Why Raghuram Rajan says world can’t let India follow China, climate change & globalisation

foreign [Music] mutual fund Investments are subject to Market risks read all scheme related documents carefully foreign governor and top Global Economist raghuram Rajan has made a very significant speech at the IMF World Bank annual meeting now this speech has led to quite a bit of commotion in India particularly on social media if you follow Twitter you can see a lot of anger a real kolaveri remember that word has been Unleashed on Twitter basically saying that Loki doesn't understand India he's anti-india it's good that Narendra Modi saw through him and got rid of him etc etc also it's been said that he's some kind of an agent or a spokesman for for a Lobby which is China plus the environment Lobby plus Indian liberal Elites and together with them being their agent he is trying to destroy Indian manufacturing and India's economy now you know what we are now living in a very interesting World a word where debate has progressed and evolved but not necessarily in the right direction so there was a time possibly at some point I don't don't remember when but it must have been when when all debate was based on facts so fact-based debate from fat based debate we came to fact-free debate now Factory debate is has been going on for some time and as we got used to it now has come the era we've entered the era of fat-free outrage so this outrage over his speech is totally fat free and why do I say this I say it because I have now read the full text of the speech and you know what when in doubt check out the facts I am sharing the full text of the speech and also the full video of the speech with you so check it out and see what it means and why 16 words from that speech Just 16 words have been taken out of context and what those 16 words are you can see on my screen and I quote from the speech the world cannot afford India to follow China's path even if it were open to do so right 16 words in fact if they sentence these 16 words follow this might have caused maybe an even greater misunderstanding and outrage and which which would have all been misplaced as I will explain to you so the full passage there is as follows export-led Services growth will be much less environmentally harmful the world can't afford India to follow China's path even if it were it were open to it which means if India were to follow China's path manufacturing LED export growth because China's exports are mainly built around manufacturing a lot of it is low quality low level manufacturing India's exports are so far essentially driven by services so this is a question of which one do you in the hierarchy of which export-led economy is better or more climate friendly that is the argument being made it is not to say India should stop manufacturing either for its own needs or for manufacture this is a question of the larger speech and the larger argument is about what is it what kind of economic activity is it that governments across the world should now be privileging over the other and the argument that raghuram Rajan is making in this speech which is mainly a speech on the theme of climate change and how to deal with that challenge is that Services growth or Services industry in Industry turns to be much more lightweight than Manufacturing ring it consumes much less energy and that is where a lot of attention investment incentives need to go into this is not a prescription only for India now how did this tamasha start this tamasha started with a bunch of new stories I noticed E.T Times of India couple of others but mainly Economic Times at times of India and these stories had the same headline the same 16 words as headlines and that happened you know what once you see a headline once you see a tweet you don't even have to see a headline headline tweet something that somebody passes on to you maybe an email whatever you don't check anything if you have anger inside you and you are looking for an excuse to be angry or cry havoc or start outraging then you don't check out any facts because you know why confuse yourself with facts so remember that Immortal and Infamous line from one retiring editor of the New York Post who apparently said to his Newsroom in his Fable speech never fact check your way out of a good story so never fact check your way out of a good outrage ask questions so you see one headline headline is 16 words taken out of about seven thousand words speech and then without bothering for the context you start getting angry so what is it that he is saying in this speech this is called The Jacobson lecture but Jacobson was first managing director of IMF I think he was also somebody involved with League of Nations Etc so one of the titans of that period so this lecture is held annually in his name so that's the lecture that he's delivering in the lecture he says that look he says there are two big issues in the world which are joined in the hip joint at the hip means Inseparable very close to each other one feeds on the other so they are joined at the hip what are these two issues these are climate change and globalization now for both there is a lot of of popular mistrust particularly in democracies and that popular distrust comes from the belief that both of these are Elite projects Elites want them right like that so Elites want Elites think this is good for them and they want us to make sacrifices for this we don't like it so people don't accept it and he said it's because of this because politicians respond to what works with their voters and what voters want that