The present economic crisis, while engulfing the whole capitalist world, has left its distinct imprint on the Indian economy. The latter has been characterized by a sharp decline in the GDP growth rate, a negative growth rate in agricultural and manufacturing sector, massive job losses and plummeting crop prices in the recent period. However, as one of the recent estimates of IMF reveals, the fiscal stimulus provided by the government under such an appalling situation is the one which is the fourth lowest among the G 20 countries. This apathy of the government to raise its expenditures adequately, nonetheless, has been one of the specific reflections of its “sound finance” policies in the neo-liberal regime. Such a fiscal policy in the neo-liberal regime has been typically marked by deflationary policies and decline in the development expenditures in India. Nonetheless, it has found ‘adequate’ justification in economic theories, which have been typically haunted by the spectre of fiscal deficit and characterized by what Joan Robinson (1964) had once termed as the “humbug of finance”. However, the very fact that those economic theories continue to be in vogue both within the academia and policy circles, inspite of its inherent biasness against the common mass, leads one to examine its very relevance in the Indian context.
The very question on the relevance of any economic theory, at any historical juncture, can be apparently addressed in at least two distinctly different, but mutually related ways as follows: firstly, in terms of its “logical correctness” along with the precision with which it depicts the reality of the economic society; and secondly, in terms of the social hegemony that it exercises along with its ‘acceptance’ within the policy circles. The nature of relationship between the two, however, depends on the manner in which “economic theory” is viewed upon. Any view which regards economic theory merely as a “pure scientific tool”, independent of any “ideological slants” in a class divided society, might lead one to derive its former relevance from the extent of its latter relevance. Or in other words, if an economic theory exercises its social hegemony at a particular historical juncture (and hence, ‘relevant’ in the second manner mentioned above), such a view might lead one to conclude that it also necessarily depicts the reality of the economic society of that historical juncture correctly (and hence, also relevant in the first way mentioned above).
But to look upon economic theories merely as “pure scientific tools” and the history of economic thought merely as a record of mistakes, successive refinements and rectifications, would be rather off the mark. This is because, contending ideologies in a class-divided society have always shaped not only what Joseph Schumpeter (1954) had once termed as the “economic thought” (in sharp contrast to what he called “economic analysis”, which was claimed to be ‘objective’ and ‘independent’), but also the entire economic theory including its ‘analysis’ (Dobb, 1971). Economic theories have always been born in response to the contradictions historically embedded within a class-divided society, while de facto resolving those contradictions in favour of one of the contending classes (Bharadwaj, 1986). Hence, the social hegemony that a particular economic theory exercises at a particular historical juncture, is also associated with the dominance of an ideology which pertains to the dominance of a particular class at that historical juncture.
In a neo-liberal regime, the social hegemony of the theories pertaining to the “sound finance” policies is particularly associated with the dominance of international finance capital. In a regime which is characterized by the dominance of finance capital, not only do such theories become “relevant” (in...