A Lunch with the Chair of the IPCC, Dr. Pachauri

This past week I had the honor of attending a private lunch with Dr. Rajendra Pachauri, the current Chair of the Intergovernmental Panel on Climate Change. The IPCC is the largest international organization dedicated to gathering the scientific evidence on climate change from scientists around the world. It shared the Nobel Peace Prize with Al Gore in 2007.

Dr. Pachauri spoke to a group of about 12 students, so the talk was intimate enough that we were able to ask questions. One student asked him his opinion of the role of the developing world, especially China and India, in the climate change issue. Many developing countries think it is unfair for them to have to curb carbon emissions just as their economic growth begins and so many of their citizens still live in poverty. For example, though China's economy is growing at unbelievable rates, many Chinese still experience a very low standard of living. Is there a way to curb greenhouse gas emissions without hurting the economy as well?

Dr. Pachauri believes that developing countries would be making a mistake if they chose to go through the same trajectory as the developed countries did. They need to find their own way to develop in a sustainable and environmentally-friendly way, without compromising their economy or the well-being of the impoverished. They could possibly try to do this by utilizing new technology. He emphasizes that this is an opportunity for developing countries to divert from the "business as usual" approach and really be innovative.

One step would be to price goods in a fair, transparent manner, without providing subsidies to goods such as oil. For example, the price of our oil does not actually reflect all the expenditures that are spent on our oil supply. Moving in a "green" direction does not necessarily lead to economic loss. The prices of renewables will only decrease, whereas oil prices can only rise in the future. Dr. Pachauri points to Germany and South Korea as examples in which sustainable changes led to economic gain.

I think that Dr. Pachauri makes valid points, but it still will be very difficult for China and India to drastically decrease carbon emissions without compromising their growth, especially if the leaders focus more on short term growth. The environment is a global public good; China will directly gain more by using cheaper and dirtier fuels than it will lose. All countries will share the burden of climate change.

China has begun large-scale initiatives that move it towards sustainable growth, but there will probably have to be some economic incentives in order for it to lower emissions to a level that will acceptable to everyone in the international community.

Do you think developed countries owe the developing countries anything in exchange for lowering emissions?

The image above is from Undergrowth.

China's Currency

I'm sure you have all heard about how China's yuan is undervalued compared to the U.S. dollar, and how this is supposedly damaging our economy and causing American workers to lose jobs. This argument has been all over the news, and more recently, both Republican and Democratic candidates' campaigns.

For example, this article "China-Bashing Gains Bipartisan Support." In addition, articles about China's currency have made headlines in the New York Times for the past few weeks.

However, have we considered any opposing arguments, or at least views that believe there are better solutions to deal with the economic crisis?

In my class "Gateway to Global Affairs," we discussed alternative perspectives. First, some background info: right now, with the yuan undervalued, exports are cheap for China and imports are more expensive. On the other side of the coin, imports from China are cheap for the U.S. and it is costly for U.S. manufacturers to export to China. Therefore, if the yuan appreciates, Chinese imports will become more expensive for U.S. consumers.

The main argument in the media seems to be that if we forced China to appreciate its currency, goods from China would be more expensive, making our domestic manufacturers more competitive, so American jobs would increase. However, why would jobs move from China to the U.S.? This is not a world that only consists of two countries. It makes sense that job creation would occur in the next low-cost producer, such as Vietnam and India. It is not likely that jobs would return to the states. So are politicians just using China as a convenient scapegoat for our economic problems?

Who is benefiting from artificially-cheap Chinese imports? Largely the American lower-middle class (think Wal-mart shoppers). So why the disconnect?

On the export side: change in currency may make U.S. products cheaper in China, so this may benefit American export manufacturers. However, Chinese savings rates are far higher than the rates in the U.S., so it is not certain that Chinese citizens would spend that much more money on imports. A good policy may be for the Chinese government to encourage more consumption among their citizens. Stephen Roach argues for this approach in the NY Times. He's the chairman of Morgan Stanley Asia.

Stephen Roach also teaches at Yale. Funnily enough, he's actually the sponsor for our Global China Connection chapter.

This image is courtesy of http://www.icis.com/blogs/asian-chemical-connections/2010/04/.

Wealth and Poverty

About a week ago, I read this article in the NY Times about China becoming the second largest economy. This occurrence was inevitable, sooner or later. However, what is more surprising is this line:

Its [China's] per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania — which, along with China, are close to $3,600 — than that of the United States, where it is about $46,000.

This had me reflecting back upon my own trip. When I met up with friends living in Beijing, living the ex-pat life in sheltered modern communities, I believed that they did not have the opportunity to experience the "real China." Metropolitan, wealthy cities like Beijing and Shanghai really can shield a person from the realities of the larger country. Living in high-rise apartments and top-ranked universities, shopping in mega-malls, visiting tourist attractions, using sparkling clean flush toilets, sipping Starbucks coffee, and hopping swanky bars is a far cry from the typical experience of Chinese citizen. Even outside of the ex-pat community, Beijing's average standard of living towers over that of other areas.

I thought I knew the real China. After all, I had ridden in a motorbike in the streets of Changsha, used dirty public restrooms, slept four to a room, gone without air conditioning, lacked internet access at times, eaten fresh greens just picked from the garden, hand-washed clothes, visited public schools and daycares, bought produce from a street market, browsed in tiny street-side shops, and suffered the suffocating humidity of the summer.

However, even my experience cannot be thought of as the life of an average citizen. All my relatives and acquaintance were members of the upper-middle class. My uncle is the chief editor of a university journal. My other uncle is a golf course designer. My grandparents were university professors. One uncle is a prosecutor. Most of the people I have met are academics, the students and professors of prestigious universities. These are not average people - they are the cultural, if not economic, elite.

The cultural elite may not be able to afford houses (rarely anyone can!). They may have to live in apartments for the rest of the lives. However, they do not have to worry about putting food on the table. Their kids are well-provided for and go to good schools. TVs, cell phones, and computers are within their price range. They will have enough to live on comfortably after they retire. They definitely make over the per capita income of $3,600 cited above. They are a part of the "real China," but they are in no way representative of the average citizen.

What is the face of the average citizen? Maybe the lady carrying the large woven baskets of bokchoy to the market down the street. The salesgirl in the tiny shop, her eyes eager as you walk in. The construction worker, dusty and sweaty from toiling under the midday sun. The little boy in the country, his bare feet muddy from helping on the farm. His older brother, eyes bright with opportunity as he enters the city to find a job and begin a new life. The old nanny, who left her family behind in the village in order to take care of another household.

I'm glad I got to see more of China this summer, but I cannot fool myself into believing that I lived the life of the average Chinese. But won't the nation's fast economic growth aid its citizens? China is changing. The expanding economy has improved the lives of millions of citizens while simultaneously crushing the dreams of others. A large city sucks in migrant workers with its demand for construction of new high-rises, while ejecting long-time residents with the demolition of old neighborhoods. Electricity and modern conveniences are now more available to farmers, while the the land and rivers that support their livelihood become more and more polluted everyday.

Development is a paradox. I can only hope it will be for the best in the end.