Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 303 - 319)

THURSDAY 30 NOVEMBER 2006

PROFESSOR AMARTYA SEN

  Q303  Chairman: Professor Sen, welcome to the committee. We are delighted that you have the time to come along and we are very pleased that you are here.

  Professor Sen: Thank you very much.

  Q304  Chairman: Can I open this up by quoting from your book How to Judge Globalisation where you said, "Global capitalism is much more concerned with expanding the domain of market relations than with, say, establishing democracy, expanding elementary education or expanding social opportunities for society's underdogs. Since globalisation of markets is, on its own, a very inadequate approach to world prosperity, there is a need to go beyond the priorities that find expression in the chosen focus of global capitalism." In our inquiry into globalisation I would say that sums up why we want to look at globalisation in its widest sense. We have looked at it in the economic sense to date, but in its widest sense it is tremendous that you are here to help us in that regard. Can I start with a question? You have said in How to Judge Globalisation that a crucial issue is not whether a particular arrangement is better for everyone than no co-operation at all would be, but whether that is a fair division of the benefits. Which arrangements need to change in order to ensure that globalisation brings about not just global prosperity, but also a fairer division of benefits both in the world and within the UK and what can the UK Government do to support those changes?

  Professor Sen: Thank you very much for giving me an opportunity here to talk. I think that particular statement I made is concerned with dissenting a little from the way globalisation sometimes is judged as to whether everyone is benefiting or not. Of course, there are complex cases when there are some people who are not benefiting and who may be losing, but most cases are not like that, and that is also true of Britain and true of China and India, though I can think of countries where, by and large, that has not happened. But I was concerned also with pointing out that if there are some countries which are benefiting but benefiting not at all commensurate with what they have reason to expect or hope, then there is an issue of distributional equity involved. I was trying to draw attention to that. Of course, I was thinking primarily with the poorer countries in mind, on grounds that it is not just whether the poorer countries are becoming less poor over time but whether the opportunities that exist for them to become less poor faster are being adequately seized or not. That was my concern. Britain's concern is, of course, a little bit different in some ways, because Britain is a leader of the world community in a variety of ways, the United Nations, through Europe, through the Commonwealth, and so on, and all these are important connections, so in some ways the general world concern must be one of the British concerns too. On top of that, of course, there is the issue of how it is affecting the British population itself directly, and there you have a different range of issues, namely whether there are some people who are losing out from globalisation—that is one question—and, if they are not losing out, there is still a question whether they could have benefited more than they are doing. That would be, in the context I was looking at it, distribution and equity addressed particularly to the relatively poor in Britain. I think that is the kind of issue I was trying to draw attention to. Here the question would be not just whether jobs are being lost or not, which is, of course, a very important consideration, but what would be the constructive way forward. In the case of Britain, if you are dealing particularly with relatively less skilled people with greater proneness to employment, who may have reason to think that in some ways globalisation is not suiting their interests so much, whether in the form of hope, freer trade or in the form of immigration, and so on, there is the issue about what is the policy to be followed by Britain in looking after that particular group of interests. I think that is the translation of what I was trying to express generally in the British context.

  Q305  Mr Love: You hinted earlier on that a lot of people think that globalisation will inevitably lead to rising wage inequality with the unskilled and the less skilled losing out. How do you respond to that, and do you think government intervention can help in this regard?

