[DEBATE] : Link to papers - 'The Value of Money in Contemporary Capitalism' 12-13 September 2008,

[Riaz K Tayob]

http://www.networkideas.org/feathm/sep2008/ft22_IDEAs_Sep_Conf.htm


IDEAs Conference on
'The Value of Money in Contemporary Capitalism' 12-13 September 2008,
World Wildlife Fund Auditorium, 172 B Lodi Road, New Delhi, India

International Development Economics Associates (IDEAS) organised a two 
day conference on 'The Value of Money in Contemporary Capitalism' in New 
Delhi on 12th and 13th of September.

The conference was meant to address issues around the role of money in 
contemporary capitalism, in both national and international contexts. 
The starting point was a new book by Prof. Prabhat Patnaik (Jawaharlal 
Nehru University, New Delhi), a renowned Marxist macroeconomist, 
entitled "The Value of Money" (Tulika Books and Columbia University 
Press 2008) which was released around the same time. This book provides 
a logical critique of monetarism, which has become the dominant stream 
of contemporary macroeconomics. However, it is a critique along lines 
very different from what is generally advanced. As against the 
monetarist view that the value of money vis-à-vis commodities is 
determined by demand and supply of money, it argues that the value of 
money is given from outside the realm of demand and supply.

The first part of the conference focused on a consideration and 
assessment of the arguments made in the book, at both theoretical and 
empirical levels. The second part of the conference was devoted to 
analyses of recent tendencies in money, finance and real economies in 
particular countries and in the world economy.

About 170 participants from India and around the world took part in the 
conference. The group included academicians, policymakers and students. 
Many members of the civil society were also present. Apart from the 
formal discussion, informal exchanges among the large number of 
participants during the course of these two days were passionate and 
productive.

DAY 1, 12th September 2008

Opening Session

The two-day long conference begun with opening remarks from the Chair, 
Pasuk Phongpaichit, Chairperson, IDEAs and Professor, Department of 
Economics, Chulalongkorn University, Bangkok, Thailand. She opened the 
discussion saying a few words about the network IDEAS and its growing 
reach among heterogeneous economists from all over the world. Talking 
about the conference Pasuk Phongpaichit said that the conference is 
about scrutinising the role and determinants of money and capitalism 
with USA as a hegemonic power.

Jayat Ghosh, Professor, Centre for Economic Studies and Planning, JNU, 
New Delhi and Executive Secretary, IDEAs, introduced Prabhat Patnaik's 
book 'The Value of Money' by listing out the various challenges posed by 
the book to existing mainstream economics. Jayati Ghosh pointed out that 
the central theme of the book is to analyse the determinants of money 
and then it goes on to critique the exogeneity aspect of the 
determinants. The book challenges the different concepts of money, 
specifically the monetarist view on money and discusses 'money' in the 
Marx-Keynes-Kalecki framework.

Prabhat Patnaik, Professor, Centre for Economic Studies and Planning, 
JNU, India, outlined the main themes developed in this book. Prof. 
Patnaik highlighted the difference between monetarist and 'propertyist' 
traditions on the question of the determinants of value of money. In the 
monetarist tradition, Prof. Patnaik argued, money is viewed as a medium 
of circulation and its value is determined by its excess demand. In the 
propertyist tradition, that includes the views of both Marx and Keynes, 
money is also viewed as a form of property or a form of holding wealth. 
Prof. Patnaik argued that the medium of circulation role of money cannot 
be separated from its role as a form of holding wealth. Money cannot act 
as a medium of circulation if it is also not a form of holding wealth. 
However, once the role of money as a form in which wealth is held is 
recognised, the possibility of realisation or effective demand problem 
also has to be acknowledged.

