India, China and other countries from the emerging markets are likely to grow at a high rate for sustained period of time as they have a long way to go to bring their people from agriculture into industry, US Treasury Secretary Timothy Geithner told US lawmakers.
"I think most economists would say that China is likely to be able to grow at a rate like 8 per cent for a sustained period of time because they have a long way to go to bring those people from agriculture into industry and to take advantage of the huge gap they still face between how people produce stuff in China and the frontier of technology," Geithner said at a Congressional hearing on China.
"So that process of catching up would for China -- it's true for India too, for many emerging markets -- justify some confidence of quite high levels of growth rate for a long period of time," he said in response to a question.
He said that what matters to the US and the world economy was the shape of growth, the pattern of growth, the growth strategy.
"To work for them over China it's going to have to come from a rising middle class and from stronger domestic demand. It can't come from the export-intensive model of the past. It's just not a tenable strategy for them and they're beginning that shift but they're just at the beginning of that shift," Geithner said.
The Treasury Secretary said the US has been living through not just the devastating scars caused by the worst financial crisis, worse economic recession since the Great Depression, but a crisis that's followed a large period of damaging underinvestment in the middle class, in education and public infrastructure, and a terrible erosion in the basic fiscal position of the country.
"This is because we borrowed hundreds of billions of dollars to finance programs we weren't prepared to pay for -- tax cuts for the rich. Those sets of policies have been terribly damaging to our country and they are going to take time for us to fix," he said.
"The only credible long-term growth strategy for us as a country -- it's going to have to rely on stronger investment in the US and stronger export performance over time. And that's not going to happen unless we restore what has been the great strength of the American economy over time, which is that -- the best place to innovate, the best place to come and build a company, the easiest place to come raise capital to finance some idea, and best universities, highest levels of sustained investment in basic science, research and development. Those are absolutely essential things for us to do," Geithner said.
