Saturday, December 20, 2008

Amartya Sen blames crisis on lack of regulation

NEW DELHI: On his flight to India, Nobel laureate Amartya Sen was asked by at least three or four co-passengers about how India would be affected by the global economic downturn. Sen admitted that he did not have a ready answer. But speaking at an international conference organized to celebrate his 75th birthday, he said on Friday the present crisis has come about from an "over-reliance on markets" and not enough regulation. Another speaker at the conference, American economist and Nobel laureate Joseph Stiglitz, was highly critical of the role of the US in the economic crisis. "The US has exported its toxic mortgages. If this had not happened we would be even worse off. We have also exported our deregulation policy." He added that decoupling was a myth and that the US was now "exporting its recession". According to Stiglitz, September 15 the day when Lehman Brothers filed for bankruptcy was a black day in the history of capitalism. "September 15 will be to free market economics as Berlin wall is to the fall of Communism. Market fundamentalism doesn't work. The idea that markets are self-correcting is flawed," he said. He said there were several inferences that could be drawn from the economic crisis: Wall Street has made several bad decisions and has repeatedly failed; prices are bad signals for resource allocation; and though the G7 has been expanded to G20 old paradigms were still at work. For Stiglitz, this wasn't just a crisis of capitalism but a crisis in how we approach economics. He said, "Sen's work which is about increasing the well-being of human beings is important here." Earlier, Prime Minister Manmohan Singh released a two-volume collection of essays dedicated to Sen. "We have known each other since the days we were both students at Cambridge. I certainly have always felt that Amartya even in those days gave one the impression that here is an individual who is going to make a lot of difference to the way people think about their problems and he has lived up to that expectation," he said. "The response of the developed countries to the challenges of our times, be it financial crisis or climate change or terrorism, shows that they have no monopoly on good ideas. We in the developing world wish to work with the developed, but we have to find our own ways to deal with these challenges," he added.
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