Months of speculations on decoupling theories were crashed at least over last few days as global financial markets melted, till the US Federal Reserves came out with the surprising 75 basis points rate cut a week ahead of their scheduled meeting.  

And theories of Reverse Coupling came into limelight from C. Fred Bergster, of the Peterson Institute for International Economics (formerly known as Institute of International Economics). Yes, the global economy has re-coupled across nations as large US firms now talk about their targets to increase non-US revenue faster than domestic revenue, and many already achieved it. 

So have we now got some evidence that the world economy moves in unison where the largest economy still drives global economic growth significantly? The answer is a firm yes, if last few days reactions of financial markets are considered.   

But surely ‘Have Nots’ as a community is increasingly getting decoupled from this round of global economic growth, that saw income inequality rise to its highest levels from the US – the land of freewheeling capitalistic heaven to socialist China to socialist democratic India. Some say a rising tide does not lift all boats. 

When the debate over last few days focused globally on availability of capital and its cost, I heard this story from one of my colleagues in India.  

The bottom-line of the story is one domestic maid from South Asia wanted to have an abortion because of non-supportive husband, and no legal recourses. The lady realized that she did not have minimum resources to support the new-born baby. Apparently she tried every possible means to get the unborn baby aborted. However one of the state run hospitals that she approached told her finally that she needs to pay a minimum of Rs. 600 (approximately $15) to have the abortion done. 

And she didn’t have that. She now is the mother of that baby, and continues her job as a domestic maid somewhere in this region of South Asia. 

Can the global fractional banking system and all its central bankers and associated banking system answer what could have been the cost of capital and how that $15 could have been made available to that lady in time to avert a crisis in her individual life? I guess that she would have surely accepted that $15 as debt also at an appropriate cost of capital, probably at a much higher rate than what the biggest Central Banker offer to the banking system in the US at their point of crisis, which is much less severe compared to what this lady faced? 

I heard the story couple of days back. It indeed is chilling, however the bigger realization is that, it’s not China, India, developing nations getting decoupled from the slowing growth in the US. It’s no more a country-specific issue. It’s rather a class-specific issue that’s been there since the time of Socrates, who said there always were, are, and would be two permanent classes of ‘haves’ and ‘have nots’. There were two classes, but there were a coupling between them as well. Over the years, it got weakened. It affects billions of people, but in the race of economic growth, they no longer matter in the considerations of economic growth. 

‘Have nots’ as a class has been decoupled from the global economic growth. Even in regions where they are a majority, they are increasingly getting decoupled from domestic growth agenda.

From the author of Wondering Man, Money & Go(l)d 


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