The
crisis consists precisely in the fact that the old is dying and the
new cannot be born; in this interregnum a great variety of morbid
symptoms appear. (Antonio Gramsci)
by
Jayati Ghosh
Part
6 - Desirable – and Necessary
The
obsessively export-oriented model that has dominated the growth
strategy for the past few decades must be reconsidered. This is not a
just a desirable shift – it has become a necessity given the
obvious fact that the US and the EU are no longer engines of world
growth through increasing import demand in the near future.
This means
that both developed and developing countries must seek to redirect
their exports to other countries and most of all to redirect their
economies towards more domestic demand. This requires a shift towards
wage-led and domestic demand-led growth, particularly in the
countries with economies large enough to sustain this shift. This can
happen not only through direct redistributive strategies but also
through public expenditure to provide more basic goods and services.
This means
that fiscal policy and public expenditure must be brought back centre
stage. Calls to end austerity are becoming more widespread in the
developed world and will soon find their counterpart in developing
countries.
Clearly,
fiscal stimulus is now essential, to cope with the adverse
real-economy effects of the current crisis/stagnation and to prevent
economic activity and employment from falling, and then to put good,
quality employment on a stable footing.
Fiscal
expenditure is also required to undertake and promote investment to
manage the effects of climate change and promote greener
technologies. Public spending is crucial to advance the development
project in the South and fulfil the promise of achieving minimally
acceptable standards of living for everyone in the developing world.
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