politicians are now tending to throw globalization under the bus but then he goes on to make a very elaborate case on why you cannot find the challenge of climate change without globalization so this is not this is not a speech to support protectionism that's rising in fact this speech points out to many flaws in protectionism in many dangers that lie within this actually says country should open up more this is also telling developed countries to open up more to not just not just Services goods from the developing countries but also for immigration because it says if you don't open up to immigration from there of people in the kind of skill sets that you need and people in the kind of age demographics that you need because a lot of the developed countries are now aging so they will need workers in certain areas so it's better to have scientific planned immigration and even if before immigration if you can train this prospective migrants teach them new skills so they can find gainful jobs in the new adopted countries they come to and he says if you don't do it then you can sit back and chill because these people will come in because the global South will suffer a lot more from the impact of climate change a lot more people will be leaving and they will crash through your borders anyway so it's better to make it scientific because more and more countries are aging even child night is aging at the same time in the global South there's a lot of young people and they are the ones who will suffer a lot more from the impact of climate change and they will not have the wherewithal to deal with it unlike the Richer countries that's why it's a vote for globalization and more open immigration now there are challenges with reform with any step to counter climate change it says he says because with all these things there is a rising distrust of Elites because the costs that you pay for all reform are immediate the benefits that come come much later so he does quote somebody somebody authoritative who says look it's a bit like you are telling me the end of the world I am concerned about the end of the month because human beings voters taxpayers Ordinary People they are worried about what is here and now problems here and now they are not particularly concerned about the future of mankind that may be for seminar circuits etc etc but right now what are my problems so if you want to address the issue of climate change first of all you need you need globalization without globalization you can't fight climate change and second as you do that you have to make both of these more palatable more acceptable more friendly to Ordinary People just because the super smart people think these are good things to do this will not travel down and that's when distrust will rise and that's when even a country like Britain we which is a very rich developed country they will also resent the fact that rules about their economy their country are being made made by bureaucrats in Brussels and so they will also say they will also use a slogan like Take Back Control which means we should be in charge of Our Own Destiny and if that is the case in Britain you can imagine what it might be in many other countries that's why they will be distrust also on these Global organizations it can be WTO it can be the UL or anybody who makes rules for other countries so you have to allow this rule making to travel down to countries themselves but give them an incentive in doing this in the example that they uses which is an excellent example and that that runs like a thread through the speech or through the argument that is Tanzania and the U.S so if you want to see who is the biggest polluter who is the smallest pollutant why should they be treated the same way to Tanzania today emits point two tons of carbon in a year 0.2 tons per capita per person in a year just 0.2 America on the other hand emits 16 tons so on an average an American emits 80 times as much as a Tanzanian but look at the real political situation can you can you tell American workers now that I am shutting down your pool based power plants because you are emitting too much carbon already or you are consuming too much carbon already emitting too much carbon carbon dioxide but it's a good thing that Tanzania keeps on building more coal based power plants because they emit so little carb money it doesn't work like that similarly can you tell the people in Tanzania that look the carbon that you burn is hurting the entire world including the Americans who emit on a per capita basis 80 times more than you but you don't do it that's a non-starter it's not going to work so he does offer you a bunch of solutions so first of all he says that globalization will be needed because without globalization you can't do it for example even if you're shifting from a climate heavy industry or way of life to a climate light way of life you will lead many countries for example if you are going towards electric vehicles that will need Cobalt nickel lithium a lot of that will be found in Democratic Republic of Congo you can't convert that into batteries there that will be done in Russia and China so in any case Global Supply chains will be needed and globalization will be needed so globalization will be needed for the flow of trade Capital technology and most importantly and that's most importantly from India's point of view also people because a lot of India's free trade agreements the negotiations get held up on the movement of people because India's resources its people India is not a resource-rich country in terms of wearing oil or gold the