Monday, May 24, 2010

Niall Ferguson assesses China and India

Niall Ferguson, Harvard historian, is one of the world's authors on geoeconomic, global systemic, money and finance, and other key international strategic issues. He delivered the Peterson Institute's ninth annual Niarchos Lecture on May 13, 2010, on the topic "Fiscal Crises and Imperial Collapses: Historical Perspectives on Current Predicaments." The transcript is available here.

A few extracts from the question-answer session following Niall Ferguson's lecture:

"Really, up until now, since 1972, since the opening to China, we’ve taken for granted that relations between China and America will be harmonious. And I’ve even written about Chimerica as a kind of happy marriage between the spendthrift and the saver. But the big concern is that that marriage is unraveling before our very eyes. What strikes me when I come to Washington is complacency on this particular issue, that when I raise the question, “Could the Chinese have a different strategy?,” the answer I always get is, “Well, they need us as much as we need them,” and that’s an illusion because they don’t. The lesson they’ve learned from the financial crisis is that they don’t depend on the US consumer anymore, that they can sustain something close to double-digit GDP growth by their own means and in trade with Asia. I think we’re in that sense at a big turning point in relations between China and the United States, but only one partner seems to see that."

"I think there’s also an important point to be made about China. China, I think quite likely, will overtake the United States in terms of GDP, but of course things could go wrong. But I’m not sure China’s a great place for a foreign investor compared with India. And I came away from a trip to India back in January deeply impressed by the fact that here is the second most populous country in the world, seems to be the most populous, and it has the rule of law, it has representative government, it has free speech, and it does, therefore, have the institutional foundations for an innovative and entrepreneurial society, which I’m not sure you can have with an authoritarian, oneparty system that has a planned economy at its core."

"So I guess my Asian strategy has become more Indian as this crisis has worn on. The Indian strategy is so much more self-propelled. There is an Indian middle-class, they are consuming, and it seems a politically stable country."

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