Beijing This Month- Nobel Laureates Back RMB�s Dollar Peg
Beijing This Month- Nobel Laureates Back RMB�s Dollar Peg
Nobel Laureates Back RMB’s Dollar Peg
2005/06/15
Text by Charles J. Dukes
The stability of China's renminbi currency and the world trade in textiles dominated discussions before, during and after the Nobel Laureates Beijing Forum 2005 held in Beijing on May 30-June 1.
Seven winners of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel participated in the event. They were (with the year of their award and in order of their appearance at the forum): Robert W. Fogel, 1993; Robert A. Mundell, 1999; John Forbes Nash Jr., 1994; James Mirrlees, 1996; Edward C. Prescott, 2004; Clive W. J. Granger, 2003; Vernon L. Smith, 2002. There were joined by five other prestigious economists: Robert J. Barro, Edmund S. Phelps, Alberto Alesina, Michael Woodford, and Xavier Sala-i-Martin.
The economists were welcomed to China during opening ceremonies for the forum that were held at the Great Hall of the People in Beijing on May 30. The opening included speeches by Vice-Premier Zeng Peiyan; Wang Mengkui, president, Development Research Center of the State Council (DRC); and Beijing Mayor Wang Qishan. Afterwards, the economists began two days of lectures on issues affecting world economics and economic development.
In his welcome, Zeng said China would continue to strive for the stable and rapid growth of its economy while relying upon diverse forms of ownership and ways of employing personnel so as to increase overall employment and to provide an opportunity for every Chinese, whether residing in urban or rural areas or whatever region, to participate in and benefit from the country's economic development.
He said the government would foster talent and creativity, encourage respect for work and knowledge, and do more to protect intellectual property and support investment and business.
Special attention will be given to the country's western regions, to the old industrial bases of Northeast China and elsewhere and to regions suffering from more extreme poverty. Improvements will be made in education, public health, social security, environmental protection and in the provision of public services.
Zeng said the country would also improve its legal system and democratization.
He urged the economists to consider China's economic development and economic research and to make suggestions for improvements in the country's reform, opening and modernization, which represents an opportunity not just for China, but for the world at large.
The DRC's Wang said, "The forum's theme of 'human harmony and development' represents a common issue faced by all countries of the world. It is also an important task that China is striving to accomplish during its modernization process. China's general objective was to bring about human harmony and development when it proposed an outlook of development that puts people first and is sustainable and balanced overall and decided to build a harmonious socialist society….
"The Chinese Government is working to make policy decisions more scientific and democratic."
Mayor Wang, with reference the 2008 Beijing Olympic Games, said, "The people of Beijing are hard at work making preparations for the 2008 Olympic Games and are striving to modernize the city to realize the goals of the strategy of 'New Beijing, Great Olympics.' We will open even wider to the outside world, increase exchanges and cooperation with other countries and regions, study and apply successful practices from both China and abroad and organize the 2008 Olympic Games to ensure they are unique and a great success and make our due contribution to the peace and development of the world….
"Peace and development are the themes of today's world and represent the common ideal and goal of mankind…I believe the extensive exchange of ideas and discussions of this forum will shed new light on economic and social development in Beijing and the rest of China and provide us with helpful theoretical references for instilling and putting into practice a scientific outlook of development and building a harmonious socialist society."
The mayor said the forum would undoubtedly raise Beijing's profile as a major world city.
Speaking for the Nobel Laureates, Fogel, of the University of Chicago, said, "China has shown a remarkable capacity for improving the lives of its people and at a remarkably quick rate."
He said the Chinese economy has grown by 6 percent to 10 percent for the past quarter century, and he said, "I cannot see a reason why this should not continue for the next quarter century." He added that he expects that the Chinese economy will one day be larger than the US and European economies combined, but warned that "policy should ensure that slower growing sectors [of the economy] do not 'lose touch' with faster growing sectors."
