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Transcript:
Rob Johnson:
I’m here today with Montek Singh Ahluwalia, long time, very, very important minister in the Indian government and was also part of a growth commission, which was led by Mike Spence, who is also the co-chairman of the Commission on Global Economic Transformation at iNet. Mike is Nobel Laureate from 2001, very involved all over the world in issues related to technology, economic development. And just I would say lovely to have you both here today. Montek, you’ve got a new book or I guess it’s not brand new, but it’s new to the world. And it’s backstage the story behind the high growth years in India. Now I’d love the opening of the book where you said, “Most people write a book and they say it’s like a book form of a selfie.” And you map to that.
And I got a very strong sense, I would say of your purpose from knowing you and how you’ve been dedicated to raising the standard of life for many, many people, but even in your book, you were very conscious of the difference, which you might call between a narcissism, looking in a narcissist pool and imparting your experience to us to give us lessons into the future. So I very much enjoy the book, and I very much thank you for sharing that perspective. I think for my young scholars, that’s a beautiful way to see the purpose of reflecting on experience and creating a book. But let me turn to you Montek, describe the process. What inspired you to write the book and what you can see as the key findings, or the illumination that you shared?
Montek Singh Ahluwalia:
Yeah. Thanks, Rob. Thank you very much. Giving me a platform, if you like to advertise my book, the least I can do is play it, that’s good. That’s nice. And I think as you said, I don’t regard it as a memoir because a memoir is all about the individual. I view it, as I said somewhere, it’s more like private law. It’s having a process that involves very large numbers of people. I wasn’t the central act by any means, but must say that I did have a very prime position that’s why the book is called Backstage. I mean, I was there for a surprisingly long part of the period. Why did I write the book? Everybody looks at it from their own perspective and looking back, one of the things I’m really surprised at, is that when I wrote the book, I think there was a much greater consensus at the time when the changes were being made much greater global consensus, but where to go? I mean, Indian reforms sort of began in 1991, I think from the 1980s onwards, the [inaudible 00:03:54] growing. And the consensus included many things.
I mean, on the political side, it included the notion that need to be a democracy, actually got the best benefits of a process of global integration. You need market and you need to recognize that the private sector has a very prominent role, okay. You need to open up to the global economy, that means integration and good trade, and also integration in technology. We were a bit cautious about the implications for integration we had, but the old Washington consensus that formula [inaudible 00:04:41] we did open up the capital, but we did it in a more gradual way. And I think that in a way, consistent with helping approach China, of kind of crossing the river while feeling distraught. And generally, I think the notion was that the global economy is supposed not to be equal, the US always had a dominant position.
And I think the US’s own view of US exceptionalism was always known, but we’ve generally felt that the US is the sort of benign hegemon. And most people kind of went along with a global economy that was intersecting led by the US. And with the collapse of the Soviet Union, 1931, this appeared to be a complete consensus. And that’s when Francis Fukuyama, in the end of history. I mean, although there was a consensus, it wasn’t easy in India to get it all done because within the system, it takes a long time to persuade everybody that change is good. One of the characteristics in India that I think was an unavoidable consequence, being a democracy is that it was gradual, you had to persuade people to come on board. You didn’t just go and unveil as part of blueprint and said, “Look, I’ve consulted all the experts and they already know how are we going to do it?”
You consulted people, you try to bring people on board, that meant the change also took longer. They’d have the enormous advantage that it broaden the political consensus. And this is happening me a lot in India because when we introduced reforms in 1991, it was very contentious. And especially, one of the reasons we were able to do it, is we had a huge crisis. It’s not just the crisis, the crisis was caused by another government. I mean, you can be running a government and have a crisis, that doesn’t encourage people to do things differently. People, continuously are having today. We had a new government, it was easy for them to say, look, the previous guys have mucked it up. They’re not speaking what’s happening around the world. We need to make this change. In the last several years, the global comfortable consensus appears to have the people.
And I mean, I don’t know… I was going to come back, but I think people around the world need to know that it’s difficult to make changes. It’s good to be making changes which are done in a consensual democratic context, but it takes time to get people on board. But one of the critical things is that, underlying has to be very substantial defenses, so that when, you actually. I mean, you insult each other, which is important in a democracy, but you then get on with doing the job. I think right now we’re in a world where a lot of what was taken for granted, as well as the… Democracy has kind of morphed into electoral autarchy, and populism is taken over, that confidence that the democratic process generated, trust isn’t there anymore. And lots about functioning of the global economy, partly due to the fact that the US position is now challenged.
