Question

.Critically examine how Amartya Sen’s capabilities approach did or has challenged development thinking. (1000 Words)

Answer 1

Amartay Sen the Nobel Prize Laureate in Economics worked across UK and Us has deeply contributed to Social welfare, justice and human rights.

His major work was into economics development of nations specifically the poor ones and developing nations.

His thinking of combined fiscal an D monetary policy tools and orivate spending was gamechanger in creating widescale growth and magnitude.

For example in US, the nation to grow needs combination of expansionary monetary and fiscal policy, automatic stabilizers and structural changes to revive from recession like Coronavirus.

commensurately his commentary on US China Trade war was backed by Keynesian economics.

Application of Amartya Sen Ideological beliefs :

Spike in inflation last year was accustomed due to higher energy prices of crude oil and higher demand and spending which crossed inflation in CPi terms to 2.3percent.
The unemployment in 2019 has remained at 3.93 percent to 3.78 percent range and has decreased gradually due to higher capital expenditure by corporates after drastically cut downs of taxes which caused headroom inflation to spike and shoot.
As of 2019 end, the Fed funds rate remains at 1.7 percent and 10 year treasury yields at 1.8 percent and 30 year treasury yields at 2.07 percent. The chnages are exacerbated by anticipation of recession such that returns are higher in near term as risk is higher amd the economy looks to revive post 10 years which has caused yields to dip for 10 year and 30 years.
The yield curve has inverted which is strong indicator of recession as probability in near term as 5 year treasury yields are higher than 10 year and 30 years and hence long term view is stable but short term indicates slowdown.
Federal funds rate remains constant in anticipation of prevention of further inflation and st same time balancing counter effects of trade war so rise in funds rate can bring slowdown sooner however cut in rates can boost inflation levels and hence Fed maintain neutral stance.
Current primary concern of The US Fed is to monitor inflation as unemployment has been projected at 3.5 per cent however the negative implications of US china trade war and global uncertainty makes the Fed dovish but spiking inflation causes it to be hawkish amd thus is in tradeoff situation.

Conclusion :

The Fed must watch and react next month and look to keep interest rates constant and analyse aftermath as US china trade war has deescalated along with US Iraq war and sanctions on Iran and also must evaluate unemployment number before taking robust steps.

The biggest issue been surfaced is US China Trade War, Immigration Laws, US National Debt, Foreign Relations policy  

US and china have great history of trade wars however recent times has been largely due to sanctions been imposed on china by USA.

Recently, USA slpped tarrifs on 40% of chinese goods. which has caused prices of US goods to go up substantially becuase cheap imports fro china have been stopped.USA has also stopped cheap imports of steel and as a result Chinese government too has imposed substantial tarrifs on USA goods.

As a result, there has been currency devaluation in China to make it goods look more cheaper and attractive and has started selling Goods in emerging markets. US goods however have become more costlier and hence sales have decreased.

Chinese government has aggravated trade war by imposing fresh round of tarrifs , however before G20 summit which will be held in 2018, such issues will be resolved.

Since, China has imposed tarrifs we see there has been lack of entry of chinese workrs and visas in USA which has nullified the clear cut winner. Because of trade war, India has managed to export steel and aluminium to US markets and hence has been the greatest beneficiary.

Given the Presidential Power following economic strategies need best case implementation :

Resolution of NAFTA deal with negotiation as well as maintenance of great relationships with South Korea on denuclearization by maintaining an eye on all developments
US China pact and removal of tarriffsby signing of MOU and economic cooperation
Immigration laws been relaxed by allowing H1B for Indians who look to create startups IN UsA and generate more employment
Debt refinancing and additional taxation on corporates with large market Capitalization to decrease debt in short term.
Increasing interest rates to appreciate dollar and control inflation and money supply in market  

References:

Bailey, Martin Neil, What Happened to The Great American Job Machine!? The impact of trade and electronic Offshoring.

Cline, William R 2004. Trade policy and Global Poverty. Washington : Institute for International economics

Goldman Sachs, 2003. Dreaming with BRICS: the path to 2050. Goldman Sachs Global Economics paper 99

Zoelick, Robert B 2001. American Trade Leadership : What is at Stake? Speech before Institute of International Economics washing mton, September 24.

Schott, Jeffrey, 2004. Free trade agreements :US strategy and Priorities. Washington: Institute for International economics  

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