Time to save the world economy through the sheer weight of numbers

Reuters reported yesterday (Thursday 16 July 2009) that with China's economic activity picking up in 2009Q2, the Chinese full-year 8% growth target might now be achievable.

Will China save the world?

No one can yet be sure how these latest developments will play out. Of course, upon hearing good news of this kind, nay-sayers are quick to relate how a more pessimistic picture is indicated by other numbers. [Power consumption is usually a good fallback for this - although it's not clear to me which fully fleshed-out economic theory says why that is so.]

Or some say that the good news is likely just unsustainable short-term hot money channeling into propping up only temporarily asset markets and bank lending. [Come to think of it, except for long-term trend growth, doesn't every kind of aggregate demand expansion simply prop up asset markets in the short run? And isn't increasing bank lending exactly what we're trying to do elsewhere in the world? Unsuccessfully at that? At the end of it all, any action that releases 4 trillion units of anything - such as that China has undertaken with its fiscal expansion - has got to have some slippage.]

Finally, there's that portmanteau standby: "I just don't trust these numbers," instantly killing all intellectual debate. That one never grows old.

Perhaps the ambiguity in the current numbers is genuine. So look elsewhere: a historical perspective might be useful.

The 1997 Asian Currency Crisis was, up through 2008, perhaps yet the most wrenching financial and economic crisis in East and Southeast (ESE) Asia. In its concentrated impact on the region, 1997 might well have been just as severe as 2008/2009 for ESE Asia. From June 1997 to mid-January 1998 exchange rates against the US dollar of the currencies of Indonesia, South Korea, Malaysia, the Philippines, and Thailand fell by over 50%; that of Singapore, 20%. In Japan and in every single one of these economies, GDP growth turned negative in 1998, with the combined fall in these economies' 1998 GDP amounting to 2.4% of GDP in ESE Asia the preceding year. Millions of people lost their jobs.

So, if you had been following developments in fast-growing ESE Asia up through before 1997, were then shocked by 1997's sweep through the region, what should you have expected for how wrenching these losses were and how much they perturbed that region's growth path? Here's a graph of the fitted trend line through 1996 of GDP in ESE Asia (excluding Japan), then projected forwards and compared to reality post-1997:


The striking feature in this chart is how little a change in the growth path resulted from what at that time was viewed to be a dramatic downturn. Sure, the accumulated GDP under-performance from 1997 to 2006 was 5.1%. But the same calculation for the world economy overall was 11%, more than double that for ESE Asia, although the world's pre-1996 growth rate was only 3.7% a year in contrast with ESE Asia's 7.6%. Even before the 2008 global financial crisis, the world overall had slowed in comparison to the 4 decades before 1997. But ESE Asia, the centre of that period's financial crisis, emerged far better than one might have expected then.

Or did it? If we exclude not just Japan but also China from ESE Asia, the graph that emerges is quite striking and a little scary:

the accumulated under-performance is then 21%! Through sheer size and economic performance, the significance of China should have been observable even from outer space. This importance of China in aggregate economic performance mirrors its single-handed reduction of the world's poverty over the last three decades (that I've blogged on previously).

To emphasize further this historical point, recall that prior to 2008 the last two times the US economy went into recession was 1991 and 2001: in 1991 US GDP fell $13.7 bn. In 2001 US GDP grew US$74.1 bn. By contrast, ESE Asia generally and China in particular continued to grow throughout. Taking absolute values, and comparing these changes with those elsewhere gives this table:

All data here are in constant 2005 US dollars, evaluated at market exchange rates, not purchasing power parity - so the denomination in this comparison is what the whole world would use to buy wide-body Boeing jets, Nokia cellphones, and Italian fashion design.

True, in this comparison, China's per capita income now stands at only 1/14th that of the US; in aggregate, the US economy is still one quarter that of the entire world. But even so and even over relatively long stretches of time (2002-2006) China was already contributing more than half of the growth to the world economy that the US was doing. In times of US and world downturns, however, that ratio rises dramatically: China contributed 3 times what the US failed to do in 1991 (again, using the absolute value of the US change in income), nearly one and a half times the US's contribution in 2001.

