An analysis of Keynesian economic approach in Indian context
The relevance of Keynes in Indian context is been questioned as well as a matter of discussion among various economists arenas and conferences from post independence to licence raj to neo-liberal shift. in the economic structure.
According to the General Theory of Employment , Interest and Money has trivial relevance in underdeveloped countries like Indian context.According to the Keynes he posses his argument on based of his understanding that these economies do not suffer with involuntary unemployment. These economies do have the state of full Employment. According to Keynes these economies do not have a long term economic development plan which he termed as the major concern with the underdeveloped economics.
Prior to the analysis of Keynesian economic approach in Indian context.I would like to discuss the concept of Full employment and the concept of Involuntary Unemployment. The condition of full employment and Involuntary Employment is related with wages, marginal productivity of labor, utility and dis-utility of the work.
Full Employment is a signifier that labor is willing to work at the given wage rate that corresponding to the social cost. The wage at which he is wiling to work corresponds to his economic contribution which is equal to social product or the the social cost of the product. In such condition the wage that is been offered to the marginal unit of the labor is in real terms. These wages are derived by equating the utility of the work with dis-utility of the work.
Corresponding to the analysis of Full employment, Involuntary Unemployment is the state of unemployment at which labor is not willing to work. In this state marginal dis utility of...
... middle of paper ...
...emand which can create multiplier effect in the economy. Government spending on the schemes like NREGA will provide high rate of employment and that will raise the mass consunmption. That may usher golden age of welfare capitalism. In such situation keyaens become more relevent because in current sate of free comptition betwen have's and have not's will not be fair. As with the help of state intervention can offer fair competition to the have nots to come forward. This makes keyens even more relevent even in the open economics structure in current times.
References
1. A K Dasgupta ,Keynesian Economics and Underdeveloped Countries, EPW,Issue : VOL 38 No. 28 July 12 - July 18, 2003,.
2. John Maynard Keynes,The General Theory of Employment ,Interest and Money.
3. Anand Teltumbde,State, Market and development of Dalits, IJSW,volume 68 issue 1, January 2007
John Maynard Keynes was born in Cambridge, where he went to King’s College and earned a degree in mathematics, in the year 1905. He stayed for another year, studying under Alfred Marshall, influencing him to write “Tract in Monetary Reform”. For two years he joined the civil service and returned in 1908 to work as a lecturer in Cambridge. He proceeded to work and in 1919 was the British Treasury’s representative at the conference in Versailles, following World War 1. He left because he disagreed with the conclusion of blaming Germany for WW1, inspiring him to write his book on economics “The Economic Consequences of Peace”. Keynes was for the idea that Governments should step in to fix short run macroeconomic problems, challenging ideas of the classical economists who believed that the market corrects itself. In recession times the government should increase their spending to increase the GDP, and keep the income flow flowing, and in good times were GDP is at its maximum level governments should cut back on spending and reduce the GDP, to prevent price levels to shoot up past what is a good level for the majority. Keynesian Economics is a demand focused economics, and focus on solving the short-term problems. A well-known example of this is the actions taken to solve the problem of the Great Depression, where Governments used a “stimulus package” to increase Aggregate Demand and increase the flow of economy, so it wouldn’t be stuck in a recession. Keynes believed that wages were “sticky”, resistant to change, which is why AD must shift, because employment won’t change over time.
Keynesian school of thought has been widely in application in the modern day. The markets have frequently veered off the rail and necessitated governments to interfere (Fazzari, and Variato, 1994). John Maynard Keynes is one of the most influential economists of the modern day. In his book on the general theory of employment, we realize that the private sector decision making sometime leads to imperfections in the market and, therefore, there is a great need for the governments to interfere to correct them (Keynes, 1937). Some of the imperfections that we witness in a market controlled by the private sector include monopolies, unemployment, black markets, cartels as well as hoarding. There is thu...
This phase of Macroeconomic history started with the book entitled “An Inquiry into the Nature and Causes of the Wealth of Nations” written by Adam Smith in 1776. (Smith, 1904) Working of the economy was presented by the classical economists like Smith, Ricardo, Say, and Marshal etc. According to the classical economists, “Supply creates its own demand.” It means that whatever is produced in the economy is sold. So, there is no question of unemployment in a market. They also argued that savings is always equal to investment. (Shahid, 2013)In short, they proved that there is always full employment in an economy based on the following:
ROBINSON, Joan (1965b). “The General Theory after Twenty-Five Years”. Collected Economic Papers, vol. III, pp. 100-2.
[15]. Andrei Shleifer and Lawrence H. Summers, 1990. Journal of Economics Perspectives, Vol. 4, No. 2, Spring 1990, pp. 19-33
The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions. The ideas of economists and politicians, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." (John Maynard Keynes, the General Theory of Employment, Interest and Money p 383)
Fegerrer, S (1969) Keynesian Theory and its implication, College of Management and Economics, Canada University, 234-78
...an HDI of 0.36. These discrepancies in levels of development have led to an exodus of people, from less developed areas to the areas that have been benefitted by development. This situation seems to depict that predicted by the Dependency theory in which the developed countries progressed due to the exploitation of peripheral nations; the same seems to be happening in India. The states that are wealthier are exploiting the poorer states. It would be difficult to imagine India having the economic status that it now has, if it was not for the terrible working conditions and wages at which the Indians are willing to work and the massive work force available in the country. Now that India has seen economic growth the government should start taking care of its citizens by implementing policies that protect the labor rights of the workforce.
Ferguson, S (1999) Keynesian Theory and its implication, College of Management and Economics, Canada University, 298-312
Dornubusch, Rudiger. Macroeconomics. USA. McGraw-Hill Publishing Company. 1990.
Government stimulation of the economy is broken up into two parts fiscal and monetary policy. In Keynesian economics monetary policy produces real effects on employment and economic output only when prices are fixed. Which indicates that Keynesian economics is much more theory than an actual effective practice. But Keynesian economist believe...
Rittenberg, L. and Tregarthen, T. (2012). Macroeconomics Principles V. 2.0. Licensed under Creative Commons by-nc-sa 3.0 (https://creativecommons.org/licenses/by-nc-sa/3.0/)
In December 2007, the United States of America experienced a very scarce yet appealing setback. In fact, because of this specific dilemma between 200,000 and 500,000 were left unemployed and without a stable home. The national Bureau of the Economic research defined this nationwide downfall as “The great recession”. According to the U.S Bureau of labor statistics the unemployment rate has not made a drastic improvement since the start of the great recession. Unemployment has become that is still rising today with a slow rate of change. Unemployment is usually expressed as a number or as a percentage of a larger number. Although it has been ambiguous who has to be included in the percentage, there are members of society without a job, for whom it is certain that should not be added. Officially the unemployed are the people who are registered with the government as willing to work and able to work at a going wage rate but can’t find suitable employment despite an active search for work. In the article “why long-time employment can’t get back on track”, the author begins speaking on a ...
“India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in the wake of an exceptionally severe balance of payments crisis”(Ahluwalia 2002).The idea being simple ,there was a need to ...
Here in this paper we will try to explain and understand the relevance of the various underdevelopment theories and different attributes related to the terms of the Indian Context. Before proceeding directly to the underdevelopment theories, it would be important for us to discuss Karl Marx’s proposition.... ... middle of paper ... ...