:00:09. > :00:13.Growth is good. That is a basic economic assumption shared the
:00:13. > :00:16.world over but is it always true? Is it possible or desirable for new
:00:16. > :00:22.giants of the world economy China and India to grow their economies
:00:22. > :00:25.until they have reached American
:00:25. > :00:28.today are Chandran Nair, founder of the Global Institute for Tomorrow,
:00:28. > :00:31.and Raghuram Rajan, former IMF ec ecd now economic adviser
:00:31. > :00:41.to the Indian Prime Minister. Will free market capitalism make or
:00:41. > :01:13.
:01:13. > :01:16.break Asia? Welcome to the programme. I want to start with you,
:01:16. > :01:19.Chandran Nair. It seems to me that you have developed ideas about
:01:19. > :01:23.Asia's economic future that are based on profound pessimism, a
:01:23. > :01:26.feeling that it is too late for Asia to enjoy the sort of
:01:26. > :01:34.prosperity derived from free market capitalism that we have seen in the
:01:34. > :01:38.West. I have made it very clear that I am not pessimistic. I am
:01:38. > :01:48.just asking for us to take a hard look about where we are going in
:01:48. > :01:54.
:01:54. > :01:57.Asia. And that means that if we aspire to look like Americans, the
:01:57. > :02:07.outcomes are likely to be catastrophic. In my book, I
:02:07. > :02:17.
:02:18. > :02:21.essentially try to do two things. address the notion that there must
:02:21. > :02:25.be limits. This is a discussion that if you have in political
:02:25. > :02:28.circles, will make you an instant pariah. But I return to the word
:02:28. > :02:33.pessimism. Already, yolready, yout limits. Limits to the aspirations
:02:33. > :02:36.of citizens in India or China, status. And I want to put that
:02:36. > :02:40.thought straight away to you in Chicago, Raghuram Rajan. Do you
:02:40. > :02:43.accept the notion that in India and Ch Che are going to have to
:02:43. > :02:46.accept that they cannot have an American liferican life real
:02:46. > :02:51.question is whether everyone in the world can aspire to the kind of
:02:51. > :02:57.living standards we have in it is probably not sustainable for
:02:57. > :03:07.the world. Then, who should make the adjustment and when? And how?
:03:07. > :03:16.
:03:16. > :03:19.The devil is in the detail. It is not clear to me that it is better
:03:19. > :03:22.for Asia to constrain its aspirations than it would be for
:03:22. > :03:25.the US. The double-income couple in a 10,000 square foot house might
:03:26. > :03:28.cut back on their consumption. We need to think about where the
:03:28. > :03:34.benefits would be greatest in increasing consumption and where
:03:34. > :03:38.the costs of reducing it would be the highest. In time, technology
:03:38. > :03:42.will allow all of us to consume more. You put that very delicately,
:03:42. > :03:45.but is it not the truth that in America, you cannot afford to see
:03:45. > :03:51.the Chinese and Indians scale back their economic aspirations and that
:03:51. > :04:01.you need to see them consuming in even greater numbers? There is a
:04:01. > :04:04.question about when you do this, how you do this and who adjusts.
:04:04. > :04:12.With the world as a whole suffering from what looks like a recession,
:04:12. > :04:15.the industrial world needs markets outside for it to grow again. This
:04:15. > :04:22.would not be the time to emphasise a dramatic reduction in consumption
:04:23. > :04:26.in Asian economies. The world depends more on them growing. But
:04:26. > :04:29.the sentiment that we need to move away from the emphasis of
:04:29. > :04:39.materialism over time so long as technology adjusts to allow this, I
:04:39. > :04:46.
:04:46. > :04:50.think, is a reasonable idea. The environment is getting damaged and
:04:50. > :04:52.we need to worry about this. Let's stick with technology. In your
:04:52. > :04:55.formulation, which you have outlined to me about resources and
:04:55. > :05:02.restrictions in Asia, are you not forgetting the resilience of
:05:02. > :05:08.Chinese technologists? They have invested a huge amount in renewable
:05:08. > :05:11.energy. They are building 100 new nuclear power plants. When you say
:05:11. > :05:19.that there are obvious resource constraints in China, are you
:05:19. > :05:23.underestimating the Chinese? I am not underestimating anyone.
