Twin Pandemics, Pathogenic and Political: Historical Perspectives on 2020-21 with Niall Ferguson

good okay right thank everybody for joining us we'd like to be joined by neil ferguson um the economic historian he's a senior fellow at the hoover institute of stan stanford university and he's also the author of the new york times bestseller the ascent of money um which i must say is a tremendous read one of the best economics and history books i've read for quite some time also adapted into an award-winning documentary uh he's also written many books of course and he's going to be joining us today to speak about the twin pandemics we have at the moment the pathogenic and the political um so to start off with do you want to talk about the title of the event today uh what what is the meaning of that and also you want to give us a preview of your next book which i'm looking forward to doom the politics of catastrophe well thank you very much it's a pleasure to be virtually in cambridge where i spent three very happy years at christ's and then at peter house early in my career like it was 1989 to 92 i shudder to think uh what age you all were then if indeed you were born at all i wanted to try to show in the past more than 12 months now that history could offer some valuable insights into the unfolding pandemic and that if policymakers listened only to epidemiologists they might not necessarily get their response right some of you might have heard of another neil ferguson who spells his name in the anglicized way n-e-i-l at imperial college london whose paper published in mid-march was the basis for really quite drastic policy changes in the uk and the us and elsewhere at the same time that that neil ferguson was publishing my rather less well-known work was appearing in newspapers magazines and also in the form of a giant powerpoint deck that i used to circulate amongst my my friends what i tried to show beginning in mid-january when i first was talking about the likely pandemic was that history offers a few important insights into the way pandemics play out i worked on and off on on pandemics from early on in my career i was a graduate student i think when richard evans published death in hamburg his tremendous book on the great cholera that epidemic swept the city of hamburg in the early 1890s but i kept on writing about the subject the pity of war a book about the first world war talks about the impact of the spanish influenza in the final phase of world war one i wrote a lot about uh the issue when i was writing both empire and civilization because you can't really understand the expansion of european empires until you realize that they had to find solutions to the problem of contagious tropical diseases or they wouldn't have been able to expand at any event there were a couple of immediately obvious points to be made back in january and february of 2020 a time when in most western democracies the prevailing view was one of complacency the first was that a pandemic of the sort that we were about to witness would come in waves and this was extremely important when epidemiologists were telling the world that there was one curve you had to flatten i think that idea misled a great many people but anybody who studied uh the black death of the 1340s or the spanish influenza of 1918-19 or the asian flu of 1957-58 knows that there is a wave-like character uh to a pandemic and that the second or third wave can be bigger than the first that was certainly true in 1918-19 the second point which is the one that my title alludes to today is that there are very often simultaneous plagues of the mind the the time of panic to make is a time of of upheaval and that time of upheaval is conducive to the the spread of radical ideas i wrote about this a bit in my last book the square and the tar which is a book about networks and history any book about networks is partly a book about contagions and a central theme of the square and the tar is that a highly networked world will be susceptible to both pathogenic pandemics but also pandemics of of ideas of fake news or extreme views and what i wanted to try and do in this discussion was talk a little bit about that for example and i'll just say a couple more things in the 1340s when the worst pandemic in history struck eurasia it didn't take long for uh millennialist ideas to feed to to become uh widespread and to actuate very extraordinary behavior the flagellant orders uh for example would uh process from city to city in germany and other parts of europe uh whipping themselves to atone for the sins of mankind in the hope the hope of warding off uh further uh waves of plague not only that but in addition to this kind of a masochistic religious demonstration we saw recurrent outbreaks of anti-semitic violence pogroms directed against jewish communities who were in some way held responsible for the the plague in the more recent times 1980-19 the plague the influenza pandemic of of that era coincided with an extraordinary wave of political radicalism it's very hard to disentangle the spread of bolshevism and of fascism from that period of disruption that came at the end of world war one in which spanish flu played a key part killed more people than the war had killed in a shorter space of time very probably ended the ability of the german army to keep fighting the war so in this new book doom the politics of catastrophe i look at disasters of all shapes and sizes and offer some general reflections on on disaster as a phenomenon trying to show that there is always a kind of interplay between what we think of as natural disasters and the political responses to them which which are very enormously and are often distorted by ideological uh extremes i'll leave the opening remarks there and hand it back to you thank you very much so of course the first topic to discuss is kobe 19 that's been obviously the main issue this year i'm very