ocampo35_ANDREWCABALLERO-REYNOLDSAFPGettyImages_manwalkingbyIMFsign Andrew Caballero-Reynolds/AFP/Getty Images

Jayati Ghosh
Says More…

This week, Project Syndicate catches up with Jayati Ghosh, Professor of Economics at Jawaharlal Nehru University in New Delhi and Executive Secretary of International Development Economics Associates.

Project Syndicate: In your latest PS commentary, you criticize the International Monetary Fund’s apparent belief in “expansionary austerity.” In the case of Ecuador – where you foresee IMF-imposed austerity leading to a growth slowdown – how could the current loan agreement be improved? Is it simply a matter of extending the timeline for fiscal consolidation, or do you think the IMF should actually be making the opposite demand: fiscal stimulus?

Jayati Ghosh: For Ecuador (and Argentina), two imperatives are abundantly clear: external debt must be restructured, and debt repayment must be enabled through economic growth, rather than wage suppression and fiscal consolidation.

Restructuring requires creditors to accept a haircut. There is nothing unfair about that: reckless lenders should not be protected from the consequences of their own folly. In any case, the interest rates financial markets demand are supposed to take default risks into account. Having taken advantage of higher interest payments from riskier borrowers, they cannot turn around and call for mommy (the IMF) when the risks materialize.

Moreover, experience has shown time and again that debts are most effectively repaid in a context of economic growth. For ailing economies, that requires fiscal stimulus, not fiscal consolidation. It was based on this recognition that, in the early 1950s, German debt was written off and its loan repayments were capped at 3% of export revenues – an approach that enabled its subsequent “economic miracle.” (Ironically, Greece was one of the countries that offered Germany loan forgiveness at that time.)

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.



Register for FREE to access two premium articles per month.


Ghosh recommends

We ask all our Say More contributors to tell our readers about a few books that have impressed them recently. Here are Ghosh's picks:

  • Sovereign Debt Crises: What Have We Learned?

    Sovereign Debt Crises: What Have We Learned?

    At a time when many countries – and, indeed, the entire global economy – continue to struggle with institutional failures to address sovereign-debt problems, this is essential reading. The book includes useful case studies that explain why some countries succeeded in coping with debt crises, while others did not, and it outlines various available policy and legal options.

  • Loose Pages: Court Cases That Could Have Shaken India

    Loose Pages: Court Cases That Could Have Shaken India

    This could be a political thriller, but it is a factual account – pieced together by two intrepid investigative journalists in India – of how governments and political elites, crony capitalists, and even the judiciary operate to enable, condone, and then hide evidence of corruption. This book would change the mind of anyone who doubts the seriousness of the threats facing Indian democracy.

From the PS Archive

From 2019
As the #MeToo movement rocked establishments around the world, Ghosh highlighted the symbolic power of five million women forming a human chain spanning India’s Kerala state. Read the commentary.

From 2018
Amid skyrocketing inequality, Ghosh condemned the disproportionate market power enjoyed by a few large global corporations. Read the commentary.

Around the web

Ghosh calls for a twenty-first-century version of the New Deal, which lifted the US out of the Great Depression, and the Marshall Plan, which revived Western Europe’s economies after World War II, ideally as part of a coordinated Global Green New Deal. Read the commentary.

Speaking at the International Social Forum 2019, Ghosh outlines the problems with the prevailing model of capitalism, which is destroying itself and the planet and is incompatible with democracy. Watch the speech.

As India’s economy slumps, Ghosh tries to force the government out of denial with a rundown of what is going wrong. Read the blog post.