:05:23. > :05:26.Technology does have a role to play and I suppose that the areas I
:05:26. > :05:29.would disagree with Raghuram Rajan is that firstly, I do not think
:05:30. > :05:37.that the American system will adjust in the time frame that is
:05:37. > :05:40.needed. Climate change is one of those areas. Secondly, I do not
:05:40. > :05:43.think that technology is the panacea for the issues we are
:05:43. > :05:47.talking about here. Again, we are talking about the rhetoric that has
:05:47. > :05:53.dominated the space instead of talking about the need for us to
:05:53. > :05:56.live within our constraints. It is important that those who talk about
:05:56. > :06:04.constraint and constraining and not seen as being ignorant of how the
:06:04. > :06:07.world works. I would say it is the others who need to be challenged
:06:07. > :06:17.because many technologies have aided and abetted the stripping of
:06:17. > :06:18.
:06:18. > :06:20.natural resources beyond anyone's imaginations. What strikes me is
:06:20. > :06:24.the thing that you may not understand, ironically, which is
:06:24. > :06:34.the Asian psyche. It seems to me that you are underestimating the
:06:34. > :06:42.
:06:42. > :06:45.question of justice that is felt by Think of the Copenhagen Climate
:06:45. > :06:49.Summit. Many Chinese delegates and others said, how dare the West to
:06:49. > :06:52.tell us that we have to sign on to mandatory caps on our emissions
:06:52. > :06:57.when the historical emissions of the West are the fundamental
:06:57. > :07:04.problem at issue here and it is they who have to act and not us.
:07:04. > :07:13.This is a justice issue... We need to move beyond that. Beyond the
:07:13. > :07:21.blame game. Are most nations ready to do that? Will they accept that I
:07:21. > :07:25.cannot have a motor car, for example? I don't think that car
:07:25. > :07:29.ownership is a human right. What I am saying is where is the political
:07:29. > :07:36.leadership? If car ownership levels in Asia are... We will have by 2050,
:07:36. > :07:41.3 billion passenger cars in the world. The boss of Renault and
:07:41. > :07:50.Nissan says that that is why his company... You cannot ask Pizza Hut
:07:50. > :07:58.to sell less pizzas. Of course they were to sell more cars. The reality
:07:58. > :08:05.is that most of the city dumps are full of cars. What we have instead
:08:05. > :08:13.is this rhetoric of green cars. This is pure fiction. This will not
:08:13. > :08:19.happen. Take Germany, for example. Going back to the issue of justice,
:08:19. > :08:22.I just want to return to that. The Indian Prime Minister said that he
:08:22. > :08:32.is prepared to live with limited caps, meaning that India will not
:08:32. > :08:34.
:08:34. > :08:39.consume more per capita of energy than the US. That seems fair. But
:08:39. > :08:47.as you said, that will probably be unsustainable. But that does put
:08:47. > :08:50.the ball back in the court of the West. They have to participate in
:08:50. > :08:53.this and bring down their own consumption as well. They cannot
:08:53. > :08:59.rely on us to make all the adjustment. What is wrong with
:08:59. > :09:02.that? You speak as an esteemed adviser to Prime Minister Manmohan
:09:02. > :09:04.Singh in India. You are a free- marketeer, presumably telling him
:09:04. > :09:08.to adopt economic policies resulting in growth, continuing to
:09:08. > :09:17.encourage the building of new power stations, most of them coal fired
:09:17. > :09:20.and emitting extraordinary amounts of greenhouse gases. You have to
:09:20. > :09:30.take responsibility at some point, saying that your economic message
:09:30. > :09:35.is not sustainable. The effects of pollution are felt within the
:09:35. > :09:39.country itself. Indian cities are crumbling. There are not enough
:09:39. > :09:43.sewers, there is too much pollution. We cannot intend to go along this
:09:43. > :09:47.path forever. There is a great deal of talk about how pollution has to
:09:47. > :09:53.be curbed. There is a lot of talk about taxes and moving towards
:09:53. > :09:57.green and sustainable energy. Perhaps not as much as the West
:09:57. > :10:01.would want but the talk is growing and this is why I think it should
:10:01. > :10:09.be a shared sacrifice in some sense rather than all the burden being
:10:09. > :10:17.put on Asia to adjust. I wonder what you make of this. I will read
:10:17. > :10:20.you a quote. Too many Asians are going to US business schools and
:10:20. > :10:24.taking on an ideology about free markets and capitalism, not talking
:10:24. > :10:34.about environmental limits and sustainability. Too few Western
:10:34. > :10:36.
:10:37. > :10:39.driven assumptions... These Asians who go to America are erica are
:10:39. > :10:44.but they are intellectually neutered because they are aiming
:10:44. > :10:52.for a high-flying career in a multinational corporation. It
:10:52. > :10:57.sounds like he is actually writing about you! Not really. I do not
:10:57. > :11:01.aspire to a career in a high-flying multinational corporation. But the
:11:01. > :11:03.point that hint that hg is that there is an ideology that
:11:03. > :11:13.emphasises growth without taking into account environmental
:11:13. > :11:14.