The US position was slowly eroding over time, anyway. But if a large number of others had come to the fore, I think it would have been easy to manage. Instead, what we brought is one dominant challenger, and the dominant challenger has actually changed its own projection of the world because he’s projecting it offering an alternative, but he’s not saying, look, we’re just joining. And the attitude that China had when it joined the WTO is very different from the attitude it has now, that creates a very different situation. The other thing quite frankly, is that apart from the security sides of it, you’ve got tremendous changes in technology which feed into security and create uncertainty. And on the rule of markets, you’ve got technologies, you’ve got winner take all effects, serious doubts about whether just letting markets function will actually lead to healthy, competitive integration. So it’s the spraying of a consent. I just hope that somehow this is not allowed to get too much, out of play.
When a lot of bad ideas can easily take over, it’s not easy to find out what’s a good idea, but it’s usually quite easy to find out what’s bad. And I think we discussed this in the board commission, which. We also, we put in, apart from the usual good ideas, we said, here’s a set of back ideas. All that is kind of disappeared. So protecting is no longer a bad idea, I mean huge deficit is no longer a bad idea. Really, if you weren’t an economist, and you like critical economist, you would be very easily tempted through the point of view that when Cane said that people are just driven by discredited economists, practically all economists today are discredited. Different with each other, enormously. So it’s very easy for somebody who’s not an economist, why should I listen to all these stuff? Anyway. That’s a tough world for somebody growing up right now, much tougher than it was for people who were making up their minds in the 1990s.
Rob Johnson:
Yeah. Mike, what are your thoughts?
Michael Spence:
No, I think Montek has put it very well. I mean, there was a… Maybe, I guess I would say there was a consensus, the Washington version of it was highly criticized. I just wrote something about that. I think most of the criticism was unfair. The Washington consensus as written by John Williamson was actually a very sensible document if you interpreted it correctly, and these are general guidelines, things you really need to think about if you’re going to have a successful development strategy. But it was never meant to be a strategy. And certainly the slim down version, which was tried several times in Latin America without paying attention to several of the things Montek said, including, it takes time and you have to do things gradually and you have to experiment and figure out, what’s going to work and what doesn’t. All of that was ignored with the results.
And so there was a kind of discrediting of that, but even when we met together in the early 2000s, as members of this commission to kind of update a sense of what people like Montek and others who had been leading important reform agendas had learned, we really didn’t have a sense that the world had sort of turned upside down, the openness, leveraging the global economy in the right ways, getting the investment levels up, avoiding market distorting activity. All the things Montek mentioned were pretty much generally agreed on. And there wasn’t a complete consensus on the governance model because the world’s largest, most democracy by then was growing quite nicely. And the other chaps across the border to the North were doing reasonably well, economically as well. It was a little hard to argue that there was a correct governance model, that was the only one that worked.
So I think you just have to face the fact that there’s more than one ways to get the job done depending on history, culture and so on, values. How much do you care about stability? How fast do you want to move and so on, but I think the world has changed. And so, let me just highlight the key things that I think have done it, and I’m really backtracking around what Montek said. One of them is that the United States was never going to be dominant, right? We knew even back then that a huge accident that stopped the growth of the major players in the developing world, the future economic giants were going to be China and India, and there was going to have to be some different way to manage the global economy, and the G20 was formed for that purpose, and to create priorities. It sort of did a pretty good job in the great financial crisis, but a struggle since then.
I think that’s not a particular criticism on my part. It just, it’s tough, when you don’t have that much heterogeneity to come together. That’s one thing, and we just said we don’t have… Second, I think the WTO was democratized replacing the GATT and that hasn’t worked very well either. I don’t know what to say about that, I’m not a great fan of authoritarian versions of making up global rules, but we haven’t been very good. It’s not been an effect… It’s been an effective adjudicator up until recently, of trade disputes, but it is not been an effective forum for adapting the rules to really dramatically changing circumstances. And I guess the third thing I would say is, technology is now all around us. It’s all over us. We don’t really have a complete map of where we’re going.
It has national security implications. It has implications the way society is put together and politics works and so on. And we just have only started to kind of wrestle with those issues. And we’re not going to come out in the same place. Europe in America won’t come out in the same place. India will come out in a different place. China certainly has already come out in a different place in managing various dimensions of the regulation of technology, whether it’s content, whether it’s either security and privacy, whether it’s market power, the type that Montek mentioned. So we’re on a journey, but these things are important. I think for us, if we were doing the growth commission again, technology would have been a much bigger prominent thing because it is in the process of removing the power of the Asian development model because of robotics.
I mean, it’s kind of that simple, and we don’t really have a very well-developed alternative growth model and source of comparative advantage for driving high-speed growth.
