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Transcript of an Economic Forum|
In Defense of Globalization
Wednesday, February 18, 2004
(View a webcast of this Economic Forum using Windows Media Player.)
Jagdish Bhagwati, University Professor, Columbia University and Andre Meyer Senior Fellow, Council on Foreign Relations
RAJAN: Good afternoon, everyone. Welcome. In many ways, the principles of free trade are ones that almost every economist subscribes to, but, paradoxically, they're very hard to convey to the lay public. How do you convince the average voter that outsourcing will not eventually lead to every person in the United States having a job at McDonald's or WalMart?
It is a difficult thing to convince people of the merits of free trade, which is why every generation needs its champion, an economist who stands up for the principles and talks to the lay public in a lucid language about its merits. This has been going on for the last 200 years. I'm glad to say that today we have our generation's champion, Jagdish Bhagwati, here to talk about his new book, "In Defense of Globalization."
Jagdish needs no introduction, and I won't proceed to give him one. However, I will say that for most young Indians, Jagdish has been an inspiration, both in terms of the work he's done and his extraordinary career. And I'm very glad that we have Jagdish here today with us. Jagdish, the floor is yours.
BHAGWATI: Well, thank you very much, Raghu, for those excessively generous comments. I'm happy to have Raghu as my Chair. I may have been one of the distinguished economists of my generation from India, but he is certainly the most distinguished Indian economist of his generation, and you're lucky to have him here as part of the IMF team. And I'm happy to see that Dan Yergin has also turned up. He is also a very old friend, but he has promised not to let that detract from raising a few questions for me to address. He is himself also a very famous man with two bestsellers and a TV series, which neither Raghu nor I can match. So if we are the Three Tenors at this afternoon's Concert for Capitalism, Dan is the Pavarotti.
Okay. Now, the book is not just about trade but globalization more generally. Of course, as Raghu mentioned, to convey the case for free trade is very difficult. I think President Bill Clinton succeeded in making the case for trade accessible whereas Senator John Kerry is flunking the test. And unfortunately, Kerry is doing so deliberately because he thinks that will win him the votes.
Often I'm asked, which is the best proof you could advance for free trade? I respond with the famous Diderot story. He was at court of Catherine the Great in Russia. He didn't believe in God. So Catherine brought in Euler, then the greatest mathematician of his time, who confronted Diderot in court and said: "X is equal to A plus B raised to the power of n divided by n; therefore, God exists." And this scared the pants off Diderot and he rapidly left the court and returned to France.
So the point is that you could always try to produce a decisive proof through the Euler technique that wins your case. So, to prove the case for free trade, you could say: Let's go back to the Garden of Eden and assume that Adam and Eve had been able to trade at the time. Then it's just conceivable that they could have traded in the apple for a kiwi fruit, perhaps, and then the whole history of the human race would have been much more benign.
That's what I've tried to do in this book, put things in an accessible fashion. That's obvious to IMF and World Bank people, particularly IMF people, because you've been dealing with anti-globalization critics all the time. They've been livening up your meetings in a very substantial way. And so has my not very favorite colleague, Joe Stiglitz.
Whenever I try and debate him, Joe always says, "Oh, but we agree on everything." When I told that to my teacher, Professor Robert Solow, the famous, witty MIT economist, he said: "You could have told Joe that, `To begin with, I don't agree with what you just said.'"
Many people ask me, "Is your book a response to Joe Stiglitz's book?" And I say, "No. It is exogenous to him." Right? Not endogenous. Because for one thing, his book is not about globalization, it's about "me and the IMF." And in a way, as far as he is concerned, it's really about conditionality. Stiglitz makes the assumption that somehow conditionality is like a straitjacket which you can't get out of. But once you've dealt with a country, you know that the reality is that even with small countries, you can't just lay down the law. One of my students did a thesis actually on what he called policy reversals in IMF programs. Even while IMF programs were continuing, there were reversals--he was looking at trade policy and so on.
So, you know, nobody can really impose conditions unless the country is a complete protectorate. There might be a few cases like that. But I think there is a tendency on the part of people like Stiglitz to think such imposition is a common occurrence. Why? Because when you go to these countries, because after all you can bring them money, you are stroked. So, not Professor Stiglitz, but other friends who have been in high places, get received at the airport by Ministers and you get motorcades. You go to the penthouse. You see the Prime Minister and the President. It's very easy to believe that you're really omnipotent and that these conditionalities work.
So I think that there's a good book to be written by someone who retires from the Fund or the Bank on how people get around those conditionalities. Because most people are smart, even in my part of the world, in developing countries. You know, wisdom and cleverness are not confined to the donor countries.
Before I go off Stiglitz, I particularly disagree with his remark that IMF attracts second-rate students from first-rate institutions. I think that denigrates the institutions and denigrates our students at these institutions. I see lots of my students here.
Stiglitz later corrected his remark to say they were second-rate students from second-rate institutions. Of course, Columbia may have gone down a notch after Joe joined us.
That's just a joke. He's a great, a terrific economist. Though not on policy matters.
Okay. Now, when you look at anti-globalization critics, I think all of them say they want to be stakeholders in the society. But there are two kinds of anti-globalization critics we have to think about. One are those who want to wield a stake. If you've seen your Dracula movies, you know, these are like the guys driving a stake through Dracula. These are the rejectionists, people who are in the streets, ranting and raving, and they don't want to sit down with you. If you extend a hand to them, they'll bite it, not take it, as poor Mr. Wolfensohn has discovered. You know, he cries all the time saying: "Why don't they accept me? Why don't they accept me?"
There are lots of reasons why they are like that. I have sections in my book where I talk about where they are coming from. Because it is interesting, I mean as an intellectual exercise, to know why there are people who simply reject the whole system--capitalism, globalization, and multinationals--I call multinationals "the B-52s of globalization." I mean, the stake-wielders just hate all this on principle, reject all this on principle.
Now we have a limited life, one life. I mean, despite Hindus, and Shirley MacLaine, believing in multiple lives, we still behave as if we have only one life when it comes to maximizing our welfare. So we have to find time to do a number of things, and transacting with stake-wielders need not be one of them. And, in any case, they have their own playground. They have Porto Alegre, the World Social Forum. They came a few weeks ago to Bombay, my home town. Fortunately I was in Delhi at the time, but Joe Stiglitz was in Bombay talking to them. You should try and get somebody to collect the quotes from that time just to amuse yourselves.
So those people are what I call the stake-wielders. It's interesting to try and understand them, but you can't transact with them.
