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Growth, trade, development, institutions, aid, oil, India, Africa, the WTO, intellectual property
Arvind Subramanian is a senior fellow (on leave) at the Center for Global Development. He is the chief economic advisor to the government of India.
Greenprint: A New Approach to Cooperation on Climate Change, written with Aaditya Mattoo, was published by CGD in 2012; Eclipse: Living in the Shadow of China's Economic Dominance was published in September 2011. Foreign Policy named him one of the world's top 100 global thinkers in 2011. India Today magazine named him one of India’s top 35 “Masters of the Mind” over the last 35 years.
He has written on growth, trade, development, institutions, aid, oil, India, China, Africa, and the World Trade Organization. He has published widely in academic and other journals, including the American Economic Review (Papers and Proceedings), Review of Economics and Statistics, Journal of International Economics, Journal of Monetary Economics, Journal of Public Economics, Journal of Economic Growth, Journal of Development Economics, Brookings Papers on Economic Activity, Oxford Review of Economic Policy, International Monetary Fund Staff Papers, Foreign Affairs, World Economy, and Economic and Political Weekly. He is currently ranked among the top 2 percent of the world’s academic economists in terms of citations of academic research, according to the widely used REPEC rankings.
He has also published or been cited in leading magazines and newspapers, including the Economist, Financial Times, Washington Post, New York Times, Wall Street Journal, Newsweek, and New York Review of Books. He contributes frequently to the Financial Times and is a columnist for India's leading financial daily, Business Standard.
He advises the Indian government in different capacities, including as a member of the Finance Minister's Expert Group on the G-20. Subramanian was assistant director in the Research Department of the International Monetary Fund. He served at the GATT (1988–92) during the Uruguay Round of trade negotiations and taught at Harvard University's Kennedy School of Government (1999–2000) and at Johns Hopkins' School for Advanced International Studies (2008–10).
He obtained his undergraduate degree from St. Stephens College, Delhi; his MBA from the Indian Institute of Management at Ahmedabad, India; and his M.Phil. and D.Phil. from the University of Oxford, UK.
“Does Aid Affect Governance?” American Economic Review Papers and Proceedings, (with Raghuram Rajan), May 2007.
“Africa’s Growth Prospects: Benchmarking the Constraints,” NBER Working Paper, 13120 (with Simon Johnson and Jonathan Ostry).
“Foreign Capital and Economic Development,” Brookings Papers on Economic Activity, March 2007, (with Eswar Prasad and Raghuram Rajan).
“How to Help Poor Countries,” Foreign Affairs, (with Nancy Birdsall and Dani Rodrik), 2005.
“Aid and Growth: What Does the Cross-Section Evidence Really Show?” National Bureau of Economic Research (NBER) Working Paper, No. 11513, (with Raghuram Rajan), 2005; forthcoming Review of Economics and Statistics.
“What Undermines Aid’s Impact on Growth,” NBER Working Paper, No. 11657, (with Raghuram Rajan), 2005.
“Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development,” Journal of Economic Growth, (with Dani Rodrik and Francesco Trebbi), 2004.
“Saving Iraq from its Oil,” Foreign Affairs, (with Nancy Birdsall), 2004.
“What Determines Long-Run Macroeconomic Stability? Democratic Institutions,” IMF Working Staff Papers, (with Shanker Satyanath), 2007.
“The Natural Resource Curse: An Illustration from Nigeria,” NBER Working Paper, with Xavier Sala-i-Martin), 2003.
“The Primacy of Institutions and What it does or does not Mean,” Finance and Development, (with Dani Rodrik), June 2003.
“Who can Explain the Mauritian Miracle: Meade, Romer, Sachs or Rodrik,” In Search of Prosperity, edited by Dani Rodrik, Princeton University Press, (with Devesh Roy), 2002.
“Policies, Enforcement, and Customs Evasion: Evidence from India,” IMF Working Paper, (with Prachi Mishra and Petia Topalova), forthcoming.
“The Intriguing Relationship between Growth and Institutions in India,” Oxford Review of Economic Policy, forthcoming.
“India’s Pattern of Development: What Happened, What Follows,” Journal of Monetary Economics, (with K. Kochhar, U. Kumar, R. Rajan, and I. Tokatlidis), 2006.
“From ‘Hindu Growth’ to Productivity Surge: The Mystery of the Indian Growth Transition,” IMF Staff Papers, (with Dani Rodrik), 2004.
“Why India can grow at 7 Percent a year or More?” Economic and Political Weekly, (with Dani Rodrik), 2004.
