International Development Economics Associates (IDEAs)
held a one day workshop on 'India, China and the World
Economy' on the 24th of January, 2008 in New Delhi.
The objective was to analyse the implications of the
emergence of China and India as large economic powers
in the Asian region for the global economy and other
developing countries. Earlier activities of IDEAs
had already been concerned with the questions of how
to make the high growth in China and India pro-poor,
better distributed and more beneficial to other developing
economies. These issues became even more interesting
in the context of the looming recession in the US
economy. Therefore, the impact of the US economic
recession on India's and China's growth stories and
the need for these economies to delink from the US
economy at this juncture became much debated topics
at the workshop. Other topics included: exploring
the nature of growth in these two economies, in particular
the apparent paradox of high growth along with sustained
poverty and rising inequality; the implications of
China's foreign exchange reserves for the global economy;
China's changing development path and its interaction
with growth, policy and the subsequent impact on globalization;
the role of China and India in recent Asian trade
patterns; impact of China and India on the African
economies via engagements in the global trade system
and their effect on global prices and demand patterns;
and finally, the history of Latin American engagement
with the US economy and the lessons for the rest of
the developing world.
The workshop had a participation of around
65 with representation from China, US, Mexico, Africa
as well as many Indian participants. The attempt was
to involve academicians as well as policy makers and
therefore the participants included Professors of
Economics from Jawaharlal Nehru University, University
of Delhi and various colleges of Delhi, members of
various research institutes in New Delhi along with
members from several government policy making bodies.
The first session was chaired by Prof. S K Thorat,
Chairman, University Grants Commission, India. The
first paper, 'Will the US Recession lead to Global
Slowdown? What role for China and India?' was presented
by Prof. Jan Kregel from the Levy Economics Institute
of Bard College, USA. He explored in detail the nature
of the US recession and the possible impact on other
parts of the world. His presentation concluded, following
George Soros, that while a recession is now more or
less inevitable in the developed world, China, India
and some of the oil-producing countries are in a very
strong countertrend. So, the current financial crisis
is less likely to cause a global recession than a
radical realignment of the global economy, with a
relative decline of the US and the rise of China and
other countries in the developing world.
The second paper, 'A Perspective on the Growth Process
in India and China', was presented by Prof. Prabhat
Patnaik, of the Centre for Economic Studies and Planning,
JNU, New Delhi. The paper explored the basic nature
of the growth in India and China. Prof. Patnaik argued
that inherent in the very nature of this growth process
is a tendency towards "dualism" or a progressive
accentuation in the internal social hiatus; an increase
in the growth rate, far from eliminating or reducing
this hiatus, may well accentuate it further. This
position is fundamentally different, argued the author,
even from the "benefits-of-growth-will-not- automatically-trickle-own"
point of view. It constitutes a basic critique of
the growth process itself. If it is valid, and inherent
to the growth process is a production of dualism,
then no fiscal intervention by the State is likely
to nullify it, as the Indian eleventh plan believes.
The next session, chaired by Prof G S Bhalla, Professor
Emeritus, Centre for Studies in Regional Development,
JNU, was devoted to understanding economic growth
and its implications in China. The first paper, 'China's
Changing Development Path: Growth, Policy, and Impact
on Globalization' was presented by Prof. Dic Lo, from
the School of Economics, Renmin University, Beijing
who is also a visiting faculty at School of Oriental
and African Studies, University of London. In the
context of global growth, he explored the new development
paradigm in China. He argued that this is a result
of a capital-deepening growth path, emphasising strong
productive efficiency, and is thus potentially sustainable.
It is also the result of a mix of government policies
which both reinforce the growth path and promote wage-enhancing
employment expansion. It is in relation to this nexus
of growth path and government policies that the Chinese
experience post-crisis might be considered as a paradigm
of "new developmentalism", which in turn
is bound to have a far-reaching, systemic impact on
globalization
The second paper was presented by Dr. Andong Zhu,
Assistant Professor, School of Humanities and Social
Sciences, Tsinghua University, Beijing. Entitled 'Implications
of China's Foreign Exchange Reserves for the Global
Economy', the paper argued that holding the huge amount
of foreign reserves that China is currently holding
may not be a positive outcome for the country as it
involved significant costs in terms of the loss due
to depreciation of USD, the colonization of the Chinese
economy in terms of increasing ownership by foreign
capital and the uneven rate of return which meant
that China paid out more in return to holding foreign
reserves compared to what these could have earned
in the US economy. The author finally suggested that
these reserves could be used to lend or invest in
developing countries which increased the power balance
of the developing bloc rather than to do so in developed
countries which represented a competitive lending-borrowing
relationship.
The subsequent sessions were chaired by Prof. Sheila
Bhalla, Professor at the Institute of Human Development,
New Delhi and retired Professor, from CESP, JNU. A
presentation on Latin American countries' pursuit
of economic liberalization and their relationship
with the US by Alicia Puyana, Professor of Economics,
at FLACSO, Mexico City, was entitled 'The long and
Sad History of LAC Development or Two Hundred Years
of LA Economic Liberalism'. This sought to draw lessons
for developing countries from the Mexican experience,
which was focused on a liberalizing development strategy
based on engagement with the US economy. The paper
pointed out that North-South integration and liberalizing
the economy with the intensity Mexico did, may not
allow a less developed economy to harvest the positive
growth effects of external trade. Secondly, negotiating
with a super power is hard and the possibilities of
reaching agreements that will give room for special
treatment according to level of development are nil.