But then there are also those who I call "stake asserters," who want to assert their stake in the system. They want to sit down at the table and discuss things with you, produce policy briefs, come to seven-hour conferences, and really try and say to you: "Look, you know, what you're pushing, globalization, is not a good process." With this lot I'm really interested in seeing what is it that really worries and bothers them about the system. That is what my book is largely about.
I draw within that a distinction between two sorts of things. One is: are they really worried about economic issues as such? It's easy to think that is the case because a lot of them come to the IMF and the World Bank and agitate. They go to the WTO and agitate. But I think it's not because they're really worried about things like conditionality, even though they may have worked themselves up into that belief. But basically this is where they get a lot of media attention. You know, there are thousands of people coming from the media, and they are, you know, looking around for stories. And there's just so much that, you know, Professor Stiglitz can do to excite their interests, right? I mean, economics is a dreary subject in the end. So if somebody does something crazy, it immediately gets attention all over the world. The old guerrillas strike where you least expect them, these new guerrillas strike where you most expect them, at the annual meetings. And, of course, that's why everyone has come to believe that the IMF and World Bank are terribly important institutions.
But the impacts of economic policies are basically still debates among us economists, in my judgment. Does freer trade help you or does it harm you? Should we be pushing for this or that kind of reform or is it really deform? Those are the kinds of issues which we economists discuss. And in every generation, there are debates about that. At the moment, Rodrik and Stiglitz are the two patron saints of the opposition school. Many of us believe that the law of supply and demand works here also because they're only two against two thousand. Imagine what your scarcity value would be. Anytime somebody says, whom can I get for an anti-globalization conference in Oslo -- nice place -- all I can suggest is Rodrik or Stiglitz. I'm presenting a cynical economic theory of why it pays to dissent like that. Now, its's easy to take these guys on, but that's within our own profession. These are debates which are really largely sort of like in the Vatican or something, between priests and so on. Of course, they're very important debates. I mean, in the Vatican cases it's about, you know, where your soul will go, up or down, and here it is a matter of whether your economy will go up or down.
But what I find in dealing with the different NGO groups with which I interact is that they're really interested not in the economic implications but what we broadly call social implications, like gender equality, democratic deficit, the state of the environment, child labor, the effect on poverty as a distributional, social justice issue. While poverty is very much an economic issue, it's put in the social, moral, ethical dimension. Inequality is sometimes brought in, but that's to me a less compelling issue than poverty. But, anyway, it's your pick between poverty and inequality; it's your approach to the problem. There are a whole slew of social issues like that which we economists do actually consider -- there are lots of papers and so on - but we don't consider them in this context you know, with a sort of oomph, and not in the policy arena.
And so a lot of people on the anti-globalization side really feel that these are the issues which worry us as citizens -- as human beings -- and those are the ones where globalization is a malign force. So they may concede in many cases that globalization is increasing the size of the pie and that, as far as increasing prosperity is concerned, it is fine. But when it comes to all the issues that really matter to as citizens, what I've just generally called social implications, globalization is a malign force, not a benign force at all.
To use the language taken from our beloved President Bill Clinton, and Tony Blair and Gerhard Schroeder -- all the "Third Way" people -- globalization needs a human face. They are all smart people, the three of them, so they must mean something. You know, it's not like a statement from President Bush.
You have these very smart people, all advised by other very smart people. So what do they mean? If they say that globalization needs a human face, they must mean it lacks one, right? That's just another way of stating it. They must mean that on all these social dimensions, unfortunately, globalization is handicapping rather than advancing, right?
In my book, I go down all these different dimensions and take all the fears that are the focus of people. And I say, "Look, really, on balance -- which is all one can say in economics -- the central tendency is that you are actually helping this agenda." Globalization has a human face.
That's where the real issue is in my judgment, based on following the debate and interacting with a lot of NGOs. I work with some of them, like Human Rights Watch and others in India, and so on. And also, though it must have been some error somewhere that led to my appointment, I was for a year a special adviser to the UN on globalization --
YERGIN: Did you get fired?
BHAGWATI: No, I mean, I was just there for a year. But every report that I read at that time invariably said: Here is globalization going on, here are all these ills, like gender inequality and so on. And then they would immediately blame those particular ills of the world on globalization. My reaction was like that of Tina Turner's song "What's Love Got To Do With It?" I mean, "What's Globalization Got To Do With It?"
Even when they didn't explicitly connect it up, they would say, "In this globalized world, children are being treated like slaves" and so on. And I'd think, gosh, if only they were in my class I could give them a D.
Many of these evils are inherited for centuries and their deep-seated cause is in history and so on. But the relevant question for us today from a policy point of view is whether, on the margin, globalization is helping or handicapping our social agenda.
Take child labor. Is child labor going to be reduced by exports and globalization? When incomes go up, are parents going to be then taking children off from work and putting them into schools? Or are they going to say, "I should send yet another child to work because each one will be making so much money"? That is, you know, a type of income effect. In that latter case, globalization is harming child labor. We would then have what we economists call a trade-off. We would have increased prosperity, but would also see more children being put to work, which is horrible from a human rights point of view.
But in fact there are lots of econometric studies now -- I won't go into them because you can read them, you know -- which show that child labor actually declines with globalization. One team looked at Vietnam where the rice exports went up with rice liberalization and international trade, and incomes went up for a number of farmers by something like 30 percent. As a result of this a lot of children were taken off the farms and off other work and were put into schools. And this includes girls, which we all approve of now as being not just good in itself but also doubly productive.
Those kinds of studies have multiplied. There are models where a credit constraint is considered to be the big hurdle. So even if you've got a high rate of return on sending a child to school, if you're really impoverished and don't have access to credit, you're not going to be able to borrow money to be able to take advantage of that opportunity. This is really right up Professor Stiglitz's alley, right? Now, if you have that imperfection in the capital market, which you do in many developing countries, then the fact that your budget constraint is relaxed means that you're going to be able to then shift children to work because then you have the finance to be able to do it, even though you can't borrow. So you have, therefore, studies which show that actually if you're going to increase prosperity through trade and other methods, that in turn leads to relaxation effect on credit constraints and then parents do act to reduce child labor.