Indeed, the rise of China [and to a smaller extent India] since the early 1980s has shifted the world's economic center of gravity 1800 km - 1/3 of the planet's radius - deeper into the Earth's crust, away from the US, and towards the East (previously blogged). This transition accelerated in 1991 and 2001, each time the US was in recession.

So, perhaps this time, it won't surprise that China leads the world economy out of recession. After all, it's already done so before, quietly.

Notes: I met John Ross recently, when he and I spoke on a panel on London and the global economic crisis, but hadn't seen his recent post on China's dramatically shrinking trade surplus, making a similar and more current point than my own post here. I highly recommend his posting.

All data are from the World Bank's World Development Indicators 2008. I provide more details on the numbers I've described above in my paper, "Post 1990s East Asian economic growth" (October 2008; also Spanish translation in pp. 40-52, Claves de la Economia Mundial 2009, Instituto Espanol de Comercio Exterior, Secretaria de Estado de Comercio, Ministerio de Industria, Espana www.icex.es).

One quick look at the world's shifting economic centre of gravity

With constant twitter and Facebook updates, I find myself putting off blogging anything altogether. Many items that might have appeared here have gone there instead. But then this entry doesn't really go in 140 characters.

At Hay Festival last weekend I appeared together with Howard Davies on a panel discussing the global economic crisis. For that and for some work (teaching, writing) that I'm doing on the global economy, I prepared this animation:




(A somewhat fuller-sized animation appears on my econ.lse site... but then we are talking about the world, so, despite the best efforts of Google Earth, anything on a computer screen will always be a little too small and representational.)

Obviously, a few more things need still to be thought through on this but for now the flat-world map animates the shift in the world's economic centre of gravity (building on calculations by Jean-Marie Grether and Nicole Mathys). The rise of China and India since the early 1980s has shifted the world's economic center of gravity 1800 km - 1/3 of the planet's radius - deeper into the Earth's crust, away from the US, and towards the East. The transition accelerated in 1991 and 2001, each time the US was in recession.

It might seem peculiar that the world's economic centre of gravity is so far north - is there some massive production going on near the North Pole that the world's military haven't told us about? No, that feature comes instead from how the 2-dimensional flat map has to represent something going on in a 3-dimensional spherical Earth. Suppose, for illustration, that Earth has two roughly equal centres of production at the same latitude just north of the equator but on the same great circle. Their centre of gravity is at that same latitude but deep within the Earth. Then, when you project a straight line from the Earth's centre to that centre of gravity and keep going until you burst out of Earth's surface, you come out quite far north - certainly further north than those two production centres were to begin. So, as long as most of Earth's production occurs in the Northern Hemisphere and aren't all closely located to each other so that only one side dominates, projection onto a 2-dimensional flatmap always shows the centre of gravity on the Earth's surface appearing quite far north.

Although it's not, strictly speaking, an error, I do think some re-definition of concepts would be useful. That's something I'm trying to fix now.

PS I've already referred to my paper on post-1990s East Asian economic growth elsewhere on this blog but, yes, that article contains more detail on the effects described in the animation.

Where in the world is Asian Thrift and the Global Savings Glut?

Sometime in the early 1990s the US began to move its international trade account from approximate balance into burgeoning deficit. From then on the US trade deficit grew year on year so that by 2006 the US consumed nearly US$900 billion more than it produced.

Such excess amounted to 7% of US GDP—up from an average of 2% over 1990–1994. For perspective, the US trade deficit in 2006 was nearly as much as the entire annual production of goods and services in the 1.1 billion-peopled economy of India (this was an improvement, though: in 2005, the US deficit was strictly greater than India’s GDP). And a 7% ratio is the same as that Thailand had in June 1997 on the eve of the run on the Thai baht precipitating the Asian currency crisis.