interested in spanish blue because that's something which i don't think is taught that much in schools although i certainly don't know much about it um how was spanish flu defeated and is there anything we can learn from that about how to defeat kerbin 19. i i my instincts are that he was defeated through her immunity is that is that true that is correct because there was no vaccine that could be developed in that terrible time 1918-19 was one of the worst pandemics in history it's calculated to have killed oh up to two percent or so of the world's population uh at this point covert 19 isn't even in the top 20 uh of pandemics and hasn't even overtaken 1957 58 in terms of the share of the world's population that it's it's killed and 1919 was much worse than 5758 the reason that uh 1918-19 was so devastating uh was that the new strain of influenza which only got cold spanish because the relatively uncensored spanish press reported on it whereas the the press of competent states did not really accurately report on what was happening the spanish flu was a new variance of influenza there was not much resistance to it none at all in some parts of the world and although there were no uh long-haul flights in those days it traveled the world with astonishing speed by ship it originated as far as we can tell on a us in a u.s army base in kansas troop ships transported it across the atlantic and then ships took it back to the us uh the war created the perfect conditions for a new uh virus to spread because men young men were herded together in camps and troop ships and trenches and and also were traveling great distances to the battlefields of europe unlike curved 19 which overwhelmingly kills the elderly very unusually pandemics in the past have not been like that uh the spanish flu uh actually disproportionately killed young able-bodied people um because uh the strength of their immune response uh in fact uh made their death more likely this happened because of the way the flu virus attacked the lungs causing a massive response which ultimately overwhelmed the lungs in fluid and enormous numbers of of young people died as a result of of this terrible disease and there really was no uh there was no pharmaceutical solution they didn't even have antibiotics then which meant that if people got in infected uh in chests they were quite likely to die and that probably explains why the mortality rate was so so very high the final point which is well established in the literature is that the only response therefore was to use non-pharmacy pharmaceutical interventions like social distancing mask wearing quarantining and that that was done to varying degrees uh in the u.s it varied enormously from city to city and we have quite good research on how those different policy regimes worked or didn't work to limit the spread but it's a fascinating episode to study because there are so many echoes of our own time for example in san francisco the huge controversy over mask wearing there was actually an anti-mask league in california in 1980 19 opposing mask wearing new york had a bad experience partly because of the extreme reluctance of public health officials to do anything at all really other than stagger daily commutes in most places schools stayed open there was nothing resembling a lockdown and this is the last point to notice one of the things that struck me writing doom was that we had an option that didn't exist really even in 57 certainly didn't exist in 1918 namely to put a large amount of of work um back in the home that wasn't an option in the industrial societies of the 20th century uh even in 1957 eve half of u.s households didn't have telephones or maybe it was a quarter i forget though in 1980 19 working from home wouldn't have been viable for more than a small share of the the workforce so we had the option to do things that really couldn't have been done before uh and that that has meant that we've been able to try to contain the spread of uh sarskova ii with uh with drastic interventions in social life and economic life that uh that wouldn't have been wouldn't have been feasible in in previous uh 20th century pandemics it seems to be a theme sometimes in history that some great periods of great catastrophe are followed by boom periods like world war ii was followed by a great prosperity in the 1950s and obviously at the end of world war one and the spanish flew there was great possibility between the rolling twenties particularly in the us do you think we'll see great another moving twenties at the end of october 19. it's a great question my good friend nicholas christakis at yale published his book apollo's arrow last year i think probably the first pandemic book out of the starting blocks and nick argues towards the end of the book that he could foresee a roaring 20s by analogy with what happened in the 1920s i'm a little more cautious than that for a couple of reasons first i think we will see a kind of party atmosphere in the second half of 2021 in many developed countries including the united states as it becomes possible thanks to vaccination and natural immunity to resume restaurants bars crowded beaches etc so there will be a kind of roaring second half of 2021 i think uh and it'll roar a lot this is relevant to the marshall society because of the enormous accumulation of forced savings and [Music] government handouts there has been there's about 1.5 trillion dollars waiting to be spent that u.s households have accumulated because of lockdowns and government programs like the cares act and i think any uh serious economist would probably have to agree with larry summers that the marginal propensity to consume will be quite high here i consciously use john maynard keynes's term from the general theory and that we will therefore get quite a spending boom particularly in the area of of services that have been that have been kind of shut down by the the pandemic so