Rob Johnson:
No, it was good. Montek, I want to ask you how you think the unmaskings associated with the pandemic have affected the challenge, both present and future, but I know Mike said a lot of interesting things you may want to start there.
Montek Singh Ahluwalia:
Well, actually I agree with I mean… I’ve always agreed with both what Mike says, actually. So I wouldn’t go over that again. I think there’s commonality there. The pandemic gives a good… I mean, a couple of points I want to make. I don’t know. I don’t understand enough by the time they make him, the world’s epidemiologists need to be put on the platform to tell us about the pandemic. The most important thing about the pandemic, it’s really rule of technology, which might five, 10 years. This time around, we’ve got more than one vaccine in less than a year. In one sense, that can be said to be a fantastic view, but that’s not an achievement that was a result of any conscious international collaboration. I mean, individual countries did what they could, at different capacities they have. I mean, the US and Europe support their own vaccine manufacture.
We encourage all vaccine manufacturers to do trial. I mean, the biggest vaccine producer in the world is Serum Institute of India. They tied up with Oxford AstraZeneca. We did our rolling out in India also, and also tied up with some of the others, but so far… I mean, the only international response to the pandemic is the generalized slogan that nobody’s safe until everybody’s safe, sounds very good, but at the back of it, you would expect a hell of a lot of money to be put into that. So that the Covax Initiative could actually go and buy off a whole lot of vaccines, and the money is just not being mobilized. So I would say that so far, we haven’t actually done all that, globally, but you never know. I mean, things might improve, not being done on a global platform either. For example, in the recent meeting of that the US, and India, and Australia had, there was some discussion, cooperation on vaccine production, but I call that more or less an extended bilateral.
It’s not a global effort, it’s not the multi-lateral. Probably at the moment, you see a lot of, not just the national, but intercompany each other down. I mean, you never know whether the news about the effectiveness of one particular vaccine is being spread by competing pharmaceutical companies. There’s a lot of concern about that. Well, I think all the points that Mike mentioned about what technology has done, taken the for generating a consent, is no longer in the control of government. It’s being done really across the world, through social media. And how we’re going to respond to that, is not actually very clear. Each individual country are oof course, has to do whatever it can to span the spread of vaccination. I mean, in India, we made a sort of a stock. I mean, the numbers of vaccinated is quite large, something like 10 million or so, but as the percent of total population is .
Rob Johnson:
Mike you had mentioned a few moments ago, the Station model. How do I say? Pass will not be prolonged in the next phase for the developing countries, global supply chains, automation, machine learning, robotics, changes in the terms of trade. So the balance of payments are not so favorable as manufacturing is the driving engine of development, but how does technology bring us potential? Are there new things? And you and I have been working with the Commissioner on Global Economic Transformation about what possibilities are there in Africa, where there isn’t these station model where an equatorial region, subsistence farming is damaged heavily by climate change and where there is a huge demographic bulge on the horizon. How can technology come to their rescue?
Michael Spence:
Well, I think there’re some opportunities, but let me say, I think development economists who have an applied practical bent should really pay attention to India because India’s development path has been distinctly different in very interesting ways, early investment in technology leading to really impressive sectoral growth in a number of areas. Less reliance on the global economies demand, and just a stunning educational system. I mean, the number of Indian citizens or people who were born and raised and educated in India, running major institutions, including major business institutions around the world, it’s just stunning. And so I think, we do want to pay attention to the model because people who are leading these changes have to plan one that works, but we shouldn’t lose sight of the fact that there isn’t just one model out there.
And that these critical investments that have been made, and India made a lot of these investments when it wasn’t a wildly wealthy country. Right. When people and educational systems and technology that has both driven growth and elevated the economy. So I think, that’s probably the most important thing I want to say. I guess the second thing I’ll mention is that the studies that the Chinese have done out of Hong Jo using the e-commerce and FinTech data, suggest that if you have a reasonably decent kind of infrastructure, and I don’t mean to pass over that. That’s a question mark, for relatively poor countries, it’s not a question mark for middle income countries, in Latin America, certainly not a question. India has the capacity to build the infrastructure it needs. China certainly does. And I think many of the Asian countries do, but there are real questions about that.
That if you have that in place, then it turns out that the growth patterns associated with these technologies are not only impressive, but they’re inclusive, right? And the reason is they properly use the technology brings people into markets, into employment, into expanding markets, Seminole, Alibaba, we remind ourselves frequently, was created to help small, medium sized businesses scale up by giving them access to bigger markets, which is just a natural for digitally enabled markets. I mean the average distance they say for non-perishable goods between the final consumer and the producer in the offline world and the seller in the offline world is like five to 10 kilometers, and in the online world, it’s a thousand, that’s just a big change in the size of the market accessible.
