"A Contribution to the Theory of Financial Fragility and Crisis"

The paper examines three aspects of a financial crisis of domestic origin. The first section studies the evolution of a debt-financed consumption boom supported by rising asset prices, leading to a credit crunch and fluctuations in the real economy, and, ultimately, to debt deflation. The next section extends the analysis to trace gradual evolution toward Ponzi finance and its consequences. The final section explains the link between the financial and the real sector of the economy, pointing to an inherent liquidity problem. The paper concludes with comments on the interactions between the three aspects.Capital Gains; Consumer Debt; Debt-driven Fluctuations; Effective Demand; Financial Fragility; Liquidity Preference

Eficiencia económica e instituciones agrarias

The paper shows that explanations in terms of economic models should be embedded in institutions in order to understand economic phenomena in a given historical situation. Thus, the way in which institutions and institutional changes are addressed from a neo-classic economic point of view is reviewed. In particular, it is argued that such a method fails to consider the market as an actual institution where the participants are by no means equal in terms of economic power. Examples from Indian agriculture are used to show that both agrarian credit and the product market exhibit arrangements and characteristics which are best explained as consequences of the unequal distribution of economic power. As an alternative to analysing economic institutions, the author puts forward the concept of class efficiency. Any institutional arrangement is considered class efficient when the most powerful class can maintain a higher income in its favour, despite the lower productive efficiency of the system. To conclude, institutions consider efficiency to be a useful concept to analyse agrarian institutions in backward regions, provided it is not mechanically understood as devoid of individual agency.Este trabajo plantea la necesidad de integrar las instituciones en la explicación de los modelos económicos referidos a situaciones históricas concretas. Desde esta perspectiva, se cuestiona el enfoque que la economía neoclásica ha dado a las instituciones económicas y el propio cambio institucional y, sobre todo, el hecho de no considerar el mercado como una institución real, en la que intervienen los agentes económicos de manera desiqual. Como alternativa para analizar las instituciones económicas, se ofrece el concepto de "eficiencia de clase", siendo una ordenación instítucional clase-eficiente si la clase más poderosa puede mantener una renta más elevada a su favor, a pesar de la menos eficiencia productiva del sistema. Se muestra la utilidad del concepto "eficiencia de clase" en el estudio de las instituciones agrarias para las regiones atrasadas, siempre que no sea interpretado de manera mecánica o desprovisto de la mediación individual

What remains of the theory of demand management in a globalizing world?

In our era of global finance, the theory of aggregate demand management is alive and unwell, says Amit Bhaduri. In this policy brief, Bhaduri describes what he regards as a prevalent contemporary approach to demand management. Detached from its Keynesian roots, this "vulgar" version of demand management theory is being used to justify policies that stand in stark contrast to those prescribed by the original Keynesian model. Rising asset prices and private-debt-fueled consumption play the starring roles, while fiscal policy retreats into the background. Returning to foundations laid down by Keynes and Kalecki, Bhaduri sets out to clarify whether there is any place for traditional demand management policies - featuring an active role for deficit spending and public investment - in the context of financial globalization. His conclusion: such policies are ultimately unavoidable if we are to revitalize the real economy and achieve stability

Income Distribution in Keynesian Growth Models and Financing of Development Plans

In the usual format of Keynesian growth models investment governs saving: higher investment causes more profits either through greater capacity utilization (normal 'multiplier') or through rising price. (‘Profit inflation,) which, in turn, generates the matching level of savings. The present paper argues that such methods of financial higher investment plans are neither socially desirable nor even sustainable over time In an underdeveloped mixed economy. Consequently, alternative institutional and financial arrangements, where. crucial role Is assigned to a public distribution system of essential goods and profits of public enterprises, becomes imperative

Allocation of capital in the post liberalized regime: a case study of the Indian corporate sector

The paper investigates the prevalent trends in the allocation of capital in an emerging economy, India, during the post financial liberalization regime. In contrast to the conventional wisdom that financial liberalization leads to better allocation of funds, the study could not find any obvious evidence of increase in the efficiency over the reform period, especially during the early years of reform. Further, the study highlights the disturbing trend of convergence of efficiencies across various strata of firms towards a lower level over the reform period. The paper rationalizes the decline as a result of excessive capacity creation in certain industries, financed by cheap external sources of finance, without any consideration of return or demand conditions. The paper, as a policy recommendation, highlights the importance of creating appropriate institutions prior to pursuing financial liberalization in developing countries like India

Allocation of capital in the post liberalized regime: a case study of the Indian corporate sector

The paper investigates the prevalent trends in the allocation of capital in an emerging economy, India, during the post financial liberalization regime. In contrast to the conventional wisdom that financial liberalization leads to better allocation of funds, the study could not find any obvious evidence of increase in the efficiency over the reform period, especially during the early years of reform. Further, the study highlights the disturbing trend of convergence of efficiencies across various strata of firms towards a lower level over the reform period. The paper rationalizes the decline as a result of excessive capacity creation in certain industries, financed by cheap external sources of finance, without any consideration of return or demand conditions. The paper, as a policy recommendation, highlights the importance of creating appropriate institutions prior to pursuing financial liberalization in developing countries like India

Assessing the feasibility of integrating ecosystem-based with engineered water resource governance and management for water security in semi-arid landscapes: A case study in the Banas catchment, Rajasthan, India

Much of the developing world and areas of the developed world suffer water vulnerability. Engineering solutions enable technically efficient extraction and diversion of water towards areas of demand but, without rebalancing resource regeneration, can generate multiple adverse ecological and human consequences. The Banas River, Rajasthan (India), has been extensively developed for water diversion, particularly from the Bisalpur Dam from which water is appropriated by powerful urban constituencies dispossessing local people. Coincidentally, abandonment of traditional management, including groundwater recharge practices, is leading to increasingly receding and contaminated groundwater. This creates linked vulnerabilities for rural communities, irrigation schemes, urban users, dependent ecosystems and the multiple ecosystem services that they provide, compounded by climate change and population growth. This paper addresses vulnerabilities created by fragmented policy measures between rural development, urban and irrigation water supply and downstream consequences for people and wildlife. Perpetuating narrowly technocentric approaches to resource exploitation is likely only to compound emerging problems. Alternatively, restoration or innovation of groundwater recharge practices, particularly in the upper catchment, can represent a proven, ecosystem-based approach to resource regeneration with linked beneficial socio-ecological benefits. Hybridising an ecosystem-based approach with engineered methods can simultaneously increase the security of rural livelihoods, piped urban and irrigation supplies, and the vitality of river ecosystems and their services to beneficiaries. A renewed policy focus on local-scale water recharge practices balancing water extraction technologies is consistent with emerging Rajasthani policies, particularly Jal Swavlamban Abhiyan (‘water self-reliance mission’). Policy reform emphasising recharge can contribute to water security and yield socio-economic outcomes through a systemic understanding of how the water system functions, and by connecting goals and budgets across multiple, currently fragmented policy areas. The underpinning principles of this necessary paradigm shift are proven and have wider geographic relevance, though context-specific research is required to underpin robust policy and practical implementation