Monday, February 20, 2006

Interview with IMF Chief Economist

Today I point you to this interview with Raghuram Rajan, Chief Economist, International Monetary Fund.

The IMF is not trusted much in India; and yet perhaps the IMF can help in accelerating India's economic growth, which is crucial to the future of more than a billion people.

In a strong capitalist economy, what should happen is that the firm should go out of business and that means it lays off workers. Workers should not go out of business. Workers should have a safety net, which allows them to survive while they look for jobs, allow themselves to retrain themselves possibly, and get new jobs — in the new opportunities that are created by the old ones releasing resources and by the growth that is created. What do we have in most statist economies typically? Firms are not allowed to go out of business and the workers don’t have a safety net. Which is why they then start demonstrating, not allowing the firm to go out of business, and they create the political support for this whole process for retaining the firm.