  Professor Sen: I think, to take the latter part of the question first, it is not only government intervention that one is looking at but also government policy in general and the strategy that lies behind the policy, which may or may not take the form of direct intervention. There can be a variety of economic policies, fiscal, monetary, as well as institutional policies connected with trade preference, all kinds of issues come into that story. I do not feel that there is any kind of inevitability about the unskilled people losing out. The argument that is presented takes this form: that the poor countries will be becoming more developed along with globalisation. That is the argument. I am presenting that argument now to assess it. If that were the case, then you would expect that suddenly certainly some jobs would be lost, and those would be of the relatively unskilled people in the developed, rich countries, which would be, in the United Kingdom case, particularly the sector I was talking about the earlier. I think that reasoning is not generally all that sound because it assumes that the jobs they will cut into would be precisely the kind of existing unskilled jobs that exist. To some extent that could happen, and, in the absence of flexibility, there would be no way of absorbing them in other sectors, but it really depends a great deal on both the nature of trade as well at the nature of the adjustment that the domestic policies allow. To take the first, while it is certainly true that some of the expansion of trade, I would say particularly from China, has been at a relatively less skilled level, from India (which I know is one of your interests because I was sent some notice of that) because of, in some ways, the fact of Indian educational policy whereby the higher educational sector was given much more priory in the past compared to basic school education (which I think was a mistake but they are correcting it, relatively slowly now) the Indian intervention in the world market has been primarily at the relatively more skilled end. It has been concerned with information technology, consultancy, pharmaceuticals and so on. The one big exception in that respect is meant to be the call centres, and there is an oddity there, because call centre employment would not be something that you would think of as high skilled employment in the British or the American, French or Italian context. On the other hand, in India, quite often, the call centres are peopled by persons with university training, and in some ways, in the relative scale of Indian education, they look like the more skilled sector because they are university graduates. I think that the call centre issue is a very special problem. I think it is a mistake to focus too much on that. The number of jobs involved absolutely obviously is significant, but it is not a very large part of the economy that you looking at. If you look at the totality of employment, it really depends on where the trade and engagement would be, and I would tend to think that the Indian trade and engagement would be primarily at the more skilled level rather than the unskilled level, even though it may seem initially odd to accept that a poor, developing country might have a comparative advantage at the skilled end. It also depends on what is done about the policies domestically in skilled Britain about displacement and to what extent it is possible for the expansion of new industries to provide jobs of the kind that people who are displaced can take on. Given the basic goodness of schooling in Britain, and here I say, in comparative terms, that there are reasons for grumbling about school education in Britain, and I know that since I have taught here for many years and, indeed, was part of the educational structure here when I was at Trinity College, Cambridge, but in comparative terms, the education level being what it is, it would be difficult to think that their absorption is being affected by the very low quality of schooling, which is often the case, and certainly in many countries, including in India, that would be a big factor. So, in general, I would be sceptical of that generalisation, but a mistaken generalisation is often useful in the sense that it makes one think about the nature of the problem and dialectically I think it is not a bad thing to engage in.

  Q306  Mr Todd: One aspect which we have concentrated a little upon is the issue of migration. Joseph Stiglitz has commented that immigration from one country to another, and in this particular case from a poorer country to a wealthier country, can both improve economic efficiency and also increase the wealth of that country through remittances of those workers back to their home states.

  Professor Sen: So increase the income in the country from which emigration takes place?

  Q307  Mr Todd: It could do, in the sense that when they arrive they remit part of their wealth back to their home country. Nevertheless, you will accept that there are difficulties in the domestic population in absorbing large quantities of people who are migrating to take their jobs to some extent. How would one balance those two things, and also, is it reasonable to suppose that the country that loses that workforce will also lose a particularly highly skilled component of those who can contribute to the development of their country themselves?

