 My topic is like with both of my predecessors is on this panel is what I like to call the trade development nexus, this very intimate and close connection that we have between international trade on the one hand and economic growth and development on the other. And our remit for this conference is to look at developments over the last 30 years that 30 years of wider existence from 1985 to 2015. So what I'm going to do is within this very limited time span that we have is to look at the last 30 years in the light of some theoretical concepts that were developed around this trade development nexus. But one strand of the literature with which many people, several people connected with wider including myself, have been associated is what we've called North-South models. That is you look at the world economy as being divided into an industrialized and developed North and a less primary, basically primary producing or to some extent labor intensive manufacturing producing South. And the idea is the difference from traditional trade theory is that we didn't think of the two sets of countries as just being country A and country B which have just different proportions of endowments and so on, but as being sort of asymmetrical in their operation. And the way I like to look at it is to think of the North as a neoclassical solo economy fully employed with a built-in rate of productivity growth that provides the engine of growth for the world economy. Whereas the South is a Lewis economy, a dual economy, there's a peasant hinterland which we may call the traditional sector or perhaps also containing services and so on and what Lewis called the modern sector of producing either plantation products or manufactured goods or whatever. So in the North-South models that I developed and other people have developed, the idea has been to look at the interplay of the solo economy and the Lewis economy through the terms of trade and how this affects the rate of growth and so on of the not only of the world economy but each of the two components of the world economy, the North and the South. So if we take this North-South approach to the current situation, what can we say? What's happened in the North? Well in the North-South model, the North sort of happily ticks along at the solo growth rate, right, the rate of population growth plus the labour augmenting technical progress that is a driving force of the world economy. Now what's happened since then? If we look over, if we look at the last 30 years, that does not give us the best way of looking at developments in the North. When I was a student, when I first started studying economics in the early 1950s, there was an exciting concept advanced by Alvin Hansen of Harvard called the secular stagnation thesis. So I was very entranced by that and then the whole concept of secular stagnation disappeared from economics because everybody thought that well, you know, Keynes has ended secular stagnation because if you short a full employment, you just, you know, you do expansionary fiscal policy or monetary policy and you get rid of it, all right? We know it's not so easy and to my big surprise, the idea of secular stagnation is being revived, all right? So we see that there seems to be a tendency in the advanced economies for the full employment level of aggregate demand to be difficult to be maintained and fiscal policy has not been able to do much because of the austerity, you know, the fashion of austerity, the spread of notions of austerity. Monetary policy has driven interest rates down to zero, but even that hasn't been sufficient to maintain the demand at the high level. So we've got this slowing down of the engine of growth provided by the North, right? So not only these deficiencies of aggregate demand, but also there seems to be a slowdown in the rate of productivity growth itself, perhaps not in the long run, perhaps not in invention but in the sense of the application of inventions to actual production. So the Northern engine seems to be beating more slowly. If we look at the Lewis side of the picture, China we could think of as a vast Lewis economy, for example, and one of the things in China has been Chinese economists have talked about, some of them even in wider research papers, one of the things they've talked about is has China reached the Lewisian turning point, right? And the view was largely that maybe by 2010 this, you know, rapid development with relatively flat unskilled wages is coming to an end, unskilled wages are going up, and then obviously all the skills, more highly skilled wages are also rising in turn. And then if we look at the factor price frontier, the inverse relationship between the wage rate and the rate of profit, we see the rate of profit coming down. If the rate of profit comes down, then growth rate slows by the standard Lewis formula and as a result, growth in China is also slackening. So the North-South framework applied to 1985, 2015 enables us to see that both poles of the North-South model are functioning at somewhat below capacity. So the outlook at this global macro level is for the moment at least something that causes quite a bit of concern. Now, we can all, in trade development literature, it's not only the sort of macro, global, general equilibrium picture that we need to look at, but we can look at the world economy from the standpoint of a single developing economy. If we do that, we can, you know, for the most part, we can use the small open economy framework where the economy faces given world prices, maybe a given interest world interest rate, and if you allow for a risk premium, that determines the internal interest rate. So what about the situation of particular economies? Well, all, here economies can choose. I mean, you know, they can choose to have protectionism, import substitution, all of those things. You know, we've exhausted that subject in this morning. I wouldn't say exhausted, but, you know, we've beaten it pretty hard this morning. So there's no point in the very limited time I have to repeat that. All right? But every economy has the option, right? As I think Adrian said, you can all, no, maybe it was Alan, that you can just, you know, at the stroke of a pen, you can sort of dispense with these things. And then you can, let's say, you can approach the world economy as an opportunity. So supposing you do that, then what can happen? Well, this morning, we heard from Justin about his new structural economics. And one of the disadvantages of being as old as I am is that whenever one hears something new, D.H. Robertson wrote about it. You say, well, maybe it's not so new. I mean, you know, this, I've come across this thing before, right? And in this case, I came across it before in 1970, I wrote a paper called Factor Proportions and Comparative Advantage in the Long Run. Where I said that, you know, if you're a developing country, you've got a very low capital labor ratio. Advanced countries have high capital labor ratios, but you can't just imitate the advanced