Wednesday, September 29, 2010

Fractures in world economy

After the global financial calamity struck in 2008, many analysts put the blame on the uncontrolled credit expansion in the United States that preceded it. But E.H. Carr reminds us that complex historical phenomena are rather like an accident that takes place during a misty night when a driver speeds along a slippery road, a pedestrian crosses it, and the brakes of the motor vehicle fail. What exactly caused the accident?

Fault Lines: How Hidden
Fractures Still Threaten
The World Economy
Raghuram Rajan
Harper Collins
Rs 499; Pp 288

Land of inequalities
The merit of Raghuram Rajan's work is that he traces the many fault lines that lay beneath the surface not only in the American economy, polity, and governance, but also in the increasingly distorted economic and financial relationships between nations. Rajan begins with the American scene. America is a land of opportunities, but they can be taken advantage of only by those who have the resources, physical as well as human. Because these resources are unequally distributed, it is becoming a land of growing inequalities. In 1976, the top one per cent of households accounted for 8.6 per cent of income, but by 2007 this had shot up to 23.5 per cent. And in 2008, seven out of 10 Americans had stagnating incomes. Because of the strong commitment to the free enterprise system, the country is also rather backward in the safety net it provides for workers. But a democratic polity cannot completely ignore them, and there is something of a moral commitment to help the needy.

Full report here Hindu

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