Dr. Rena Schwarting

In her speech at the Guardian Conference on capitalism in crisis, Jayati Ghosh, professor of Economics at Jawaharlal Nehru University, New Delhi, states that the financial crisis is not all bad news but rather offers an opportunity for alternative change. In her explanation Ghosh traces the historical pervasiveness of the current crisis back to the emergence of three simultaneous imbalances. The first imbalance describes the high interlinkages between the financial and the real economy. In order to avoid uncontrollable side-effects of not taking the counterparty risks, states had to nationalize banking. Ghosh, however, points out that the socialization of losses can only be considered as a transitional solution since it is boosting the second, macroeconomic disequilibrium. As a matter of fact, there is no alternative to reduce current account deficits. In particular, the U.S. debt burden – serving as an engine of the unequal demand boom – has to decrease. Coordinated expansion provides not only the basis for fiscal, but also for the waste of natural resources. Though the Club of Rome declared the Limits to Growth more than 35 years ago, pollution, congestion and degradation remain unsolved.

» Read the rest of this entry «