Except for the possibility of trade with outer space, the US deficit has to be matched dollar-for-dollar by trade surpluses in the rest of the world. Correspondingly, therefore, the rest of the world has been saving—consuming less than it has been producing—and accumulating dollar claims against the US as a result.

In this description, however large the global imbalance, a savings glut—wherever or however it might arise on Earth—has no independent existence. It makes as much sense to say the world’s excess savings caused enthusiastic US consumers to flood into Walmart to buy $12 DVD players, as to say US consumer profligacy made hungry Chinese peasants abstain even more and instead plow their incomes into holdings of US Treasury bills.

When two variables have always-identical magnitudes, obviously neither can usefully be said to cause the other. With global savings and consumption, however, looking at a third indicator, namely world interest rates, is suggestive. The Figure shows world money market interest rates falling sharply through the 1990s, as would be suggested by a global savings glut driving the large global imbalance.

(The Figure is for short-term nominal interest rates. Charting this for real long-term rates accentuates the fall. Subtracting actual inflation to construct real short rates makes the decline less obvious although not vanish. But I’m going to dispute this reasoning next anyway, so let’s keep the Figure.)

Many other factors could, of course, have driven down short rates: US monetary policy responded to national economic downturns in 1991 and 2001. Through the 1990s inflation rates worldwide converged and fell, together with short-term interest rates set by central banks everywhere. The burst of the dot-com bubble in March 2000 saw the NASDAQ index decline 77% in the following 18 months, prompting action by the US Federal Reserve. Japan’s monetary policy during its decade-long recession drove nominal interest rates there to zero.

It seems useful to obtain additional evidence on whether the global imbalance was indeed driven by a global savings glut or, in some interpretations, Asian thrift.

The Figure shows that, indeed, Developing Asia in general and China in particular, were running large and growing bilateral trade surpluses against the US.

The next Figure, however, shows that running trade surpluses against the US was pretty much the pattern nearly everywhere in the rest of the world. Both the EU and the bloc of oil-exporting countries, had rising bilateral trade surpluses against the US too, although of course the notion of “EU Thrift” has hardly ever been bandied about in international relations. Summed, the EU and oil-exporters trade surplus against the US moved almost exactly in step with that of China’s.

Dwindling investment opportunities and an aging population in Europe might, indeed, over the longer run, smoothly and gently, end up pushing greater savings in the direction of the US. But why would those same persistent movements cause higher-frequency gyrations in the EU’s trade surplus against the US that match almost exactly that of China’s in particular and Asia’s more generally? It seems to me the most direct and straightforward explanation is that the causal impulse to these trade surplus dynamics is instead the US economy, and everyone else is simply passively responding.

Indeed the ratios to the overall US trade deficit of individual country bilateral trade surpluses—run by each of China, Developing Asia, the EU, and the oil exporters—have time-series profiles that, after the mid-1990s, were essentially flat. Sure, China's and Asia's trade surpluses against the US were large and growing. But they were growing only because they remained roughly constant in proportion to bilateral trade surpluses elsewhere and, more to the point, to the US overall trade deficit.

So, yes, of course, there was a global savings glut. It necessarily mirrored exactly US profligacy, both private and public. Looking at these last few Figures, however, one might be tempted to think that excesses in the US economy drove trade surpluses everywhere else in the world, rather than that causality ran from Asian thrift to US trade deficit.

The reality, however, is almost surely that some combination of factors—central bank policy, Asian thrift, US consumer profligacy, US government actions, cheap East Asian goods resulting from a low-wage yet productive workforce (which must be a good thing surely)—was responsible for the large global imbalance of the early 2000s. To put the blame monocausally on Asian Thrift seems both irresponsible and inconsistent with the facts. And it is important to get to the root of this: the resulting global imbalance and its associated massive flows of financial assets likely led to the extreme financial engineering that now everyone claims no one responsible ever really understood in the first place.

