Biden’s bailout could fuel growth in US, but ‘global finance’ will cause third world to suffer
The US stimulus will almost certainly increase the demand for commodities and therefore their prices, and while this does not have much of an impact on the US inflation rate, it will certainly increase the inflation rate of the third party raw material suppliers. world like India. The political response to such an increase in commodity inflation will be precisely the reverse under a globalized finance regime of what it should have been, and what it would have been under the post-interventionist regime. war.
Rising commodity prices due to a sudden increase in demand should ideally expand state efforts to increase the supply of these commodities by increasing public investment in areas critical for such production. But in a globalized finance regime, the policy response will be to reduce public investment, and public spending in general, so that it is not supply that is increased, but domestic demand that is reduced, for control inflation. In short, austerity will be imposed on the economy providing raw materials so that its level of activity and therefore its rate of growth will be limited for this reason.
So for an economy like India, if there will be some increase in exports as a result of the Biden package, this would be accompanied by an overall compression in the level of activity and growth, so that a number sufficient raw materials are squeezed out of domestic absorption to curb excessive demand pressures and hence inflation.
This was not the case during the post-WWII boom. Governments were not obliged to obey the dictates of finance. Consequently, a rise in the prices of raw materials has been accompanied by a government effort, including greater public investment, to increase the supply of these products, rather than restricting their domestic absorption by reducing public expenses. For this reason, a global boom during this period could only have a stimulating effect on the Indian economy, not a contraction effect.
In short, the Biden package is based on an untenable hypothesis, namely that a Keynesian policy of stimulating the economy by fiscal means can be followed, while the Keynesian injunction according to which “finance must above all be national” is ignored.
This unsustainable assumption in turn stems from the illusion that the world economy as a whole can emerge from the protracted crisis to which neoliberal capitalism has doomed it without placing any restrictions on the movements of finance, i.e. say that the hegemony of finance is not important for the level of global economic activity.
But while the U.S. state may not be crippled by financial hegemony, or even advanced country states as a whole acting in a coordinated fashion, states in third world countries are not so lucky. . Instead of calling for a change in the international economic order whereby nation states regain their autonomy from now globalized finance, the Biden package simply assumes that in the current order we can go back to the times. of Keynesian demand management for the benefit of all countries.