The lectures at the Great Hall of the People began with Mundell, a professor of economics at Columbia University in New York City for the past 31 years, who on March 16 was awarded permanent residency in Beijing, becoming one of the first foreigners to be awarded one of the city's new "green cards." He also became the city's first Nobel prize-winning resident.
Mundell stridently defended the Chinese Government's renminbi currency policies and its practice, since 1994, of pegging the renminbi to the US dollar.
"I have always supported a fixed-rate policy," he said, "for the same reasons I supported the euro and am now supporting a world currency…China should keep its exchange rate fixed as long as the dollar is stable."
He said tying the renminbi to the dollar, or perhaps a basket of stable currencies such as the dollar, euro and Japanese yen, maintains currency stability in China and in Asia.
A rash revaluation, he said, might see the renminbi appreciate in the short term, but, he added, "In the long term, it will go the opposite direction, and currency instability would bring great uncertainty to Sino-US trade."
Regardless, he said, "China is in the best position to decide."
While economists such as US Federal Reserve Chairman Alan Greenspan and fellow Nobel winner Joseph Stiglitz have backed Mundell's stance, political pressures in the United States, from both Democratic and Republican Party politicians, and some forces in Japan have called upon China to "float" the renminbi or to move rapidly to revalue it. In the United States, the currency issue is related to soaring US trade deficits with China and has been linked, to some extent, with trade issues such as Chinese textile imports into the United States.
Mundell said, "There's no evidence that exchange rates correspond with trade balances…The US arguments in this regard are intellectually weak. Chairman Greenspan was 100 percent correct when he said that the currency has no relation to the US trade balance…The dollar-yuan peg is good for the US economy; the US is just trying to shoot itself in the foot."
He said Japanese economic problems, particularly deflation, are a result of Japan's central bank policies "that have nothing to do with China."
The Nobel laureate then presented 12 reasons why revaluing the renminbi would be a bad idea for China, Asia and the world including the assertion that a possible move to appreciate or float the renminbi would delay the convertibility of the Chinese currency, cut down on the inflow of foreign direct investment, reduce economic growth greatly, aggravate the non-performing loans (NPLs) situation in Chinese banks, hurt the profitability of Chinese enterprises, increase unemployment rate, add more deflation distress in rural sectors and reward speculators, all of which would add to instability in China and Asia and hurt the worldwide economy.
He said, "The real issue here is the competitive shock of China's entry into the world economy. In 1978, China provided 0.5 percent of world exports; in November it provided 6 percent…This represents a process of efficiency; it's real, but it's not a monetary issue and cannot be addressed with monetary policy."
On the other hand, Mundell said that while Chinese policy commits policy-makers to ensuring the stability of the renminbi, "this is poorly defined" and needs some work.
He urged Chinese policy-makers and economists to become more active in international forums in defence of the rationale for their financial policies, which Mundell characterized as essentially sound, but in need of further reform.
He urged policy-makers to use the upcoming G-20 Meeting of Finance Ministers and Central Bank Governors, scheduled for October 15-16 in Beijing, to "put monetary reform on the agenda."
Mundell reiterated his remarks at meetings in Hong Kong following the forum.
Nash, a portion of whose life was portrayed by the actor Russell Crowe in the movie A Beautiful Mind, used mathematical techniques to prove that the concept of equilibrium could be applied to a broad class of "games" within "Game Theory," which made it possible for economists and other scientists to apply Game Theory to practical problems.
At the forum, Nash applied his intellect to the problem of currency stability, which he said he supports, because stable currencies lead to economic certainty and soundness.
"Money is a commodity that should be used like a radio, that is, efficiently…so values regarding money are important."
Nash said certain traditions, such as the Islamic or Christian religious traditions, sometimes consider money "unclean," which he said "interferes with the idea of money as a public utility."
But, he asked, "What will enhance the welfare of a country or the world?"
He answered that money, because it has more utility, is more efficient than bartering to get the goods and services humans need.
"Money allows a more efficient transfer of utility; gains accrue to all."