In producing the Figures above I found useful the data and discussions in Ben Bernanke (2007) “Global Imbalances: Recent Developments and Prospects”; Thierry Bracke and Michael Fidora (2008) “Global liquidity glut or global savings glut”; Menzie Chinn and Jeffrey Frankel (2003) “The Euro Area and World Interest Rates”; Niall Ferguson (2008) “Wall Street Lays Another Egg”; Paul Krugman (2005) “The Chinese Connection”; Kenneth Rogoff (2003) “Globalization and Global Disinflation”; and Brad Setser (2005) “Bernanke's global savings glut”.

Daniel Gross (2005) “Savings Glut” traces the history of the idea that a global savings glut is to blame for many current US economic ills. The subtitle (The self-serving explanation for America's bad habits) reveals the conclusion that Gross reaches. Fareed Zakaria (2008) “There is a silver lining” describes the profligacy of the US consumer and government since the 1980s, and how the current global economic crisis might turn that around. He remarks that the US “cannot noisily denounce Chinese and Arab foreign investments in America one day and then hope that they will keep buying $4 billion worth of T-bills another day.”

The data I used are from the World Bank's World Development Indicators (WDI) Online, April 2008; and International Monetary Fund (IMF), Direction of Trade Statistics (DOTS) and International Financial Statistics (IFS), November 2008, ESDS International, (MIMAS) University of Manchester. Developing Asia, in IMF terminology, comprises Bangladesh, Bhutan, Cambodia, China, Fiji, India, Indonesia, Kiribati, Lao People's Democratic Republic, Malaysia, Maldives, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Tonga, Vanuatu, and Vietnam. In the Figures, China refers to China Mainland.

(This post also appears 21 November 2008 on RGE's EconoMonitor on Global Macro and Asia.  See also December 2008 discussion on the FT Economists' Forum on global imbalances.)

Martial arts on the mean streets of East Asia

In his book Angry White Pyjamas Robert Twigger, the prize-winning poet and author, and martial artist, describes how in the 1930s Gozo Shioda would prowl the streets of Kabuki-cho Tokyo, looking to fight street gangs and test his martial arts skills.

Decades after, Gozo Shioda went on to establish the Yoshinkan style of aikido.  In the eyes of some, Shioda and his teacher Morihei Ueshiba were at one point Japan’s greatest martial artists.

Ueshiba used to tell his students “On no account go looking for fights.”  Shioda, like many other good martial arts students, completely ignored his teacher on this.  

Instead, out of the situations in which Shioda constantly found himself, he formulated his own rules, like “In a fight against many, always make the first blow count against the strongest man.”

Shioda felt that you only really understand what aikido is when you have to use it in life-or-death situations.  His own aikido-enlightenment moment came when, cornered by four gang members, he used aikido techniques to break the arm of one of his attackers and the leg of another, and incapacitated a third by a single punch to the solar plexus.  According to Shioda's autobiography he appreciated only then how aikido wasn’t something you just practiced in a safe environment.

I have friends who train in aikido but I myself do taekwon-do, the birthplace of which is Korea.  So, that balmy July evening in Seoul when my taekwon-do training partner James and I came out of his dojang, we reminded one another of what Ueshiba and Shioda would have said, had they been walking Seoul’s crowded streets alongside us.  James, who has started training seriously in hapki-do as well, pointed out to me how in modern Korean language you say taekwon-do players but hapki-do fighters.

Every street corner in Seoul has over a dozen schools of taekwon-do and hapki-do.  Every shaded doorway has darkened stairwells leading up to a brightly-lit dojang.  Martial arts training is everywhere.

The other thing found everywhere in Seoul is free WiFi.  When you land in most airports in the world, service providers try to sell you a pay-as-you-go SIM card so you can use your cellphone without incurring high roaming charges.  At Incheon and Gimpo, they try to get you to rent a Skype handset instead.  Why call over cellular networks when you can just log in to the Internet on a cellphone handset, and transmit via VOIP for zero marginal cost?

