Economics

By King Meera -
ECONOMICS:
  1. Developed and under-developed economies
  2. Capitalism
  3. Communism
  4. Socialism
  5. Nehruvian Socialism
  6. Five-year plans
  7. Nationalization
  8. License Raj system
  9. Stock market as a barometer of economy
  10. Liberalization 
  11. Privatization
  12. Globalization
  13. Alternative to GDP - Quality of Life
  14. Crony capitalism
Each country has its own economic identity, just as India does. For instance, America is considered a rich country, and in terms of non-Americans' aspirations, chasing the American dream. However, in any analysis we must always consider comparisons as opposed to "sops" and unrealistic yardsticks.

We discussed status, the role of advertisements in desires, "keeping up with the Jones'" and skipped over a thousand other topics.

Economies may be categorized into first-world, third-world, in-between (or still-developing) and oil-producing countries.

Parameters of development:

(Discuss facets of development keeping India in mind. - 15 marks' potential question)

1. Earning power or capacity (individual income as well as country's income)
Questions to ask:
Why is it considered inappropriate to accept "income" as the chief parameter of development? What really is development? (Money is not the only proof of development)
2. Healthcare
whether, and how well we take care of our sick and infirm
3. Water
Availability, quality
4. Job opportunities
more the merrier
5. Education
However, not automatic to development - literacy, knowledge creation, culture etc also part of education
6. Housing

3 Reasons for Underdevelopment:

1. Socio-economic potential not realized
2. Existing resources not optimally utilized
3. Complex interplay of internal and external factors

Modernizing Theory (a.k.a.) Development Theory
"it is sensible for countries to share resources so that there is concormittant development among the countries"
input => output (as you sow, so shall you reap)
+ no duplication
- if a country has to spend billions on something someone else makes better (for instance aircrafts or cars) because they won't share (this happens if political and economic identities clash)

Dependancy Theory
"The world is divided into unequal sections - some sections consist of countries that are very developed, others consist of countries that are not so developed. The developed countries want those that are not, to stay so, so that the under-developed countries must depend on the developed countries' produce."
"MacCaulayism"

  • if surrounded by developing/under-developed countries, plenty of man-power - cheap labor
  • cheaper resources - raw stock (material resources)
  • countries like India become a destination or dumping ground for obsolete technology

Capitalism
Emerged in 1640-50
Features: 
1. private ownership (not waiting for government subsidies, handouts)
2. mass production
3. profit oriented (no such thing as a free meal)
4. highly competitive (competition heralds quality)
-ve: 1993 price war between TOI, DH, The Hindu - prices dropped too low
5. believes in the philosophy of free market or open economy 
6. least interference from government (India after LPG (FDI, import-export etc))
7. philosophy looking toward achieving optimum GROWTH
  • capitalism <= capital (raw stock, material, resources, land deeds, livestock, machinery, titles, assets)
  • mercentile capitalism (mercentilism with a capitalistic approach - profit of the country comes first - example of China after 2000)
  • free market capitalism (rather than patriotic fervour, demand and supply influence the economic systems of the country)
  • Social market economy (at least 30% government intervention - help - not interference to ensure equitable resources (at least equal access) in the country; example - Amul (Anand Milk Union Limited)
  • State capitalism (state own the enterprises but chief incentive is profit) (ex: China. Many corporations owned and run by Chinese government - unforgiving of loss)
  • Corporate capitalism (Bureaucratic corporations dominate economy - "corporations hold government at ransom")
Communism
  • Status of political or economic philosophy that creates conditions that liberate the labor class or the Proletariat
  • mining, textile, seamstresses, maids
  • Capitalistic countries exploit labor class in communist countries 
Origin of Proletariat:
1. Beginning of industrial revolution (industrial labourers)
2. Machines increasingly replaced people
3. Unskilled labourers employed by factories - skilled/trained/pricey labourers employed by the rich

Led to the creation of two classes -
1. bourgeois (owners) (educated, elitist, preferred intellectual labor)
2. Proletariat (workers) (physical labor)
gap increased to the extent that the other became the enemy
This polar opposition influenced social narratives - them vs us attitude

Communism based on tenets of Marx and Lenin
Treatise by Marx and Engels - Principles of Communism - 1848
About freeing the working class, abolition of private property, imposing "progressive" income tax, abolition of inheritance.