So I think, we want to pursue those ideas and then ask ourselves the question, do they provide at least some significant potential to augment growth in a wide range of countries, but including the ones that are still in the low-income category?
Rob Johnson:
Montek, do you think this Indian model in early investment in technology has created on whole, very positive developments, but are there some contradictions that we might call race to the surface that other places have to contend with? What have you learned from knowledge intensive development?
Montek Singh Ahluwalia:
Let me first endorse what Mike said about the benefits of the whole digitalization process. It obviously depends on being able to build out effective infrastructure, which would support the data intensive kind of digitalization. India is part of at the bottom of the middle income group of countries, but it can probably, and does, and is engaged in making these investments. And they are having a huge effect. I mean, in the sense that, we have a large number of startups, some of them doing very well, these are guys, you’ve never heard of. The social impact of new names who are not people with inherited wealth, making it big, is a biggest endorsement of both private sector activity and market based. A lot of negatives on that front, and we hear that all the time in India, but the fact that we’ve got, I don’t know, 300 unicorns of lab in India, this is not widely publicized.
I think you mentioned, what is it about India? That’s interesting. No, I think the most interesting thing about India business is, there’s a lot of interesting things happening that are not captured in the aggregate data. I mean, they’re the result of micro stories and we don’t really even have systems of data direction that can put this up. Fortunately, social media, a hell of a lot of very active keep bombarding, my iPhone with all these well-researched stories. And I must say they’re quite impressive from everything. I mean, whether it’s payment, online delivery of education, new things. There’s a big change that’s taking place, new altitudes that’s being created, et cetera. So this growth of technology is quite visibly leading to economic productivity, economic benefit, unemployment in a very decentralized way. But I think this is entirely private sector driven, even the infrastructure actually in India, is not being done as fast as it should be.
I mean, the real role of the government in this, will be to build out the fiber optic in the whole area. And they’re doing it, but they’re not doing it as far as we should, but certainly as part of the private sector is concerned, they’re very keen to expand this network because they see it as a way of making money. So in that sense, all private sector basic initial incentives . I think this would translate into Africa. There’s no reason that it wouldn’t. My guess is that all the micro [need to be spread, and this was a fine ways of applying them. You leave it to some centralized organization. I mean, it probably works now. There’s one thing that I want to mention to tell you what I’ve learnt.
I think I really learned from board’s commission because it was always there. People, we underrate the role of institutions in getting a whole lot of things done. I mean, for example, the undergraduate view of technology is part of manna from heaven. It just happens exogenously, it becomes available to everybody. The worst case, if you make a cop Douglas type, it doesn’t even alter the labor capital ship. That’s the kind of Pollyannaish view. The truth is that talking types of institutional factor, do encourage the growth of technology. It shouldn’t all be centralized in government control. I mean, the internet would never have impacted, whatever have happened. If hadn’t gotten into devising, that would be pretty immune to network being crushed by a single. There is a very close relation with the government support for research, and the fact that technology is picking it. Relying only on the government would be disastrous because you can have a lot of basic direction, but doesn’t pick it up then you’re not utilizing it.
And I think that our own experience. I mean, for example, let’s take two different parts of it and high tech area. One is the atomic energy and the other is strict, interestingly because of the security type restriction on atomic energy, we had a lot of these. Until the nuclear deal, we’ve not cared for a whole lot of things. The entire thing was sort of controlled within the government, trying to develop within government, making progress really moving as rapidly. The space program on the other hand has been a very different faculty and it brought in a lot of engine type sector, making different components. And on the whole has done a better job because it produced a very competitive based program, the lower end of the spectrum.
And they were today launching satellites via a whole range of countries. I mean, I go back to the national institutions, those with development technology, efficient functioning of markets. And of course, when you get into the financial, having a system that will encourage the flow of capital does depend on many functioning institutions, which we sort of take for granted. For example, in India, we are slowly beginning to realize that it’s totally unacceptable that the commercial dispute through the port could take 15 years to resolve. I mean, that’s ridiculous. So quite frankly, if the Indian government would do nothing else than to say, “Listen, this is going to be cut down to five years.” I’m not saying two, I’m saying five, obviously, it wouldn’t controversial. The only vested interest that might oppose it are high paid lawyers because they benefit from this prolonged delays and everything. Many of these things can be done, and I think growth commissions work on institutions.
