Andy Xie is a rare beast, he’s a talented, creative economist. His recent departure from Morgan Stanley, and by implication from the Global Economic Forum, is now being widely commented on in the press (and here).
Andy was really one of the first global economists to start drawing attention to the important impact the rise of the Chinese economy was going to have (you can find a selection of some of his posts on my page here, and my early China Economy Watch blog – now defunct – was full of citations from Andy, basically he was getting it right when almost everyone else was getting it wrong).
There are two memorable arguments that Xie has advanced over the years that still bear thinking about.
1) Throw away the text books. This wasn’t meant, I don’t think, to be taken literally, what he was getting at was that we are facing new phenomena, and we need to think on our feet. Intuitive economics. Two recent posts of mine (and comments) on the Indian Economy Blog reflect this legacy (and here).
2). It’s time to start conceptualising the global economy as *one* single developing economy (with a lot of market imperfections) rather than as the sum total of a lot of discrete individual economies. I still think that this idea hasn’t attracted the attention it deserves as a methodological proposal.
Ostensibly Andy left as a result of remarks he made about Singapore (if you believe the rumour mill):
The Hong Kong rumour mill quickly began speculating as to why Xie had left. Attentions have focused on an email that Xie penned on September 18. Many copies of the email â€“ which was about Singapore â€“ have since been passed around by the regionâ€™s fund management and banking community.
Clearly following Thaksin’s demise sensitivities in Singapore are running higher than usual.
But there was another issue lurking around in the background, namely:
â€œI tried to find out why Singapore was chosen to host the conference….Nobody knew. Some said that probably no one else wanted it. Some guessed that Singapore did a good selling job. I thought that it was a strange choice because Singapore was so far from any action or the hot topic of China and India. Mumbai or Shanghai would have been a lot more appropriate.”
Xie here is certainly expressing thoughts which are very much ‘out of season’, in the sense that he is raising an idea which he has long been advocating: that increasingly the drivers of global growth will be in China and India. In this sense what he is talking about is not so much the location, but rather the orientation and focus of the conference. In this sense what Xie is saying is very much ‘add odds with the consensus’ in the context of what was actually on the agenda.
And he is at odds with the way many people are currently conceptualising those global imbalances. In particular I would suggest that we currently have three rival paradigms in competition for understanding events:
1) The ‘it is largely a policy issue’ approach. The best known representatives of this view would undoutedly be the team at the Roubini Global Monitor (especially Brad Setser and Nouriel Roubini), and some of the staff economists at the IMF (in particular Raghuram Rajan, and also see this).
2) The view that the imbalances are – in large part at least – a result of excess global liquidity. The best examples of this view are to be found at the Bank for International Settlements (especially Claudio Borio and William White ), and in Morgan Stanley’s Joaquim Fels (and here).
3) The idea that there is an ongoing global demographic transition taking place and that this is occuring in different countries at different speeds. This means, for example, that some countries which are now enjoying their ‘demographic dividend’ – India, China, Brazil, Chile, Thailand, Turkey – are growing very quickly indeed, while others which are experiencing protracted population ageing – Japan, Germany, Italy – are suffering a continued economic slowdown. It is this asymmetry which lies behind the phenomenon which has become generally know as the ‘global imbalances’. One point of entry to this view would certainly be Ben Bernanke’s now notorious ‘global savings glut’ speech, another would be the work of Andy Xie (and to some extent Chetan Ahya) at Morgan Stanley, and a third point of access would, of course, be via the kind of posting I have been doing here on Afoe.
Quite who is right here only time will tell (and maybe not even then), and again quite why Andy left MS we will possibly never know, but at the end of the day one person’s loss here is almost certainly going to be someone else’s gain.
Incidentally, Ben’s been at it again: see the details from this speech yesterday.