The
current crisis presents an opportunity to examine financial
stability at both global and national levels. As the New
Economic Liberty and Capitalism are under attack, it is
time for a paradigm shift.
The
debate by The Economist on current crisis rightly
focuses on future impact by tilting balance between `government'
and `markets' towards the former at least in short-run.
This prognosis essentially is based on historical fact and
need for being pragmatic during a period when Capitalism
has failed to deliver. High priests of Capitalism are not
seeking solutions from advocates of Adam Smith's `invisible
hand', but searching Keynesian Theory for Solutions. This
would have a perceptible impact on Emerging economies as
they have always resisted liberalization of their economies
in general and financial sector in particular in the name
of `globalization'. The emerging economies have now every
reason to increase regulatory powers of government so as
to reduce the pains of market economy. On the other hand,
poor economies are likely to suffer most as aid flow would
dry up.
Until
early 2007, it looked as if we are going through another
phase of great prosperity, which is usually referred to
as a secular phase. According to The Economist, broadly
speaking, the 20th century can be divided into
six phases: bear markets from 1901-21, 1929-49 and 1965-82
and bull runs from 1921-29, 1949-65 and 1982-2000. And the
current phase is under spell of bear market which is likely
to last for a longer period than what is anticipated. In
order to understand the implications of the current crisis,
it is necessary to look at its genesis, measures being initiated
for containing it, repercussions and likely implications
for India. |