Communism and India: 1960-70
  • establishment of a central bank (highly nationalized )govt controlled)) to prevent interference from big business houses
  • government ownership of infrastructural entities (power, transport)
  • govt ownership of factories and agricultural units
  • Government control of labor (concept of corporate farming also began, through government entities)
  • all each other's comrades, friends - all in it together
  • education heavily controlled by communist parties - easiest way to control human minds (obviously never critical of this influence)
  • considered it very important to inculcate philosophies of atheism and morality
Socialism
a blend of capitalism and communism, as understood in the Indian context
  • production is inimical to success
  • distribution and exchange is owned by community and government, where community maintains a healthy balance
  • production for use rather than profit (profit regarded with suspicion, pursuit of money looked down upon)
  • strong government intervention w.r.t. investment, pricing, production levels
  • often populist policies
Communism vs. Socialism
  1. Socialism refers to economic understandings at any given time whereas communism is political and economical.
  2. Socialism seeks to manage economy through deliberate (well thought-out, no imposition) and collective social (taking society into confidence) solutions - communism seekss to manage economy and society by ensuring that everything is owned collectively (party represents collective angst, even at the cost of individuals, for instance businessmen)
  3. Perception of socialism as no different from communism in the Western world, but not so in India and countries like it
Opinions about Communism and Socialism
Theorists say socialism is merely another way of looking at communism. Many call it progressive communism, in the sense that it seeks to minimize the flaws and optimize on merits of communism. Communism is considered militant or aggressive politicization of the economy. Socialism is seen as an abstract idea difficult to implement.

Nehruvian Socialism
  • a "democratic socialism"
  • a Vedic political philosophy
  • if people carry out their duties toward themselves, their family, community, work and the country, there is no need for external intervention
  • example of legalization of prostitution considering poverty and lack of training in any other skills
  • classic example of a non-interventionist period in India (1947-52)
  • not much of an organized planning system in place - government too busy
  • can manage fairly well without government intervention if we all put our minds to it
  • revolution without bloodshed or strife
  • political and economical democracy
  • revolution by consent rather than dissent
  • considered inclusive
5-YEAR PLANS

I
  • Started (1st ever) in '51-'56
  • influenced by erstwhile USSR - planned occupations such that no one was unemployed; no excess of professionals - brainwashed
II
  • 56-61
  • only a suggestion of improvement of standards of living in first five-year plan
  • priority areas - establishing and putting in order steel mills
  • thrust on coal
  • railway
  • road islands (where they put up statues and all so people at intersections don't kill each other)
  • continuation of hydel plans
  • Mahalanobis (statistical economist)
III
  • 61-66
  • Nehru's power receding 
  • Lal Bahadur Shastri succeeded
  • then Indira Gandhi
  • focus on EMPLOYMENT - reduction of unemployment - better job opportunities 
  • originally wanted industrial economy but realized it's mostly agrarian so Japanese technology and research brought in - green revolution
  • local self-government
  • Sino-Indian war
Follow this link for all the Five Year Plans' summary

Don't have notes on 
Nationalization:
License Raj System: 
Stock Market as Barometer of Economy:
Liberalization-Privatization-Globalization

Quality of Life vs. GDP

  • GDP is not a true index of quality or growth
  • GDP => A measurement that reflects the growth of the economy where the economy is getting bigger but definitely not better
  • It is a measure to an end but not an end by itself
  • True economic ends include a long happy life, healthy ecosystem, vibrant communities, opportunities for meaningful employment
  • GPI - Genuine Progress Indicator
  • ESDI - Environment Sustainable Development Indicator
Crony Capitalism
  • where the economy sees a close relationship between business and government
  • negative connotations - unfair
  • Success in the economy depends upon close relations between businesses and the government exhibited by favoritism executed through legal permits, government grants and tax breaks.
  • Development or growth of economy often incidental
  • forms of crony capitalism :
  1. bail-out (Kingfisher, Air India)
  2. stimulus (incentive)
  3. special loans
  4. too-big-to-fail syndrome
  5. barriers to entry
  6. tax breaks
That's all I've got, folks :/
Study hard, don't panic too much, curse the TMI syndrome and do well tomorrow.
Here's some motivation for when you start to lose hope :P

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