Trade and Intellectual Property
“The WTO promotes trade strongly, but unevenly,” Journal of International Economics, (with Shang-Jin Wei), 2007.
“Why Prospects for Doha Trade Talks are not Bright?” Finance and Development, (with Aaditya Mattoo), March 2005.
“Medicines, Patents and TRIPs,” Finance and Development, March 2004.
“The Africa Growth and Opportunity Act and Its Rules of Origin: Generosity Undermined?” The World Economy, Vol. 26, No. 6, (with Aaditya Mattoo and Devesh Roy), 2003.
“The WTO and Poorest Countries: The Stark Reality,” World Trade Review, (with Aaditya Mattoo), 2003.
“Measuring Services Trade Liberalization and Its Impact on Economic Growth: An Illustration,” Journal of Economic Integration, (with Aaditya Mattoo and Randeep Rathindran), 2002.
“Dynamic Gains from Trade – Evidence from South Africa,” IMF Staff Papers Vol. 48 No. 1, (with Gunnar Jonsson), 2001.
“Can TRIPS Serve as An Enforcement Device in the WTO?” Journal of International Economic Law, (with J. Watal), 2000.
“Trade and the Environment: A Nearly Empty Box?” The World Economy, 1992.
“TRIPs and the Paradigm of the GATT: A Tropical, Temperate View,” World Economy, 1990.
“The International Economics of Intellectual Property Right Protection: A Welfare-Theoretic Trade Policy Analysis,” World Development, Vol. 19, No. 8.
“Regulatory Autonomy and Multilateral Disciplines: the Dilemma and a Possible Resolution,” Journal of International Economic Law, Vol. 9 No. 2, (with Aaditya Mattoo.)
India: Trade and Intellectual Property
“India as User and Creator of Intellectual Property: The Challenges Post-Doha,” in India and the WTO, edited by A. Mattoo and R. Stern, World Bank), 2003.
“India and the Multilateral Trading System Post-Doha: Defensive or Proactive?” in India and the WTO, edited by A. Mattoo and R. Stern, World Bank, (with A. Mattoo), 2003.
“The Case for a US-India Free Trade Agreement,” Economic and Political Weekly, (with A. Mattoo), 2003.
“Putting Some Numbers on the TRIPS Pharmaceutical Debate,” International Journal of Technology Management, 1994.
Book, op-eds and other
“Efficiency, Equity, and Legitimacy: The Multilateral Trading System at the Millenium,” Brookings/Harvard University Press, (edited with Roger Porter and Pierre Sauvé), 2002.
Profile of Paul Krugman: “Economist as Crusader,” Finance and Development, June 2006.
“The Bangalore Bug,” op-ed in the Financial Times, (with Raghuram Rajan), 2006.
“China’s exchange rate,” op-ed in the Financial Times, (with Raghuram Rajan), 2005.
Profile of Jagdish Bhagwati: “The Globalization Guru,” Finance and Development, September 2005.
The audience in New Delhi, India clung to their seats well past the scheduled end of the program at the recent launch of CGD’s Understanding India Initiative. India’s minister for rural development (and former minister for the environment) Jairam Ramesh, presided over the event, which was organized and hosted by Pratap Mehta (president of the Center for Policy Research and non-resident CGD fellow CGD). Among participants was Nandan Nilekani, head of the Unique Identification Authority of India (who we look forward to welcoming to Washington when he delivers the 2013 Sabot Lecture); prominent academics, and the India-based representatives of foreign development assistance institutions.
“This important book sets a sensible and specific way forward. It should be read by all involved in economic development and international action on climate change.”
—Lord Nicholas Stern, author of the Stern Review
Senior fellow Arvind Subramanian writes a piece for the Financial Times with Martin Kessler on the rise of the renminbi as a reference currency.
The following op-ed originally appeared in The Financial Times..
The Republican presidential candidate Mitt Romney last week repeated his promise to declare China a currency manipulator on his first day in office. Even discounting the “get tough on China” bluster of the campaign season, this remark encapsulates American distance from, and denial about, changing economic realities. Would-be US leaders would do well to note that for probably the first time since the second world war the dollar bloc in east Asia has been displaced. In its wake a currency bloc based on China’s renminbi is emerging.
In new research, we find that since the global financial crisis, as the US and Europe have struggled economically, the renminbi has increasingly become a reference currency (meaning emerging market exchange rates move closely with it). In fact, since June 2010 when the renminbi resumed floating, the number of currencies tracking it has increased compared with the earlier period of flexibility between July 2005 and 2008. Over the same period, the number tracking the euro and the dollar declined.
