UN warns of severe crisis Poor man’s money at risk, calls to end clutch of banks


Even as finance minister Arun Jaitley looks for new ways and methods to rejuvenate Indian economy, the world economic outlook appears to be bleak. The new UN report says the global economy appears stuck.
The financial system is facing grave crisis and the world people have to be cautious about is safety and fairness.
The United Nations Conference on Trade and Development (UNCTAD) report on Trade and Development blames a combination factors for the sinking world economy. The report calls for ending austerity, clamping down on corporate rent seeking and harnessing finance to support job creation and calls for infrastructure investment.
In other words, the necessary infrastructure investment has frozen across the world.
It is “a combination of too much debt and too little demand at the global level’, says UN Secretary-General Mukhisa Kituye and adds, “This has hampered sustained expansion of the world economy”.
Unfortunately enough every bit is true about Indian conditions despite some supposed reform like GST.
UNCTAD says that world economy is not lifting off. The growth is almost flat at around 2.6 percent that was in 2015 but a slight better than 2016 when it had slumped to 2.2 percent. It notes India and China have come down to the same level at 6.7 percent.
However, India’s internal figures suggest it is even less than that at 5.7 percent. Naturally it is a cause for concern for Jaitley and solutions are not easy as the government is facing cash crunch on the one hand and the people are getting squeezed under heavy tax burden. The GST has yet to settle but income-tax is eating into the purchasing capacity of the salaried class, supposedly today the mainstay of Indian market.
In such scenario, Latin America seems to show the “biggest turnaround at 1.2 percent growth The Eurozone growth touched 1.8 percent but lags behind the US, which at 2.1 percent.
The main obstacle to recovery is fiscal austerity or what in Indian terms is said to be “cutting of expenditure”. The UNCTAD finds that 13 of the advanced economies experienced “austerity” between 2011 and 2015.
For India trade will remain a problem. Indian exports have not grown and imports have not slumped. The trade balance is massively distorted. The hopes of its correction are not seen by UNCTAD. The global demand remains sluggish as globally jobs are not there and people do not have money to meet their needs.
The UNCTAD had laid the highest hope on the growth of emerging economies, particularly India and China but now it says, “ they are facing significant downside risks”.
“Debt levels continue to rise without real signs of robust growth and there concern about political instability, falling commodity prices, higher interest rates in the US and a stronger dollar”. All these are virtual key risks for the Indian economy.
Another concern that the recent India faced is being seen to be a global phenomenon. Net capital flow is shrinking – reminiscing a scenario of 2007-08 global meltdown. Net private capital flow that had reached about $ 200 billion in 2011 has shrunk to negative levels since late 2015 and has yet to recover.
The deregulation of financial markets is being seen as the biggest problem. It increases inequality and instability. The rise of the top 1 percent super elites is a major problem, says the report’s lead author Richard Kozul Wright. The trend leads to severe inequality and spells precarious future as investments would be insufficient, no job growth and welfare provisions would weaken. All these are seen to be manifesting in Indian economy.
The report lambasts the bail-outs that were announced after the 200-7-08 meltdown. In Indian situation, though at that point of time it was not needed, it has led to massive bleeding of bank reserves, estimated at Rs 12 lakh crore (Rs 12 trillion).
This was the bonanza to the large corporate across the world. It has bled governments and public savings and rise in irrational bank charges across the4 world. India that had maintained a distance from this global phenomenon unwisely succumbed to the corporate lobbies taking its burgeoning economy downhill. The correction now is a difficult economic and political task.
The increased automation, which has seen Indian IT sector throwing people out jobs is another concern for UNCTAD. The system is “becoming unduly biased in favour of handful of large corporations”. The precarious situation has seen that also in India where also a few corporate have made massive gains and now some looking for bankruptcy cover.
It has given a severe warning. “The failure to correct the excesses of hyper-globalization (corporatisation) is not only jeopardising social cohesion but diminishing trust in both markets and politicians and increase inequaites.
The UNCTAD calling for a change in the global system, though it finds the way difficult, says the world has to come out of the grip of finance – banks and related organisations. Total banking sector assets since the 1990s have more than doubled in most countries, including India, with peaks at 300 percent of GDP in some OECD economies.
India of late has also gone into the clutches of banks and financial institutions leading to high costs, extortions adding to the miseries of the people. It has favoured large corporate and fleecing of average common savers. The common man’s money is at risk and that finally leads to the doom of the market and economy.
The UNCTAD calls for end to financialisation as it has led to indebtedness across the non-financial sector, increasing to 188 percent of global GDP crisis. Steps like demonetisation are also financialisation and leads to severe “income disparity”.
Among some of the measures for correction it calls for a global dialogue like the Marshall Plan of 1947 charted out by IMF, World Bank and General Agreement on Trade Tariff.
Last but not the least it calls for a strong voice of the labour for higher wages and bringing down the tax rates that mostly deprive about half of the earnings of the wage earners.
The governments have to come together to take the people out the clutches of big houses and financial sharks, the report says. It f this happens the global economy would see a turnover else it would continue to shrink as “income equality” (poverty) may continue to rise. The world governments must make the report bedrock of the policy framework.

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