country, because if you try to do that, your costs will be too high. So what you've got to do is, you know, accumulate, raise your capital labor ratio and climb the ladder of comparative advantage, right? So one analytical way in which I illustrated this was the concept of the billion-dollar production function, right? So think of how can you produce a billion dollars at world prices of a number of goods, okay? So you can have a hierarchy of goods, very labor-intensive goods at one end, very highly capital-intensive goods at the other end. And you can, for each of these isoquants can be for $1 billion worth of good. If you draw the envelope to all of these isoquants, we can call that the billion-dollar foreign exchange production function, right? The country can, by picking one point there, you can generate a billion dollars of income at world prices. So which point should you pick? Efficiency says you'll get the best result if you pick the point that is appropriate to your capital labor ratio, right? You pick that. Maybe that's very labor-intensive, like Korea and so on in 1960. You produce shoes and wigs and things like that. But then if you save and accumulate a la solo, then your capital labor ratio will rise and you will ascend over time to increasingly, you'll climb the ladder of comparative advantage. You'll get increasingly capital-intensive. You'll start to export increasingly sophisticated goods. So that option remains open to any single economy, all right? So the fact that the world economy as a whole is slowing down should not be a reason why any single country cannot take advantage of this process of climbing the ladder of comparative advantage. On the other hand, I want to say something about the role of the state and infrastructure. I've been working on infrastructure with my colleagues, Stan Wellish, and Rich Clareder for some time. And the way we think of infrastructure is the following. I think of a production function, right? So Cobb Douglas production function. Normally in front of that production function, we put a coefficient, let's say just A, which is a constant, all right? But make A should be not just a constant in our opinion, but a function of the level of public services that the economy provides. What can we call hard and soft infrastructure, right? This is the law and order because for the economy to function properly, you have to have a process of law and order. You have to have the borders defended. You have to have law courts. You have to have all of those things. You have to have properly functioning roads, road and transport, properly functioning public utilities, things like that, okay? So the better the quantity and quality of this infrastructure, the more productive the different sectors of the economy can be. Now in the spirit of Arthur Lewis, we can think of two sectors, the high tech sector and the low tech sector. And we can, Clara and I assume that infrastructure has a differential impact on these two sectors. It has a stronger effect on the high tech sector. And then we can assume that the high tech sector and the government in infrastructure uses skilled labor in a very simple two kind of labor model. And the low tech sector uses unskilled labor. Let's say capital, both sectors use capital, but you can import capital from the rest of the world at the world interest rate plus a risk premium, okay? So that ties down one factor price. And then the model that I don't have time to construct and show you, but which can be done, will determine the skilled wage and the unskilled wage. Now if you determine the skilled wage and unskilled wage, you get the wage differential. And if you have an exogenous cost of education, the ratio of these two things will give us what Becker and Mincer call the rate of return on investment in human capital, all right? So infrastructure can, by boosting productivity, particularly in the skilled sector, can raise the skilled wage. That raises the wage differential. That creates a more incentive for the rate of return on education to grow. So you can build up the skilled labor force. You can accumulate more skilled labor force over time. So we can think of a model in which the government has a very important role to play, but this isn't like industrial policy or socialism or central planning or anything. As a matter of fact, it fits into what Adam Smith called the duties of the sovereign, right? Provide the framework of law and order and institutions and physical public goods that make it possible for the private sector to function effectively. And if you do that, then you widen these wage differentials. That has, of course, at the beginning, a negative impact on income distribution, as Adrian would be quick to point out. But at the same time, it gives the incentive for the raw labor force to accumulate skills over time, and eventually to catch up. So that is a very benign process, right? So one can put together in this framework, you can put together infrastructure, formation of human capital, international capital mobility, and of course, openness to world markets, okay? Now, if you go through all the countries in the world, that every country has this opportunity. The one who's taken the opportunity best, in my opinion, is Singapore, all right? And Singapore does all these things. It provides infrastructure at a very, very high level. Its educational system pours out increasingly skilled labor force. It's very open to importing capital from abroad. And the result is a very good one, right? My friend Deepak Nair, who's sitting in front of me, rightly points out that we should be aware that cases are different and so on. But when Deng Xiaoping was looking for a model, what was his model? His model was Singapore, right? And you say this is crazy. I mean, Singapore is a tiny city state. All right, there must be 200 cities in China that are bigger than Singapore, not to speak of the whole 1.2 billion or whatever the total population is. But basically, that's what China has done. I mean, put in a lot of infrastructure, right? It's brought in foreign investment. It's opened itself up to the world. It is producing increasingly skilled labor force. And these are important components of development, okay? So although every country is different and so on, which I, of course, completely understand, nevertheless, I think the importance of infrastructure, the importance of skill formation, importance of upgrading your industrial structure, all of these things everybody has to do, all right? So there's this common underlying element that we have, all right? So I think that what I always used to hear sometimes in the, that if there was a recession in the West, that the third world or the developing countries should immediately sort of look inward and sort of try to escape from this situation. But I think that's wrong. I think the important thing is to continue to take advantage of the world economy. And if you do that, and if enough people do that, then I think you can actually change the world. Thank you.