotiate bilateral and multilateral trade agreements that protect the interests of Indian workers and farmers. The Ministries of Trade, Industry, and Agriculture.
- The inability of citizens to find secure employment with a living wage needs the involvement of all Ministries and State governments. The third issue is related to the first two because it is currently a significant cause of social and political turmoil in the country.
- According to economists, there is no comprehensive treatment for the “poly-crisis.” Even on the solutions to each of its specific difficulties, there is no longer a consensus among them. They disagree on a number of issues, including who is harmed by the depreciation of the rupee and whether central bankers should be independent of governments, whether employment should come before inflation, whether lowering import costs for consumers should come before protecting worker incomes to increase their purchasing power, and many others.
Lessons from China:
- All economists agree that higher investment will lead to higher growth. China’s past therefore has lessons. China and India both opened their economies to international commerce more than 35 years ago. Both countries at the time had industrial technologies and per capita GDP at comparable levels. Since then, China has attracted noticeably more foreign investment than India, and the income growth rate for its citizens has been multiplied by five.
- Given the rise in Chinese incomes, India seems to be in an excellent position to attract global investment. To attract investment, India must compete with other countries. It’s common knowledge that investors from the west and Japan find Vietnam to be more enticing than India. Economists are now looking to Vietnam in addition to China to understand why.
- Neoliberal economists in the West hold the view that China’s incredible economic success is due to the country’s embrace of free trade policies, and they also appear to have similar view with regard to Vietnam’s recent economic boom. Prior to opening their doors to foreign investors, both countries had reached advanced levels of human development, with a universally available education system and efficient public health care systems. China did so before Vietnam.
- In contrast, trade-and-growth economists like Jagdish Bhagwati were dismissive of proponents of the human development theory of growth like Amartya Sen even 10 years ago in India. Jagdish Bhagwati asserts that increasing the size of the economic pie is necessary before money can be distributed. It was the wrong order.
- Because it serves as the cornerstone for growth, basic human development must come before growth. Earnings must increase concurrently with increasing consumption in order to encourage additional investment and consumption.
The current paradigm has a problem because:
- Time cannot be turned back. India’s leaders must devise a strategy for preserving the economic tree’s benefits while strengthening its roots. Several significant issues plague the current economics paradigm.
- Economists commonly reference Tinbergen’s theory, which stipulates that the number of policy objectives and instruments must be equal. This exemplifies the need for autonomous financial institutions for controlling inflation, having distinct industry and trade experts, and having distinct rules for managing the environment and agriculture.
Crises and the inadequacies of the system:
- Macroeconomic experts seek out broad-based solutions. It is impossible for other nations to benefit from a trade and monetary system designed to meet the needs of the United States, China, Vietnam, or India. Their past has made clear what they need. Indian economists bemoan how bad politics are preventing advancement in their profession. But the country’s peaceful progress may be hampered by its dire economic situation!
- Einstein thought it was foolish to strive harder to solve systemic problems with the same mindset that caused them. Global challenges and economic theories from the West have given rise to problems that call for new solutions. The COVID-19 pandemic, the unequal response to the 2008 global financial crisis, and the approaching global climate catastrophe all acted as wake-up calls to the inadequateness of the current paradigm. It is evident that there is no one solution that functions for all situations.
Conclusion:
- This year’s G-20 theme is Vasudhaiva Kutumbakam (One Planet, One Family, One Future). The summit is being held in India. A new economics is required. There is a trend to change the paradigm of economics research and incorporate ideas from the investigation of complex self-adaptive systems, even in the West. Instead of just following these changes passively, Indian economists need to take the lead. They also need to lead them.