Prof. Patnaik further argued that the propertyist tradition is 
incomplete because it does not explain why, in spite of its inherent 
tendency towards the realisation problem, capitalism has operated in a 
viable and stable manner over long stretches of time. Patnaik contended 
that it is the existence of a pre-capitalist sector, which provides both 
cheap inputs and markets to the capitalist core that provides stability 
to the system. He argued that the pre capitalist sector provides cheap 
inputs to ensure stability of the value of the currency used 
internationally, namely dollars. This theory of the value of money in 
capitalism therefore logically leads to a theory of imperialism. This 
leads Patnaik to a discussion of the international monetary system. He 
argues that even while the world economy may appear to have done away 
with commodity money by de-linking the US dollar from gold, in fact it 
can never actually do so. The value of money, even paper/credit money, 
arises because of its link to commodities. Stability in the 
international monetary system requires the persistence of the confidence 
of the capitalist world's wealth-holders in the leading economy's 
currency as a stable medium for holding wealth, and this depends on the 
continued perception of global hegemony of the leading economy. Patnaik 
refers to the current international monetary regime as the oil-dollar 
standard, and provides an explanation for the Iraq war in terms of the 
need to stabilise the oil-dollar standard. This explains the present 
drive by the US to establish control over oil. The control over oil by 
US instils confidence among international investors over the value of 
dollar.

Session 2: Responses 1

Chair: Utsa Patnaik, Professor, Centre for Economic Studies and 
Planning, JNU, New Delhi, India

Speakers: Jan Kregel, Anjan Mukherjee, Robert Pollin

Opening remarks on his book by Prabhat Patnaik were followed by 
responses from Jan Kregel, Anjan Mukherjee and Robert Pollin.

Jan Kregel, Senior Scholar, Levy Economics Institute of Bard College, 
USA, in his note: "The Value of Money in Contemporary Capitalism: Draft 
of Remarks" argued that while Patnaik's book is presented as a book on 
monetary theory, it is a book about economic policy as well. In this 
regard, he highlighted the role of Employer of Last Resort (ELR) 
programmes. He argued that such programmes, by offering employment to 
anyone who is willing and able to work at a given wage, not only solve 
the problem of unemployment but by fixing a base for the wage also set 
the base for the price system. Prof. Kregel, however differed with Prof. 
Patnaik on the latter's assertion that at the international level we are 
still employing a commodity money standard or what Patnaik called the 
oil-dollar standard. Prof. Kregel argued that the recent increase in oil 
prices has been due to increased financial speculation and not due to 
increase in demand caused by greater industrialisation in parts of Asia. 
This, according to Kregel, suggested that US financial interests, who 
should have a clear interest in supporting the value of the US dollars 
and international currency, did not recognize that their actions would 
eventually undermine their position according to Prof. Patnaik's 
interpretation.

Anjan Mukherjee, Professor, Centre for Economic Studies and Planning, 
JNU, India, in his comments on the book, argued that Prof. Patnaik's 
book is an attack on the Monetarists, mainstream economics and Walras. 
However, in a three sector general equilibrium model consisting of a 
produced good, labour and money, he argued that the value of money can 
be shown to remain incompatible, even with a lower number of 
assumptions. He argued that some of Prof. Patnaik's conclusions are thus 
compatible with the Walrasian logic.

In his paper "Considerations on Interest Rate Exogeneity", Robert 
Pollin, Co-director, Department of Economics and Political Economy 
Research Institute (PERI), University of Massachusetts-Amherst, said 
that he agreed with most of the conclusions reached by Prabhat Patnaik. 
However, he also had some points on which he differed with Patnaik. 
First, he pointed out that the book ignores the role of central banks 
and financial innovation in driving the money supply process. Second, he 
argued that the role of the pre-capitalist sector in Prof. Patnaik's 
book is perhaps exaggerated. Processes internal to capitalism, such as 
the maintenance of the reserve army of labour can keep prices stable. He 
also argued that aggregate demand can be boosted through government 
expenditure, bourgeoisie's consumption etc. Hence, pre-capitalist sector 
is not a logical requirement for capitalism to ensure stability and 
growth. Finally, he stressed the importance of overcoming the 
realisation crisis through clean energy investments, in the context of 
threats posed by climate change.