Now, it's important to have in the policy space these two sharp contrasts of the potential effects of globalization on child labor. It makes a lot of difference to what you will do as a policy response. If you have child labor, and the removal of it is being handicapped by prosperity, what will be your response? What will be your governance -- I call it appropriate governance in the book -- if that's your view of the globalization process? You will want to throw a little sand into the gears; indeed if you're a stake-wielder, you'll want to throw sand into the engine and stop the goddamn thing from moving at all. But because you have a trade-off, it means you are putting an implicit tax on it. You take a little less income but you get a little more improvement in reducing child labor.
But if you take the evidence that globalization reduces child labor seriously, you're not going to be bitching about globalization. You're going to be celebrating it, you know, opening a bottle of champagne, even if it's imported, and in Kerry's household. You would then say, "Look, this globalization is terrific." What appropriate governance follows in this case? The appropriate governance that follows is: how do we accelerate the fulfillment of that social agenda? Because there's nothing which requires us to say that the pace at which social agendas are achieved must be confined to the pace at which prosperity leads to their achievement. You will want to go faster.
Suppose a woman is screaming, "My boyfriend is beating me up, help, help." You shouldn't say to her what some people say in essence, even magazines I won't name who are on our side normally: "Look, just hang around for 25 years and economic growth will take care of you."
You want to go and nail that bastard to the wall right away. That is your additional policy instrument in this particular case.
So, in general, the first question I pose about the appropriate governance for globalization is: What policy instruments can we use to accelerate a variety of social agendas?
Today in this country among the unions, including ICFTU, what they want to do is to crack the whip. They want to use sanctions to be able to advance these social agendas. That's what the Democratic Party has bought into. Developing countries must have the same labor standards, they must have eliminated child labor altogether, and so on, otherwise it amounts to unfair competition and so on.
Now are unions, and Dean and Kerry and others, doing this because they're worried about their own competitiveness? Dean was quite clear in many of his TV programs that I saw that this is the only way we can compete. We're going to raise the cost of production of the foreign competition to our levels. Now that argument doesn't turn me on particularly. To say it's unfair that the competitions has lower labor standards, you might as well say Americans have high standards--Americans also are competing unfairly because they have a whole lot of capital equipment, et cetera, to work with, and the competition doesn't have anything like that. So in that case, you will end up sort of saying that the Special Olympics are for everyone because everyone has some handicap, right? Where do you draw the line? Everything is unfair because he has some advantage, I have one advantage, he has another.
So that is a cockeyed argument, but it's also a selfish argument. We have to remember what Rabbi Hillel said: "If I am not for myself, then who will be for me? And if I am only for myself, then what am I? He meant that everyone's a blend of selfishness and altruism. There are a few people who are one end and others at the other, but most people are in right in the center somewhere. So it's a particularly bad argument for the Democrats-they're supposed to be cosmopolitan liberals not just nationalist liberals, right?-to be trying to screw the underdeveloped countries by pretending to care about labor standards and making fair trade arguments of this kind. I mean, that's deplorable. Nevertheless, I still won't vote for Bush.
Now there are lots of people who I work with who genuinely want to be advance these social agendas. It could be poor working conditions in Mars. We may have sympathy for those little green men out there who are being exploited, and it has nothing to do with competition. It's just interplanetary empathy.
Are trade sanctions then the way to do it? That's really the question. In that case too, in the book and elsewhere, I've written that this is not the way to go because if you start doing it through trade sanctions, you immediately put up people's backs. It's like who shall throw the first stone? It's very difficult for poor countries to throw stones at big countries. So it becomes asymmetric and, therefore, people resent it, particularly at this time when the United States has achieved hyper-power status, has gone into the war in Iraq and so on. For us to take up these attitudes saying that we are going to impose something on you in the developing world, when we ourselves are flawed on other dimensions just doesn't make sense.
What can we do instead? Well, we've got NGOs and we've got CNN and we've got democracy breaking out everywhere. Given all of those things, moral suasion and boycotts and all sorts of things like that can be much more effective these days than sanctions. So to Robert Reich and others who support trade sanctions on the grounds that the "the ILO has no teeth to enforce labor standards," I say, "Look, but God has given us not just teeth but also a tongue, and a good tongue lashing today, meaning moral suasion, can be very effective." And the alternative, trade sanctions and other stuff, can be very counterproductive.
When we look at the stake-asserting NGOs, I think we can sit down with them, and that's my experience, and we can say, look, what is it that worries you? Are these social dimensions really the things that worry you? And then let's see are we advancing the agendas or handicapping them as a result of globalization? And if you agree with me that they're advancing them and globalization has a human face, with what appropriate governance can we make it look even better?
The second aspect of appropriate governance is that we also have to be very careful about the downsides of globalization. The real problem is buying off or compensating or helping workers to adjust to import competition. The advanced countries have been doing it ever since Kennedy's time. Every trade act has had trade adjustment assistance programs and so on. But the poor countries that are just beginning to liberalize, basically, in the last ten years or so, don't have any adjustment assistance programs. That's where the leaders of the poor countries simply cannot hack it. So who's going to finance adjustment programs in many countries? And that's where I have been arguing in particular for many years that the World Bank could be a source for such financing. I was happy to see that Wolfensohn and Kohler finally responded. Kohler has announced a program which is more or less like an extended fund facility. Trade liberalization is not always associated with an external payments problem, but it's good to have more assistance, you know, in case there's a balance of payments implication.
Third, we have to make allowance for the fact that pushing very fast on reforms can be very counterproductive. I don't wind up disagreeing with all my colleagues, but my colleague Jeffrey Sachs's "Shock Therapy" is a good example where you can spoil a good thing by going too fast. The maximal speed is not the optimal speed. The speed of transition is something we've got to manage really rather cautiously, taking the politics and even the economic difficulties into account. And I think that is where we need to worry a little bit more. I think we've learned those lessons from the undoing of some of the enterprises which are technocratic. How we make the transition to a much more open regime is itself an important issue. During the Asian financial crisis, of course, the banking structures were not adequately equipped and so on to handle the financial liberalization. We know now that we've got to prevent them from going to excessively rapid liberalization.
So I think those are the three things: first, slow down generally the pace at which you go on reforms; second, provide institutional support to handle the downsides; third, accelerate the speed of achievement of social agendas through appropriate policies. That's the way I view the entire framework with which to transact with stake-asserting NGOs. I think we can bring them on board. I don't think they're a bunch of crazy people. Far from it. A lot of them are very dedicated people, and I think they're as amenable to reasonable argument as economists are. In fact, I shouldn't say this, but it is economists who are sometimes unreasonable.
So that's what the book is about. Thank you.
