In Italo Calvino's novel Invisible Cities, Marco Polo and Kublai Khan are sitting comfortably, the former regaling the latter with descriptions of the impossible places he has visited. Khan asks Polo where he goes on these voyages and why; are these "journeys to relive your past," or "journeys to recover your future?"
Mongolia’s nomadism is a sign of the past, but the transition to parliamentary democracy and a market economy shows a nation recovering its future. Bold Sandagdorj, chief economist at the Bank of Mongolia and holder of an MS from Michigan Tech in Applied Natural Resource Economics, is helping to build that vision of the future.
“Most of the decisions I make are directly related to macro-economic policymaking and effectiveness of monetary policy implementation,” he says, explaining his part in building Mongolia’s new economy. “I have policy discussions with the Governor of the Bank of Mongolia on a daily basis and advise him as necessary.”
In addition to being chief economist, Bold is also an advisor to the Governor of the Bank of Mongolia and a member of the monetary policy committee and board of directors of the Bank. Helping chart the course of his country on its new economic voyage: not bad for someone still in his early 30’s.
“I have thought of a model city from which I deduce all the others. It is a city made only of exceptions, exclusions, incongruities, contradictions. But I cannot force my operation beyond a certain limit: I would achieve cities too probable to be real.”
Ulaanbaatar seems too improbable to be real; the major city of Mongolia is the center of government, culture, and economy, but it also grows right out of the plains and hills and mountains, an extension of the people, reaching up toward the sky.
Bold sees a much different city and country rising up from just two decades ago. Vast mineral deposits have been discovered out on those plains, and nomadism is slowly giving way to permanent settlements, citizens seeing a remarkable improvement in lifespan and quality of life as a result, both out in the sparsely-populated countryside and in the increasingly vertical city. As chief economist, Bold knows the reputation central bankers generally have, but he also knows the difference they can make in guiding growth and prosperity, both up in the city and out across the plains.
“Although people commonly think and even criticize that central bankers are inflexible, incongruous, and impractical, central bankers always try and need to be forward-looking, prudent, and pragmatic,” he says, describing the role of his institution in Mongolia’s economy and politics.
“In this rapidly changing environment, central bankers are and should always be proactive rather than reactive. We have to look broader, think ahead of others, work harder, and take more resolute and effective measures to achieve policy objectives.”
The changes wrought by the peaceful transition from communism to parliamentary democracy in the early 1990’s have gathered steam. The transformation is both economically and socially ambitious.
“During the last two decades Mongolia has gained three important achievements,” Bold says. “These include democracy and liberty, transparency and accountability, and equal opportunity.”
From a controlled economy and one-party system, “it became one of the most democratic and transparent countries in Asia,” Bold says.
That change, the move to a new government and economy, is the root from which modern Mongolia has risen.
"I shall tell you what I dreamed last night. I saw from a distance the spires of a city rise.”
For the westerner, getting an image of Mongolia in the mind’s eye can be a challenge. We can easily picture the low population and caricatures of the nomad warrior Genghis Khan and his mark on history. But modern Mongolia is one of the fastest growing economies in the world, with a population moving rapidly from common nomadism to permanent settlements and improvements in life expectancy and overall life quality.
It is Bold’s job to help maintain stability and manage that growth, to temper the white-hot economy into a system that is stable and benefits everyone. In his role with the Bank, Bold is plugged into this growth engine and sees his role as not merely reactive, but proactive.
"The most important macroeconomic challenge,” he says “is to immediately reduce double-digit inflation to our targeted level and keep it low and stable. Indeed, ensuring low and stable inflation by targeting its main components is a core condition for maintaining long-term, sustainable growth and safeguarding the economy in Mongolia.”
Inflation has been a large concern for this economy, with the danger of pricing ordinary citizens out of basic needs. As a solution, Mongolia has adopted a law regarding the budget and debt while enacting measures to stabilize prices.
The Fiscal Stability Law has been effective,” Bold says. “Strictly adhering to this law ensures long-term fiscal stability and discipline in Mongolia, which enables us to significantly decrease demand-pull inflationary pressure.” Demand-pull inflation occurs when demand outstrips supply, and is regarded as a byproduct of an increasing GDP and decreasing unemployment. In other words, it is a potential pitfall along a path that is positive for the country as a whole.
He pauses, considering the scope of his work as chief economist. “It is indeed an art.”