Session 3: Responses 2

Chair: Jan Kregel, Distinguished Research Professor, Centre for Full 
Employment & Price Stability, University of Missouri, Kansas City, USA 
and Senior Scholar, Levy Economics Institute of Bard College, USA

Amiya Bagchi, Director, Institute of Development Studies, Kolkata, 
India, in his paper "Money under Capitalism: Domestic, Universal", 
argued that much of the theorizing of money under capitalism relates to 
a developed economy. Thus, he argued that there is no history of finance 
and money from the point of view of the poor. Even in systems where 
there is more than one type of commodity money, the one used by the poor 
is the one which has the least amount of acceptability. However that 
money cannot work beyond the domestic sphere. One can have domestic 
money entirely based on trust but cannot have a similar form of 
international money because an international money requires an 
acceptance beyond the domestic circuits of trust. Therefore throughout 
the period of development of capitalism, the competing capitalist states 
have sought to control the form of money which has the largest degree of 
acceptability in the arena of international exchange. The power seeking 
hegemony has always sought to make its domestically acceptable currency 
the hegemonic currency in the world. Therefore the money used by the 
weaker economies has also been made the weaker currencies.

S. L. Shetty, Director, EPW Research Foundation, Mumbai, India, in his 
response to the theme put across the point that finance capital is one 
of the important ways of establishing strategic infringement of 
imperialism. In the context of India his paper "India's Economic 
Structure and Financial Architecture: A Growing Mismatch" makes the 
point that over time the financial infrastructure of the economy has not 
moved in consonance with the changing economic structure of the economy. 
A comparative analysis of pre-reform and post-reform periods in India 
shows that changing public policies themselves have been the main source 
of stress in the financial system.

In the discussion on his paper, "The Value of Money and the Theory of 
Imperialism", Dr. Prasenjit Bose, Convenor, Research Unit, CPI (M), New 
Delhi, India, said that the book by Prof. Patnaik opens up new vistas 
for understanding the nature of development of capitalism. At the same 
time, he felt, the two main problem of Prof. Patnaik's analysis was 
that, first, the role of the state has been analyzed solely in terms of 
demand management and second, military expenditure as an important 
expenditure of the state has been glossed over in the book. Also, the 
theory of imperialism, as proposed by Prof. Patnaik in the book, should 
be put to the test of praxis. For that, Dr. Bose said, it is essential 
to explore the nature of the relationship between different exploited 
classes.

Session 4: Panel Discussion

Chair: Anil Bhatti, Professor, Centre of German Studies, School of 
Language, Literature and Culture Studies, Jawaharlal Nehru University

Speakers: Abhijit Sen, Charles Abugre, Chris Baker, Patan Khasnabis

Opening the discussion Abhijit Sen, Member, Central Planning Commission, 
India and Professor, Centre for Economic Studies and Planning, JNU, New 
Delhi raised three main issues. The first is a discomfort with the idea 
that there cannot be a closed capitalist system, a discomfort that has 
been borne out of the fact that we have been subjected to models of 
closed systems. A great deal of money is used to finance wars, aid, etc. 
which is actually state spending, signifying some kind of fiscal policy. 
As long as we can allow the state to do these, there is no need for 
pre-capitalist economies. Therefore the capitalist state can take care 
of its own crisis while working as a closed system without any 
intervention from outside.

Second, seen in terms of the world economy today, the idea of money as 
commodity money, specifically as oil money, though attractive, seems to 
be somewhat inconsequential to the current behaviour of the world 
economy. The approach taken by Prof. Patnaik therefore does not help in 
demystifying things for the following three reasons:

(i) After the neoliberal takeover, a huge rise of finance capital 
happened through successive bubbles in various assets. The relationship 
between money and these asset markets need to be spelt out.