RAJAN: Thank you. To comment on the book we have Daniel Yergin, who's a highly respected authority on international politics and economics. He is President of Cambridge Energy Research Associates and Vice Chairman of the Global Decisions Group. He's a Pulitzer Prize winner and recipient of the 1997 United States Energy Award.
I guess most of us have encountered his book, "The Commanding Heights: The Battle Between Government and the Marketplace that is Remaking the Modern World," which is co-authored with Dr. Stanislaw.
I remember reading this book, and I thought it was fascinating, and the series that followed, maybe a few years later, was equally fascinating, on PBS. And if you haven't seen the book or the series, I recommend both highly to you.
Over to you, Dan.
YERGIN: Thank you very much. Thank you for that introduction. I'm very pleased to be here under your chairmanship at the IMF and honored to be on the platform with somebody whom I have learned from and respect and have known a long time, Jagdish Bhagwati.
When I was doing my Ph.D. a long time ago, I remember my thesis adviser saying, "You stand on the shoulders of other scholars," and I think all of us who work in this area recognize that we depend a lot on your shoulders, Jagdish, for the work you've done over the years.
My job is indeed to comment on the book. I have the advantage over most of you that I've read it, and so that will facilitate it. I should begin by noting that Professor Bhagwati has, with an economist's incredible mathematical precision, observed that globalization has 13 letters in it.
I'd like to go even farther and observe that it also has five syllables and is indeed a rather abstract, Latinate word. And so it does lead to this question: How can such an abstract, Latinate word excite such fiery passions? Why is it such a rallying cry? And the conclusion one comes to is that it is a shorthand for much change, much of it disconcerting, and even controversial. As Jagdish said, some of it is, I think, concerns that we would all see as central to the concerns of many of you in this room, issues like global poverty, the environment. But it's many other things, too. It's genetically modified foods. It's Hollywood movies. It's shifting jobs. It's big companies. It's the role of the IMF. It's competition and restructuring.
I remember asking George Shultz when I was working on "The Commanding Heights": Why is it that people don't like markets? And he might have said the same, why don't they like globalization? In reply, instead of saying it's because they see it as unjust or unfair, he said, No, he said, it's because markets are relentless. And there is a sense, as you are in a more globalized world, that competition is more intense and the pressures that come with it.
I would say there are two other things that stand out to me that a lot of people just don't like capitalism and that some part of the anti-globalization discourse strikes me at least as kind of Marxism without Marx because Marxism doesn't have the same credibility. And, finally, of course, for many, globalization and the United States are the same thing, and really, anti-globalization is also an anti-Americanism and the two conjoin.
Globalization is often attacked or lauded as a thing, but, of course, it's a process. And Jagdish focuses on, in a sense, one definition of globalization, which is economic integration, trade, movement of capital, and so forth, and the interweaving of national economies. There's a further dimension to it, which is the coordination of economic trade, fiscal, monetary policies among countries. And then more broadly, which he makes clear in the book he's not really dealing with, though he deals with it a little bit, are the flows of technology, skills, ideas, news, information entertainment, and--he does deal very much with this--people.
Now, when you get into the subject, you get into a discussion of, well, when did globalization begin? And, of course, you can answer that it began a very long time ago, and concerns about globalization. In the first century A.D., the Emperor Tiberius banned the import of silk clothing from China because it was taking jobs away from honest, trustworthy Roman weavers. You could say it's been going on for 500 years since the Age of Discovery. You could say it's been going on since the beginning of the trade negotiations after World War II. Some, including my 18-year-old son, insist that it began in 1964. Does anybody know what happened in 1964?
AUDIENCE MEMBER: The Beatles.
YERGIN: The Beatles, exactly. The Beatles made their first worldwide tour, giving us a true global culture.
But I think that I would say, and I think Jagdish takes the view, that we are in this second age of globalization. The first one, you know, that is always held up as a counterpoint, of course, is the end of the 19th century, the beginning of the 20th century. But it's that second one, the end of the 1980s, the beginning of the 1990s, that demarcation, some of the things are obvious. Obviously the Berlin Wall, the collapse of the Soviet Union, the end of the Gulf War--all these things happened at the same time. Europe's march to a single market. Some things that are not so well recognized, but I think at this table would be extremely well recognized, are India's opening up to the world economy and China's extraordinary gearing up. And something that people don't focus on much but the big British privatizations in the 1980s that really jump-started global capital markets. And all of that came with this acceptance of markets. And so in a way you could say for the first time since 1914, the world economy was really open for business.
So much brought this together, and these themes run through Jagdish's books. One is his greater confidence in markets and less government control. Second is the increasing integration of national markets through trade institutions. The third is the emergence of what we've taken to calling the global shareholder and investor, tying capital markets together; companies wanting to operate on a global basis; communications and culture.
You know, when a famous actor ran for Governor of California--not Arnold Schwarzenegger--Ronald Reagan, there was no foreign television camera there filming him. When Arnold Schwarzenegger ran, at one point there were 142 non-U.S. television cameras there to film him. That's the sort of globalized world.
And, finally, this technology, the obvious that we think about, transportation and communications, and my favorite example--and it's because the economics are so daunting. But if you made a three-minute phone call from the United States to Britain in the 1970s, that call in today's dollars would have been about $8. Today, most of you, probably many of you have a call plan, you get that call for 30 cents. Probably a few of you here get it for 15 cents. And if you do it over the Internet, you'll kind of get it for free. But think of it, a 98-percent drop in 30 years in the cost of communications and the impact that would have.
Now, as Jagdish points out, globalization and anti-globalization in one form or another are among the issues at the forefront of this presidential campaign. This time it's not only trade and calls for fair trade. What I think Jagdish very clearly demonstrates is the unfair use of fair trade as a term. It is outsourcing or offshoring, and it's certainly somewhat misleading. And, again, it's striking just to see kind of in the culture what was almost quaint two years ago, to see call centers, computer call centers in India or the Philippines and, you know, they have news items. We have something in "Commanding Heights" on it. Now it's something to be attacked on the campaign trail. And it raises that fundamental question. You know, are people to be poor forever? Or if they engage with a world economy are they going to be punished?
Now, because I have a historical memory, I think of this, that there may be more heat than reality when all is said and done. Some of you may remember 1992, all that talk about downsizing and that never again would a new job be created in the United States. And shortly after that, something like 17.5 million jobs were created, after having created 17.5 million jobs in the 1980s. And I suspect that when we pass through this turbulent thing, this will also recede as an issue, but right now it's gotten a lot of traction.
