THE DISRUPTIVE ECONOMIST
Arvind Subramanian doesn’t agree with forecasters who predict China’s economy will be the world’s largest in 20 years.
He is convinced it already is.
That’s not the only economic heresy Subramanian has committed in recent times. In May this year, he wrote an opinion piece for the Financial Times suggesting that defaulting and subsequently exiting the Eurozone might, in the long run, be the best thing to happen to Greece.
Just when one is ready to write off Subramanian as a rabble-rouser, you come across reviews of his highly controversial new book Eclipse: Living in the Shadows of China’s Economic Dominance, and pause.
Because a stellar lineup of commentators including Francis Fukuyama (Stanford professor and respected author), Henry Kissinger (legendary diplomat), Liaquat Ahamed (Pulitzer-winning author of Lords of Finance), Martin Wolf (chief economics commentator, Financial Times) and Dani Rodrik (Economics professor at Harvard University) have been almost unanimous in their assessment of the book: that it is provocative, compelling and above all, convincing.
Not to mention, Foreign Policy magazine included Arvind on its globally respected list of Top 100 Thinkers for 2011 for ‘sounding the alarm on China’s economic ascendancy.’
For a man who’s shaking things up considerably in the elegant corridors of the world’s top economic institutions, Arvind seems remarkably mild. It’s hard not to wonder whether this is deliberate, the counterpoint between his calm manner and controversial opinions, making them all the more effective because they so patently aren’t hyperbole and hysteria. Currently a senior fellow jointly at Washington’s Peterson Institute for International Economics (PIIE) and the Center for Global Development, Arvind specialises in India, China and the changing balance of global economic power. Earlier, he has been assistant director in the research department of the International Monetary Fund, taught at Harvard’s Kennedy School of Government and at the Johns Hopkins’ School for Advanced International Studies.
He’s a prolific writer, publishing academic papers, authoring books and writing columns for the world’s top publications including the Financial Times, Economist, Washington Post, New York Times, Wall Street Journal and the New York Review of Books, among others. He’s an advisor to the Indian government in different capacities, including as member of the Finance Minister’s Expert Group on the G-20.
His academic credentials are as impeccable: a graduate of Delhi’s St Stephens College, he went on to get an MBA from IIM Ahmedabad before studying for an M.Phil and PhD at Oxford.
But credentials on paper can only go so far. It’s the reasoned, convincing case he makes for his radical pronouncement on China that has turned the global financial community thoughtful. He calculates that after adjusting for purchasing power parity, China’s GDP surpassed the United States’ in 2010. Describing his economic metric as an Index of Dominance, he argues persuasively that it makes a more appropriate measurement than pure GDP and points out that purchasing power parity is a standard used globally to compare standards of living.
While the world turns its attention to proclamations of a China slowdown, Arvind strikes a note of caution. “Of course China will slow down considerably. But even conservative growth translates to a lot of power,” he said in an interview to Wired magazine in February this year. “I see China’s renminbi replacing the dollar as a global reserve currency in 10 to 15 years. Even China-boosters find that hard to swallow.”
Behavioural economics may be a relatively recent discipline but economists have always assessed human behaviour when making financial decisions. Perhaps Arvind’s edge, then, is that his understanding of human behaviour is factored into his prescriptions for some of the challenges confronting the world economy. Take Europe. In another controversial recommendation – they seem to come effortlessly to him – he wrote in an NYT op-ed that Europe could look to China for a bailout. It turns out, there’s a strong strategic undertone to that advice. “If China provided emergency funds to Europe, we’d need to give it more say in the IMF, that’s a fair quid pro quo. But at the same time, China’s stake would rise because it wouldn’t want the money to be squandered,” he argued to Wired. “The strategy is to bring them in, then tie them down so their interests are aligned with those of the multilateral system.”
This isn’t, clearly, your ordinary number-spouting, jargon-juggling economist – a suspicion confirmed on finding that he quotes, among others, James Joyce’s Ulysees in Eclipse. What is clear is that Arvind’s ascendancy to the top ranks of global economists seems as inevitable as his favourite subject’s.