In theory, as in practice, it is important to maintain the utility of money as a medium of exchange by protecting trust in it, which eliminates one of the strongest anti-business factors, uncertainty.
For this reason, Nash said, China, but also the United States, should protect the stability of their currencies.
"In the long term, to control inflation, money must have a stable value."
Today, he said, China's currency is relatively stable because of its peg to the US dollar, even though the dollar is not as stable as it likely should be. One result is that currency migrates to places of stability, such as Switzerland.
Smith's lecture focused on mostly the plusses of the phenomenon now known as globalization, which he said was just another name for human migration and integration that has taken place throughout the history and pre-history of humanity.
Smith's academic work involves Game Theory and has, somewhat surprisingly, shown that it's a very human cultural norm to pursue "win-win" outcomes in human interactions.
"I owe you one…is a very human universal," he said, but added that he's found this attitude exists even in relationships where there is no expressed intent to aid another human being, as in the impersonal operations of the marketplace, where he said people established "rules" for economic relations "a long time before the first economist was born."
Smith asserted that the first "human right" was a property right that governed the marketplace with the consent of the participants in the markets.
"These rights are individual, but are dispersed throughout society…And we can see that maximizing personal gains maximizes the group, without intent."
For this reason, he said, participants in a market do not always know how they affect another. So reliance upon consensuality in the market and diversity are very important in a service/consumer society.
Smith said losses can be expected along the way and used an example of auto development to make his case, where the first viable automobiles to emerge were based on electrical or steam power.
"It would have been impossible to predict, beforehand, the internal combustion engine's success."
Despite the "failures" of electricity and steam relative to the internal combustion engine, the overall wealth of society was increased, which added an increment as well to poverty relief in the world. He said he's observed the same thing in stock market rises and crashes and in the high-tech world which recently experienced a bubble and bust from which a stronger high-tech world is emerging.
As painful as job losses are in outdated "smokestack" industries around the world, in China and the United States, Smith said, "Remarkable growth allows people to pursue economic betterment. Let yesterday's jobs go the way of yesterday's technologies…It's very important not to stand in the way of new technologies. Not to do so will bankrupt your domestic companies."
Instead, he said, "We must engage in wealth creation."
Rather than curtail textile trade between China and the United States and European Union or stop the expansion of globalization, Smith said, "This trade should be extended and encouraged. Find ways to ease the pain without stopping the activity."
Smith ended by quoting the French economist Frederic Bastiat, "If goods don't cross borders, soldiers will."
Alesina, a political economist at Harvard University in the United States, indicated agreement with Mundell, Nash and Smith.
On the textile issue, he said he disapproved of US and EU actions against China.
"In the short term, politically, tariff action is a "natural," but actually it would be bad for all. China is not an economic enemy, it is an economic friend [of the US and EU]. We need to view China as a market and as a place for economic cooperation."
Alesina, as Mundell, urged China to exercise restraint in its response to the textile issue and, as with Smith, urged China to explain and defend its position to the world.
Sala-i-Martin, who has been awarded Spain's King Juan Carlos I Prize of Economics and who uses econometrics to investigate poverty in the world, demonstrated how economic growth is leading to poverty reduction almost everywhere in the world, including China, but not Africa, where there is no growth.
He said, "Before the Industrial Revolution, people in the world were mostly equal, but equally poor."
With an unabashed goal of "getting more wealth to the world's poor," Sala-i-Martin said economic growth in and of itself means little to him if the world's poor are not getting more. His studies, he said, indicate that they are, regardless what standard for poverty is used.
But while the world is getting richer, as a whole, he said, "This says nothing about the distribution."
Sala-i-Martin said his studies show that incomes of the richest Chinese are rising faster than that of the poor in China, roughly at 10 percent compared to 5 percent, but he said this disparity should not cause too much concern in society as long as the poor are getting wealthier, which they are, and that the richest in China do not lose touch with the poorest, as he said has happened in Africa.