(ii) The present capitalist leader is in debt, predominantly to 
countries that sell goods to it. It allows other countries to run 
current account surpluses. In this context, it is important to consider 
the question of the undervalued exchange rate of its trading partners, 
especially China, which refuses to let its currency to appreciate.

(iii) The immediate past has seen a huge commodity boom, with finance 
moving from one set of assets to another. The past 18 months' events 
cannot be termed as any long term tendency. Even as the oil-dollar 
pedestal is the building block of Prof. Patnaik's ideas, the US does not 
think of oil as that important except on the supply side.

Third, he made some remarks about the Indian case:
The Raghuram Rajan Committee report on financial reforms talks about 
"growth and inclusiveness". Too many people are excluded from the 
financial system. How do we bring them into the financial system? For 
the Indian capitalist class, this could be thought of as necessary. But 
that's not it. The discourse within peripheral capitalism does not seem 
to recognize any relationship on which Prof. Patnaik puts so much emphasis.

Is it not the case that governments have moved away from fiscal policy 
management?
Moreover, today wages are very sticky. Real wages in the capitalist 
sector have hardly increased. BPOs, etc cannot be seen as safety valves 
as Patnaik would have it. These merely utilise existing reserve armies. 
In this context, how should we blend the idea of imperialism to the idea 
of the closed capitalist economy which is what capitalism is all about?

Charles Abugre, Head, Policy and Advocacy, Christian Aid, London, UK, 
was of the opinion that Prabhat Patnaik's argument that stability of the 
capitalist economy lies in the degradation of the pre-capitalist economy 
that resides together with capitalist economic structures was 
particularly interesting. But he questioned whether and to what extent 
questions it is possible to make a clear demarcation between capitalist 
and non-capitalist economy in reality. Abugre pointed out that such a 
demarcation may be plausible in case of a country like India, which has 
faced a rapid economic transformation. This is, however, not true for 
countries in West and East Asia. Those economies stand testimony to 
continuous decay and diffusion of new modes. As a result, there arise 
intermediate class structures. Secondly, he argued that Patnaik's book 
has suggested socialism as the necessary solution to the present problem 
but the solution does not emerge as an inevitable outcome of the 
theorization of the same.

Chris Baker, Independent Researcher and Writer, Bangkok, Thailand, made 
the point that it is not possible to talk about the global economy 
without talking about practice. He raised the question whether it is 
realistic to make a stark division between capitalist and pre-capitalist 
economy in today's world. Patnaik's theory, Dr. Baker opined, does not 
incorporate the diffusion of capitalism. Capitalism degrades the 
precapitalist economies, but not till the point until the whole system 
fails. If we look at the examples of economies in Latin America, Africa 
and Asia, both degradation and diffusion have been going on in parallel.

Patnaik produces socialism out of the hat, as essential but not 
inevitable. Does this ambitious re-casting of the ideas about world 
capitalism give us any idea about the political organization required to 
put this into practice?

Ratan Khasnabis, Professor, Department of Economics, and Dean, School of 
Business and Management Studies, University of Kolkata, West Bengal, 
India, began by saying that he agrees with Patnaik's critique of 
neoliberal economic theory. Patnaik's world is the world of sticky 
prices of Marx, Keynes and Kalecki. To Khasnabis, the Marxian stand is 
more convincing, as it does not bind the model to the short term. It can 
be used to build a model keeping in mind long term consequences.

Maintenance of a minimum rate of profit is required for the sustenance 
of capitalism. For the viability of the system, pre-capitalist sectors 
are needed to provide stimulus to investment and as a repository of 
labour reserves.

But the stimulus to investment might come from within. The Schumpeterian 
innovation 'creative destruction' fits well with the Marxian model of 
capitalism. Marx had argued that competition among capitalists leads to 
concentration and centralization of capital. The process is facilitated 
by innovation. Innovators eliminate the competitors, which is achieved 
by reducing the cost of production. Hence profitable lines of production 
can be maintained to an extent.

