So the news is that Raghuram Rajan has been appointed as the Governor of the Reserve Bank of India and his three year term will start in September.
This is a bit surprising given that Indian government officials are not too free market fundamentalists as Raghuram Rajan. What is more disappointing is that Rajan completely denies that Keynesianism works....
Instead Rajan offers supply side reasons for the economic mess.As Ramanan says, OMG. Does this signal that India is on the way to neoliberal dystopia?
The Case For Concerted Action
An Anti-Keynesian Central Bank Governor
Ramanan
Rajan is talking thru his rear end. In an FT article of his (see links in the above mentioned article) he makes the blindingly obvious point that in a recession some geographical areas and industries will be harder hit than others, thus, so he claims, we’d be better off concentrating on the hard hit areas / industries than spending money on general Keynsian stimulus.
ReplyDeleteThe flaw in that idea is that there will ALWAYS BE areas and industries doing better than others. That doesn’t disprove the idea that given a GENERAL lack of demand, the solution is a GENERAL i.e. non-targeted rise in demand.
As to the “hard hit” areas and industries, that’s an entirely different point and a total can of worms. E.g. government CAN INTERVENE and help the “hard hit”, but does government have more wisdom than the market? Should we subsidise rust belt industries? The British government poured millions into declining industries like British Leyland and shipbuilding over the last four decades or so. That didn’t stop their ultimate demise.
Even with the endless examples of how it has failed miserably, far from arresting the spread and influence of this destructive doctrine, it is proliferating everywhere.
ReplyDelete