  Professor Sen: I think this is a very complex question. I think there are three reasons why it is particularly complex. The particular scenario that Joseph Stiglitz mentioned is a possible scenario, not the only scenario I can think of. Looking at the country from which emigration is taking place, I think the benefit for these countries is not primarily, I think, only relative, I think it is the interchanged economic opportunity that greater contact brings about. I think the Chairman at the beginning mentioned that I tend to think of globalisation in rather broader terms, not just in terms of immediate trade effect. I do not think that any of the expansion that in India took place in the information technology software industry and even pharmaceuticals would have actually occurred the way it did without there being a lot of Indians who were abroad working in these jobs, and when they returned it had a major impact. If you take the size of the expansion that has taken place in these fields, these are very significant. Initially, it looked like a very small thing, but they have gathered momentum. A lot of the recent things that people talk about are directly connected with the experience that comes from having been abroad. So I think in some ways it is strengthening Joseph Stiglitz's point that there are advantages that come to the country from the emigration that is taking place, but it is slightly different from Joseph Stiglitz's in the sense that it is arguing that, aside from the remit of trade, and I am not trying to put them in a comparative scale in any sense, there is another very important factor, and that is in the domain of mind, understanding what is possible, how you can organise things. One of the things that has happened in India, for example, is that the nature of business practice, which used to be very fossilised, has dramatically moved, and to a great extent this is as a result of people who have seen new ways of managing things and then trying to do it better and sometimes, indeed, succeeding in doing it better. I would tend to think that it is all a matter of the number of people involved, but in general emigration from a poorer country sometimes has turned out to be of great benefit to the poorer country, certainly in the long run. The remittance is an immediate issue; the other thing takes time. In terms of the country into which immigration takes place, which is part of the concern that you expressed, certainly there are two different types of issue here. I am more familiar now, since I teach in Harvard, though I am between my teaching in Harvard now for 19 years—for six years I was Master of Trinity, so I was back here—with American discussion. There, of course, quite a lot of the jobs for which immigrants claim (and it is mainly Latin America you are looking at there) have been jobs which the current native Americans are unwilling to offer themselves; so in some ways they did not really tend to displace many people, they just made those jobs feasible. Of course it is also sometimes true that, of those who were still in that sector among the native born Americans, their wages might have been somewhat affected by that—that is perfectly possible. The possibility that people are coming in and disclaiming a whole lot of people where there is a great deal of willingness for British labour to work but foreigners are preferred because they are cheaper labour, I am not denying that that possibility exists, I do not know enough about British statistics to be able to say how realistic and how important a scenario that is compared to the other scenario, which is the one which has received most of the attention in America and with which I am more familiar.

  Q308  Mr Fallon: The sentence the Chairman read out, your definition of global capitalism should be more concerned with the expansion of the domain of market relations, is something I wanted to pursue with you so far as it applies to property rights and the protection of law that is available for property rights and the absence of individual property rights in much of Africa and parts of the Middle East. How can governments guide the forces of global capitalism to help promote property rights?

  Professor Sen: You are saying what Britain can do for these countries where the capitalist expansion cannot take place because of the absence of property rights?

  Q309  Mr Fallon: Yes.

  Professor Sen: I think that the nature of the legal system is an important factor in the development of economies, and I think you are right to consider that as one of the challenges to be addressed. I think it may be a mistake to concentrate only on that, because what holds back African industries are very often other factors, which include lack of basic schooling, and so on. After all, if you are trying to produce goods for the world market today, you need quality control; you have to be able to follow instructions; you need literacy; you need a certain amount of understanding about what modern technology is like: so there is the whole issue of education there, the whole issue of healthcare, which is a very big thing. Joseph Stiglitz's name has come up already. One of the things that another economist friend of mine, like Joseph Stiglitz, has discussed, namely Jeffrey Sachs, is how the low quality of health, particularly in Africa, plays a major part in devastating the opportunity of economic expansion. I would tend to put those concerns along with the property rights issue to which you drawing attention. I would say also that Africa has also suffered tremendously from continuing warfare and civil war, and there are, of course, a number of indigenous factors to be looked at in that. At the moment I am chairing a commission, which has been set up by the Secretary General of the Commonwealth, which actually begins its deliberations tonight, which is dealing with this problem of respect, the Commission on Respect and Understanding. Among the issues to be addressed we have to address that issue, not just religion related to terrorism and violence but also the continuing warfare that has happened in these areas. The reason I am mentioning it here is because one of the factors which I think is important is that the armament market makes a direct contribution to the continuation of local wars by providing a kind of incentive to buy armament, which is a very big factor. I note the fact, but I am just mentioning Britain as being particularly guilty, that between the G8 countries they have exported more than 80% of the world armament for every year for many years now. The United States, of course, alone exports about half of that. In order to sell armament you need demand, not only supply. It is one of the few fields in which supply does tend to encourage demand, Say's Law, which is supposed to be a mistake, and it is a mistake, but it is likely it is only one that may be wrong. It is possible actually to get people to buy through means, some of which are commercial and some of which, to put it nicely, would be extra-commercial, and I think that is another factor. So I would take all of these factors into account, because making investment is problematic when the property laws are not in place. It is also problematic if where you have set up your factory it may be blown up at any moment. So, I think peace is very important for that along with education and healthcare. So, I welcome your issue. I have not got any magic formula to suggest a way forward for property rights, but I would have thought that by doing what you are doing you are drawing attention to that problem, and what I would like you also to do additionally is to draw attention to other problems which you are holding up. We can begin to see some role that Britain particularly, and other countries too in the richer parts of the world, can play to help the poorer countries in this respect.