I think Mike, he’s done a lot of the work in this. And Mike the answer is you need a second Growth Commission, who will lead a second goal, you’re probably doing that already because of this work that you’re doing on INET. But I think you better come out with the New York consensus or maybe the Milan consensus since you’re living there. It will be less but fast thing. Another thing by the way, the country experience is very… The biggest damage that the national institutions do is they create a uniform brand. If you want to create a uniform brand, whereas to my mind, it would be much better. They were to say, I don’t really know what makes an economy tick. Here are 20 cases of it having tick, and maybe you should see which of these things you could do reasonably, seamlessly at home.
Michael Spence:
Yeah, no, I agree with that completely. Rob, I was just thinking, we’re trying in this global economic transformation to pay attention at least to Africa as you know, because it would be so easy to skate by, as we think about mega issues like climate change and political and social polarization and building economies on digital foundations and so on. But I think Montek’s right, at some point down the road, some people mainly drawn from leadership roles in a wide range of countries could be assembled to look at the world from the point of view of, well, how does it look when you’re still in the development phase? Which is what we were doing and I think that’s slightly different, it’s not inconsistent with, but it’s slightly different than the mandate of the commission that you created that Joe and I co-chair.
Montek Singh Ahluwalia:
I think one of the interesting things that maybe way back in the early 2000s, it was kind of assumption that progress for the governance is going to come within the established international institutions that deal with the global governance. I don’t think these institutions have distinguished themselves as leaders of ideas. It’s not like I can spot any of the problems that actually arose. And right now all that’s happening is they’re rehashing the usuals. But yet the global economy is trying come to grips with some of these very very difficult thing, even the most difficult of this climate change. It includes all the reasons for market failure including expertise, absence of institutions, and incredibly long time frame for action with a backward looking time frame for paying from us. Miss the use, I mean, just impossible. Somehow hopefully, these guys are going to get function.
The G20 invented a very interesting phrase, it used to keep talking about coordination. I mean, coordination implies that you’re going to do this and I’m going to do that. And it soon became clear that although there was a lot of agreement, there was absolutely no willingness to coordinate. So I think they invented the word, concerted action. It probably means, well, we’re broadly moving in the same direction, but we’re not coordinating. I’m not doing this because you’re going to do that, but this is what we’re both going to do and I think it’s pretty good. Although, maybe I can do more and you should do more too. Yeah. I think climate change is going to be exactly like that because 10 years for the developing countries, which is actually, from a moral point of view, not without [inaudible 00:36:51] that since the developing countries development is during their development [inaudible 00:36:57] available space.
I mean, the atmosphere, they shouldn’t really be asking developing countries to do very much. I mean, nearly everything that was going to work, when China became the biggest remitter, not the biggest, but that time, they were the biggest remitter. India is now the third largest remitter. While again, not the third for Africa. Africa is very low, for a quite long. And I think in Paris, all the developing countries finally agreed that they were going to do some. It wasn’t part of a negotiation, didn’t establish that I’m going to do this because you’re going to do this. It’s just more relief that you didn’t want to be accused, that you’re not doing anything. So they agreed to stop. I don’t know what they’re going to do in the, which meets in November in Glasgow, and they’re supposed to look at what’s happened and then decide what more can we do?
And it’ll be very interesting to see what comes up. One other example, and then I’ll stop, which is actually very interesting is the US proposal which Yellen has proposed on taxation. I mean, on a minimum global tax, deal with the problem of countries that pay too low rates of taxation, I’m not sure whether it’ll be implemented. That’s not been very clear. And also I think the US notion is that we can introduce this plan. We can introduce some kind of a right to be able to tax profit in proportion to the sales of this large proportions in different regions. Of course, the Europeans want that to be restricted to the topic that would only be American. American say, “How about the top 2000?” We’re quite happy with the top 2000. These are not being discussed in the UN, they’re not being discussed in [inaudible 00:39:07], they’re really being discussed in the OECD.
I think some kind of elaborative thinking is going on and what happens on this tax problem absolutely, because individual countries, if whoever is running attacked the problem, they’ve been told that, “Look, this is now a global consensus.” When our finance minister of the board, he should be able to say, listen, what we are doing is in line with the global consent. We always have little difference, nobody can then be accused of saying you’re doing something completely weird that we’ve not thought of. Now, getting this done is an extremely important thing in practice for global business. There’re lots of uncertainty, there’re lots of unknown loose ends that haven’t been tied up in the American politics. How to get that done is the real issue.
Michael Spence:
Well, one of the big challenges if that’s going to work, then there has to be a way to detect subsidies that undo the agreement on taxes. And that’s a really hard problem. I mean, it may just… We’ve been through this with the US, China tensions in the state owned enterprises and stuff.