I think that is truly cool.  It just makes so much sense.

South Korea’s 15-year-olds score highest in the world at problem-solving skills, way ahead of the US, the UK, France, or Germany, in the OECD’s 2006 Program for International Student Assessment Surveys.  Fifteen-year-olds in Hong Kong and Japan score well up there too, right alongside South Korea, and again far, far above the US, the UK, France, and Germany.  The same pattern emerges again for science skills and mathematics skills.

South Korea is a country brimming with clever people, knowledge, and technology, of the most exciting, intelligent, and useful kind.  The same holds for Hong Kong, Japan, and Singapore.  [Singapore will only start to participate in PISA surveys from 2009, and so its formidable student strength in mathematics, science, and problem-solving—apparent to anyone who teaches undergraduate students at any good international university— will only appear in the next OECD round.]

When economists estimate TFP (total factor productivity) to be low for countries such as these, whatever it is that we’re measuring more and more accurately as TFP, it simply can't be technology—at least, not the way technology is commonly understood.  So what is it that we have ended up estimating better and better?

Oh, back in Seoul, James and I felt that before anything else happened that hot July evening we needed sustenance.  So, taekwon-do player and hapki-do fighter together, we went and had really good Tak Galbi for dinner.  I described to James how in February 2005, after giving a talk on the global economy to Rusal executives in Moscow, I was jumped by 3 men while I was wandering about Red Square in the early evening.  I had then nowhere near Shioda’s presence of mind.  The month after that, I broke my nose fighting in a tournament. But I didn’t consider I had yet had a Shioda moment, and I was just as glad not.

So, after dinner, as all good martial arts students eventually must, I followed Gozo Shioda's example and I broke the law.  I bought a Kung Fu Panda DVD off a street vendor.  All the while, however, I was thinking about the relative sizes of deadweight loss and ex ante incentives in this picture of monopoly pricing under intellectual property rights.

When I got to Kuala Lumpur in late July, I discovered that Sri Hartamas too has dozens of martial arts schools.  So, August there, I trained with several seriously dangerous-looking hapki-do practitioners at Grandmaster Lim’s dojang in Mt Kiara.  (Thanks to my taekwon-do teacher at LSE Kian-lun Wong for making introductions.  Kian-lun and our LSE taekwon-do club are affiliated with Grandmaster Lim's Korean Martial Arts organization in Malaysia.)

In this same time I presented papers in Singapore and Seoul; made speeches to LSE alumni in Tokyo, Kuala Lumpur, and Singapore; gave lectures at Bank Negara Malaysia and Khazanah Nasional in Kuala Lumpur; and discussed economics and government policy in Ministerial offices and with numerous panellists on radio and TV throughout Southeast Asia (including the first ever webcam telecast for RTM on 29 August 2008).  I am grateful to Governor Zeti at Bank Negara Malaysia, Chairman Zarinah at Securities Commission Malaysia, Minister Shahrir Samad, Tan Sri Dr Munir Majid, Tan Sri Azman Mokhtar, Malaysia’s Finance Minister Nor Mohamed Yakcop, Singapore’s Finance Minister Tharman Shanmugaratnam, Takatoshi Ito, Bart Thia, Khuong-minh Vu, Dato' Azman Yahya, Dato' Dr R. Thillainathan, Carmen Chua, and many others who gave generously of their time to talk to me about the economics of the region wherever I went.

