Meet finds China growth sustainable, India’s possible

The Stanford Center for International Development (SCID) held its seventh annual conference on Indian economic policy reform on June 1-3, 2006. This year the conference had a pan-Asia focus, with participation from over 200 policy makers, academics and business leaders from China, India, Japan, Pakistan and the United States. The conference, in 14 sessions, covered a range of issues from economic prospects in China, India and Pakistan to expected demographic dividends in Asia, with its rising share of working age population in contrast to rapid ageing in many rich countries.

The keynote speakers were Anne Krueger, First Deputy Managing Director of the International Monetary Fund and the founder of SCID; Haruhiko Kuroda, the President of the Asian Development Bank; Yashwant Sinha, India’s former finance minister and ex-minister of Foreign Affairs; and Kakutaro Kitashiro, President and CEO of IBM, Japan.

Panel discussions on developments in the Asian economy featured George Schultz, former US treasury secretary and ex-secretary of state; Xiang Huaicheng, former finance minister of China; Ishrat Hussein, former governor of the State Bank of Pakistan; and Kapil Sibal, Minister for Science and Technology of India. Participants of other panels included Rakesh Mohan, Deputy Governor, Reserve Bank of India; Wu Xiaoling, First Deputy Governor of the People’s Bank of China; Takatoshi Ito, former deputy vice-minister of finance for international affairs, Japan; and Ramalinga Raju, Chairman and Founder, Satyam Computers.

In the session on energy and environment, Nobel Laureate Kenneth Arrow and Larry Goulder presented a very stimulating paper on the sustainability of the growth in China. The authors defined sustainable development as a growth path in which each generation leaves the next one with the capacity to enjoy the same or higher quality of life. The indicator for per capita well-being is a measure of per capita wealth that includes a wide range of productive assets—reproducible physical capital, various forms of natural or environmental capital, and human capital, including health.

The focus of the analysis is national, not global, sustainability, so that if the foreign share of the national capital base is increasing, as in the case of the US, it detracts from sustainability. The wealth measure of well-being is the entire stream of future goods and services that can be delivered by current assets, rather than the current flow of income. Consequently, any rise in the future cost of a good or services, for example of fossil fuels because of depletion of stocks, is taken into account. Also, a future increase in prices of resources that are primarily owned by foreigners detracts from national sustainability.

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