We are constantly reminded how much can be achieved with a slogan, anti-globalization, how disrupting it can be. And this gets us to the importance of Jagdish's book, because if assertions go unchallenged, they take on a reality and a fact. I was on a radio show in Washington last year--no, actually, it was a television show. And the person I was on with said, with great confidence and authority, that, "The IMF and the World Bank are responsible for AIDS in Africa." And the host was about to move on, and I said, "Wait a minute. What are you talking about?" But these kinds of assertions, if they go unchallenged, do become part of the lingua franca.
And so Jagdish, in setting out to, in a sense, as he says, to defend globalization, is really taking on the slogans, myths, and confusions and does it with great clarity. And it underscores the fact, I think, as Raghu would agree, that no one has written with such clarity on trade so consistently.
For the most part in this book, I think he succeeds in a very impressive way and makes a very important and timely contribution. And he does it with a great deal of wit, which we've seen this afternoon. I do have some disagreements, which I'll come to in a few minutes. But at one point in the book--and I was trying to go through it again last night and find it--Jagdish talks about a journey, and I feel in this book is his own intellectual journey as part of the underlying narrative.
One of the fundamental questions that prompted "The Commanding Heights" was the question: Why have we moved from an era in which government sought to seize and control the commanding heights, the strategic sectors of the economy, to an era in which ideas of trade, competition, deregulation, privatization, have, not completely by any means, as per this discussion, but captured a large part of the commanding heights of world economic thinking?
I think that you see his own journey in this book, and as he says at one point, "The turn to economic reforms in developing countries is to be attributed not to the rise of conservatism but to a pragmatic reaction of many to the failure of what a number of us once considered to be progressive policies that would lift us out of poverty, illiteracy, and many other ills." And he cites in the book his own experiences, both in India and internationally, that led him to see that outward-oriented economies do better than inward-oriented economies.
As he suggests today--and I think you find it in the book--that really one of the great tests indeed for globalization in many people's minds, in practical terms, is what it does in terms of eliminating and dealing with poverty. And I found his discussion of--as he said, the globalization's human face, that's what it's about, and this argument that it already has a human face because it has been doing it. And, you know, he makes--it may be very obvious to most everybody here, but making this clear argument that the evidence does show indeed that expanding trade promotes economic growth and economic growth in turn reduces poverty. Many of you will not need to be persuaded of that here, but a lot of people do. And it demonstrates that analytically rather than merely as an assertion.
He also, I find--and he did it today--demolishes many of the sort of given arguments that are out there, the style of argumentation, what he calls the "gotcha" examples where something seems to prove something or what he calls the gigantic non sequiturs. And I believe--I asked him earlier today--I'm convinced that this is a phrase from him, but he denies having coined it but is willing to take credit for it, the fallacy of misassigned blame, that is, the Tina Turner, what does this have to do with love. And he talks about mission creep, as he puts it, among NGOs where, for instance, a famine/anti-hunger organization now stakes out a major position on trade.
Of course, the best case study of trade is probably what's happened in Asia over the last 30 or 40 years. I find myself puzzled again and again why is it that when a country or region kind of emerges out of poverty and achieves higher growth rates, starts to achieve higher per capita incomes, as a sort of debating point it's taken off the table and people don't pay attention to it. It no longer counts in the crusade against poverty, but there are obvious lessons there.
The second puzzle I have is one that Raghu mentioned right at the beginning and I think many of you have thought about. Trade, as has often been remarked, is one of the few things that most economists will agree about that it's a good thing. And yet for much of the public, it's one of the least understood things. It's the same as a zero sum game. I remember when we were doing "The Commanding Heights" television show that the producer said, "You mean if this country trades with that country, they both gain?" "Yes." "You mean they both gain?" "Yes."
And I remember when we were interviewing Bill Clinton for the series. He said one of the hardest things was to communicate the value of trade, because you have that stark image of that single factory where the people have been laid off and need the assistance, but what you don't see, you can't visualize, is the widespread job creation that results from that. Indeed, you just saw from one of the think tanks on NAFTA a study that came out a few weeks ago that said NAFTA has not been associated with any job creation in the United States or Mexico. I mean, really?
Jagdish cited--and I just will go through them very quickly--some of the other issues that he addresses very effectively. The argument that globalization makes the environment worse? Wrong. Obviously poverty is extremely bad for the environment, for both the physical environment and the human environment. And as my colleague Thane Gustafson once said, "a country gets the environment it can afford." A rise in standards of living leads to better environments.
Jagdish deals with the sweatshop arguments that are so prevalent on campuses by pointing out that foreign direct investment creates jobs for people that don't have them. And I think his point about not using trade sanctions to achieve other objectives is a very important one. He addresses, obviously, child labor. He eviscerates the race to the bottom thesis. And he makes a very convincing argument that something we hear much about, that growing income inequality--those three words, always go together--in fact, rests on very weak foundations and compares things that are not comparable. He's not shy in his use of language, and he goes so far as to describe some of the efforts in an extremely neighboring precinct to the IMF to come up with global comparisons on inequality is nothing less than, in his direct quote, "lunacy."
He takes on the shibboleth that globalization is anti-democratic, and we might well notice that--and it doesn't--again, it gets kind of ignored, but the 1990s as a period of globalization has also been a period of incredible explosion of democracy around the world.
I could go through several of the other things that he points to, but those are some of the most important. Of course, I should add his emphasis on the need to cope with the downsides and think them through.
Now, my the issues with the book: The first point I would like to raise is a purely pedantic one. It's a small factual one, but for some reason he decides that the CIA supported the 1954 coup that overthrew Muhammad Mossadegh in Iran, partly, if not principally, because of a giant oil company's interest. I would hasten to add that the company affected was British Petroleum, and it was unlikely that the CIA was going to care that much and intervene to help out BP. But that's my pedantic point.
More problematic and one that concerns people in this room a lot more is my view of his chapter on the Asian financial crisis. Of course, he emphasized the difference between trade liberalization and capital markets liberalization, and I really feel, with Raghu here and others, I should leave this critique to economists from the IMF. But I'll simply note that it seems to me a very one-dimensional explanation of what happened that veers into kind of witticisms, confusions, and is not the strongest part of the book. He refers to what he calls the machinations of the Wall Street-Treasury complex, which I jokingly remarked to him at lunch sounded a little Stiglitzian
and with some C. Wright Mills thrown in, and that when great events like that happen, usually there are lots of causes for them, not one cause for them.
