— Dr B K Mukhopadhyay As the things stand now the global economy continues to reel under severe pressure and those who preferred to opine that it would be disappearing after June, 2009, has virtually been foxed. One thing is often forgotten – the ongoing situation surfaced due to interaction of a number of conflicting reasons and any solution overnight or the typical saying [18 months] does not necessarily happen. In the world of economics and finance two and two do not necessarily make four so far as projections are concerned. Approximation, side by side, should not also vary widely. All depends on how the analyses are done, factors taken into account, changing landscape, political challenges and the like.
As per the ongoing situation US and Japan are surely not to recover soon. That is why the ability of the emerging markets to have robust return to potential growth is going to be constrained. If there is recession the recovery process becomes weak, unemployment figures jump up inviting impacts on crucial factors like wages, prices and the like. Slush of global liquidity (in many advanced economies budget deficits are being monetised) has been there and as such the surge in emerging markets (stock prices/other assets) cannot be considered as indicating the end of recession in the biggies. Easy money situation is actually being chased by money chasing commodities, stocks as well as other risky assets. Recovery of the true economic fundamentals is to be seen in particular. Slush of liquidity, in turn, could lead to asset bubble and eventually it is going to go into goods inflation by 2011-12 and not for 2009-10 when the biggest problem is going to be deflation, as rightly observed by the eminent expert on global economy Nouriel Roubini.
The impact till date on the developing economies has been no less. In fact the developing nations have been the victim of meltdown. The epicentre being the US, developing nations have become unfortunate victims on account of the adverse consequences like falling export revenues (We even registered a fall by as much as 30 per cent), coupled with job loss. That is the unemployment figure is added to the retrenched! Naturally, at this stage the Geneva-based ILO (International Labour Organisation) has a big role to play.’ Global job pact’ could counter the job crisis created by the meltdown.
Side by side the need has been crucially there as to becoming extra vigilant. Resource crunch was already there and the meltdown has added fuel to the flame. Official development assistance to developing countries might come down further in the wake of recession, which, in turn, would impact on social spending and of course employment. Resources allocated for employment, if cut, would invite fall in employment generation.
As the matter stands: the vast majority of the world’s population is living close to the perilous border of bare subsistence, which has been the case for a long, long time, but it is only in the recent past that it commanded the interest and attention it deserves. The poverty in which the great mass of people live stands sky-high – at the very top of world economic problems and naturally the same demanding solution in a time-bound specific manner. The economic development obviously stands first on the priority list of goals. It is also very meaningful as the developed countries, individually and collectively through various international organisations, have also joined the battle and expressed in unambiguous terms their intention to help raise the standard of living of the poorer countries. At this very juncture, international cooperation emerges to be the most crucial factor and an early settlement of the Doha round could benefit both the developed and the developing countries. But for that both the sides are required to be reasonable and practical. Side by side, no settlement can ever be reached if it is at the cost of the tottering millions, whatever is the magnitude of trade concessions being offered.
Thus, there is virtually no alternative to international cooperation – right from food, energy security to educational, social and cultural, spheres in spite of the fact that there exists considerable structural and development differences between the economies. Whatever the motives the important fact remains that economic development has become a major concern of the contemporary world. Economic development is a complicated and many sided process which defies simple solution. Mere understanding of the problem of developing economically backward areas does not carry any practical meaning if the resources of development are not properly explored and enhanced keeping in view the ongoing skill and knowledge shortage.
Especially, the level of technology in use in an economy is a function not only of the state of knowledge, but also of the availability of the processional, technical, and skilled personal required to apply the knowledge and, side by side, of the opportunities and incentives to do the same. It has rightly been located that ‘even though technical knowledge itself tends in the long run to be a “free good” that can be improved from developed countries, it may be slow in some to reach the least developed block. The fact remains that research and development expenditure underlying the advancement of technical knowledge is, typically, extremely limited in many developing economies. Quick adaptability, in turn, depends on a host of factors – political and sociological aspects in addition to the economic factors.
(The writer is a faculty member, IIBM, Guwahati). SOURCE: ASSAM TRIBUNE
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