:11:14. > :11:17.consequences. I think that is wrong. I do think that any economist worth
:11:17. > :11:22.his salt thinks about externalities and the fact that some of these
:11:22. > :11:29.externalities are not priced. We have got to find ways of pricing
:11:29. > :11:34.them. When we talk about the cost of pollution, many economists say
:11:34. > :11:37.that one way to deal with it is to have a high energy tax. That is not
:11:37. > :11:47.micro-managing a process to which people must adjust, but making them
:11:47. > :11:50.
:11:51. > :11:54.face up to adjustments using new mechanisms. So you are not making
:11:54. > :12:04.decisions for companies and people, but forcing them to think about it.
:12:04. > :12:06.
:12:06. > :12:08.That is consistent with all of the theory. What I hear there is an
:12:08. > :12:11.effort to define a middle ground still embracing free-market
:12:11. > :12:17.ideology but tempering it with some new adaptations and controls to
:12:17. > :12:21.accept some of your points about sustainability. Do you buy that? I
:12:21. > :12:25.teach at a business school and I work with one of the largest
:12:25. > :12:34.companies in the world. I have not arrived at the view that I put
:12:34. > :12:40.forward in my book with a sort of empty activism. I have seen this on
:12:40. > :12:50.the front end. We should start to price externalities, yes, he is
:12:50. > :12:52.
:12:52. > :12:55.right. Carbon is just one externality. Let's not use jargon.
:12:56. > :13:05.You believe that carbon taxes have to be much higher. My basic
:13:06. > :13:06.
:13:06. > :13:11.training is in pollution and engineering. The first thing is
:13:11. > :13:14.that you have to stop it before it gets to the pipe. Treating the
:13:14. > :13:20.symptoms, which is what emissions trading does, does not deal with
:13:20. > :13:30.the need to reduce emissions. This is why I talk about the political
:13:30. > :13:30.
:13:30. > :13:33.nature of our challenge in the 21st century. We need strong government.
:13:33. > :13:36.You seem to think we need authoritarian government. I do not
:13:36. > :13:40.say that, we need strong government. Look at the US. President Obama,
:13:40. > :13:44.with all the goodwill in the world, has not been able to do anything
:13:44. > :13:47.about carbon. When I speak in the US about the nature of climate
:13:47. > :13:57.change, and I start talking about people taking action and perhaps
:13:57. > :13:57.
:13:57. > :14:00.the need to have only one child or a one car... You are saying that
:14:00. > :14:04.government should intrude in people's lives, restrict what kind
:14:04. > :14:13.of car they should own or how many, restrict access to meat, for
:14:13. > :14:20.example? They should price it properly, at least. But you would
:14:20. > :14:26.go further. I have no qualms about people consuming meat but it is one
:14:26. > :14:29.of the most unproductive ways of creating food. It is water
:14:29. > :14:39.intensive, carbon intensive and it would be interesting to uncover the
:14:39. > :14:49.Once you go through the basket of consumption, some may like things
:14:49. > :14:58.
:14:58. > :15:02.or not, the question is: Who is going to make those decisions?
:15:02. > :15:05.There has been enormous lobbying. Unless you do away with
:15:06. > :15:15.corporations in general, you will have a version of what we have in
:15:16. > :15:23.
:15:23. > :15:30.India. This time it is corporations trying to bribe politicians.
:15:30. > :15:34.Europe is calling for enormous increases in these prices. It is
:15:34. > :15:37.not clear that the end result will be more environmentally sustainable,
:15:37. > :15:45.because the richest people will be able to buy things by lobbying
:15:45. > :15:48.politicians. How do you work this? In the last few years we have seen
:15:48. > :15:57.a fundamental free market failure. You could argue that the 2008 crash
:15:57. > :16:07.was a market failure. Even more of a failure is the failure to address
:16:07. > :16:11.
:16:11. > :16:20.resource restriction and climate failure. If that is true, there has
:16:20. > :16:30.to be another way. I want to know what you think we can do. We are
:16:30. > :16:38.seeing change slowly. You do not seek HOMAs as a socially acceptable
:16:38. > :16:42.any more. -- Hummers. It may not be as fast as people want. For example,
:16:42. > :16:45.in the US, you do not see the Hummer motor vehicle being
:16:45. > :16:53.acceptable any more. Now people are embarrassed about them and hide
:16:53. > :16:56.them in their garage. A huge, petrol guzzling vehicle. I am not
:16:56. > :16:59.saying there is no need for government action, but I would
:16:59. > :17:02.rather that be across the board in more limited ways which allowed
:17:02. > :17:12.choices to be made and sensible technologies rather than statements
:17:12. > :17:18.
