Dr. Susmit Kumar, Ph.D.

Right now writers at financial websites like Forbes and Bloomberg are criticizing the Modi administration for the resignation of Mr. Panagariya, claiming that PM Modi is turning back on reforms. But the question is - what kind of reforms they are talking about? These economists/MBAs/Wall Street have destroyed the US economy and middle class in the US. I lived in Ohio (a state in US) for 15 years and it is part of Rust Belt in US which has suffered massive job losses due to shifting of manufacturing jobs to China - the median salary in the state was $56,400 in 2000 whereas in 2013, it was only $48,000, i.e. 15% drop - nearly all the states in Midwest (in US) have similar drop in median incomes (5 States Where the Middle Class Is Being Destroyed, Sam Becker, July 30, 2017, www.cheatsheet.com). Do we need a similar "reformed" economy in India?

Here are the effects of their “reforms” in US economy- The US lost millions of jobs related to:

 

(i)        a decrease of nearly 35% (from 14.2% in 2000 to 9.3% in 2008) of world export markets in just eight years (thereafter it has hovered around 9%) as shown in Table 1, and

 

(ii)      related to goods for its own consumption corresponding to a record increase in trade deficit since the mid-1990s, as shown in Chart 1.

As The New York Times reported (Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones, Annie Lowrey, The New York Times, April 27, 2014), based on a study, the deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery in the US has been in low-wage work, at places like strip malls and fast-food restaurants (in India that would be in kirana stores and dhabas). Job losses and gains have been skewed. Higher-wage industries — like accounting and legal work — shed 3.6 million positions during the recession and have added only 2.6 million positions during the recovery. But lower-wage industries lost two million jobs, then added 3.8 million. There was a drastic reduction in mid-wage jobs also. As per the same study (Tracking the Low-wage Recovery: Industry Employment & Wages, National Employment Law Project, April 27, 2014),

·         Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.

·         Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.

·         Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

(Source: Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones, Annie Lowrey, The New York Times, April 27, 2014)

 Chart 1. US Monthly Balance of Trade (1975-2017)

 

Table 1 (Data source: World Economic Outlook which is published twice a year by IMF)

 

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