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Taking Stock

Taking Stock: Global impact of crisis

Kai Ryssdal Dec 4, 2008
Taking Stock

Taking Stock: Global impact of crisis

Kai Ryssdal Dec 4, 2008


Kai Ryssdal:
We’re going to continue now with Taking Stock, our occasional conversations with individuals who can give us the longer view of our economic situation.
All the trouble might have started in the United States.
But it sure hasn’t ended here.
Europe and Asia are trying to control their own crises.
And the problems have reached into smaller, more vulnerable economies in places like Africa as well.
Amartya Sen won the Nobel Prize 10 years ago for his work in welfare economics
He teaches now at Harvard University.
Professor Sen, welcome to the program.

Amartya Sen: Well, thank you very much.

Ryssdal: At this time of such great economic uncertainty in this world, is there one thing that you feel we should be paying greater attention to?

Sen: Well, I think the uncertainties affect different people very differently. People who are already vulnerable are affected dramatically more than others. The vulnerable part of the society who often don’t get the attention. I mean even in the rescue packages the concentration has been so much on bailing out the relatively more prosperous. So I think the prior susceptability is a very important consideration. And the other is, I think, there is a new kind of understanding that’s emerging about the balance between markets and the state. But the fact of the matter is there are limits to what markets can do as well as limits to what the state can do. I think the kind of crisis that we’re going through now will have some educational value if we did learn something from it.

Ryssdal: Kind of an expensive lesson isn’t it though?

Sen: Certainly, oh yes. I’m not recommending it as a method of education. No, the fact of the matter is that we are in this mess and we have to pull ourselves out of that. And the question of vulnerability and susceptability is a ways and means of doing it. But my second point about learning some lessons is to look at the future because this is not the last time we may face a crisis of this kind.

Ryssdal: Who then do you think is the most vulnerable in this case?

Sen: Well, vulnerable depending on which country you are in. If you are looking at the United States, environment is a very big factor. More than in Europe, for example, where if you are unemployed you have a longer unemployment insurance, you have health insurance which covers you. Now, if it is the case, as is indeed the case in this country, that you don’t have automatic health insurance, and that unemployment benefit could easily run out, that would certainly be a source of great vulnerability. But there’s also a whole lot of people whose interests are not often looked at, namely people with disability for example. And I think that kind of a question is extremely important, even though the numbers involved may not be a majority. But these are people who have intense suffering.

Ryssdal: What about the wider world, though. Is this financial crisis setting up increased conflict and stress between the West and the developing world?

Sen: I don’t think it’s quite doing that. I think there are two things it’s doing. One is bringing out the interdependence. You know, the American market collapse is influencing the lives of people across the world in a way that brings out how, in some ways, indivisive our interests are. If you look at the poorer parts of the world, there are those which are relatively dynamic at this time like China, India, Brazil and so on. And they are affected, of course, because quite a lot of their economy depends on exports. But they are already in a kind of high growth part. On the other hand, there are a lot of vulnerable people in China and India, who from the reduction of that growth would suffer. Because they’re very dependent on public expenditure of various kinids. But then there’s a whole lot of other countries in Africa, for example, where they are not having that kind of a dynamic economy. On the other hand, they will get the downturn. And things may get much worse for a whole lot of people. So, I think that the fact of the matter is that our fortunes are always divided. And nothing brings out our division as much as a situtation of crisis like we’re seeing today.

Ryssdal: What’s the role for some of the international economic organizations like the World Bank and the International Monetary Fund at times like these?

Sen: Well, I think that’s a very big question. I think we are trying to look at a kind of differnt way of seeing the world. After all, these institutions were basically set up in the 1940s, when pretty much all of Africa and much of Asia were colonial territories. So we have to take a much more global view and a much more nuanced view about the fact that there are poor and the rich, and that there are vulnerable and nonvulnerable. These issues require explicit attention. We need to change the perspective which goes — and I can’t emphasize this enough with what I see of global democracy, by which I don’t mean a global government. Democracy basically has always meant active public reasoning. John Stewart Mills’ phrase, “Governemnt by discussion is extremely important.” And the global organizations have a huge role to play in that.

Ryssdal: What’s the right thing for the big economies to do for the United States and Europe to do? Should we fix our own problems first and then turn our attention to what’s going on in the developed world? Or should we try to keep an eye on both areas and try to do what we can for countries like Brazil and Russia and India and China and some of the even poorer countries too?

Sen: Kai, I think absolutely the latter with a slight modification. I must say I’ve never been a believer in one thing at a time. No economic policy can be run like that. But when it comes to fixing one’s own house, there’s no question that America fixing its own house — and I hope that under the new administration that will happen rapidly — will help the world. There’s no question. But there is at the same time the issue of not overlooking the plight of the distressed, whether it be the Chinese poor or the Indian poor. But I would even give less concern on that because, after all, these countries are in some ways able to deal with them within reason. But there’s a whole lot of countries whose interests may not be so well looked after. I would tend to emphasize that.

Ryssdal: Amartya Sen, thank you so much for your time.

Sen: Thank you.


Amartya Sen is the Thomas W. Lamont University Professor of economics and philosophy at Harvard University.

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