:17:18. > :17:27.of: Thou shalt not, and thou shalt. To my mind, that brings in a whole
:17:27. > :17:33.lot more corruption and more authoritarianism then we need. --
:17:33. > :17:37.than. I asked you if you felt you were really in touch with the Asian
:17:37. > :17:47.psyche. I wonder whether Asians are really ready for that level of
:17:47. > :17:51.
:17:51. > :17:54.state intervention. We must understand the consuming
:17:54. > :18:04.classes in Asia are a minority. The consuming classes in Asia are
:18:04. > :18:07.perhaps half a billion people. The Washington consensus that resorting
:18:07. > :18:12.to a post war world results in catastrophic failure because there
:18:12. > :18:19.are not enough people around. 2.5 billion people cannot have cars or
:18:19. > :18:29.eat whatever they want. The opportunities for Asian governments,
:18:29. > :18:30.
:18:30. > :18:32.be they China if they come in, India, other Asian countries, the
:18:32. > :18:39.challenge is to recognise their legitimacy will depend on dealing
:18:39. > :18:42.with this conundrum. The Arab Spring was not about people seeking
:18:42. > :18:46.utopian democracy, but asking, Where are my basic rights to access
:18:46. > :18:51.to resources? That we look like a work in -- A Walk In the Park
:18:51. > :18:55.evasion governments do not take their people seriously.
:18:55. > :19:00.To take people with you will have to convince them that you have an
:19:00. > :19:03.answer. Your answer seems to be the quote you have of "delivering
:19:03. > :19:06.prosperity without growth". I do not understand what you mean by
:19:06. > :19:09.that. How can you have greater prosperity but no growth?
:19:09. > :19:19.If you define prosperity purely by the acquisition of goods and
:19:19. > :19:22.
:19:22. > :19:26.services, that would be very different. Prosperity, in the Asian
:19:26. > :19:29.context over the next 40 years, prosperity is one in which 3
:19:29. > :19:36.billion Asians will have access to what most people don't have today:
:19:36. > :19:42.Food, safe and secure food, water and sanitation. Mobile phones have
:19:42. > :19:51.been underpriced. More people worldwide have access to mobile
:19:51. > :20:01.phones than toilets or safe water. That is prosperity. An interesting
:20:01. > :20:03.
:20:03. > :20:13.point. But you talk about the benefits of mobile phones.
:20:13. > :20:16.Or more widespread use of mobile phones. There is benefits. There
:20:16. > :20:19.are now fishermen who can sell their goods in the markets which
:20:19. > :20:23.pay the highest prices without being exploited by middlemen and
:20:23. > :20:26.they can find out those prices on their cell phones.
:20:26. > :20:33.I have heard this argument about technology all the time. That is
:20:33. > :20:38.not the issue. Studies show that incomes has gone
:20:38. > :20:44.up. You say that we take away the cell phones in India and people
:20:44. > :20:48.will be better off. I have not said that.
:20:48. > :20:51.You are an advisor to the Indian government. You have to address the
:20:51. > :20:55.fact that while India has seen the rise of the middle class, an
:20:55. > :21:05.increase in prosperity, it has also seen a rise in the number of people
:21:05. > :21:07.
:21:07. > :21:16.earning $1.25 per day or less. Poverty in India is still an
:21:16. > :21:20.ongoing problem and it has not been solved by the embrace of technology.
:21:20. > :21:23.India should do more on bringing down poverty but it has come down
:21:23. > :21:32.much faster than in the years where we had the government determining
:21:32. > :21:38.everything. The markets have worked for India in bringing people out of
:21:38. > :21:48.poverty. The other thing to remember is that much more needs to
:21:48. > :21:59.
:21:59. > :22:03.be done. When you ask the average person on the street what they want,
:22:03. > :22:06.going back to your earlier point, it is to embrace this growth. They
:22:06. > :22:10.are not moving to buying cars, they are moving from walking to riding a
:22:10. > :22:17.bicycle. The point is that if everybody consumed at the rate of
:22:17. > :22:27.America it would be unsustainable. I think that is right. Up I would
:22:27. > :22:36.have to emphasise we need to ask -- that we need to ask, "Who, when and
:22:36. > :22:39.how?" A final brief thought. Some of what you say puts me in mind of
:22:39. > :22:42.Thomas Malthus and in the 18th century his conviction that human
:22:42. > :22:45.activity and population growth was outstripping the means of the
:22:45. > :22:50.planet to support it. You say that Malthus was wrong and many
:22:51. > :22:54.doomsayers since his time were also wrong.