Lenin had pointed out that underconsumption is a reality, and that it 
could be the cause of crisis. The motive of capitalists is to increase 
the organic composition of capital. A way out of crisis is to take up 
investment in Department II, though it may lead to dis-proportionality 
crisis. There is a big differential between wages of workers in 
capitalist economies and the third world. Within a capitalist economy 
itself, there are low-valued products (with low organic composition of 
capital, for instance, agricultural products) and high-valued products 
(with high organic composition of capital, such as infotech), which 
explains the wage differentials within the capitalist system.

The welfare loss of the above-mentioned strategy will be high. But 
interventions from the other side, namely labour, reset the agenda. The 
system inflicts tremendous welfare loss on society. Socialism as such 
does not come naturally from within.

DAY 2, 13th September 2008

Session 1: Money and Monetary Policies in Capitalist Economies

Chair: S K Thorat, Chairman, University Grants Commission, New Delhi, India.

Speakers: Erinc Yeldan, Sunanda Sen and Jyotirmoy Bhattacharya

Erinc Yeldan, Professor, Department of Economics, Bilkent University, 
Ankara, Turkey, in his paper titled, "Beyond Inflation Targeting: 
Accessing the Impacts and Policy Alternatives for Employment Creation 
and Economic Development", highlighted the effects of the orthodoxy's 
obsession with inflation targeting at the cost of macroeconomic 
variables such as employment. The economics behind inflation targeting 
which explicitly commits itself to attain price stability is in fact 
nothing but the management of expectations, where the market 
participants are like Roman gods and goddesses who need to be kept happy 
at all times.

The obsession with maintaining price stability in the absence of nominal 
anchors has compelled the Central Bank to concern itself solely with 
inflation targeting under the pretext that the latter cannot influence 
the real side hence it would be best to return to monetary economics. 
Even while the ILO statistics suggest that more than 186 million people 
across the world are unemployed, 22 percent of the developing world's 
workers earn less than a dollar a day and 90 percent of the labour 
employed in merchandise trade suffer from informalisation, the 
mainstream's dogma of inflation targeting has replaced employment 
creation on the direct agenda of almost all countries.

The role of financial globalization which merely redistributes 
investible funds rather than accelerate accumulation as a source of 
instability cannot be ignored and merely targeting price stability will 
be insufficient. He argued that what we really need is macroeconomic 
stability.

Yeldan pointed out that although inflation needs to be controlled we 
need to focus on income redistribution. The focus on inflation targeting 
which is primarily situated in a world where inflation is solely 
attributed to wage push fails to take note of the phenomenon of imported 
inflation and takes away powers from the powers of the Central Bank. 
When control over other instruments such as exchange rates is taken 
away, targets then become difficult to achieve.

Yeldan suggested alternatives such as the use of the Pasinetti Rule 
which implies setting the interest rate to the rate of growth of labour 
productivity. Taking from a study by Pollin and Zhu which found out that 
higher inflation rates are associated with moderate gains in GDP growth 
upto a roughly 10 to 15 percent inflation threshold, he stresses the 
need to have case specific thresholds for different kinds of inflations.

In her paper titled "On Trade-Off and the Impossibility", Sundanda Sen, 
Professor Emeritus, Department of Economics, Jamia Millia Islamia and 
Professor (retired), Centre for Economic Studies and Planning, JNU, 
India, stated that in a globalized world, where there is capital account 
convertibility and exchange rates are subject to market forces, monetary 
policy which is subject to the changes in capital inflow and exchange 
rates becomes an inffective instrument in the hands of the Central Bank.