Platinum or lithium stuff like that India is a resource to its country in terms of people India has to mine its people so that you can't do without globalization and again it says accept the inevitability of migration so he says three things have to be done about climate change one is mitigation mitigation is very simple I gave you the example of batteries because you have to shift to electric vehicles to reduce your carbon footprint number two is adaptation to climate change again for adaptation it's much easier for richer countries to adapt right it's much tougher for poorer countries for example poorer countries Global South agriculture has already been severely hit by sudden climate changes abrupt climate changes extreme climate events and what will then happen is it will make it tougher and tougher for poor Farmers to survive now in richer countries or even in poorer countries richer Farmers might still find the way with all to survive in terms of new technology apologies now the poor countries may not have the money to invest in developing new technologies but the Richer countries will have a best interest in developing those and giving those cheap then to poorer countries so they can deal with climate change otherwise many more millions of them will become climate refugees refugees and come towards developed countries similarly even within poorer countries the Richer Farmers the Richer people will be able to still afford new technologies and he gives the example of the past when richer farmers were able to quickly switch to tractors modern fertilizers and things and they became richer in the process so that is the adaptation part and as part of the adaptation he also points out the risks of deglobalization because deglobalization is very fashionable right now so see the Chinese coronavirus first rose or emerged in China so Chinese were able to control it immediately but in the course of time more strains came more people travel and the Chinese again got hit everybody got hit again China's also got hit but you know what because Chinese blocked globalization Chinese have a de-globalization mindset they like globalization only as long as it suits them they refuse to accept any Western vaccine they took too long vaccinating their population raghuram Rajan is not saying this so he should be blamed for this I am saying this that for on all evidence it looks like that the vaccine the Chinese produced was much less efficacious and that's why even last week in the 20th party Congress Xi Jinping said that he will continue continue with this Dynamic zero covet policy which means lockdowns will still continue because his vaccine is about 55 percent efficacy no I know I know that immediately a lot of you will say oh sheikhar Gupta is not batting for Pfizer in modern you are free to say that if you so wish but all I am trying to remind you of is that India was not as stupid as the Chinese so while India developed its own vaccine which is a great idea India allowed the most popular and the most sold but cheap foreign vaccine to come into India that is your Kobe Shield which I also carry in my arm two shorts and one booster most Indians have it in more than 90 percent Indians have that vaccine so India was open-minded enough or globalized enough in its thinking to accept a vaccine that came from overseas from Oxford University in AstraZeneca which is also Global Pharma major the Chinese didn't do it and that's why the Chinese suffered so once again that tells you that globalization has great benefits you can make it work to your benefit but if you but if you decide to be cursed about it or stick in the mud then you can also do yourself a great deal of farm now this is where raghuram Rajan brings in his favorite bicycle example we say favorite because he's used it earlier in a different context that I will tell you so he says look think of it like riding a bicycle the risk of falling is much greater if the bicycle is stationary application if you've learned to cycle you know it's almost impossible to be stationary on a bicycle right that's why you have this slow cycling races which are so tough people keep toppling from left to right because it's almost impossible to be stationary so he says on globalization follow the bicycle Theory which means if you are stationary the risk of falling is much higher so you have to keep on moving and the reason I said that this is his favorite example is in one of his earlier works I think the book titled saving capitalism from capitalists he'd use the same bicycle metaphor for Indian way of governance and he said that's Indian system is like somebody riding a bicycle the example there was you kicked those who are below you and you bow to those who are above you upcycle so you tend to bend a little bit but you also kicking furiously you're peddling furiously at the bottom so he used a bicycle metaphor to explain that phenomenon and now he's using it to support the idea of globalization so what is the solution he produces his solution is something that he calls Global carbon reduction initiative gcri what happens in this case is again go back to Tanzania and America now you can't tell Americans who shut down their their power plants you can't tell tanzanians to not set up more power plants you can apply the same example to India as well India is in fact setting up more coal-based power plant because India does need them and gas is too expensive gas also is polluting but less polluting than coal but is now way too expensive so how do you how do you persuade people on both sides so he says the way to do it is