Papers I’ve written recently relevant to the preceding discussion include:

Post-1990s East Asian Economic Growth (October 2008)

Knowledge:  The driver of economic growth (June 2008)

while lectures and presentations include:

Khazanah Megatrends Forum (October 2008, KL: "Shifting sands:  The real side longer term")

Bank Negara Malaysia lecture (August 2008, KL: "Global growth and inflation")

LSE Tokyo alumni lecture (July 2008, Tokyo: "Post-1990s East Asian economic growth") [Photos]

LSE Malaysian alumni lecture (May 2008, KL: "The rise and fall of subsidies") [Ng Wei-Li's photos]

LSE Asia Forum in Singapore (April 2008, Singapore: "Knowledge: The driver of economic growth") [video]

[The aikido photograph is of my friend Attila Emam, who is third-dan blackbelt in aikido (and LSE-trained economist now at Securities Commission Malaysia), executing a throw.  The taekwon-do photograph, from September 2007, shows me sparring my instructor Mr Read, who is fifth-dan blackbelt in taekwon-do:  I am executing a jump spinning back kick while he is preparing to deliver a hook kick at my head.  The photograph is a still that I extracted from a video of us sparring.  The 2008 May photograph is of a meeting with Finance Minister Nor Mohamed Yakcop in his Putrajaya office.  The 2008 July photograph is from the LSE Tokyo alumni event at the Roppongi Hills Club.  The 2008 August photograph was taken after my lecture at Bank Negara Malaysia.  I obviously wear Vivienne Westwood way too often.]

 

Who moved my BlackBerry... and those hundreds of millions of people?

China and India are, for now, the only billion-people economies. In one popular telling, China shifted hundreds of millions of workers from farms to urban areas. In that story that switch rate, paired with reasonable assumptions on relative productivities in relatively backwards agriculture and forward-looking manufacturing just about matches China's overall growth rate, after factoring in other measureable progress.

A related not uncommon view further has it that India codes workman-like software, designs lower-end pharmaceuticals, answers queries about insurance claims over the telephone, and scans X-rays that Western doctors are too busy to do. These jobs might pay far less than done in the West but, in their part of the global marketplace, they almost surely pay better than stitching together textiles in Shanghai (上海) or assembling refrigerators in Shandong Peninsula (山东半岛).

So, which economy has had its growth driven more by changes in labour input? Where have more people moved out of poverty?


The Figures (using data kindly provided me by Dale Jorgensen and Khuong-minh Vu that they had used in their paper "Information Technology and the World Economy", 2006) show decompositions of Chinese and Indian growth into contributions due to physical capital, labour, and productivity (TFP). Earlier on, between 1989 and 1995, China certainly drew more on labour than did India to power economic growth and, true to stereotype, drew more on labour hours ("mere sweat and effort") than on labour quality, i.e., on skills and human capital. But even then the difference was small.

By 2000-2005 the most recent period for which we have data, China had come to rely more on physical capital, i.e., on machines. Its reliance on labour had fallen to 13%, almost exactly half that of India's. That shift occurred, moreover, with little loss in productivity's contribution. Through both periods and in both countries, productivity never contributed less than 40% of growth overall.

By 2000-2005, in fact, China's profile of growth contribution from capital, labour, and productivity almost exactly matched that of the US. The difference, of course, is that China has been growing at 3 times the rate of the US.




The next Figure (per capita income on the horizontal axis; hundreds of millions in $1/day-poverty) shows how China's much, much more impressive aggregate growth has lifted half a billion people out of extreme poverty in the last quarter-century; India, on the other hand, has only recently and, by comparison, imperceptibly started along the same path. But with a long way to go still. The data are for 1984-2004; I had used them in a previous blog posting.



My own small contribution on global inequality the last couple months was extremely practical. I did what I could in charitable fundraising. The video shows my friend Maria Gratsova holding the board for an airbreak. I performed a jump spinning hook kick. This particular event was the LSE Development Society auction on 05 February 2008, and I was up on the auction block. Fortunately, someone did buy me - for much more than I'm worth. But the money went to a good cause and the deal was that we had a paid-for dinner together afterwards.

(Yes, yes, I know, boards don't hit back but an airbreak means the board swings loose, and so is harder to break. And of course that they don't hit back doesn't mean they break everytime. In this next video [from September 2007] I attempted two boards on one jump and only broke one.)



Thanks to the kindness of friends, Maria and I held a repeat performance at LSE's Malaysia-Singapore Students Night, 23 February 2008, in the Old Theatre. Money changed hands there too, and for just as worthy a cause. (This still is from LiEe Ng's camera; thanks LiEe!)

