SESSION V: Macro and Growth Policies In the Wake of the Crisis; March 7–8, 2011; HQ2, Conference Hall 1, IMF Headquarters 2; Washington, D.C.

Washington, DC, March 7 and 8, 2011

Macro and Growth Policies in the Wake of the Crisis

SESSION V: Growth Strategies

The crisis was preceded by a long period of high growth, and higher income inequality.

Some argue that this increase in income inequality was at the root of the large decrease in household saving in the US, as people tried to maintain consumption growth by borrowing. Some argue that the emergence of a middle class in China is essential to the development of more advanced products, in which technological progress is higher. If the diagnosis is correct, can the problem be handled through conventional policies, or does it require a more dramatic reassessment of growth models, both in advanced countries and in export-oriented emerging economies?

Background notes on growth

CHAIR

George Akerlof

George Akerlof is the Koshland Professor of Economics at the University of California, Berkley. He was awarded the Nobel Prize in Economic Sciences in 2001.

George Akerlof received his Bachelor’s degree from Yale in 1962, and his Ph.D. in economics from MIT in 1966. It was during these years that Akerlof began conducting his extensive research in Keynesian macroeconomics.

After graduating, Akerlof became an assistant professor at the University of California, Berkeley. During his first year at Berkeley, he wrote “The Market for Lemons: Quality Uncertainty and the Market Mechanism,” in which he coined the term “lemon” for a car with hidden defects. In 1967-68, Akerlof spent a year at the Indian Statistical Institute in New Delhi. There he attempted to develop a program to evenly allocate water from the nearby dam. He also continued his research on unemployment and the gaps between supply and demand.

In 1969, after returning from India, Akerlof was granted tenure and joined the faculty in Berkeley’s Department of Economics. In 1977, he moved to Washington, D.C. to work for the Federal Reserve Board in Washington, D.C., where he met Janet Yellen. In "Efficiency Wage Models of the Labor Market", Akerlof and coauthor Janet Yellen (whom he later married) propose rationales for the efficiency wage hypothesis in which employers pay above the market-clearing wage, in contradiction to the conclusions of neoclassical economics.

Akerlof spent time at the London School of Economics, before returning to Berkeley in 1980. Akerlof decided to change his focus in research from macroeconomics to studying the fairness and social customs of unemployment. From 1994 to 1999, Akerlof moved back to Washington, D.C., because his wife had been named to the Board of Govenors of the Federal Reserve System. Akerlof and his wife returned to Berkeley in 1999, and since then Akerlof has served as the Koshland Professor of Economics.

George Akerlof demonstrated how a market where sellers have more information than buyers about product quality can contract into an adverse selection of low-quality products. He also pointed out that informational problems are commonplace and important. Akerlof's pioneering contribution thus showed how asymmetric information of borrowers and lenders may explain skyrocketing borrowing rates on local Third World markets; but it also dealt with the difficulties for the elderly to find individual medical insurance and with labor-market discrimination of minorities.

