Richard Sandor and Henry Paulson Talk Economic Growth in China at First Coase-Sandor Institute Event
Sandor, Chairman and CEO of Environmental Financial Products LLC and founder of the Chicago Climate Exchange, and his wife, Ellen, recently gave a gift to name the Institute for Law and Economics after Sandor’s mentor, Ronald Coase. This discussion, “Economic Growth in China: Prospects and Potential Pitfalls,” was the first event of the newly named Coase-Sandor Institute for Law and Economics. Sandor, widely recognized as the “father of financial futures,” is also a Lecturer in Law at the Law School.
Paulson is Chairman of the Paulson Institute at the University of Chicago, a nonprofit that promotes collaboration between the United States and China to address pressing global economic and environmental challenges. He served as Secretary of the Treasury from 2006 to 2009 and, before that, as Chairman and CEO of Goldman Sachs.
In a March 5 conversation moderated by Professor Tom Ginsburg, Sandor and Paulson talked about China’s need for a marketplace of ideas, its environmental challenges, and whether the nation is moving toward the rule of law.
Coase was unable to attend, but the participants spoke of his ideas and influence throughout the event. Ginsburg described Coase’s thesis in his 2012 book with Ning Wang, How China Became Capitalist, in which Coase argues that markets in China came from the people and market socialism, not the government. In fact, Coase argues, while the government has adopted markets, it does more to constrain them than to create them. Coase also expressed concern at a lack of a marketplace of ideas in China, the jump-off for Ginsburg’s first question for Sandor and Paulson.
Paulson said he agreed that, despite China’s progress, “ultimately you need a free marketplace of ideas, and that’s going to come from political reform and education reform.” Paulson added that more personal liberties, such as those that come with free speech, are the surest way to stability.
Sandor talked about one way in which the Chinese are more than willing to embrace new ideas: exchanges for reducing and trading carbon emissions. No one in Washington wants to consider “cap-and-trade,” Sandor pointed out, but China has seven such exchanges.
Ginsburg asked about whether China’s well-documented environmental problems hurt its growth. Both men agreed: Absolutely.
Paulson said the focus on rapid economic growth and urbanization has hurt the environment, and therefore, the people.
“Another point in GDP growth doesn’t mean much if people are dying of dirty air and dirty water,” Paulson said. The people will demand environmental changes, he predicted, and there are global consequences; the world’s leaders cannot deal with climate change without efforts from China.
Sandor said he sees China’s environmental woes as one of three main constraints to growth, alongside corruption and the single-child policy.
As for China embracing the rule of law, Sandor said he is very optimistic.
“This is an orderly society, a society that needs the rule of law, and I think it’s going there. And I think it’s important we continue to engage them and build relationships,” whether in the private sector, government, or educational institutions, he said.
Sandor and Paulson spoke before an audience of faculty, business leaders, friends of the university, alumni, and students that included Andrew Alper, Chairman of the University Board of Trustees.
Angus Ni, ’13, said after the event that it was eye-opening to hear so much about why China is the way it is, and what’s next. He was born in the country, where he lived until age 11.
“We don’t have any access to leaders. We don’t know what they’re thinking,” Ni said. Listening to Sandor and Paulson, “I learned a lot about the decision-making processes at the top in China.”
Sandor finished the event by urging students to become like Paulson and him, and Coase before them: students of China.
“China looks at the University of Chicago in a very special way,” he said. “The legacy of Coase is very, very important and the university has an enormous role to play…so go out and do it. There’s a great opportunity to be influential and help the reform process, and hopefully this university can lead the way.”
Sandor also announced that Coase and writing partner Wang will co-edit a new multidisciplinary journal, Man and the Economy, to be launched by De Gruyter next year.