She also argued for certain policy prescriptions for
the Mexican economy, including using the exchange
rate for development purposes in coordination with
monetary policy, increasing public investment for
inducing sectoral growth and broad based employment
generation, using import substitution to reduce the
external component of the economy, and promoting active
sectoral development.
Two papers looked specifically at the external impact
of China and India. The presentation by Prof. Jayati
Ghosh, Centre for Economic Studies and Planning, JNU,
New Delhi, entitled 'The "Asian Century"
So Far: China and India in Recent Asian Trade Patterns',
described the recent rise of emerging Asia not only
within Asian trade but also in Asia's trade with the
world. She tried to analyse the pattern of Asian trade
in the recent period and found that both China and
India, the most important players in emerging Asia,
were increasingly looking regionally inward and reducing
their dependence on developed countries in both exports
and imports of goods. This was also true for FDI flows
which saw an increasing concentration within Asia.
However, the final destination for exports was still
dominantly the developed North, especially the US
and the EU, and so the entire region would be adversely
affected by a US recession unless there was more emphasis
on export diversification through regional and South-South
integration. Therefore this is an opportune moment
for China and India to re-orient trade towards developing
countries, possibly through providing investment and
Marshall Plan-type resources to other developing countries.
A paper on 'China and India in Africa' was presented
by Prof. C P Chandrasekhar, Centre for Economic Studies
and Planning, JNU, New Delhi. This presentation looked
at how the growing economies of China and India could
engage Africa in terms of trade and investment and
what this meant for the African economies. The Impact
of especially China in affecting the international
price level of even non-fuel commodities by creating
demand for certain commodities like industrial raw
material that Africa supplied was considerable. He
also argued that for China and India, there is a trend
of increasing interaction with developing economies
including Africa (to a lesser extent for India). While
African shares of Chinese trade are still negligible,
China is now a major trade partner for most African
countries. Africa has benefited in both volume and
price terms from China and India trade. This can provide
a challenge to the old imperialism as it gives Africa
and developing countries more space to negotiate.
So, while Africa still remains the hinterland, it
is trading with and receiving investments from with
new partners other than the erstwhile colonial powers
and more importantly, on terms that are improving.
The last session was a panel discussion on the topic
'Is There a Challenge to the International Economic
order?' and was chaired by Dr. Arjun Sengupta, Chairman
of the National Commission on Enterprises in the Unorganized
and Informal Sector, Government of India.. The chair
in his opening remarks pointed to the need to protect
the workforce in the current juncture of development.
He suggested that the installation of social security
measures by the government will benefit the labour
force, which is going through a process of casualisation
and increasingly subject to hire and fire policies.
Prof. Jan Kregel underscored the need to translate
the rise in productivity, especially in certain sectors
of the emerging economies, into the creation of higher
aggregate demand through a rise in the wage share.
According to him, this is a necessary condition for
a sustainable macroeconomic and development policy.
Prof. Prabhat Patnaik reiterated that the high growth
regimes in the newly developing countries like India
and China are also accompanied by a rise in inequality
and poverty for large sections of the population.
He construed that a reorientation in the balance of
class forces, which is tantamount to a political change,
is required to ensure better living conditions for
the poor and the working class in these economies.
Prof Sunanda Sen (Professor Emeritus, Jamia Milia
Islamia, and retired professor, CESP, JNU, New Delhi)
reasoned that the current growth process in the economies
like India or China is leading to huge and uncontrolled
financial inflows, which is making it more and more
difficult to control the exchange rate. She argued
that an uncontrolled appreciation of the domestic
currency in this era of trade liberalization will
potentially lead to deindustrialization in these economies.
While the export-oriented industries will suffer from
the rise in their product prices in the global markets,
cheaper imports will also hurt industries which cater
to the domestic consumer markets or supply inputs
to other domestic industries. Finally, Prof. Abhijit
Sen emphasized that economic growth should be accompanied
by the expansion of economic activity and generation
of new employment. It was therefore necessary that
there should be appropriate state interventions through
policies, which can successfully achieve these targets.
The programme of the workshop follows below with links
to the presentations / papers.
10-11.30 a.m.
Chair: S. K. Thorat
Jan Kregel – Can
China and India stall a global recession?
Prabhat Patnaik – A
Perspective on the Growth Process in India and China
Discussant: Pronab Sen
11.45 to 1.15 p.m.
Chair: G. S. Bhalla
Dic Lo – China's
Changing Development Path: Growth, Policy, and Impact
on Globalization
Andong Zhu – Implications
of China's foreign exchange reserves for the global
economy
Discussant: Prasenjit Bose
2.15 to 3.00 p.m.
Chair: Sheila Bhalla
Alicia Puyana – US
"strategic liberalization" and the implications
for developing countries
Discussant: Praveen Jha
3.00 to 4.00 p.m.
Chair: Sheila Bhalla
Jayati Ghosh – The
"Asian Century" so far: Recent trade and
investment patterns in Asia
C.P. Chandrasekhar – Rapid
growth in China and India: The impact on Africa
Discussant: Surajit Mazumdar
4.30 to 5.30 p.m.
Panel discussion: Is there a challenge to the international
economic order?
Chair: Arjun Sengupta
Jan Kregel
Prabhat Patnaik
Sunanda Sen
Dic Lo
Abhijit Sen
April
7 , 2008.
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