DISCUSSANTS

	Dani Rodrik Growth After the Crisis Globalization and Growth: Implications for a Post-Crisis World Commission on Growth and Development The New Development Economics: We Shall Experiment, But How Shall We Learn? The Real Exchange Rate and Economic Growth Dani Rodrik is the Rafiq Hariri Professor of International Political Economy at the John F. Kennedy School of Government, Harvard University. More He has published widely in the areas of economic development, international economics, and political economy. His current research focuses on globalization and its economic consequences. He is the recipient of the inaugural Albert O. Hirschman Prize of the Social Sciences Research Council and of the Leontief Award for Advancing the Frontiers of Economic Thought. Professor Rodrik's articles have been published in the American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, Journal of Economic Growth, Journal of International Economics, Journal of Development Economics, and other academic journals. His most recent books are The Globalization Paradox: Democracy and the Future of the World Economy (2011) and One Economics, Many Recipes: Globalization, Institutions, and Economic Growth (2007). D. Rodrik, “Growth After the Crisis,” in Michael Spence and Danny Leipziger, eds., Globalization and Growth: Implications for a Post-Crisis World, Commission on Growth and Development, Washington, DC, 2010. D. Rodrik, “The New Development Economics: We Shall Experiment, But How Shall We Learn?” in J. Cohen and W. Easterly, eds., What Works in Development? Thinking Big and Thinking Small, Brookings Institution Press, Washington, DC, 2009. D. Rodrik, “The Real Exchange Rate and Economic Growth,” Brookings Papers on Economic Activity, 2008:2.
	Paul Romer Which Parts of Globalization Matter for Catch-Up Growth? Future Cities Need to Hand Over the Keys Paul Romer is the President of Charter Cities, a research nonprofit focused on the interplay of rules, urbanization, and development. More Charter cities are special reform zones that let governments quickly adopt innovative new systems of rules, rules that can be markedly different from those in the rest of the country. (For more information, see www.chartercities.org.) Romer is a senior fellow at the Stanford Institute for Economic Policy Research and the Henry Kaufman Visiting Professor at the New York University Stern School of Business. He is also non-resident follow at the Center for Global Development and a member of the Board of Trustees of the Carnegie Foundation for the Advancement of Teaching. Recent writings by Romer can be found at Charter Cities
	Andrew L T Sheng Financial Crisis and Global Governance Free Markets and Property Rights Infrastructure The Crisis of Money in the 21st Century Andrew L T Sheng has published widely in economics and finance. His latest publication is “From Asian to Global Financial Crisis”, Cambridge University Press, October 2009, and a special article on Global Financial Regulatory Reform, in Global Policy Journal Issue 2, London School of Economics. More Mr. Sheng He is working on a book on Chinese governance and growth. He writes a column for Caijing Magazine, 21st Century Magazine in China and for Asia News Net, which is circulated in Star (Malaysia), Bangkok Nation, Jakarta Post, China Daily, and Korea Herald. He is also Adjunct Professor at the Graduate School of Economics and Management, Tsinghua University, Beijing and the University of Malaya, Kuala Lumpur. Mr. Sheng was Chairman of the Securities and Futures Commission (SFC) of Hong Kong from 1998 to 2005. Between 1993 and 1998, he was the Deputy Chief Executive responsible for the Reserves Management and External Affairs Departments at the Hong Kong Monetary Authority. Between 1989 and 1993, he was Senior Manager, Financial Sector Development Department at the World Bank. From 1976 to 1989, he held various positions with Bank Negara Malaysia, including Chief Economist and Assistant Governor in charge of Bank and Insurance Regulations. Mr. Sheng co-chaired with Mervyn King, the Work Group on Transparency and Accountability, which was established by the Group of Twenty Two in 1998. He also chaired the Financial Stability Forum’s Task Force on Implementation of Standards in 1999. From 2003 to 2005, he chaired the Technical Committee of the International Organisation of Securities Commissions (IOSCO). He currently chairs the Annual OECD/ADBI Roundtable on Capital Market Reform in Asia. He has a Honorary doctorate from the University of Bristol and was awarded the title of Datuk Seri Panglima given by the Yang di-Pertua of Negeri Sabah (September 2006) and Panglima Mangku Negara (PMN), which carries the title “Tan Sri” by His Majesty the King of Malaysia in June 2010. In 2009, he became the Pro-Chancellor of the University Tun Abdul Razak, a member of the International Advisory Council of the China Investment Corporation, the China Development Bank, the Advisory Council on Shanghai as an international financial centre to the Shanghai Municipal Government and also a member of the International Council of the Free University, Berlin. He is also a member of the Governing Council of the International Centre for Education in Islamic Finance (INCEIF).
	Michael Spence New Ideas for a New World: Michael Spence—Watch the video interview Michael Spence served as the Chairman of the Commission on Growth and Development (2006-2010 – the life of the commission), Professor Emeritus of Management in the Graduate School of Business at Stanford University, a Senior Fellow of the Hoover Institution at Stanford and Professor of Economics at the Stern School of Business at New York University. In 2001, Spence received the Nobel Prize in Economic Sciences. More He is the author of the book, “The Next Convergence: The Future of Economic Growth in a Multispeed World” Ferrar, Straus and Giroux, forthcoming, May 2011. The book will be published in several other countries including China and Brazil. He served as dean of the Stanford Business School from 1990 to 1999. As dean, he oversaw the finances, organization, and educational policies of the school. Spence serves on the boards of Genpact and Mercadolibre, and a number of private companies. He is a member of the board of the Stanford Management Company, and the International Chamber of Commerce Research Foundation. He is a Senior Advisor to Oak Hill Investment Management and a consultant to PIMCO. Spence writes monthly comments for Project Syndicate which are published globally (Spence in Project Syndicate). He writes occasional op-ed pieces in the FT and other major newspapers and magazines. Spence earned his undergraduate degree in philosophy at Princeton summa cum laude and was selected for a Rhodes Scholarship. He was awarded a B.S.-M.A. from Oxford in mathematics and earned his Ph.D. in economics at Harvard. He taught at Stanford as an Associate Professor of Economics from 1973 to 1975. From 1975 to 1990, he served as professor of Economics and Business Administration at Harvard, holding a joint appointment in the Business School and the Faculty of Arts and Sciences. In 1983 he was named chairman of the Economics Department and George Gund Professor of Economics and Business Administration. Spence was awarded the John Kenneth Galbraith Prize for excellence in teaching and the John Bates Clark medal for a "significant contribution to economic thought and knowledge." From 1984 to 1990, Spence served as the Dean of the Faculty of Arts and Sciences at Harvard, overseeing Harvard College, the Graduate School of Arts and Sciences, and the Division of Continuing Education.

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