Punjab’s Post-COVID-19 Economic Policy Under Indian Federalism

Abstract

All economic crises present challenges for economic theory and policy. The Great Depression of 1929–1933 exposed the fundamental weakness of the neoclassical economic theory that had been almost unquestioned since the 1870s neoclassical counter-revolution against classical economics (Bharadwaj in Classical Political Economy and Rise to Dominance of Supply and Demand Theories. Sangam, Delhi, 1986). The neoclassical doctrine, with its reliance upon the market as automatic stabiliser, collapsed amidst the massive disequilibrium in labour, product and money markets witnessed during the Great Depression. This gave rise to Keynesian economics supporting state intervention in recession-hit economies (Keynes in The General Theory of Employment, Interest and Money. Macmillan, London, 1936) and initiated the birth of heterodox approaches to economic theory and welfare state policies (Foldvary in Beyond Neo-Classical Economics: Heterodox Approaches to Economic Theory. Cheltenham, Edward Elgar, 1996; Singh and Bhusal in Economic and Political Weekly XLIX:111–118, 2014). The ‘stagflation’ of the late 1960s and early 1970s, which involved high inflation caused partially by the global oil price rise of 1973, together with high levels of unemployment, made visible the flaws in the Keynesian economic framework’s assumption that a certain degree of unemployment can keep inflation low. The crisis of Keynesianism gave birth to monetarist explanations of inflation based on money supply and pushed economics in the direction of neoliberalism, which reached its height during the Thatcher/Reagan era of state withdrawal in the 1980s. Neoliberalism claimed its final triumph with the collapse of Soviet-type Stalinist economies in the late 1980s (Niskanen in Reaganomics: An Insider's Account of the Policies and the People. Oxford, Oxford University Press, 1988; Skidelsky in Thatcherism. Oxford, Basil Blackwell, 1989; Radice in Capital and Class 38:277–287, 2014). The triumph of neoliberalism collapsed with the 2007–2009 global financial crisis (Singh in Economic and Political Weekly, 2008a), but pro-neoliberal elites very quickly recreated it as austerity economics (Konzelmann in Cambridge Journal of Economics 38:701–741, 2014; Singh and Bhusal in Economic and Political Weekly XLIX:111–118, 2014).