In another section that is also really a bit tacked on, he takes on shock therapy and rapid reform in Russia and argues that there should have been some form of gradualism. And, you know, I don't see how that could have happened. Mikhail Gorbachev -- central planning had already collapsed under him. He was left trying to have a market in the remnants of the central planning, what Boris Yeltsin called the marriage of a hedgehog and a garden snake. And then the Soviet Union dismantled itself, and breaking many fundamental links. With that said, I don't want to go on at length about this, but to quote Yegor Gaidar when they took over the Russian Government, he said it was like traveling in a jet and going to cockpit and he discovered that there's no one at the controls. Clearly, all our theoretical ideas about the proper sequencing of reform measures were nonsense. There was simply no time to do anything, and I find myself continuing to believe that very strongly.
Finally, I'm struck that in a sense September 11th is rather absent from the book. What does it mean for migration, travel, and trade? We struggled as we revised "The Commanding Heights" for its second broadcast with this very simple question: What happens to globalization in a new age of turmoil and conflict? It clearly works better in a time of peace.
So these are the issues that I have with this otherwise impressive and very important book. It is both forward-looking on the debate about globalization and how to think about it, and also at the same time captures the thinking and experience that led to that point of view. It's really a book that needed to be done. One of the themes throughout the book is the importance of ideas, and I think Jagdish could have even gone farther and talked about in a sense what is going on here in his book really, and in this debate is a battle of ideas.
I would say his own grasp of the issues, his analyses, his intellectual honesty, and his forthrightness, and his ability to communicate make "In Defense of Globalization" a very significant and winning contribution to the battle of ideas and a very welcome one.
RAJAN: Thank you. That was really very interesting. Let's have questions from the audience. I'm told that there's a button on your armrest which you can press, and then speak into the microphone. Please give your name and affiliation before you ask your question.
QUESTIONER: I'm Kathy (?) with National Public Radio. It seems to many people that the anxiety about outsourcing and its potency as part of this presidential campaign season is that people understand, okay, maybe our factory jobs have to go but we'll do something else. And classical economic theory says there will be something else for people to do, but I think many people look at the outsourcing of service sector jobs and skilled jobs and say, well, what's going to be left? What ultimately are people in this country going to be good at?
BHAGWATI: We have to ask why outsourcing is a major issue in this country and not in Britain, for example, or in European countries. Why is the United States, which came out so strong and is, in fact, a hyper-power, is the leading dog on the block, you know, barking and biting and so on. Why does it always get into a funk like you're seeing now on outsourcing?
When it came to Japan bashing and baiting and so on, even President Clinton for a year-and-a-half wasted his time on trade policy just chasing the Japanese. That I think was cultural, you know, I mean, this system is based on competition much more than any other system. And the desire to be number one I think is very important, and Detroit, which was suffering from competition, exploited that cultural reality of this country very well.
But all the other worries have been with poor countries, actually. With NAFTA, the notion came in that we would lose all our jobs because this is a poor country with labor-intensive exports. That was a time when we went into all this stuff about labor and environmental standards because we just were so petrified by the fear that we would be cleaned out in competition with a country from which we were getting peso refugees, as they were called. I mean, that scared a whole lot of people, and so we put in all these things as--you know, all these non-trade issues became trade issues. Any wart on the face of Mexico became a trade issue because that was a way to beat down trade. So everybody who's followed this concedes that NAFTA was the starting point of the corruption of the trade issue with all these kinds of extraneous lobbying issues of our country, whether good or bad. You know, TRIPs got into it, intellectual property got in through NAFTA first, so did labor and environmental standards, as trade issues rather than as issues of their own right to be addressed in appropriate forums and so on. So I think there's fear of a poor country's competition. There are China worries in a big way, and now we've gone from the yellow peril to the brown peril with India on outsourcing.
So I often wonder what is it about this country that really makes us go bananas over these kinds of fears. I think it is an interesting question because we are always out front in getting scared. And what is it that leads to it? I think it has to do with the institutional system in this country. I think there are two things. One is since Reagan's time, the talk about removing the safety net, even though the talk was greater than the actual action, and then we had the welfare reform and so on. So the notion that a market-determined distribution of income--which may not give you any income, right?--you'll be left out in the lurch, you will not get the state support. That is a much greater fear in our country than anywhere else, because elswehere you still have fairly advanced welfare states. In Europe and elsewhere they are trying to reduce them, but they'll never get to the kinds of levels we have got in this country.
Two, I think that, you know, family institutions are probably collapsed. While we say during the marriage ceremony "for better or for worse", when worse comes we disintegrate, frequently, because there's too much pressure on the nuclear family. There's no extended family support. And so there's much expected of one another that during times of stress people break up.
So if you are unemployed or underemployed or thrown out of work, where do you go? You don't have state support. You don't have the familial support. I think given the latter, we need overcompensation rather than undercompensation from the state compared to other cultures. I don't believe you can do social engineering to restore family institutions; that's out as far as I'm concerned. So we have to go back to the state, and I think this is where the institutional support, even if it's inefficient, has to be there. And I think unless we do that, we're not going to get anywhere.
Now, in reality, the amount of transfer of jobs is still a pittance compared to the number of jobs in the system. And, in my New York Times article, I have a tiny paragraph-you know in op-eds you can write just about the barest minimum, almost to the point of distortion of your ideas-I point out that in this highly competitive world system, if American firms do not reduce their cost levels down to the absolute minimum, they are not going to be able to compete with other firms which are actually outsourcing, like the British firms and so on. If we were to adopt any restrictive policies, supposing we succeed, whether they're openly protectionist or other ways in which we do it, our firms will not be able to compete. So we are taking ten jobs away by buying services abroad, but we are saving 90 jobs in the firm because the firm survives. If the firm disappears, those 90 jobs disappear.
Same thing for import competing industries. If our rivals are outsourcing or using the cheapest of supplies and we are not, then we'll be at a competitive disadvantage in our markets as well. So looking at only the outsourced jobs, which is what people focus on, you really are not doing the right calculation, in my opinion.
But who's going to see that unless you point it out. I think the politicians ought to take the best advice that there is. But one of my friends sent to me John Kerry's trade advisory team - they're all people from the Bureau of Labor under Clinton and so on. One major figure-he was in the Clinton administration and was very sensible, and he was in Carter administration as well-told me he had offered his services, but was told they don't want anybody with that kind of background or any economist. So they've made a political decision in this, with people staking out positions that are not Kerry's positions. I know that. I mean he's talking about labor and environmental standards? Three years ago I was with him in Davos on a panel and he said that we ought to have a dual-track approach, by which he meant that ILO should deal with labor standards and trade should be dealt with at the WTO and through trade treaties. He obviously dare not say such a thing anymore, obviously, because he's running for the Presidency. My worry is that we might get stuck in this mode.