  Q310  Angela Eagle: Professor Sen, in your book Development as Freedom you redefine development as an expansion of real freedoms, not just gross domestic product or personal income, and also the removal of unfreedoms, such as poverty, social deprivation, tyranny and the protection of public goods, and you have also talked about the necessity to share the gains of globalisation fairly. You have said that, in order to achieve that, we need extensive institutional reform. Could you say a few words about how you see this institutional reform developing, if it were to be successful, for companies, for governments and for the international architecture?

  Professor Sen: Thank you very much for asking that question. Yes, I think institutional reform has to be of many different kinds. I think there is a basic issue of political power in the world, and that includes management of major financial institutions like the World Bank and IMF, it also raises questions about the United Nations, and so on. That is at a kind of very general, relatively abstract level, which is not unimportant for that reason. Completely at the other end, there are a whole lot of reforms that are needed about institutional structure. To give one example, patent law would be one of them. The patent law issue is interesting. In the period when I had the privilege of being Honorary President of Oxfam, we did try to do various things, and actually that work is continuing to be done now and Médecins San Frontie"res is another organisation which has been involved. Quite often this has been seen as being basically confrontational to the richer countries' interest, because they introduced pharmaceuticals and so on. That picture is a bit complicated now, partly because of the dynamism of the nature of the world economy. For example, India, which we were discussing earlier, which began primarily as an importer of drugs, has ended up now being one of the bigger producers of drugs. So in some ways the identification of interests have got much more muddied over time. But there is a general issue which I would like to draw attention to, particularly in relation to your question, namely, how is this going to work? If you look at the patent laws, I think they are very unsatisfactory and the WTO reforms, which have tried to do something, have not really got as far as they could have got. To see the issue of equity and incentive at loggerheads with each other, I do not think is the right way of thinking about it. Just consider one of the issues. That is why for many of us, including, as I was mentioning earlier, Oxfam and Médecins San Frontie"res, there exist drugs, for example for AIDS, which people cannot afford and cannot therefore buy in the poorer parts of the world, and the question is that you can produce them at an extremely low-cost, but you may be prevented from doing that on grounds of loyalty and patent rights and, therefore, there is a kind of direct interest. That picture is over simple.

  Q311  Angela Eagle: Does that imply that there should be some institutional changes to company law in order perhaps to give them social justice responsibilities?

  Professor Sen: That would be a more radical change than I was thinking of, but I am very happy to address that.

  Q312  Chairman: We are a bit short of time, Professor, if you could answer that one quickly and then we will move on.

  Professor Sen: All right. I am entirely in favour of companies having recognised and accepted social responsibilities, and it is a question of whether the companies could accept that and whether you intend to do it by legal change or whether you want to do it by political pressure or by social pressure of some other kind. I am no expert on that and I do not know whether that can be done. But what I would also like to point out, if I may, just to complete that, is that, if you do not manage to sell a drug, that cannot be bringing much profit to that company and, therefore, in an unsold drug which poorer people cannot buy there is both a story of injustice and a tragedy and a story of unfulfilled capitalist ambitions, namely making money by selling drugs. So I think it requires much more innovative thinking, and that is not as radical as what you are suggesting, which I am in favour of, but, even less radically, one has to think about a dual price system whereby it is possible for people to buy at cheaper prices commodities for which they can only offer a small price, and this is not a new thing in economics, it has been discussed for hundreds of years as to how that could be brought about. There is also the issue of how you could give the incentive to drug companies to produce new drugs, particularly for those illnesses which primarily affect poorer people in the world for which the incentive to produce may not exist. The fact that the production cost of an already known drug is very low does not eliminate the fact that the richer costs may be quite high. It is a question of generating incentive for producing such commodities which requires a radical rethinking about the price system and the patent law. It is that which I am recommending, which is part of the standard capitalist rule of gain but it is a question of playing the price mechanism more intelligently than the market at the moment is succeeding in doing. To that you can add the social responsibility issue, and I would certainly join you in that.