Montek Singh Ahluwalia:
Yes, that is the accusation, I guess with China which I think not only the US, but also Europe makes and quite frankly, all producers. Maybe they’re just riding on the global’s expense. Is it China’s bad trade because it underwrites a whole lot losses not giving and that’s really a critical issue and we need to have some agreement. To handle that, you’ve got to strengthen the WTO and I mean, that raises the issue of whether the new US administration will be able to take the steps necessary to revive the WTO, the WTO is a free for all. Because they can find whatever they want against you, and you have a right to appeal. And since the appellate process is there, you’ll never be violating the WTO. You can always say, “Well, I want to follow WTO, but there isn’t an appeals process.”
And the Americans stated the appeals process didn’t work too well, they probably they have a point there, but seems to be something that the countries are able to get and agree on. And here again is a related issue. I don’t think that the WTOs consensus will make any sense. I mean, the present position in the WTO is that, at least more countries could have an agreement by simply not agreeing. Now, knowing that all large countries can get more countries info they want. I mean, this is simply not feasible. Why can’t we have a system that says that, look, first of all the countries should not have just one vote. Countries should have a vote in proportion to their share in World Trade, and why can’t we have a system that says, 80% vote, but even an 85% vote, so that no one can country can be reachable. First emphasize by the way. India has never supported, not when I was in government and I don’t think the present government also, there is a mechanical approach.
Maybe sanctify, the developing countries have always sanctified the UN as the only truly democrat global body that doesn’t mean anything. I mean, the effective UN instrument is rely on one man and what’s worse is it also has a weak point. That’s why it’s been ineffective, but that needs to be reformed and managed. People can say one man, one vote, I mean, that just doesn’t make any sense. You cannot have a situation where if countries with, let’s say 85% of modern trade, agree that these are going to be the rule. That a few countries can hold it up, and if you don’t like 85 make it 90%.
Michael Spence:
I agree completely with you.
Rob Johnson:
Yep. Let me ask you both-
Montek Singh Ahluwalia:
You should take a vote in INET, by the way, Rob. Take a vote on this . My picture is, since you are an institution reputed to be pro-development and pro-liberal, this proposal would be shut up as being a plutocratic . At the same time-
Rob Johnson:
I think we should.
Montek Singh Ahluwalia:
Just try that one. What do you think-
Rob Johnson:
Let’s put this before the young scholars initiative and see how they-
Montek Singh Ahluwalia:
Yeah, exactly. And by the way I mean, since I’m just with friends here, I would really like that it’s quite possible that I’m completely wrong, and certainly out of touch. I would really like to know what the young scholars say about this proposal.
Rob Johnson:
Okay. We will bring that up. As a matter of fact, I might invite you to be the person who presents the proposal.
Montek Singh Ahluwalia:
No, no, no. That requires a lot of work, put it this way. I’ve said what I have to say, if you can’t find this guy and I need to elaborate the proposal then the proposal is dead in the hot oil. I’m quite happy to listen to such, I persuade Mike also to join in, then we can comment on it at the end if you like.
Rob Johnson:
Okay, good. Well, Mike, I want to… You and I have not talked about some of these issues related to the notion of trust in governance and expertise. It’s very hard right now to believe that an excellent proposal can actually become enacted given the way in which voting in democracy and other things are functioning. So I think, one of the question for all of us is, how do we repair trust and faith, in expertise, in governance and rely on senior experienced people like Montek to lead, which you might call the fake news generators, console the seeds of distrust at very low costs and have a very large footprint?
Michael Spence:
Well, I think this is one of the central questions of our time, and Montek and I, we have talked about this as well. I mean, the perspective is that we live for a lot of our adult lives. In democracy, is the call representative of democracy? We delegated willingly through what we thought were effective institutions decisions to people who actually knew what they were talking about and knew what they were doing and that sort of like the tide going out and we don’t live in that world anymore. I mean, I think that the easy part of this is that I think the way we have governed ourselves has left people behind with major lapses of inclusiveness which you can attribute to self-interested behavior or failures of values, but they’re understandable and they’re fixable.
Michael Spence:
That doesn’t mean it’s easy to fix, but I mean, I think we earned some of this polarization by losing track of the distributional aspects of the growth patterns in many places. And we’re going to just have to get it back by paying attention. And I think that’s a complete description of a fairly large fraction of the Biden administration’s intentions, right? I mean, they’re basically going to ignore the political noise and try to build a set of programs that are designed for maximum inclusiveness and to some extent, sweep away some of the identity politics, which is understandable, but divisive in the American context. I think the hard part, the one that we don’t know how to address is we know that the social media that Montek mentioned before, are pretty powerful tools for the pursuit of things that lead in the opposite direction from what we’re talking about.