To spell out the course of action, with CAC, the import of capital leads 
to capital appreciation. Where the exchange rate is not allowed to 
appreciate too much, there is some capital absorption which leads to a 
rise in prices and increase in interest rates. As interest obligations 
have to be met and fiscal deficit increases are not acceptable, the axe 
falls on the primary deficit or in other words expenditure cuts are 
enforced. CAC is an integral part of deregulated finance where the Bank 
of International Settlement Rules makes it compulsory to comply with 
Capital Adequacy Ratio (CAR) and CRPR which reduces lending to sectors 
like agriculture and small sectors. Where financial securities are 
considered more profitable than industrial securities in a world where a 
range of assets are available and corporates prefer to invest in 
financial assets due to the presence of ESOPs and the need to show 
better balance sheets, inflation targeting is resorted to only to 
protect the interests of finance capital.

Jyotirmoy Bhattacharya, Assistant Professor, IIM, Kozhikode, in his 
paper on "Oil Shocks: How Destabilising are they for a contemporary 
Capitalist Economy?" begun by arguing that reaction of the world economy 
to oil shocks has changed significantly in the last two decades. He 
pointed out that inflation due to oil shocks in the seventies was higher 
and even led to stagflation as compared to the nineties where the impact 
on inflation has been more muted. Neo classical models do a very bad job 
of explaining this differential response of inflation to oil shocks in 
the two different decades.

At a time when money is not fiat and is linked to oil in what is called 
the Oil-Dollar Price and it has been argued that oil price increases 
have been mainly due to speculation, the relatively reduced impact of 
oil shocks in the 90s on inflation in the developed world has been due 
to the availability of cheap imports from China and the access to the 
cheap labour reserves of the developing world. Notwithstanding the fact 
that imperialist powers have a need to control oil to ensure price 
stability, Bhattacharya establishes that price stability due to 
fluctuations in oil may not be as crisis causing as before.

Session 2: Finance and the Real Economy

Chair: Robert Pollin, Co-director, Political Economy Research Institute 
at the University of Massachusetts, Amherst, USA

Speakers: Esteban Perez Caldentey, Nirmal Chandra

Esteban Perez Caldentey, Economic Affairs Officer at ECLAC, Santiago, 
Chile, began the presentation of his paper "Trade Openness, Financial 
Liberalisation and Volatility" by discussing the limitations of 
neoclassical economics in dealing with money. The neo-classical theory 
cannot function with money as a medium of exchange. But it is difficult 
to conceive the functioning of an economy of exchange with a great 
number of goods and of private property owners, without an efficient 
exchange system. An exchange economy presupposes 'something' to record 
and settle transactions with. Intertemporal models made 'that implicit 
something to settle transactions' an explicit component of their models 
by introducing money as a medium of exchange from 'outside'. This was 
achieved by appending a quantity theory equation to the 'real equations' 
of general equilibrium. While people starting with Patinkin (1956), 
Clower (1965, 1967) and Wallace (1980) did this, introducing money as a 
means of exchange negates the very purpose of intertemporal equilibrium. 
Esteban then offered an analysis of the last part of Prabhat Patnaik's 
book by incorporating a discussion on the inter-temporal approach to 
open economy macroeconomics. Intertemporal approach in essence transfers 
the intertemporal utility maximisation of households onto the sphere of 
countries. The current account balance is thus 'a facet of the market 
for intertemporal trade in goods and services'. The capital account 
exists to 'support' the gains from trade in goods and services. The 
prediction of this theory is that capital should flow from capital 
abundant developed countries to developing countries. However, based on 
empirical evidence from the Latin American countries, Esteban Perez 
showed that net resource flow is moving from the South to the North. He 
argued that this has been happening due to repatriation of profits and 
incomes. He concluded by arguing that it is not trade that drives 
finance as in intertemporal models rather the causality is in the 
reverse direction.