"Since 1980, the number of poor has in the world fallen by 150 million people while the population was growing by 1 billion, but in Africa, where 700 million people have the lowest incomes in the world, their incomes are going down and poverty is increasing. For the first time in human history, inequality is going down again, yet many millions are living in stagnation or decline, especially Africa."
In Africa, he said, the wealthy elites have lost all contact with the poor, and, "In countries that do not take care of the poor, growth stops. Citizens of the world should be doing more about Africa."
Fogel and Prescott addressed the issue of human longevity and social welfare issues that are emerging with the aging of the world's population.
Speaking directly economically, Fogel said it is essential that economic planners pursue increased productivity, because about one-third of the world's people are already feeding, clothing and housing the remaining two-thirds.
"This is a key factor."
Fogel said he expects the human lifespan to increase as much in the 21st century as it did in the 20th, when the lifespan increased from about 49 years old at the beginning of the 20th century to 80 years today. He said it is conceivable that lifespans could reach 100 years by the end of the 21st. This will have serious repercussions in China, where the average lifespan was only 45 years at the time of the Chinese Revolution, but which is about 80 years today.
Prescott, who used the United States as an example, said it is necessary to implement mandatory personal retirement account systems so that retirement systems can keep pace with the wealth of society in general.
He asserted that the present US system penalizes those who do more and contribute more to the US retirement system, because "those who contribute more don't get more; it's really more a redistribution mechanism."
Regardless, because of an increasingly elderly society relative to the available work force in the United States, "Increasing taxes on workers will not solve the problem."
"My advice [for China and the United States] is to set up a good system and think ahead. Personal savings systems are the way to go."
Commentators at the forum, many from China's most prestigious universities and think tanks, said they regarded the forum as a wonderful opportunity to see these economic giants in person and to hear them explain their views. However, the forum's lecture format did not provide many opportunities for intellectual give and take. The free-market views or other views of the economists were not publicly challenged.
This reportedly did take place in other special events surrounding the forum, including meetings with students at various venues in Beijing and meetings on at least two occasions with senior officials from the Development Research Center of the State Council and People's Government of Beijing Municipality.
Nobel Laureates Back RMB’s Dollar Peg
2005/06/15
Text by Charles J. Dukes
The stability of China's renminbi currency and the world trade in textiles dominated discussions before, during and after the Nobel Laureates Beijing Forum 2005 held in Beijing on May 30-June 1.
Seven winners of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel participated in the event. They were (with the year of their award and in order of their appearance at the forum): Robert W. Fogel, 1993; Robert A. Mundell, 1999; John Forbes Nash Jr., 1994; James Mirrlees, 1996; Edward C. Prescott, 2004; Clive W. J. Granger, 2003; Vernon L. Smith, 2002. There were joined by five other prestigious economists: Robert J. Barro, Edmund S. Phelps, Alberto Alesina, Michael Woodford, and Xavier Sala-i-Martin.
The economists were welcomed to China during opening ceremonies for the forum that were held at the Great Hall of the People in Beijing on May 30. The opening included speeches by Vice-Premier Zeng Peiyan; Wang Mengkui, president, Development Research Center of the State Council (DRC); and Beijing Mayor Wang Qishan. Afterwards, the economists began two days of lectures on issues affecting world economics and economic development.
In his welcome, Zeng said China would continue to strive for the stable and rapid growth of its economy while relying upon diverse forms of ownership and ways of employing personnel so as to increase overall employment and to provide an opportunity for every Chinese, whether residing in urban or rural areas or whatever region, to participate in and benefit from the country's economic development.
He said the government would foster talent and creativity, encourage respect for work and knowledge, and do more to protect intellectual property and support investment and business.
Special attention will be given to the country's western regions, to the old industrial bases of Northeast China and elsewhere and to regions suffering from more extreme poverty. Improvements will be made in education, public health, social security, environmental protection and in the provision of public services.
Zeng said the country would also improve its legal system and democratization.
He urged the economists to consider China's economic development and economic research and to make suggestions for improvements in the country's reform, opening and modernization, which represents an opportunity not just for China, but for the world at large.