We need to have a lot of people putting their oars in on this issue, but in a non-ideological way. I think it can be done. It can be explained. I think we on the Democratic side should do it. I assume you are on the Democratic side?
Or how could you be on NPR?
You would be outsourced.
I think we have to do it before Karl Rove realizes that Bush might look presidential by behaving better on this and might look more cosmopolitan, more multilateral; whereas we will look like we are wackos on the Democratic side worrying about things like this. I'm not saying be callous or complacent, but, you know, we can produce much better arguments on the side of it.
As for where the U.S. will go? I think it depends on how the election plays out. I mean, at the moment it is still at the level of rhetoric. Even Kerry, to be fair to him, has been saying, I'm going to remove all tax incentives to go abroad. So he's talking of offshoring, not outsourcing, meaning taking a factory from our Milwaukee and putting it somewhere else, like in Malaysia. But what incentives do we have? I've asked so many people. What are the incentives he's talking about? There are no such incentives that I know of.
YERGIN: But isn't that a terrific thing then for a politician to be firmly against them?
BHAGWATI: I know, this is why I said to be fair to him, because he may be actually creating strawmen to beat up on, to flog. And I think if he does that, that's terrific. But Edwards is certainly not playing with straw men, and if Edwards is getting closer, then Kerry will move still further in that direction.
QUESTIONER: My name is Hasmukh Shah from Business Times. This is for Professor Bhagwati. He was my classmate so I am pleased to meet him again. Globalization is a well-accepted term, and as everybody believes it, it is going to benefit the world economy. But the latest measures taken by the United States, especially regarding the outsourcing, and this morning's reports about the antidumping duties against shrimp imports, all these kinds of things, does it indicate that the United States, which is considered a democracy and a free trade protagonist, is not going to follow the general acceptance of this globalization in the world?
BHAGWATI: The antidumping is just a fact of life, unfortunately. I mean, this predates everything. Shrimps are a difficult issue. We've all written against that. Nothing much is going to happen there, I think, beyond shrimp and a few other cases. That and safeguards action, which was what we had in steel. Ultimately it's the countervailing lobbies. I think at the moment it's the restaurant associations and so on agitating against it because everywhere you go you eat shrimp, right? I mean cholesterol levels have been shooting up, too, as a result. But in steel it was basically both WTO finding against steel, the ITC decision, and the fact that a whole lot of steel users were involved also. It was that movement which enabled them to get off and make that move. So ultimately it's case by case. But I don't think there's a huge outbreak of protectionism in this country at all. I don't think so.
QUESTIONER: James Morgan. I'm a recent graduate. We've heard a lot of talk about what's going to happen in China and what's going to happen India. Do you anticipate any effect of globalization on, say, Africa? I was discussing this with a friend of mine. With the flow of farmers in China to the cities, there's going to be less agricultural output in China. Do you think this might have a positive effect on Africa?
RAJAN: I think it's an interesting point that China exporting also implies China imports a lot, which can be very beneficial to many developing countries around the world. China doesn't just have to be a competitor in export markets.
BHAGWATI: Yes, that is a very good point, but there may still be a deflation influence because they're building up surpluses. And, besides, there can be adjustment problems, like they're exporting X but importing Y.
BHAGWATI: So the X guys are going to have to adjust, and the Y guys benefit. So, for such a large player, even with balanced trade there could be waves of adjustment being necessitated in specific industries. And so ultimately it all gets back to what the lady from NPR was saying: how are we going to handle the adjustment problems? So I think we have to strengthen the support system, particularly with this anxiety in this country.
RAJAN: Before we go to some more questions the one question I wanted to ask, exercising my prerogative as moderator, is: Do you think the balance of power has shifted in this country, especially because non-traded goods are increasingly becoming traded? Earlier, the people working in non-traded industries used to support free trade. Now, when the doctors and the accountants see their jobs at risk, however small the job losses are, when they see them, have they shifted over? And has, therefore, the balance of power in this country shifting more than we give it credit for?
BHAGWATI: It's not entirely clear. Because also there are lots of people who are exporting these services. As you know, medical services, accounting services, legal services, there's a massive export performance there. And we were the ones who actually pushed for the GATS, the General Agreement on Trade and Services, because our firms wanted to be able to send lawyers out and so on and so forth. So I think that balance hasn't changed, in my view, because we are at the high-paying range when our services are being exported, and last quarter our aggregate export earnings went up by about 18 percent, I am told. So exports are an important item for us, and they are at the high value added in the service sector.
QUESTIONER: Samuel (?). I'm a Ph.D. candidate at Fordham University. Actually, I have a question about the causality issue between financial development and economic growth in the context of globalization. We know that the economic mainstream states that financial development leads to economic growth, but the contrary is not very clear. So what do you think about it?
BHAGWATI: Ask Raghu Rajan, he's the expert on it. I preach and practice comparative advantage.
BHAGWATI: No, he is the leading authority on the issue, really. I would take advice from him.
QUESTIONER: Andrea (?) scholar from Montenegro. A question for Mr. Yergin and for Mr. Rajan. According to you, which are the key factors or the most influential factors moving toward higher globalization of markets?
YERGIN: Well, if I understand the question, I tried to point to them. I think it's technology, it's policy decisions, and I think it's a greater confidence in markets. I mean, if we see from questions before about a rising anxiety about loss of jobs or loss of industries and you get protectionism, then to some degree it puts things in reverse.
But I guess I come down to the question this is all irreversible. Poor Norman Angel, before the First World War, wrote a book, in which people said that he said that globalization then was irreversible. He didn't say that. He said that if it was disrupted, it would be very costly, and he was quite right about it.
So I think it's a question--I mean, is it fairly smooth--does it work fairly smoothly? Is there a consensus? We used the word "globality" in "Commanding Heights" to describe that. And we got groans on it, but then Bill Safire in his column on language in the New York Times said it was okay to use the word, so we do use it from time to time. Or you can get a sort of much more fragmented world in which things don't work, and you get protectionism and so forth, and you don't have the same kind of economic growth. Or you can have a sort of pendulum swing back towards more concentrated state power. That's the way I conceptualize what kind of future it will be in this regard.