East Asia is now a renminbi bloc because the currencies of seven out of 10 countries in the region – including South Korea, Indonesia, Taiwan, Malaysia, Singapore and Thailand – track the renminbi more closely than the US dollar. For example, since the middle of 2010, the Korean won and the renminbi have appreciated by similar amounts against the dollar. Only three economies in the group – Hong Kong, Vietnam and Mongolia – still have currencies following the dollar more closely than the renminbi.
This shift stems from China’s rise as a trader; its share of east Asian countries’ manufacturing trade has risen from 2 per cent in 1991 to about 22 per cent today. Countries that sell to the growing Chinese market or are locked in supply chains centred on China see the advantages of maintaining a stable exchange rate against the renminbi.
Trade is also propelling the rise of the renminbi outside east Asia. For example, the currencies of India, Chile, Israel, South Africa and Turkey all now follow the renminbi closely; in some cases, more so than the dollar. If China were to liberalise its financial and currency markets, the lure of the renminbi would broaden and quicken.
This development has two implications. First, it is one more important marker in the shift of economic dominance away from the US and towards China. Not only is China, by some measures, the world’s largest economy in purchasing power parity terms, the world’s largest exporter and the world’s largest net creditor (for more than a decade), but the renminbi bloc has now displaced the dollar bloc in Asia. The symbolism and its historic significance cannot be understated because east Asia, despite physical distance, has always been part of the dollar backyard.
America optimists invoke the rise and fall of Japan over the past few decades to suggest that China’s rise today will go Japan’s way, ensuring the continuation of Pax Americana. But they should take note that even during the heady days of the Japanese miracle, the yen never came close to rivalling the dollar as a reference currency. There was never anything close to a yen bloc in east Asia.
Second, and related to the above, is that this shift highlights the conflicting tugs that east Asian countries will face. The gravitational forces of economics, trade and now currency are drawing these countries closer to China. But Chinese shenanigans in relation to politics and security have repelled these countries into America’s embrace, reflected most vividly in the latter’s pivot-to-Asia strategy. The old saying is that politics trumps in the short run but economics wins in the long run. If true, the strategy of relying on China for butter and on America for guns will be a difficult balancing act to pull off.
The message for the next US president is clear: America’s top priority should be internal economic regeneration rather than targeting China’s currency or other policies. The urgency of the message is underlined by the reality that this regeneration is a necessary but by no means sufficient condition for retaining American pre-eminence in the face of China’s rise.
Read it here.
Reliance on natural resource revenues, particularly oil, is often associated with bad governance, corruption, and poverty. Worried about the effect of oil on Alaska, Governor Jay Hammond had a simple yet revolutionary idea: let citizens have a direct stake. Thirty years later, Hammond’s vision is still influencing oil policies throughout the world.
This piece originally appeared in the Financial Times on September 23, 2012 (gated) and is posted here with permission.
The Indian government’s recent reforms to reduce government subsidies and embrace greater foreign direct investment were unexpected and bold. Markets have rewarded them with surging stock prices and a rebound in the value of the rupee. The reforms may yet be reversed or diluted because of the political backlash. Their impact may be more symbolic than substantive. Nevertheless, they are significant in that they reflect changes in the operating assumptions of Indian politics.
Surprisingly little is known about how Indias shift from a state-dominated to a market-driven economy is influencing the issue of caste. Kapur will present a new paper, co-authored with Lant Pritchett, that draws on a unique survey designed and implemented by Dalits (formerly called Untouchables). The survey captures changes in socially structured inequality since the 1990s that are important to Dalit households but typically overlooked in surveys that focus on conventional measures of well-being.
*This is the first in a planned series of seminars organized by CGD's Understanding India initiative, which explores India's development challenges and experiences and the lessons they might offer for other developing countries.
President Bush asked Congress last week to provide $770 million in emergency food aid to help alleviate the food price crisis that is destabilizing parts of the developing world and threatening to reverse years of progress in global poverty reduction. Arvind Subramanian, a CGD senior fellow with a joint appointment at the Peterson Institute for International Economics, discusses the president's surprise announcement in a Q&A that highlights the complex policy relationships between food, trade, and energy.
Q: What's your view of President Bush's food aid announcement?
