Interactive Session with Professor Michael Spence

Thursday, 21 September, 2006

An interactive session was organized with Professor Michael Spence, the Nobel Prize winner in Economics in 2001 who was visiting India as the Chairman of the Growth Commission. Professor Spence initiated the discussion by stating that no economy could achieve high growth rates by being cut off from the rest of the world. He cited as examples 11 economies in the post world war II period (8 of which were from Asia) that experienced sustained growth with increasing integration with the rest of the world. In his opinion growth could be initiated only if domestic peace, sound political leadership and dynamic strategies and policies were in place.

On the question of inequality associated with rapid growth, he said that the focus should be on generating more employment and making public services more inclusive. Citing the growth experience of China, he said that as more and more people moved into the manufacturing sector (largely export–oriented) in China, income inequality declined. Professor Spence agreed that an economy must possess the innovative capabilities to produce for the bottom of the pyramid. Domestic demand, he said, had a great role to play in the growth process. He concluded by stating that in case of developing countries, economic theory should not be blindly followed. In such circumstances one needs to be pragmatic in experimenting with different forms and pace of liberalization.