RAJAN: Other questions?
QUESTIONER: I just wanted to ask if you could expand on the issue of race when it comes to globalization. We talked about outsourcing as a problem. At the same time we have things like the Patriot Act, where free movement of labor is kind of constricted. So when we're talking about jobs, jobs for whom? And could you expand on the issue of race and racism and how that would impact your assessment of globalization and how it's progressing?
BHAGWATI: I'm optimistic on the immigration front, because obviously we have had the Patriot Act, et cetera, but at the same time there have been massive reactions against that. So my feeling about international migration is that in the end borders are beyond control. I mean, you can interfere with them and so on, but we've got lots of institutions like Human Rights Watch and ACLU and, you know, back to these groups. Nothing that is done or attempted by the government in panic or otherwise really has much of a chance. You could in principle stand at Rio Grande border and open up with an AK-47. There are countries which have done things like that. But we can't do that. We simply can't do that. besides, many of those people are here anyway. You would lose the entire Hispanic vote if you did that, even if the rest of the people might want to do it.
So there's an internal imperative, and, therefore, we'll go through politicians naturally trying to restrain it. But in the end, just as the Bush initiative in immigration reform shows, we're going to work through repeated de facto amnesties for the stocks of illegals, and we're going to work at importing more temporary workers who will become permanent workers. So in this country, I have no worry at all because this is a country of immigrants, which also defines the basic ethos of the place. And, in fact, the Europeans are not having much success with their policies of exclusion. So I think I'm not worried about it. These are things that will come up, you know, little blips, you know.
QUESTIONER: Jim Carr, IMF. I wondered if you might comment on the next round of trade negotiations, which have been stymied now for years. First, are they really important? Trade goes on, nevertheless, and goes on at a pace that doesn't seem to be directly related to the pace of negotiations. And, second, if it is important, what is it going to take to make one or several of the major powers shift--is it a political issue or does the structure of the economies needs to shift to make them negotiate seriously in this area?
BHAGWATI: In terms of the prospects of Doha, I have an article in Foreign Affairs which you might want to read,. I'm quite optimistic there because, as in Seattle, what happened at Cancun was basically the U.S. had come up with a number of concrete proposals. It had changed the TRIPs agreement and made an important concession. So that was very much a plus sign. I mean, all the President had to do was bring six or seven CEOs of pharmaceutical firms and tell them you've got to do it, right? We need it for the round. And that's essentially what he did. So, you know, Zoellick went with that and gave that concession right away at the beginning of the negotiations.
And on agriculture, the U.S. offer is much more substantial. The mistake was to move closer to the EU one, which was much less generous. But now the U.S. has moved away and decided to go with the developing countries and, therefore, EU is now under pressure to revise its offer. At the same time, some of the developing countries, the big ones which also have trade barriers in agriculture, believe it or not, are also now coming around and talking, at least talking about it.
Remember that the round hasn't gone on forever. It's just been two years from the start of Doha. No negotiation could possibly reach anything like a substantial junction point in two years' time, particularly when you're dealing with issues like agriculture, which is the toughest thing to change. And ultimately I'm optimistic because you can't change agricultural subsidies, which are at the heart of the negotiations, through bilateral mechanisms. You can remove a trade barrier for another trading partner in an FTA, free trade agreement. But how can you remove a production subsidy say just for Chile? You can't do that. As soon as you do, the production subsidy is gone for everybody, right? So it cannot be done except with multilateral impact. It cannot be done just for one partner; Zoellick is unable to make that kind of concession. So when he says, "I'll go to Doha" it's not just "I'll go to Doha" but it's also the only way to do it.
When it comes to export subsidies, if I reduce my export subsidy in Professor Rajan's market, what happens? You have maintained your subsidy, so you will get into his market with your subsidy, and I've removed my subsidy, so I'm at a disadvantage in my partner's market compared to you. So it turns on its head this great diversion which arises when we are not dealing with subsidy removal but with tariff removal. He can remove his tariff for me and not for you, and then I'm happy as a clam, right? So I love an FTA. It creates diversion away from you to me. But when I've removed my subsidy, I lose vis-a-vis you. So nobody in their right mind, meaning nobody who has to worry about a lobby, will ever be able to transact an agricultural subsidy reduction in a bilateral context.
Therefore, if we developing countries really want progress, as we do, we'll have to get back to Doha, make a little concession here and there, and strike a deal. I would say three years and we'll get something.
QUESTIONER: Bernard Norwood. I'm retired, having, among other things, gone through the trade agreements program in this country in what's now the Office of the Trade Representative many years ago. I wondered in your book whether you have any examples or suggestions that are persuasive to non-economists. We have this concern now about jobs which are new in the trade field, technical support people talking to us in Bangalore, for example. But we've had really the counterpart of the same situation in this country many years ago. There's no limit to the "chutzpah" of candidates from the Democratic side now who are talking about globalization and the loss of jobs from Carolina to distant areas. It ill suits them to make that argument since if we go back to the 1930s, jobs went from textile mills in Massachusetts and elsewhere in New England to areas of non-union, low wages, escaping both to the Carolinas and to Puerto Rico, which many of us in New England felt was just about a foreign country. We tended to survive that period in terms of trade policy--
RAJAN: Could you ask the question, please?
QUESTIONER: Yes. My question was whether there are some examples that would be persuasive to the politicians who are using this argument now. Among economists, we don't have any problem with globalization. But it's rather distressing to try to deal with non-economists and to persuade them that there's really nothing to fear.
YERGIN: Just very quickly, I think you just have to look at the results. Two examples. Singapore was so poor four decades ago, people didn't think it would survive as a country. But it oriented itself to the world economy and the last time I checked it had a higher per capita income than Britain, which had a 200-year head start.
The other is to go back to the United States. In two decades, we created 35 million jobs. Remember at the beginning of the 1990s, some of the prominent fair traders were saying that the United States was going to be a nation of hamburger flippers, but we created 17.5 million jobs, many of them very high quality. If you're worried about job creation, compare that to Europe, which during that period I don't think created any new jobs--somebody here can correct me if I'm wrong. That leads you to say that more important than call centers in Bangalore is the flexibility of your labor markets to encourage job creation.
RAJAN: With that note, that I think everybody in this room from the IMF will agree with, let me end. Let me thank Professor Jagdish Bhagwati and Daniel Yergin for coming here and for giving us such a wonderful time. Thank you.
IMF EXTERNAL RELATIONS DEPARTMENT