A: A very good first step, both for recognizing the severity and urgency of the problem and for the assistance offered. But two key issues leave room for doubt and criticism. The doubt concerns timing. President Bush’s proposal would make this new aid available next year, although he has called for Congress to provide $350 million in supplemental funds for this year as well. Congress needs to approve the proposal so that the assistance can be provided sooner; otherwise, it might come too late to provide real help. The criticism: very little of the aid can be used to purchase the required food locally while the rest will have to be purchased and shipped from suppliers in the United States. As my colleague Kim Elliott pointed out in a recent blog post (see How NOT to Fix the Global Food Crisis), this policy results in roughly half of the already-inadequate U.S. food aid budget going toward distribution and transportation rather than feeding hungry people in poor countries. That seems like an unnecessary waste in the face of such suffering.
Q: What additional short-term steps would you recommend?
A: Besides Congress quickly approving the president’s request and raising the ceiling on the amount of food that can be purchased abroad, a third useful step has been recommended by my CGD colleagues Peter Timmer and Vij Ramachandran (see President Bush Can and Should Do More to Address the Food Crisis: Let Japan Sell Its Rice Reserves). They have rightly called for the U.S. to drop its objections to Japan selling a large stockpile of rice that Japan stores under commitments negotiated with the United States and other trading partners under the World Trade Organization (WTO). The U.S. could relieve Japan of this obligation because a large part of this stockpile is comprised of U.S. rice that was exported to Japan. If these stocks are released, rice prices could come down substantially.
Q: What about the longer term?
A: Starting now and over the next couple of years, the U.S. and other countries need to work together to ensure that world trade in agriculture is supportive of agriculture, as Nancy Birdsall and I argued in a recent Wall Street Journal op-ed, Food and Free Trade. That includes getting rid of inefficient biofuel subsidies; ensuring that countries don’t impose export restrictions (as several have done in the recent episode) since these aggravate food shortages; and injecting some rationality into the genetically modified organisms (GMO) debate, where the EU in particular has taken an extreme position that could be impeding the spread of agricultural productivity, especially in Africa.
In the long run, the international community needs to devote much more energy to figuring out how to spark a Green Revolution in Africa—the part of the world that is most vulnerable to food price increases.
Q: How serious a problem, in your view, are the ethanol subsidies in the U.S.?
A: Very serious. According to the World Bank, a substantial share of the rise in maize prices over the last few years is due to U.S. ethanol production. For example, between 2004 and 2007, when prices rose sharply, almost all the increase in maize production in the world—about 50 million tons—went into U.S. biofuel production. The fuel versus food conflict is suggested by the following statistic: the grain required to fill the tank of a sports utility vehicle with ethanol (240 kilograms of maize for 100 liters of ethanol) could feed one person for a year. So, if all the U.S. biofuel production had gone into feeding mouths rather than Hummers, you are talking about a lot less hungry people. Africa expert Paul Collier calls the U.S. ethanol mandate and subsidies program “grotesquely inefficient” in today’s Financial Times.
Former Mexican president Ernesto Zedillo called for far reaching governance reforms at the World Bank, speaking at a packed CGD forum on Friday. Discussants and other forum participants generally supported the recommendations of a high-level commission he chaired and much of the discussion focused instead on the power and politics of achieving changes necessary to make the bank more effective and legitimate.
Read Nancy Birdsall's blog about the event
Watch or listen to the forum
The large audience included current and former World Bank board members and dozens of current or former World Bank staff, some of whom raised pointed questions about how Zedillo’s reform agenda could be implemented. Discussants included CGD president Nancy Birdsall; Moisés Naím, editor-in-chief of Foreign Policy Magazine, and Arvind Subramanian, a joint senior fellow at CGD and the Peterson Institute for International Economics.
Naím, a former World Bank board member and reformist minister of trade and industry in Venezuela, called the document “the best report on World Bank reform I have read in 20 years.” But he emphasized that not even the most rational set of recommendations can be implemented without building a strong political coalition and urged that the debate go beyond design to focus on factors that have stalled all previous efforts. “This is an exercise in power,” Naím concluded, “not in technocratic decision-making.”
Birdsall, too, urged getting on with the governance reform process and listed three simple steps, based upon the Zedillo Commission report, that she argued could be implemented in the near future. Step One: move to a 50/50 split in voting power between high-income and developing countries for governance of the International Bank for Reconstruction and Development (IBRD), which borrows on commercial markets and re-lends to the bank’s middle-income members.
World Bank President Robert Zoellick invited Zedillo last year to chair a high-level commission charged with developing a set of recommendations for bringing World Bank governance structures up to date. At the Friday event, Zedillo introduced the product of that commission's work, a report titled Repowering the World Bank for the 21st Century.