The DRC's Wang said, "The forum's theme of 'human harmony and development' represents a common issue faced by all countries of the world. It is also an important task that China is striving to accomplish during its modernization process. China's general objective was to bring about human harmony and development when it proposed an outlook of development that puts people first and is sustainable and balanced overall and decided to build a harmonious socialist society….
"The Chinese Government is working to make policy decisions more scientific and democratic."
Mayor Wang, with reference the 2008 Beijing Olympic Games, said, "The people of Beijing are hard at work making preparations for the 2008 Olympic Games and are striving to modernize the city to realize the goals of the strategy of 'New Beijing, Great Olympics.' We will open even wider to the outside world, increase exchanges and cooperation with other countries and regions, study and apply successful practices from both China and abroad and organize the 2008 Olympic Games to ensure they are unique and a great success and make our due contribution to the peace and development of the world….
"Peace and development are the themes of today's world and represent the common ideal and goal of mankind…I believe the extensive exchange of ideas and discussions of this forum will shed new light on economic and social development in Beijing and the rest of China and provide us with helpful theoretical references for instilling and putting into practice a scientific outlook of development and building a harmonious socialist society."
The mayor said the forum would undoubtedly raise Beijing's profile as a major world city.
Speaking for the Nobel Laureates, Fogel, of the University of Chicago, said, "China has shown a remarkable capacity for improving the lives of its people and at a remarkably quick rate."
He said the Chinese economy has grown by 6 percent to 10 percent for the past quarter century, and he said, "I cannot see a reason why this should not continue for the next quarter century." He added that he expects that the Chinese economy will one day be larger than the US and European economies combined, but warned that "policy should ensure that slower growing sectors [of the economy] do not 'lose touch' with faster growing sectors."
The lectures at the Great Hall of the People began with Mundell, a professor of economics at Columbia University in New York City for the past 31 years, who on March 16 was awarded permanent residency in Beijing, becoming one of the first foreigners to be awarded one of the city's new "green cards." He also became the city's first Nobel prize-winning resident.
Mundell stridently defended the Chinese Government's renminbi currency policies and its practice, since 1994, of pegging the renminbi to the US dollar.
"I have always supported a fixed-rate policy," he said, "for the same reasons I supported the euro and am now supporting a world currency…China should keep its exchange rate fixed as long as the dollar is stable."
He said tying the renminbi to the dollar, or perhaps a basket of stable currencies such as the dollar, euro and Japanese yen, maintains currency stability in China and in Asia.
A rash revaluation, he said, might see the renminbi appreciate in the short term, but, he added, "In the long term, it will go the opposite direction, and currency instability would bring great uncertainty to Sino-US trade."
Regardless, he said, "China is in the best position to decide."
While economists such as US Federal Reserve Chairman Alan Greenspan and fellow Nobel winner Joseph Stiglitz have backed Mundell's stance, political pressures in the United States, from both Democratic and Republican Party politicians, and some forces in Japan have called upon China to "float" the renminbi or to move rapidly to revalue it. In the United States, the currency issue is related to soaring US trade deficits with China and has been linked, to some extent, with trade issues such as Chinese textile imports into the United States.
Mundell said, "There's no evidence that exchange rates correspond with trade balances…The US arguments in this regard are intellectually weak. Chairman Greenspan was 100 percent correct when he said that the currency has no relation to the US trade balance…The dollar-yuan peg is good for the US economy; the US is just trying to shoot itself in the foot."
He said Japanese economic problems, particularly deflation, are a result of Japan's central bank policies "that have nothing to do with China."
The Nobel laureate then presented 12 reasons why revaluing the renminbi would be a bad idea for China, Asia and the world including the assertion that a possible move to appreciate or float the renminbi would delay the convertibility of the Chinese currency, cut down on the inflow of foreign direct investment, reduce economic growth greatly, aggravate the non-performing loans (NPLs) situation in Chinese banks, hurt the profitability of Chinese enterprises, increase unemployment rate, add more deflation distress in rural sectors and reward speculators, all of which would add to instability in China and Asia and hurt the worldwide economy.