  Q313  Mr Gauke: Professor, do you think that in response to globalisation, returning to the point Angela made a moment or so ago, more powers should shift from the nation state to global institutions, and in doing so, do you believe that the stronger the belief in the role of the state in governing economic areas, the stronger the argument for more power for global institutions and, conversely, do you believe that the state has less of a role within the economic field the weaker the argument for stronger global institutions?

  Professor Sen: Again, this question is very exciting for me. It is also very difficult for me, because I do not know whether it is at all realistic to think that the nation states will in any way give up their right to be the ultimate authority on what they decide to do. Certainly policies that bring many countries together to address the same issue have many advantages. One of the issues, for example, is the environmental issue, that is, if you have only environmental regulation in Britain and nowhere else in the developed world, then the fear that some people express that industries might move elsewhere may well come about, and, at the same time, if you try to introduce that in all the countries involved and it is done through a global tax, which is what Kyoto tried to do, not adequately, but even that did not ultimately become widely accepted as the hope was it would be, but an environmental policy is certainly one where you need quintessentially combined action on the part of many countries, and that has to be done by negotiation, not so much by just giving over the power to the global body, which I do not see. You are a politician, which I am not, but even in my naivety I do not see that happening; that has to be through agreements of various kinds. There is also the issue which you have not mentioned, namely intermediate bodies like the European Union, which is neither national nor global. Here, if I may mention, and I have divided loyalty in many ways, I have lived in this country half my life and I vote in British elections because, happily, the nature of British law permits me to vote as a Commonwealth citizen resident in Britain, and I have tried to argue in my book Identity and Violence one of the reasons why we should look at the success of multiculturalism in Britain. I also discuss the problems that multiculturalism wrongly, in my judgment, has generated, but if we look at the successes, a big part has been played by the voting law, by wage, which immigrants coming into the country had until very recently where terrorism related to religion has become dominant; but the absorption of immigrants in this country has been made possible very much more easily than most of the non-white population who came from Commonwealth countries by giving them an immediate political voice which they did not have in France, Germany, Italy or anywhere else. I tried to make that point in France and Italy as well, and I have some reason for thinking that they have taken that point, the success case of Britain. Where I would regard it to be not a great success is that when the European Union was set up I do not think the interests of the Commonwealth were particularly well guarded at that time compared with the French. I think the French Associate got a much better deal. Certainly my own country of origin and nationality, namely India, had no kind of special arrangement whatever. I think part of the problem does arise from that because I would have thought at this time there could have been very easily a good policy relation between many Commonwealth countries and Britain which is not possible given the European law, and there is no way of changing that. So I think the whole question of intermediate organisations is an important one, but one hopes, of course, that something better might come about, namely that the whole of the European Union might take a more intelligent policy on that subject.

  Q314  Chairman: Thank you. Professor we will adjourn and reconvene in 10 minutes and finish at half past three.

  Professor Sen: Thank you.

The Committee suspended from 3.06 pm to 3.16 pm for a division in the House

  Q315  Kerry McCarthy: You touched, in your previous answer, on the question of environmental standards. What do we need to do to ensure that the distribution of meeting environmental challenges is spread fairly between the developed world, which you say you are trying to meet Kyoto as well, and the developing countries so that we are not requiring more of them, say, than we are of us?