Zedillo described the bank as an institution that was designed to reflect realities soon after World War II, not the current world. And he warned that without the sorts of reforms he advocates, the World Bank will follow in the path of other institutions that have become "irrelevant and useless."
Change will not come from the current board or management, he said, but must come from the highest political levels—for example, from the heads of government who comprise the G-20 and represent the bank’s biggest stakeholders.
The Zedillo Commission report advises strengthening the voice of developing countries in the bank and creating processes that allow for smoother, more accountable decision-making. Among the concrete measures: shrinking the Executive Board and rebalancing it to increase the representation of developing countries, selecting future presidents in a transparent, merit-based manner, without regard to nationality; and creating a yearly performance review process to hold the World Bank president accountable.
Zedillo described the current Board as attempting an “impossible trinity” of roles—at once representing the interests of member nations, exercising responsibility for bank policy, and providing oversight of those same policies.
During the panel discussion, Subramanian described what he termed a “cozy arrangement” between donor countries and recipient governments, with little urgency for reform from either side. “Those who are getting power, frankly, aren’t all that interested in change,” he said. He also warned of the need to carefully consider China, which is pursuing a distinct development-driven foreign policy independent from multilateral institutions.
In her comments, Birdsall cautioned that, while President Obama has demonstrated a commitment to multilateralism, Congress and the American public are, "at the moment quite beleaguered and, if anything, feeling isolationist." Nevertheless, Birdsall declared, "Now is a moment, unlike any in the last 30 to 40 years, where there is the possibility of change."
She listed several measures that could form the basis for a political bargain for reform. First, she declared, voting power at the IBRD should be split 50/50 between developed and developing countries by the spring of 2010. Such an arrangement is hardly radical, she said, and has been the rule at the Inter-American Development Bank for many years.
A re-balancing of the IBRD votes could be achieved, she said, in part by soliciting paid-in capital contributions from advanced developing nations, who now hold $3 trillion in reserves and have said they want a bigger bank.
Second, she endorsed the Zedillo Commission recommendation that the World Bank president be selected without regard to nationality. The problem, she said, is that reformists haven’t convinced the U.S. Congress that a non-U.S. World Bank president would be compatible with American interests. Even if selection were made without reference to nationality, “it would never happen that someone was selected that the U.S. didn’t want,” Birdsall emphasized.
A third component of the bargain, Birdsall suggested, could be separate boards for the IBRD and the bank’s soft loan window, the International Development Association (IDA), another Zedillo Commission recommendation.
There is an implicit difference between the two bodies, and different nations have interests in each, she said. As part of a deal in which the Europeans relinquish some chairs on the IBRD board, European nations could retain stronger voting rights in the IDA, which provides highly concessional loans to the world’s poorest countries.
“It’s not clear to me why there should be anyone sitting in an IDA chair who isn’t a recipient or a donor,” said Birdsall. Advanced developing countries who want to have a seat on the newly reconstituted IDA board could do so by becoming meaningful donors themselves, she said.
To accomplish this deal or any deal, Birdsall declared, U.S. leadership is critical. Securing U.S. participation, however, will require both an understanding of U.S. domestic politics and a strong partner from the developing world, most likely Brazil or China.
Zedillo responded to Naím and others by acknowledging that the Commission did not lay out a clear strategy to convince the developed world to embrace reform. However, he insisted, the current state of affairs is unsustainable, and it is in the enlightened self-interest of the bank’s largest shareholders to have a functioning institution. “What is the purpose of the U.S. to spend money on the Bank,” Zedillo asked, “if it’s not going to deliver what is expected?”
(A previous blog posting about the initial release of the report by Lawrence MacDonald, CGD vice president for communications and policy outreach, has prompted a lively discussion )
Paraphrasing "jesting Pilate", "what is truth when academic superstars supposedly produce it?" is possibly the most important yet neglected question raised by the recent Reinhart-Rogoff (R-R) affair.
The essential facts of this episode are these: two Harvard professors, Carmen Reinhart and Kenneth Rogoff, used their academic research to become strong advocates in the policy realm, although not among fellow academics, of the need for fiscal austerity when economies approach a threshold level of debt-to-GDP ratio of 90 per cent. Their superstar reputations (deservedly earned through previous work) rendered their advocacy influential, even highly so, in the charged policy debates in the United States and all over Europe. The research - especially the critical and attention-grabbing finding of a sharp growth discontinuity at that 90 per cent threshold - was subsequently exposed as flawed.