:22:54. > :23:01.I am not doing that. Thomas Malthus was not wrong. He simply got the
:23:01. > :23:10.timing wrong. He said what he said on the eve of the Industrial
:23:10. > :23:13.Revolution. But that is the point. He could not
:23:13. > :23:23.conceive the shift in technology that was to come, and maybe you
:23:23. > :23:25.
:23:25. > :23:29.can't either. He could not forsee the shift in technology in terms of
:23:29. > :23:32.fossil fuels, etc. And the game has not been played out. The scientific
:23:32. > :23:35.evidence is that the natural resource base has been stripped. I
:23:35. > :23:38.do not discount that we may have a genius somewhere that will solve
:23:38. > :23:44.this problem. But we are stripping the ocean. Aided and abetted by
:23:44. > :23:51.technology. Do you find him convincing?
:23:51. > :23:56.We have had evidence that technology has adapted.
:23:56. > :23:59.There is a possibility it will not adapt next time. We need to limit
:23:59. > :24:06.environmental damage. Reduce risk factors on various forms of energy
:24:06. > :24:09.consumption. The Asians have to be aware of that. You do not want to
:24:09. > :24:13.stand in the way of their aspirations and say that they have
:24:13. > :24:16.to make adjustments while the Western world gets a free pass. If
:24:16. > :24:26.you could force the Western world to also make adjustments, that
:24:26. > :24:45.
:24:45. > :24:50.would be great. After yesterday's heavy rain and
:24:50. > :24:54.flash flooding Friday's forecast is much improved - a return to our
:24:54. > :24:57.summer, dry and some hazy sunshine. With clear skies overnight, it
:24:57. > :25:01.could be a chilly start this morning with temperatures into
:25:01. > :25:04.single figures. There will be lots of bright weather around and
:25:04. > :25:09.certainly some clear blue skies for the north-east of England down into
:25:09. > :25:14.the Midlands, East Anglia as well. Those temperatures will be nine or
:25:14. > :25:17.ten degrees Celsius. Sunshine too for the south-east of England and a
:25:17. > :25:27.much-improved start to the day for Berkshire, that had Sherine Dorset
:25:27. > :25:27.
:25:27. > :25:31.- dry at lots of sunshine here. -- had Show and Dorset. For Wales
:25:31. > :25:35.again, lots of sunshine and patchy mist and fog first thing. That will
:25:35. > :25:40.clear quickly. For western parts of Wales into Northern Ireland, we
:25:40. > :25:43.will see some hazy sunshine, bright conditions but thickening cloud
:25:43. > :25:47.towards the West and with that some rain and drizzle. For most of
:25:47. > :25:51.Scotland it will be a dry start with some overnight showers
:25:51. > :25:55.lingering in the far north and east. Those should clear quickly through
:25:55. > :25:58.the morning. For many today, it will be a dry day with some
:25:58. > :26:03.sunshine. Cloud amounts will increase, especially towards the
:26:03. > :26:05.West, making the sunshine turn a bit milky. Some rain and drizzle
:26:05. > :26:10.for parts of Northern Ireland and more substantial rain into western
:26:10. > :26:15.Scotland by the end of the day but a much warmer day than yesterday,
:26:15. > :26:19.temperatures up to 22 degrees. A full day's play at the 4th Test at
:26:19. > :26:24.the Oval. Temperatures about 22 Celsius with sunny spells. Coverage
:26:25. > :26:28.across BBC Radio. For this evening and overnight, we keep the clear
:26:28. > :26:31.skies towards the south. Some rain spreads east across Scotland in two
:26:31. > :26:35.parts of northern England as well. More substantial rain into the
:26:35. > :26:40.south-west of England during the early hours of Saturday morning. It
:26:40. > :26:43.will not be as cold on Saturday morning with temperatures in double
:26:43. > :26:47.figures. It is the rain in the south-west causing headaches into
:26:47. > :26:51.Saturday. We had a wave on the front straddling the UK, linked to
:26:52. > :26:55.this area of low pressure. When we had these waves on these fronts, it
:26:55. > :26:58.brings uncertainty into the forecast. Some damp weather into
:26:58. > :27:02.the south-west of England into the Midlands, East Anglia also make
:27:02. > :27:05.during Saturday. Further south will stay dry and sunny and the North
:27:05. > :27:08.should be dry as well with sunny spells. Into the early hours of