Nirmal Chandra, Professor Emeritus, IIM, Kolkata, India, in his paper 
"Is Inclusive Growth Feasible in Neoliberal India? Some Preliminary 
Notes on Fiscal and Credit Policy", spoke on the changing fiscal 
situation In India in recent years. He noted that there has been an 
improvement in tax to GDP ratio in recent years. Prof. Chandra argued 
that improvement in the tax to GDP ratio cannot be attributed to the 
fiscal policy stance adopted by the government but has taken place due 
to sudden rise in world oil prices. He also pointed out that there has 
been no increase in the ratio of tax to non-agricultural GDP. He argued 
that the indirect taxes have fallen due to reduction in import duties. 
The corporate income tax has increased moderately, but at the same time 
because of a number of tax-exemption provided to the corporate sector, 
the effective tax rate in the profit share of the corporate sector has 
gone far below the statutory rate. He also drew attention to large 
number of tax sops given to the corporate sector. Different tax sops 
provided by the Centre and the States not only lead to a loss in 
potential tax revenue but also give rise to high economic inequality in 
the society. The low tax base of the government and its adherence to 
neoliberal FRBM act has greatly reduced the scope of undertaking 
developmental expenditure in the economy. The speaker ended his speech 
by raising an important aspect of the recent high growth phase in India. 
According to him, one of the main driving forces of achieving higher 
growth rate is the increase in the luxury consumption by the high income 
groups and different tax sops given by government to promote such 
consumption which means that while this can work for a short time, there 
is a natural limit to this process.

Session 3: Open Forum

Chair: C P Chandrasekhar, Professor, Centre for Economic Studies and 
Planning, JNU, New Delhi and Member, IDEAs' Executive Committee

In the open forum, Prof. Chandrasekhar summarized some of the issues 
that came up for discussion in previous sessions. Prof. Chandrasekhar 
argued that the issue that was intensely debated was the logical 
necessity of the pre-capitalist sector in closing demand constrained 
capitalist system. In this regard, he himself proposes that in recent 
times finance may also have provided exogenous stimuli to the system. He 
draws attention to the credit financed expenditure booms in stimulating 
aggregate demand. He also argued that oil-dollar standard proposed by 
Prof. Patnaik was also much debated. He argued that the fact that high 
rates of growth are experienced only by few developing countries can be 
brought into the analysis in explaining the continuing confidence in 
dollar. He argued that China was holding large idle dollar reserves that 
it can use to stimulate domestic growth. But it is holding these large 
reserves at rates of growth that are already very high.

Next, Prof. J. Kregel explained the Keynesian approach to money. 
According to him, anything for which liquidity premium exceeds carrying 
cost can serve the role of money. Money, in this approach does not have 
a concrete referent; a worthless piece of paper can also serve the role 
of money. Therefore, Prof. Kregel differs with Prof. Patnaik who pegs 
the value of international money to a commodity viz oil. In explaining 
the current US drive for gaining control over world's oil resources, 
Prof. Kregel argued that it was mainly driven by the personal interests 
of those who run the US administration rather than by the desire to 
ensure stability to dollar. He also argued that the recent increase in 
oil prices has been on account of financial speculation. It is not clear 
why financial speculators in US will undermine the stability of dollar 
by raising the price of oil.

Besides Prof Kregel, Prof. Bagchi and Prof. Pollin also made important 
interventions. Prof. Bagchi reiterated the role of pre-capitalist 
markets in ensuring stability and growth in capitalist world. Prof. 
Pollin highlighted the importance of green investments. Such investments 
will not only insure the world against threats posed by climate change 
but will also boost demand in the economy.

In his response, Prof. Patnaik once again emphasized the role of pre 
capitalist sector. He drew attention to the role played by colonies in 
fostering growth in capitalism in the nineteenth century. He also argued 
that demand supply conditions played an important role in determining 
the price of oil. He contended that control over non-renewable resources 
is essential for maintaining the value of dollar and in the present 
scenario, oil is the most important non-renewable resource.

http://www.networkideas.org/feathm/sep2008/print/prnt220908_IDEAs_Sep_Conf.htm