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Re: [Re: Globalisation kills Indian Industry??!!]



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Liberalization and globalization are two different things. And it is
imperative to understand the difference between the two. 

Liberalization is freeing a market from the shackles of protectionism and
government control. And as long as the market exists within a single framework
liberalization leads to a free market economy. 

Globalization on the other hand is opening up trade *across* market
frameworks. This need not necessarily lead to a "global free market." This is
because of the different levels of instutional development in different
markets, and the notion of exchange rates. Exchange rates is an arciaic notion
in which globalization existed in the past. (Note that we have always been a
globalized world, it is only the trading configuration that changes.
Isolationism is also a kind of globalization where connections across markets
is zero.) 

A few researchers from the IGIDR have recently discovered an impossibility
condition: It is impossible to have globalization, independent monetary
policies (based on demands) and a constant exchange rate. 

It is not difficult to notice many profound ideas hit the mud in India. And
the reason for this is not always government controls. In a globalized soceity
it is much easier to seek out demands of a market whose currency is strong,
rather than nurture and build solutions for meeting local demands. But then,
it is the meeting of local demands that increase local economic strength. 

I am not sure the Mumbai club was asking for more protectionism. Or rather, I
am not sure protectionism is the answer. Government controls and protectionism
not only suffocates the local machinery, but it also prevents ideas and value
flowing in from the outside. But at the same time FDI and unbacked rupee is
also not the answer. Because market dynamics seek out the stronger economies
ignoring ground realities of local economies completely. The answer, I guess,
lies somewhere in a rethinking of the notion of money and value. 

We still use archaic definitions of money -- something based on bullion value
and currency interchange. But in today's world it is possible with no great
efforts to set up an MNC in the room upstairs and transact with several
countries and their currency at the same time. The technology is there, but
economic paradigms to match them aren't yet there. Whenever rupee falls down
wrt the dollar there is a cry to regulate money supply for preventing
inflation. What this does is to increase the barriers between the rich and the
poor (not that the rich and the poor here are not the same rich and poor
created in a free market economy; the poor aren't lazy here -- they're just
hard workers doing thankless and revenueless jobs.) 

This topic is much more complex and much less understood than what is usually
portrayed over the "global" media. And I feel it is imperative to be
addressing (and leveraging) over this issue soon. 

Srinath 




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