  Professor Sen: I am very glad you asked that question because it is something I would like to think more about. To share what I tend to think, I think there seem to be three different issues. One question that came up in David Gauke's question was the need for global action rather than individual countries going their own way. That is a point that we accept. The second point is that, if we were to do that, we would have to think about some way of dividing the burden that is carried. Some of the rules are not of that kind; they are going to prohibit some kind of behaviour altogether. You may be able to find a general argument which is not conditional on that distributional issue being very important, but once the distributional issue is addressed, there is the question about poor countries, rich countries, what should be the division, and there is also the historical issue. I found that in China, which I visited late last month, and I have heard it in India and elsewhere, that America, Britain and Germany polluted the world when there was no such regulation and suddenly when we started going we were told that we cannot do any of these things. So there is an issue of historical fairness that is being addressed, so that has to be addressed too. There is a further problem, which is the question whether the environmental issue can be addressed separately altogether from the issue of global inequality and injustice on the subject on which the Chairman kindly began quoting a statement of mine. I would think that what we need there is to integrate that question. If there is a sense that the particular problems of developing countries are being addressed fairly, you might be able to get bigger co-operation, even in the environmental field, by making it part of a better understanding, some kind of a social commitment about global equality, global fairness more than global equality. I would have thought that the power of reasoning here could be quite strong. I was quite struck, even coming from India, as to how much more pollution some of the successful places in China industrially are, even locally. So there is a local cost involved and there is also its impact on global warming. I think, as the community and public discussion expands, we can bring more and more of these issues in. It is enormously easier in India, because of the nature of the polity there whereby the public discussion as to whether the government are failing to do what it is doing is a standard part of discussion that everyone participating in the environment would talk about. In China it is less common. The issue would be that as China becomes more tolerant of public discussion—and I have seen this time they are already much more tolerant than I remember last time about the problem they have created about their own healthcare by, in 1979, abolishing National Insurance for everyone on health replacing it by privately purchased insurance 1979, which has slowed down China's progress in healthcare dramatically—I would expect there would be a bigger discussion on the environmental issue in China too. One of the things I must say, speaking as a non politician, I think that the politicians really have to bring the discussion much more into the picture. I have always taken the view that there is a big difference between getting the right policy and getting the right policy on the basis of public discussion, because that is much more durable, the nuances are much better thought out that way. I think the time has come when certainly India is very willing to listen to the environmental issue after years of deafness, and I must say this is very good. I found that earlier about gender. When I first started working on gender inequality in the 1960s it was regarded at best as an amiable eccentricity. It has become certainly much more common to accept that as a very big dimension of India's problem, and, basically, people are recognising that in China too; similarly the environment. I think both bringing the public discussion much more into the story, linking the environmental issues perhaps to that of global fairness in general and the connection between the local cost of pollution and global warming. If you just go on saying, China will overtake America by 2010 in being the biggest polluter in terms of global warming, I think you are just addressing half the story. Meanwhile, already the local air in China is quite often foul. It is that complementarity on which much more discussion and awareness is needed. I fear I remain an unreformed pro-enlightenment believer in policy change, and I think bringing it more into public discussion will be a very big contribution besides resolving the problem which you are asking me about.

  Q316  Chairman: Professor, hopefully you are in a good position to answer this. Some commentators argue that encouraging people to place more importance on their affiliation to their country of residence rather than their affiliation to religious or ethnic communities will improve social harmony. How do you respond to the suggestion? To what extent will government policy initiatives, such as ensuring people pass British citizenship tests and speak English, will improve immigrants' integration into British society and improve social harmony?

  Professor Sen: It is such a huge question, and we do not have very much time. I wish we had. If I may say, I really tried to address that question in my book Identity and Violence. I am not suggesting you buy the book. You can borrow it from the library, which is much more cost-effective.

  Q317  Mr Love: We cannot afford to buy it; we need the library!

