Jagdish Bhagwati
Professor of Economics, Columbia University

What is the world's greatest challenge in the coming decade?

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Planning for panic.

Jagdish Bhagwati

One of the most influential trade theorists of his generation, Jagdish Bhagwati is a professor of economics at Columbia University and a Senior Fellow in International Economics at the Council on Foreign Relations. From 1991-1993 Bhagwati was an Economic Policy Advisor to Arthur Dunkel, the Director of GATT. For the World Trade Organization, he has been an External Advisor to the WTO and has served on the Expert Group on the Future of the WTO appointed by the Director General. Bhagwati has been a Special Advisor to the UN on Globalization. He was also on the Advisory Committee to Secretary General Kofi Annan on the NEPAD process in Africa, and a member of the Eminent Persons Group under the chairmanship of President Fernando Henrique Cartoso on the future of the United Nations Conference on Trade and Development.

Bhagwati is the recipient of several prizes and honorary degrees, including Gold and Silver Stars from Japan's Order of the Rising Sun and the Padma Vibhushan from the government of India. The author and/or editor of over fifty volumes and over three hundred articles, Bhagwati's articles have appeared in The New York Times, The Wall Street Journal, The Financial Times, The New Republic and The Times Literary Supplement. He founded the Journal of International Economics in 1971 and another journal, Economics & Politics, in 1989.

His most recent books are In Defense of Globalization (2004) and Free Trade Today (2002); his early books, particularly India: Planning for Industrialization (1970) and India (1975) opened the doors for current economic reform in India; on these reforms he was advisor to India's Finance Minister, now Prime Minister.

Bhagwati has delivered lectures at many top educational institutions and appeared on television shows including the MacNeil Lehrer News Hour, the Charlie Rose Show and Bloomberg. He is a director of the National Bureau of Economic Research, a Fellow of the Econometric Society, a member of the American Philosophical Society and the American Academy of Arts and Sciences, a Distinguished Fellow of the American Economic Association, on the board of the Academic Advisory Board of Human Rights Watch, Asia and on the Council of the Economic Priorities Accreditation Agency. The recipient of many awards, among them the Mahalanobis Memorial Medal, the Bernhard Harms Prize, the Kenan Prize, the John R. Commons Award, the Freedom Prize and the Frank E. Seidman Distinguished Award in Political Economy, he has been awarded honorary degrees from several universities.

Jagdish Bhagwati graduated from Cambridge University in 1956 and continued his studies at MIT and Oxford. Before joining the faculty at Columbia, he was a professor at the Indian Statistical Institute, the Delhi School of Economics, and MIT. 


Jagdish Bhagwati: If I had to choose one, let me choose it in the area in which I have written quite a bit and taught quite a bit. It’s about globalization. There is a weak underbelly as it were. And that has to do with capital flows. It’s in my book “In Defense of Globalization.” I have a separate chapter on capital flows.

Capital flows, we still really don’t know – in an interdependent system where capital can move very fast – what we can do if suddenly panic materializes. Right now – in fact as we talk – we’re on edge as a result of the subprime lending and so on. In international capital flows, there’s always this continuous anxiety – no matter what people say in public who are involved in it – as to whether one day something will break up the system. And there’s no way to feel completely secure about it.

That is something I wrote at the time of the East Asian financial crisis in foreign affairs. It was called “The Capital Myth,” and I was simply saying that with trade, of course there can be problems; but they’re minor problems. Like if I exchange my toothbrush for your toothpaste. And if we remember to brush our teeth, we will both look rather good, right? And the probability of our teeth being knocked out in the process of exchange is rather small. There’s nothing _________ life.

But with the analogy for capital flows, it’s like with fire. Fire can be used to turn raw meat into a wonderful steak. But it can also burn your house down. And that is the worry. And I think we really haven’t scorched that. I don’t know whether one ever can, and that remains today with very rapid flows of capital __________; with people continuously playing, and with people unscrupulously ________ advantage.

For instance George Soros was asked, why did you bet against the Malaysian currency. ______ was mad as hell, so mad that he made some anti-Semitic slurs which are totally uncalled for. I don’t even know if George Soros is a practicing Jew. But it was such a crazy thing to say. But he had a point about George Soros himself. Leave my currency alone.

So George Soros eventually said look, I believe there should be control. _________capital flows are a problem. But as long as they are possible, I’m going to make money out of it.

Now there are many people who don’t care. George cares; but you know if there is money to be made he will make it until the system changes.

And then there’s the rest of us. This I do worry about, and this is the most important problem because multinational investments, trade, even migration, we are beginning to learn how to handle that. And I think some of the evolutionary thinking there, we want to manage it between _________.

It’s moving in the right direction, in my view. And international patents and so on. And letting generic drugs develop, that has also moved along the way.

So the only place where I don’t think anybody can reassure me actually, because it’s not possible right now. All we can do is whistle in the dark and hope nothing will happen, which is exactly where we are on the emerging crisis, which I hope will disappear. But it’s only a hope. It’s not an expectation.


Recorded On: Aug 14, 2007