He said, "The real issue here is the competitive shock of China's entry into the world economy. In 1978, China provided 0.5 percent of world exports; in November it provided 6 percent…This represents a process of efficiency; it's real, but it's not a monetary issue and cannot be addressed with monetary policy."
On the other hand, Mundell said that while Chinese policy commits policy-makers to ensuring the stability of the renminbi, "this is poorly defined" and needs some work.
He urged Chinese policy-makers and economists to become more active in international forums in defence of the rationale for their financial policies, which Mundell characterized as essentially sound, but in need of further reform.
He urged policy-makers to use the upcoming G-20 Meeting of Finance Ministers and Central Bank Governors, scheduled for October 15-16 in Beijing, to "put monetary reform on the agenda."
Mundell reiterated his remarks at meetings in Hong Kong following the forum.
Nash, a portion of whose life was portrayed by the actor Russell Crowe in the movie A Beautiful Mind, used mathematical techniques to prove that the concept of equilibrium could be applied to a broad class of "games" within "Game Theory," which made it possible for economists and other scientists to apply Game Theory to practical problems.
At the forum, Nash applied his intellect to the problem of currency stability, which he said he supports, because stable currencies lead to economic certainty and soundness.
"Money is a commodity that should be used like a radio, that is, efficiently…so values regarding money are important."
Nash said certain traditions, such as the Islamic or Christian religious traditions, sometimes consider money "unclean," which he said "interferes with the idea of money as a public utility."
But, he asked, "What will enhance the welfare of a country or the world?"
He answered that money, because it has more utility, is more efficient than bartering to get the goods and services humans need.
"Money allows a more efficient transfer of utility; gains accrue to all."
In theory, as in practice, it is important to maintain the utility of money as a medium of exchange by protecting trust in it, which eliminates one of the strongest anti-business factors, uncertainty.
For this reason, Nash said, China, but also the United States, should protect the stability of their currencies.
"In the long term, to control inflation, money must have a stable value."
Today, he said, China's currency is relatively stable because of its peg to the US dollar, even though the dollar is not as stable as it likely should be. One result is that currency migrates to places of stability, such as Switzerland.
Smith's lecture focused on mostly the plusses of the phenomenon now known as globalization, which he said was just another name for human migration and integration that has taken place throughout the history and pre-history of humanity.
Smith's academic work involves Game Theory and has, somewhat surprisingly, shown that it's a very human cultural norm to pursue "win-win" outcomes in human interactions.
"I owe you one…is a very human universal," he said, but added that he's found this attitude exists even in relationships where there is no expressed intent to aid another human being, as in the impersonal operations of the marketplace, where he said people established "rules" for economic relations "a long time before the first economist was born."
Smith asserted that the first "human right" was a property right that governed the marketplace with the consent of the participants in the markets.
"These rights are individual, but are dispersed throughout society…And we can see that maximizing personal gains maximizes the group, without intent."
For this reason, he said, participants in a market do not always know how they affect another. So reliance upon consensuality in the market and diversity are very important in a service/consumer society.
Smith said losses can be expected along the way and used an example of auto development to make his case, where the first viable automobiles to emerge were based on electrical or steam power.
"It would have been impossible to predict, beforehand, the internal combustion engine's success."
Despite the "failures" of electricity and steam relative to the internal combustion engine, the overall wealth of society was increased, which added an increment as well to poverty relief in the world. He said he's observed the same thing in stock market rises and crashes and in the high-tech world which recently experienced a bubble and bust from which a stronger high-tech world is emerging.
As painful as job losses are in outdated "smokestack" industries around the world, in China and the United States, Smith said, "Remarkable growth allows people to pursue economic betterment. Let yesterday's jobs go the way of yesterday's technologies…It's very important not to stand in the way of new technologies. Not to do so will bankrupt your domestic companies."