Pop music

People ought to enjoy the arts for, err, well personal reasons. To the great disapproval of my friends who live in Hampstead and Islington (and parts of New York City. And Beijing. And Shanghai. Singapore. Mumbai. Helsinki. Rome. Brussels. Oh heck, just about everywhere) I enjoy pop music. For them pop music has no staying power and therefore no redeeming features. For me it is precisely that pop music is transient that gives it value. Because it does not endure, pop music provides an indelible marker in time.

In the same way, valueless data serve useful functions. By providing nonsense values that sweep appropriately through the underlying probability space, such data become indexes that provide balanced access into individual records in a database. These valueless data become keys whose precise values no user will ever want to know. However, simply from being invisibly present, they keep a database from becoming unbalanced, unwieldy, and slow to retrieve.

This blog entry similarly says nothing but I hope it provides balance and a marker in time. Most recently I have already talked too much:

14 November 2007 Confucius Institute for Business London Public Lecture: Knowledge economies in China [Podcast] [Presentation (PDF, 696Kb). The dynamic animation won't show in the PDF file but is available here]

28 November 2007 Queen Mary CGR Public Lecture: Global imbalance, global inequality [Podcast] [Presentation (PDF, 861Kb). The dynamic animations won't show in the PDF file but are available at $1-poverty and $2-poverty]

30 November 2007 BBC2 Money Programme: Superstar, Super-Rich (iPlayer broadcast soon)

04 December 2007 Inequality debate with Richard Wilkinson, at St Mary-le-Bow Church [Opening speech (PDF, 79Kb)]

The Confidence of Nations

In 1993 the New York Times ranked as one of the world’s top 10 restaurants the Far East Asian eatery Din Tai Fung (鼎泰丰): This restaurant specializes in xialongbao (small steamed dumplings).

Overnight, culture snobs everywhere no longer had to hide their inner ethnic hawker stall-foodie.

When I was growing up on a small Far East Asian island—when I say small, I mean 46 miles around—the height of sophistication was to eschew hawker foods like small steamed dumplings. Instead, if you were one of the cool kids, you boasted of having been at least once to an air-conditioned café, to sit there and have lunch comprising a ham sandwich and a salad, with tomatoes in it (although this last cost extra).

These days, of course, you can’t stay in any top international hotel in most countries in the Far East without waking up to a breakfast (or lunch or dinner) of koay teow thng, laksa, nasi lemak, sar hor fun, rojak, char koay teow, murtabak, oh chien, …, and, last but not least, small steamed dumplings. Everyone is now Deckard gesturing for two portions, only sitting in fancy surroundings.

What’s going on here? When did emerging economies acquire the self-confidence that allowed their native foods—for centuries sold only in back alleys and street-side hawker stalls, and served on banana leaf and old newspaper—to assume the mantle of cosmopolitan sophistication? Is it just higher incomes per capita? Is it the lifting of hundreds of millions of their populations out of absolute poverty? Or did the self-confidence come first and it is that that drove the people living in these economies to engage with the rest of humanity through trade and exchange, to clear out corrupt and ineffectual governments, to go to schools and be educated, to organize markets and to engineer efficient production?

I like it that my students at the LSE (including the 70% non-UK ones of LSE’s 8300, from over 150 countries worldwide) have that kind of self-confidence. This year (together with the very personable and prolific Conor Gearty, Professor of Human Rights Law at the LSE) I got to give a welcome lecture to their parents the week before classes began. I talked to them about “Globalization and The Student,” [PDF transcript, podcast coming soon]; I enjoyed tremendously the entire event, the questions the parents asked, and the conversations I got to have with them afterwards at the drinks reception. From everything I’ve seen at the LSE in my time here, their kids—our charges for the next few years—will be as interesting and interested, as delightful and entertaining as those kind people I got to meet Thursday evening.