  Professor Sen: I personally feel that Britain made a mistake in this, in the sense that the whole idea that the British identity is somehow mediated through your community belonging was a great mistaken step to take. Basically we have many different identities, we have a strong citizenship identity, we have a residents identity, we may have a religious identity, none of them have priority over other issues, and in some ways giving priority to religion over language, over citizenship, over residence and over membership of civil society and political community I think has been a great mistake. If I may use your language, it is not a question of X rather than Y. It is emphasising X because the idea that we have many different identities in the field of religion, religious identity, which need not in any way interfere with the political identity in the context of our political action, I think is very engrained. I show some slight pride in the fact that if you look at India today, a country that is more than 80% Hindus, if you look at the three principal positions, none of which is occupied by a member of the majority community, the President, Abdul Kalam is a Muslim, the Prime Minister, Manmohan Singh, is a Sikh and the leader of the Ruling Party, Sonia Ghandi, is a Christian born in Italy. I think the country does not feel that it is falling apart. That does not mean that religion is regarded to be less important, but it is just that you do not think of politics being mediated by religion. There are parties which try to do just that, and some of us celebrate the fact that those parties did not do so well in the elections where this became a critical issue. If we had more time, I could have gone on, but we do not. I would suggest that the importance of emphasising the loyalty of residents is very great, but that does not require you to say that in the field of religion you have to be less religious or anything like that. We live perfectly well with this. I have a strong British identity, having lived half my life here and being a participant in British elections which protects the Commonwealth regulations, and yet that does not conflict with either my religious belief, which in my case is none, but it certainly has no bearing on that. It has no bearing even on my citizenship and the loyalty I might have to India, because until Britain and India go to a war that issue would not be engaged. In most other cases the human mind is able to the take on sophistication much more than sometimes people assume that we are able to do.

  Q318  Chairman: Professor, the inquiry we are having is: "Globalisation: its impact on the real economy". What substance should we have in a report regarding that inquiry, what message would you leave with us that we should have in that report, "Globalisation and its impact on the real economy"?

  Professor Sen: One sceptical point, but a very constructive one, I think the real economy is such an undefined concept that I am not sure what is meant by it. Sometimes people mean by it commodity production and possible services, but that overlooks the way the nature of the world has changed. The share of the manufacturing sector has continued to fall throughout the world, and no less in Britain than elsewhere. So if by "real economy" one means manufacturing only, one would make a mistake, and, indeed, even about employment. If people lose a job in manufacturing but find a job which is equally good or better in the service sector or somewhere else, I think there is no particular harm in that, bearing in mind some of the biggest globalisation changes in India, for example, have been very strongly connected with information technology and others which sometimes may not count as real economy but is very much a real economy. But if by "real economy" you mean the entire economy, then I think, yes, it is a very serious question and I am happy that is being addressed. My second point is that in discussing the real economy there are three interdependencies which are important to bear in mind. One is that the economy does not stand alone independently of society and politics and, just as we were discussing earlier about not only property law but also the question of healthcare, education as well as lack of violence, has a big impact on the economy. We have to think about the real economy in terms of the broader interdependencies that the economy has with the society, with the polity and with everything else around it. The second interdependent is the issue of the global equity question, global fairness question. I think it is exactly right that the British Parliament should be very engaged in the interests of the British people, but the world in which we live, and given Britain's role in the world, has to take into account how British policies impact on the rest of the world, and in some ways that dissociation is not an easy thing. The final thing is connected with the question about the advantages that we get from immediate employment, immediate income for the whole future and the environmental issue which will engage. That is another interdependent. I am afraid I have never been an economist who can give you an answer to questions in the form of a slogan. I am just addressing these issues as problems which I hope you will address.

  Q319  Chairman: As Angela says, thank goodness you are not such an economist. Professor, we are honoured that you are here today to speak to us. Some of my fellow Chairmen were quite jealous when I told them that you were coming, and I said it was very easy; I phoned your hotel, it was easy to talk, and you accepted our invitation; so maybe you will have further phone calls from people as a result of that easy path. Again, it is tremendous that you have been here, all of us are delighted just to receive your wisdom, and it will enhance our globalisation report. So, on behalf of the whole committee, can I thank you very much.

  Professor Sen: Thank you very much for giving me the opportunity.





 
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