Michael Spence:
And it’s not clear we can get this job done if we allow everybody to use those tools to the maximum extent possible. And the reason that’s difficult for us is, we don’t want to believe that we need to control things like free speech, to some extent in order to prevent divisive, very bad political and social outcomes. But my honest… I’m not in the frame of mind to think that I ought to make up my mind at this point. But I think if we go at this rejecting the notion that we need mechanisms and institutions that exercise some degree of control over these things. Look, they’re part of the educational system, right? We have institutions and mechanisms that make decisions about the content of the educational system and the way it’s run. It’s not unthinkable that we may need institutions that do this too. So that’s enough for me, but I think that’s going to be at least for a lot of places, a lot of democracies that’s going to be the hard part.
Rob Johnson:
Yeah. Our friend and fellow global commission member Rohinton Medhora, the head of the Center for International Governance Innovation in Ontario, has presented, I would say, at Pontifical Academy of Social Science meeting in front of Pope Francis where Rohinton presented the need for an to the food and drug administration so that technology can be experimented with going to phase two, phase three, but we have to understand the adverse side effects before it’s unleashed. And I think there are people obviously very concerned about how, what you might call rent-seeking games, would take place where people protecting their own property rights are fomenting fear about new technologies.
But nonetheless, I think this notion of a process of understanding how these things affect society and having some discretion, or judgment about approval or not might be a healthy dimension of the next phase.
Michael Spence:
I mean, let me call a commentary, but in America a few years ago, our Supreme Court gave corporations in money, a huge voice in politics to pursue vision, I assume what they perceive is their self-interest which… And so we now go along and say to the people who don’t have the money and so on, that we’re going to take away their powerful tools, to be rabble-rousers and populist and object to this, it’s not going to be a huge hit. I don’t think. So digging ourselves out of this hole, it’s going to take a big shovel.
Rob Johnson:
Yeah. It is true that two wrongs don’t make a right, but I think you’re right that both sides of that ledger have to be corrected to bring things back into balance. Montek, in India do you have similar concerns? In America the role of money in politics is quite overpowering, have similar concerns?
Montek Singh Ahluwalia:
Oh, yeah we do. We’ve had that concern for many, many years. I mean, there’s almost no thoughtful book on India which hasn’t worried about the direct link between money Parler influencing governments, generating corruption, that’s been pretty much there. I mean, the real issue is how do we counter? And other institutional changes taking place, which will make it easier to control or make it more difficult. That’s really what you need to look at. And I mean the whole issue of hate speech, I think there was some article in the Atlantic or something which had very interesting basic point which said that we’ve done some response, that negative news in social media goes viral 10 times faster than any positive news. The truth of the matter is, that it looks good that it shouldn’t be a free for all then everybody should be able to say whatever they can say. That’s freedom of speech, but unfortunately, and this goes to what people in America are worrying about.
I think book on political fights. This falls into a position where it becomes easy to identify certain ethnic groups or other groups which become the object of a hate campaign. That can generate a huge amount of popularity, and this is true in different countries, which is, how do you counter? As I think Mike was saying, not very clear that we can do that like before. If you stop doing it like before, any number of people could say, for example, that criticism, or capitalism, hate speech against the top capitalists in the country I don’t know how you would do that quite frankly. And this is really where you need a robust set of institutions, which would prevent the misuse of these types of methods of communication. I’m sure they’ll develop. But I think they’re going to take time.
It’s not going to be done by somebody sitting around in a committee. I think this is a serious problem let’s all be there. I think some of the culture, the system has to explore its own solution and I’m optimistic and I think it will. But I’m also getting on in years, but I wonder if it will do that and we are yet to see it, but this is just one of those long term things that will happen. And I think there was a big change from the past. Way back, I think in the early 20th or 19th century. This is something that there’s a commonality in the lead, the governments can train guys running the government real page, things as to get praised, whether it’s the 40s or the liberals, or something like that. And I want to kind of put it, if you’re quite happy with the society, because the democracy becomes a nice play thing, I mean, yes, you can have your own government now, but it’s the same guys who are going to be running the show so we can all sleep peacefully.
And if you’re not trying to bring about radical change, that’s good. But do you know if you are trying to bring about radical change, that’s not good. I think the solution has to be have this ability to bring about changes must be consistent with its ability to tolerate frustration. And you need institutions that will bring these two, bring the ambition for change in line with the ability to change and bring them to consensus. What happened in the past? Right now, I think globally, we are going through a period when political leadership all over the world doesn’t seem to be capable of doing.
