Foreign Capital Investment into Developing Countries: Some Economic Policy Issues

This paper analyses the role of foreign capital in the economic development of developing countries, particularly South Asian and East Asian countries. Mainstream economists suggest that foreign investment would benefit developing countries by increasing the availability of capital, and through their positive impact over productivity and the general economic wellbeing of the host country. After the Second World War, the rapid economic growth first of Japan and later on of South Korea, Hong Kong, Singapore, and Taiwan has been widely cited in support of foreign capital. It is true when we look at the records in terms of the removal of poverty, job creation, educational achievements and improving the overall living conditions. I find however, that such discussions have ignored the experiences of developed countries in their early phase of industrialisation. In addition there is a lack of attention to the analysis of the issue of capital inflows in the context of neoliberal economic reforms and financial deregulation. After the global financial crisis in 2008, capital inflows to developing countries have witnessed a sharp decline. Foreign investments are highly sensitive to foreign exchange rate fluctuations. Thus, under such a situation, it is difficult to build a long term industrialisation strategy

Reflections on Chinese Political Economy

he aim of this paper is to discuss the reasons for the rapid growth in the Chinese economy over the last three decades. China has been growing fastest in human history, which has an impact on the global economy and also various challenges that the country faces. It is seen as heralding a major shift in the international division of labour through changes in its output and employment pattern. China is described as becoming the “work-shop” of the world as a result of the expansion of its manufacturing production. Its impact on other Asian economies and also on the world economy has the potential to be enormous. Market reforms and opening up of the Chinese economy to trade and foreign capital since the early 1980s, have unleashed entrepreneurial energies. China’s development policies can be best understood if these are looked at from an institutional economic perspective. This article is based on a review of published papers in the field of economic policies, focusing on the debate concerning the respective roles of the state and the market. A wide range of data sources are presented, including statistics compiled and generated by wide range of organisations such as IMF, World Bank and WTO that are non-governmental agencies. Secondary data of this type provides greater potential for addressing the research questions than statistics produced by the national government. This study finds that corporate debt has risen in recent years in China, a large part of these loans having been financed with investment in trust products issued by the banks. In addition, a huge amount of credit has been channelled into the real estate sector, and seems to be heading towards the housing and estate sectors, meaning that most of this is speculative. Investments are financed by credit; which clearly needs to be repaid. If these levels of debt become unsustainable this could pose a major challenge for the Chinese economy

Growth and Crisis in India’s Political Economy from 1991 to 2013

Since the pro-market reforms were launched, the Indian economy has grown from 4.7% in the 1990 to 9% in 2011 before slowing down dramatically to nearly half of that rate in recent years. From launching of reforms until 2011, it did manifest some vivid and impressive signs of India moving towards high growth and increase in living conditions of its population. The purpose of this article is to access the likely effects of reform measures on the society, because the mainstream approach suggests that the reforms can be expected to increase economic growth and incomes. However, this study finds that the mainstream economists ignore the role of domestic aggregate demand and inequality. India’s growth was led by the services sector, which included real estates, IT, telecommunications and banking, and contributed nearly 50% to the GDP in 2012. Manufacturing, which experienced remarkable growth and transformation in the East Asian economies, had rather grown much slower. The agriculture sector, which still employs nearly two-third of India’s workforce, remains stagnant. The study suggests that education and health have been neglected in India and this will compromise productivity and growth

Experiences of Capitalism in India and Pakistan

The objective of this study is to examine the economic policies and socio-economic changes which have taken place in South Asia for the last six decades. However, my focus will be mainly on India and Pakistan to try to examine how capitalism has been developing differently in these two countries. It seems to me that this study is important because the proponent of free-market polices (i.e. mainstream economists) ignore the poverty issues and emphasise mainly growth rates and unquestionably assume that ‘trickle down’ would solve poverty problems. We should also not forget that India is home to the largest number of poor in the world, and as such is an obvious test case for whether pro-market reforms work or not. The ruling elites cite high GDP (gross domestic products) growth rates as indicative of economic development and consequently the well-being of the people. Growth is seen as a panacea and in order to achieve higher economic growth rates both countries had earlier adopted import-substitution-industrialization (ISI) and later on neo-liberal (i.e. ‘free market’) economic policies. The study will also analyse the impact of neo-liberal economic reforms on socio-economic situation both in India and Pakistan and its impact on reducing poverty. In Pakistan these reforms were launched in 1988, while in India in 1991 under the IMF supervision. As a result both economies have witnessed an upsurge in GDP growth rates (especially in India). Despite the high GDP growth rates for the last two decades in India, for example, over all employment has not been growing. The service sector, which witnessed a rapid economic growth, accounts for a much smaller share in employment relative to their contribution to GDP. The study finds that capitalism has failed to remove poverty and inequality despite its long history of penetration in South Asia under colonial and neo-colonial regimes and in spite of being backed by the new technology and increased amounts of credits. The experience of Pakistan clearly illustrated this fact. There is a lack of discussion about the presence of a large proportion of people living in sub-human conditions and lack of overall and holistic development of human being

The Political Economy of Religion and Politics in India

The paper will examine the dramatic rise of the right-wing Hindu organisations in India, especially since the 1990s. Most prominent among these organisations are RSS, BJP, VHP, Bajang Dal and Shiv Sena. However, they all work together under the philosophy of Hindutva (i.e. Hindu-ness) and are rabidly anti-minority in their stance. They appear to need an ‘enemy’ in the form of a religious minority to unite Hindus and consolidate their support. This study is important because RSS is too politically significant to be ignored. Since the BJP (BhartiyaJanta Party) came to power in May 2014, its ministers and senior party leaders have been coming out in support of Hindutva. Attacks against Muslims have risen sharply. Cultural issues such as cow slaughter and the building of the Ram temple at Ayodhya have been raised again by the RSS as a means of dividing communities and keeping Muslims in a state of constant fear and insecurity. This study argues that the failure of India’s economic development to remove socio-economic constraints leading to slow and uneven development has intensified rivalry between castes and religious communities. Under such conditions, it became possible for extremist Hindu organisations to target people on the basis of religion

Contradictions in development: growth and crisis in Indian economy

Since the pro-market reforms were launched, the Indian economy has grown from 5% in the 1980s to around 10% in 2011 before slowing down dramatically to less than half that rate in recent years. From launching of reforms until 2011, it did manifest some vivid and impressive signs of India moving towards high growth and increase in living conditions of its population. The purpose of this article is to access the likely effects of the reform measures on economic growth and poverty. Because the mainstream approach suggests that the reforms can be expected to increase economic growth and incomes. It seems that India’s growth has been led by the services sector, which includes real estates, IT, telecommunications, and banking, which contributes nearly 50% to the GDP in 2012. Manufacturing, which experienced remarkable growth and transformation in the East Asian economies, had rather grown much slower. The agriculture sector, which still employs nearly two-third of the India’s workforce, remains stagnant. The study suggests that education and health have been neglected in India and this will compromise productivity and growth