look at the per capita carbon consumption average or carbon dioxide emission average any country that is above this global average global per capita average any country that's above it pays into an international fund it is like a carbon tax but everybody doesn't pay it because if you put a carbon tax on everybody equally then tanzanians will say what the hell these guys are polluting 80 times more than me I'm paying the same tax as they are paying it is not acceptable even India would say look look at these Americans they are producing almost 10 times as much as I and there are other countries which which are big polluters and I'll give you a roll of Honor Qatar almost at the top is Palau on top of it but that's too small cutter 35.64 India's 1.74 ton per year Qatar is 35.64 UAE is 20.70 Brunei is 17.95 Saudi Arabia is 16.96 Oman 16.9 Australia 15 Canada 14 us 16. so all these resources countries are either in the 16 ballpark or above so again a country like India will say why am I paying any tax on this so his way is that look at the global average the global average today is about 4.78 that is two and a half times India's per capita emission so any country that is above that address will pay a certain amount you can call it carbon tax you can call it anything you want into a global fund and this will then be distributed to other countries who emit less than the global average which means it will give the Richer countries the incentive to move to less carbon intensive lifestyle and products and machinery and Technologies because because that that way they save this carbon tax at the same time this will incentivize poorer countries say like India Tanzania Pakistan Bangladesh any country that you name with large populations they will have the incentive then to use this money and to invest more in carbon saving Technologies because the less carbon they emit more of the share they get out of this pool now this is where the idea of service is coming now he's explaining why is there so much resentment against globalization against Outsourcing say in a country like America or developed countries that's because open borders Imports are Outsourcing those have knocked out the middle those have knocked out the middle of manufacturing jobs it means mid-level workers have lost their jobs in the entire economy so mid-level workers have lost their job so people with mid skills have lost their jobs because their jobs have been exported either to China or to Bangalore or wherever lower level workers are all right because they are needed and nobody takes their job so easily it is those who are in the service sector service sector banking Finance they become much richer and as they become much richer their children also get much better education go to much better schools much better training academies etc etc and they move further into the same Services Finance sectors and that is causing the big resentment so one way now is to reduce the cost of living for the middle and also to create more jobs in the middle and the way to do that is to move towards services for example telemedicine mentions that can be a big service industry but for telemedicine education for legal work just writing legal documents writing what we call as affidavits these are things that should be part of the globalized economy and he's not saying it but I would say these are areas that India is going to ace partly also because of our strength in English language no matter about some people on the political side today are trying to do by enforcing Hindi or other languages and people our strength in English will remain in more and more parents will send their children to English education for this he says entry barriers will have to be broken and what are the entry barriers most countries don't recognize each other's University degrees so the countries could either either start accepting each other's degrees through negotiations or they could have they could offer equivalency exams He suggests why one because further liberalization in manufacturing globally not just for India further liberalization in manufacturing is now having diminishing returns number two services are the largest chunk of the GDP now and there is more scope of growth there and that's where telemedicine is quoted as an example number three as we move towards more climate friendly Lifestyles then Everything Will Change in the materials we use in our construction architecture all of this will have to to be climate friendly and all of this will then need more research more expertise and these expertise could then be traded worldwide so this will be a globally traded service that's why in conclusion services are weightless they consume much less energy on way to the final consumer and finally that passage which has got so many people's backs up export-led services growth will be much less environmentally harmful the world can't afford India to follow China's path even if it were open to it so I do hope I've been able to explain the context of that statement to you this is not to defend somebody or attack somebody this is only to give us all a little fact check so we don't continue to be trapped in this cycle of fact-free outrage foreign [Music] [Applause] [Music]

Channel: ThePrint

Views: 192,449

Keywords: ThePrint, shekhar gupta, theprint india, theprint hindi, raghuram rajan speech at imf, globalisation in india, covid vaccines in china, covid vaccines in india, liberalisation, IMF-World Bank annual meet, raghuram rajan at imf, imf

Id: w4bDuWDy4pI

Length: 24min 3sec (1443 seconds)

Published: Wed Oct 19 2022