Rob Johnson:
Mm-hmm (affirmative). Your thoughts, Mike?
Michael Spence:
Well, I’d refer to Montek on this. I mean, what I learned from Montek, economists tend to say the same, this is what we need to do to that, and I was constantly learning from Montek that there’re issues about how to get it done. What institutions, what order do you do things? How do you make sure people are on board? And that’s why the growth commission spent a fair amount of time on institutions and leadership for the role of leadership and so on. Which we’re obviously quite proud of, it was mainly the work of the people who had the experience leading. Still, I’m like Montek, I’m kind of an optimist, but this it’s more fun to be an optimist when you can see the outline of the solution you’re working toward And-
Rob Johnson:
Light at the end of the tunnel. Yeah.
Michael Spence:
In this case it may be long enough term that I’m not absolutely confident that I’ll get to see the solution implemented.
Rob Johnson:
Mm-hmm (affirmative). Well, Montek guy, I did a paper… I grew up in Detroit, Michigan, and we did a course or it should be a conference on the questions of race and inequality and what we call otherness and Arjun Jayadev and I co-wrote a paper, where he did a lot of empirical work which showed that the places where geographically there was economic despair, was also associated with the places where the diseases of despair that Angus Deaton and others have cited. And in those places the… By the way, were also places in 2016, where Donald Trump did very well. But the other piece was that the variations in economic despair went up and down in lock step with variations in racial animosity and racial episodes. So at some level, and Peter Temin in his book on The Vanishing Middle Class, wrote about this. We had a very ugly dynamic, which was when the…
Let’s say, I don’t know where the circle begins and ends, but when you start with economic despair, it fullness racial animosity, racial divide, non-cohesive public policy, lots of polarization in the structure of the education system and people are not… how do I say it? A vast majority of the population are voting to do things to poison the institutions that would help them emerge in a knowledge intensive economy. And this was a very, very dysfunctional study of the dynamics of the interaction between economy and despair and hostility and what you might call misdirection of what the causes were of the underlying despair, and then refractory and damaged public policy being the result. And I think that is quite haunting because at some place we have to arrest the underlying fear. So people aren’t so receptive to the hostile, the negative, the hate information.
Montek Singh Ahluwalia:
No, that’s absolutely correct and I agree with you.
Michael Spence:
And there’s a lot of examples of that, where you get into dysfunctional spiral, reinforcing the wrong way. And I think some of the biggest challenges that the leaders in various countries face is creatively figuring out how to break into the spiral and stop it running.
Rob Johnson:
Mm-hmm (affirmative). I mean, Franklin Roosevelt in the United States, at least regarding the Caucasian community, was given a lot of credit for stepping into the spiral and creating a positive result. And obviously, the Biden administration stands amidst that challenge in the United States right now. But I think this is a pervasive set of challenges that the two of you have been illuminating today. And I don’t know why a young talented person would want to run for office right now. The challenge is so daunting and the light is not at the end of the tunnel, as you mentioned earlier. I think it’s a very, very difficult time.
Montek Singh Ahluwalia:
But at the same time, we should all be hoping for some irrational reason they do. I mean-
Rob Johnson:
I agree.
Montek Singh Ahluwalia:
A good example, negative spiral that Mike talked about, ties leave these developments, lead the sensible people sort of say that probably politics might speak, it shouldn’t be that way.
Rob Johnson:
Yeah. Had I napped, the draft of our last strategic plan was called filling the void and trying to rise to this occasion is a formidable challenge. Well, I want to thank the two of you for getting together today and exploring, I think this was a… How would I say it? Daunting, but illuminating session. And it sits on the… How do I say, on the shoulders of your stimulating book that I encourage everybody to read, Backstage in India, which you might call, behind the curtain is a place to have observed many lessons for tomorrow. And by creating that book, you’ve shared an extraordinary document, in extraordinary vantage point, that experience with all of us. So thank you both. And hopefully we can get together again before too long, and perhaps when the skies are a little sunnier.
Montek Singh Ahluwalia:
Thank you very much Rob. Thanks. Great seeing you again Mike.
Rob Johnson:
Thank you.
Montek Singh Ahluwalia:
All the best. Thank you.
Michael Spence:
Great to see you Montek, and thank you, Rob.
Rob Johnson:
Pleasure.
Montek Singh Ahluwalia:
Okay.
Rob Johnson:
Bye-bye.
Montek Singh Ahluwalia:
Bye-bye.
Rob Johnson:
And check out more from the Institute for New Economic Thinking at ineteconomics.org.