Instead, he said, "We must engage in wealth creation."
Rather than curtail textile trade between China and the United States and European Union or stop the expansion of globalization, Smith said, "This trade should be extended and encouraged. Find ways to ease the pain without stopping the activity."
Smith ended by quoting the French economist Frederic Bastiat, "If goods don't cross borders, soldiers will."
Alesina, a political economist at Harvard University in the United States, indicated agreement with Mundell, Nash and Smith.
On the textile issue, he said he disapproved of US and EU actions against China.
"In the short term, politically, tariff action is a "natural," but actually it would be bad for all. China is not an economic enemy, it is an economic friend [of the US and EU]. We need to view China as a market and as a place for economic cooperation."
Alesina, as Mundell, urged China to exercise restraint in its response to the textile issue and, as with Smith, urged China to explain and defend its position to the world.
Sala-i-Martin, who has been awarded Spain's King Juan Carlos I Prize of Economics and who uses econometrics to investigate poverty in the world, demonstrated how economic growth is leading to poverty reduction almost everywhere in the world, including China, but not Africa, where there is no growth.
He said, "Before the Industrial Revolution, people in the world were mostly equal, but equally poor."
With an unabashed goal of "getting more wealth to the world's poor," Sala-i-Martin said economic growth in and of itself means little to him if the world's poor are not getting more. His studies, he said, indicate that they are, regardless what standard for poverty is used.
But while the world is getting richer, as a whole, he said, "This says nothing about the distribution."
Sala-i-Martin said his studies show that incomes of the richest Chinese are rising faster than that of the poor in China, roughly at 10 percent compared to 5 percent, but he said this disparity should not cause too much concern in society as long as the poor are getting wealthier, which they are, and that the richest in China do not lose touch with the poorest, as he said has happened in Africa.
"Since 1980, the number of poor has in the world fallen by 150 million people while the population was growing by 1 billion, but in Africa, where 700 million people have the lowest incomes in the world, their incomes are going down and poverty is increasing. For the first time in human history, inequality is going down again, yet many millions are living in stagnation or decline, especially Africa."
In Africa, he said, the wealthy elites have lost all contact with the poor, and, "In countries that do not take care of the poor, growth stops. Citizens of the world should be doing more about Africa."
Fogel and Prescott addressed the issue of human longevity and social welfare issues that are emerging with the aging of the world's population.
Speaking directly economically, Fogel said it is essential that economic planners pursue increased productivity, because about one-third of the world's people are already feeding, clothing and housing the remaining two-thirds.
"This is a key factor."
Fogel said he expects the human lifespan to increase as much in the 21st century as it did in the 20th, when the lifespan increased from about 49 years old at the beginning of the 20th century to 80 years today. He said it is conceivable that lifespans could reach 100 years by the end of the 21st. This will have serious repercussions in China, where the average lifespan was only 45 years at the time of the Chinese Revolution, but which is about 80 years today.
Prescott, who used the United States as an example, said it is necessary to implement mandatory personal retirement account systems so that retirement systems can keep pace with the wealth of society in general.
He asserted that the present US system penalizes those who do more and contribute more to the US retirement system, because "those who contribute more don't get more; it's really more a redistribution mechanism."
Regardless, because of an increasingly elderly society relative to the available work force in the United States, "Increasing taxes on workers will not solve the problem."
"My advice [for China and the United States] is to set up a good system and think ahead. Personal savings systems are the way to go."
Commentators at the forum, many from China's most prestigious universities and think tanks, said they regarded the forum as a wonderful opportunity to see these economic giants in person and to hear them explain their views. However, the forum's lecture format did not provide many opportunities for intellectual give and take. The free-market views or other views of the economists were not publicly challenged.
This reportedly did take place in other special events surrounding the forum, including meetings with students at various venues in Beijing and meetings on at least two occasions with senior officials from the Development Research Center of the State Council and People's Government of Beijing Municipality.
posted by Eastlaw at Monday, July 04, 2005
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