Demand-pull inflation has not been the only pitfall, however. Cost-push inflation, where the price of goods increases when there is a supply shock, infrastructure and logistics bottlenecks, and no adequate alternative available, has also been an issue while regular, growth-friendly supply lines are developed.
“The Bank of Mongolia has been implementing a policy to prevent supply shocks,” Bold says. “The Price Stabilization Program (PSP) reduced the cost of main consumer goods, and stabilized food, retail gasoline prices, housing, and rents.”
These policies, developed by Bold and his team, have worked well, making life for the average citizen more comfortable. “Cost-push inflation has significantly decreased as a result of the success of these programs.”
“Marco thought of the mists that cloud the expanse of the mountain ranges, when dispelled, leave the air dry and diaphanous, revealing distant cities.”
The Oyu Tolgoi copper mine, the largest financial project in the history of Mongolia, has just begun producing minerals. It is expected to generate nearly 80 billion pounds of copper in its lifetime, nearly four times the copper resources estimated to be remaining in the Upper Peninsula. This site alone will account for 30 percent of Mongolia’s GDP in the near future.
It’s not a surprise that this mineral rush has meant high pressure for the Bank of Mongolia. But while it is a blessing for wealth, Bold is concerned by the strength of the minerals industry in Mongolia.
“Mongolia aims to develop its vast mineral resources and ultimately transform natural resources into human capital for sustainable, but inclusive, growth,” he says, emphasizing Mongolia’s desire for the new economy to benefit everyone. “However, current statistics show that the country has been overly dependent on the minerals sector. Over 93 percent of total exports are mineral commodities and 85 percent of net foreign investments are in minerals.”
“Of course,” he says with the concern of an economist, “these are not desirable or healthy statistics.”
Bold supports such developments, but emphasizes the importance of diversification.
“Mongolia aims to build a strong middle class, to increase nationwide savings and investments, to diversify the whole economy, to ensure inclusiveness of economic growth, to increase economic competitiveness, and to decrease poverty,” he explains. “I think Mongolia is going in a right way to make this economic reform realistic. The key is definitely good governance.”
Bold is unequivocal about the role of the central bank. “The Bank of Mongolia always cares about the economy and its stability,” he says. “Since the economy is becoming highly dependent on minerals, I think one of our obligations is to maintain macro stability, safeguard the economy, and protect the middle class.”
“Ultimately, I am sure that people in Mongolia will enjoy the fruits of effective economic reform and their own contributions to it.”
“No one, wise Kublai, knows better than you that the city must never be confused with the words that describe it.”
It is a challenge to envision the future of a city or a country. But in the mind of Bold Sandagdorj, that undiscovered country is already taking shape.
“Asia has been a core engine of global economic growth, and Mongolia is expected to be the fastest growing economy,” he says. “The real GDP growth of Mongolia grew by over 17.5% in 2011 and the economy has rapidly been expanded by 16% per quarter since 2011.”
But it goes beyond just the numbers for Bold, who sees the people in those high rises and on those plains. “Providing inclusive growth is more important than just having high growth. Mongolia’s economic and social reforms are not targeting high growth, but high-quality growth.”
Within 10 years, he sees poverty decreased to single digits, Mongolia as the fastest growing economy in the world, a strong middle class, a diversified economy, “green” growth and environmental protection, and enhanced quality of life.
Considering the future brings Bold back to his family: his wife (a television commentator), his children (including a child born during the production of this article), and his parents. In Bold’s parents, one can see his perspective and personality, and the interweaving of social and economic goals for an entire nation.
“One of my role models was my father, a retired economist. My professors at Michigan Tech have also been a significant influence” Bold says. “Gary Campbell, Mark Roberts, Dean Johnson, Brent Lekvin, and many others at Tech have really influenced my life. I learned from them a lot and the basis of my achievement was their assistance and investment in my brain.”
Just as Mongolia is more than its economics, Bold also honors what his mother impressed on him. “I have great respect and love for my mom,” Bold says. “She helped me to understand the meaning of human life.”
Michigan Technological University is a public research university founded in 1885 in Houghton, Michigan, and is home to more than 7,000 students from 55 countries around the world. Consistently ranked among the best universities in the country for return on investment, Michigan’s flagship technological university offers more than 120 undergraduate and graduate degree programs in science and technology, engineering, computing, forestry, business and economics, health professions, humanities, mathematics, social sciences, and the arts. The rural campus is situated just miles from Lake Superior in Michigan's Upper Peninsula, offering year-round opportunities for outdoor adventure.
