One global fall-out of the sub-prime crisis in the US is a liquidity squeeze that central banks in the developed countries are attempting to counter by pumping liquidity into the system and reducing interest rates. This is indeed paradoxical, since the crisis in the first place was a result of an excessive build up of liquidity in the international system, leading to a synchronized boom in stock and real estate markets across the globe. Explaining the paradox requires understanding how the liquidity spiral occurs and how such liquidity is put to use by a liberalized and globalized financial system.

China's growing presence in Africa has led to arguments that the country is seeking to meet its growing requirements of primary products, including oil, by building a relationship reminiscent of a colonial past with many African countries. In this article, the authors examine what the evidence reveals about this relationship.

The depreciation of the US dollar has been closely bound up with the movement of oil prices, as world oil trade is typically denominated in dollars. Yet this relationship may now be under threat as the dollar continues to depreciate and the US economy tips into recession. This article examines how oil prices have changed with different numeraires, and considers the implications for the future of the oil-dollar nexus.

With the US economy clearly tipping into recession, international attention is now focussed on the extent to which China and India can create an alternative growth pole for the world economy through their increasing demand. In this article, the authors assess the potential for China to play such a role by analysing its trade pattern with developing Asia.

While China is increasingly seen as “the workshop of the world” and there are fears of relocative shifts in manufacturing output and employment away from other countries to China, the recent pattern of manufacturing growth appears to have been characterised by declining employment. In this paper, the authors investigate the trends in manufacturing employment in China and consider the reasons for this paradox.

All eyes are directed at the US housing market that has been afflicted with a meltdown in its sub-prime mortgage segment. With housing asset values having driven the US economy, which in turn serves as locomotive for the rest of the world, fears are that this American disease could trigger a global slowdown. The assumption is that the original problem is quintessentially American. If it is not, the authors argue, the US experience can have other lessons for countries like India.

Basel II is the modified framework of supervisory regulations governing capital adequacy for internationally active banks, published by the Basel Committee of Banking Supervision. This paper argues that while the Revised Accord is yet another attempt by the global financial community to remedy the woes associated with unhindered financial liberalization, it will only serve to exacerbate the already existing conflicts between the objectives of financial stability and economic development facing developing countries under the present paradigm.

The success of India in the global market for software services has encouraged the view that software is a competitive industry with limited barriers to entry and space for new and small players. In reality, however, US firms dominate the global software market with a high degree of concentration. The authors argue that some of the factors explaining this structure have implications for an assessment of the Indian industry.

The second fortnight of May witnessed a much needed though still inadequate correction of the recent unprecedented rise of the Sensex. Yet, in the blame-game that followed, inadequate ''reform'' stemming from political opposition has been seen by some observers to have caused a ''loss of wealth'' In this article, the authors examine the context and nature of the downturn and the validity of these arguments.

High and rising levels of the prices of oil have stoked dormant fears of a global economic shock comparable to those experienced in the 1970s. However, early evidence points to a strengthening of growth in the US, despite the current tenuous equilibrium in which global surpluses finance an ever widening US current account deficit. The authors discuss the possible reasons for this tendency.

In recent years, bilateral investment treaties (BITs) have proliferated especially for developing countries, yet they remain largely secret and outside the realm of public scrutiny and audit. In this edition of MacroScan, C.P. Chandrasekhar and Jayati Ghosh discuss the current and potential implications of these BITs.

In this article, the author discusses the Baran hypothesis that there cannot be a spontaneous diffusion of industrial development from the developed world to the countries of the third world under capitalism: a hypothesis apparently contradicted by the current pattern of development visible at least in Asia. His analysis resolves this contradiction by using an inherent but less talked about 'contradictions to capitalism' which is the role of a stable medium of wealth or in the present context, a leading currency. He explains why the current pattern of growth and technology diffusion in the newly industrialising countries cannot be sustained given the necessary pattern of their interaction with the leading capitalist country.

Contrary to last year's gloom, the dominant mood in Davos this year was to underplay the problem of global imbalances and recession, generated by US over-consumption and large capital inflows, and to desperately believe those who proclaimed that the world can muddle through with a reasonable rate of growth and no calamity, led no doubt by India and China. Unfortunately, terrorism, oil-price spike, natural disasters and a bird-flu pandemic seem to be the only disasters the world leaders were willing to discuss.

Despite its many achievements, the communications revolution has reduced our need for, and therefore use of, paper or any other physical form of aid to memory. And by doing this, it has destroyed for the future what used to be considered the essential sources of knowledge about what will become the past.

The extraordinary fallout of the Volcker Report has clearly shown that not only has the US completely disregarded both international law and the UN itself, the controversy has also completely diverted the attention of national and international media from the huge and ongoing corruption in Iraq where the real scam is currently happening in the name of reconstruction.

In meetings in London, Geneva and elsewhere aimed at forging an agreement that could help revive the Doha Round negotiations at the Hong Kong ministerial meeting in December, the focus has been on agriculture and the ECs inability to make an adequate market access offer. All other areas have been neglected on the grounds that an agreement can be found once the deadlock on agriculture is resolved. This article argues that this is a replay of developments during the Uruguay Round in which an inadequate, last minute agreement between the US and the EU on agriculture was used to force developing countries to offer major concession in other areas of significance to them.

The media coverage has been far in excess of anything warranted by the actual incidence of the current outbreak of birdflu, or even any immediate potential threat posed by it. The panic caused by such media hype basically ensures a rising and continuous demand for the vaccine for this disease and transforms fear into super-profits for the multinational producers of this vaccine.

There is substantial agreement that international imbalances in growth and balance of payments performance are a source of global fragility. But disagreements persist on the source of those imbalances. The authors discuss an effort to manufacture a global savings glut to cover up US responsibility.

In this article, the authors consider the nature of developing country capital flows and analyse why investing in US dollar assets has become such a favoured use for financial resources that could be used instead to increase economic growth in the developing world.

This paper argues that even though "accumulation through encroachment" in the inclusive sense of the term is always an integral part of the process of capital accumulation, so that the pure reign of "accumulation through expansion" is rare and at best transitory, a crucial feature of contemporary imperialism is a vast increase in the relative importance of "accumulation through encroachment".

Awaiting the Oil After-shock

With headlines tracking the ever-rising price of oil, the lack of any major effect of the shock on global growth has become the subject of discussion and speculation. In this paper, C.P. Chandrasekhar and Jayati Ghosh examine the factors driving the oil price increase and the likelihood that this increase would persist and affect the level and distribution of global income.