that that's the roaring part where i i disagree is that it will be sustained for a decade uh i'm not sure we would necessarily want to rerun the 1920s if the end point was 1929 but even if we did want to to do that uh there's a lot of reasons why it won't be like the 20s um i think that the fiscal burdens of the pandemic and indeed of the previous financial crisis are going to become a headache for governments sooner than people want to face including even the u.s government and that reminds us that the 1920s weren't roaring everywhere and this is one of these moments when you have to remind americans that they are not the world the us did have roaring twenties the uk didn't as anybody who studied british economic history knows there was a savage post uh war recession 1920-21 and the economy essentially performed poorly through the 20s for a variety of reasons returned to the gold standard etc that we could debate so i think that might be a far more common experience of the 2020s than the necrostarcus nice analogy implied and of course for many emerging markets it is much harder to pull off large-scale debt financed support of your economy if you are brazil much less argentina and that's another reminder that the 1920s weren't roaring in countries that had hyperinflation i mean the german hyperinflation happened in 1923. i think there are going to be some inflationary episodes probably in the southern hemisphere to to match those so when people talk about the roaring twenties i have to remind them what the 1920s were actually like economically uh all too often these discussions uh get framed by caricatures the sort of cartoon version of history and uh and if we are going to rerun the 1920s in some ways i think we are um but it won't just be roaring it won't just be you know the great gatsby and flappers and um and jazz i think there's going to be a lot of the 1920s that happened in other continents and and it some of it was distinctly unpleasant uh you touched on my next question there as well when we come out of this crisis we're going to come out with government debt levels substantially higher than uh they've been for a long time what do you think history can teach us about the best way to deal with national debt well that's a question i've been working on my entire career because my oxford d phil and i have to confess to being from the other place originally was about the german hyperinflation and argued that its origins lay in war finance and a failure of post-war policy to cope with the fiscal and monetary overhangs the war had created throughout the last however many years i've recurrently written about the unsustainability of u.s federal government finances it was a theme of my book colossus back in 2000 uh 3-4 and it's become an unfashionable position because in the aftermath of the global financial crisis of 2008 2009 those who argued for fiscal consolidation became tarred with the brush of austerity and those who said that the world should have done massive keynesian stimulus people like paul krugman didn't claim that kind of factually they were right and if only they had been listened to the the us recovery would have been stronger after 2009. part of the consequence of that logic is that the biden administration is full of people who say we won't make the mistake that we made back then and we're going to go large and on top of an existing very large deficit we'll do another 1.9 trillion dollars of of stimulus when you think about doing that on top of vaccination you are kind of flu pouring uh fuels on on what will be quite a briskly burning fire and striking that larry summers piece in the washington post last week warned of the danger of uh overheating and inflation for that to come from larry summers the high priest of secular stagnation signals that there is dissension within the keynesian camp and i think with with reason because a pandemic's not like a financial crisis and and all those people who use the 2008 2009 analogy are committing a category error pandemics as i said come in waves and they end there is an end point and it's quite i think a lot nearer than people realize whereas financial crises can drag on as ken rogoff and carmen reinhardt showed in this time is different they're like a sort of hangover because household balance sheets are impaired bank balance sheets are impaired it's very hard to get past those problems uh whereas household balance sheets have never been in better shape people are kind of not sure what to do with all the money they've accumulated so i think to think that we're in a kind of repeat of the post 2009 period is a great mistake that could cost the biden administration dear what does one do about a debt to gdp ratio higher than we have seen since world war ii in the case of the united states well probably stop thinking about it as a debt to gdp ratio would be a good start in in a book called the cash nexus published 20 years ago i tried to show that that is not a good measure of fiscal sustainability at all i mean you you're taking a stop comparing it to a flow what you need to know is is something completely different and that is do you have sustainability in terms of debt service and is your real debt service cost uh greater than or less than your real growth rate because if it is greater than your real growth rate you are doomed to nasty fiscal arithmetic and in that situation there aren't many ways out in a happy uh deleveraging or if that's the term one wants to use you grow your way out of it you get some kind of positive productivity shock and and you somehow are able to run primary surpluses and growth uh will get you there and that has happened in history that's how the uk dealt with its post-napoleonic debts but if you can't do that then the choice is actually a rather hard one between austerity measures which can be self-defeating as we've seen in some cases inflation which doesn't necessarily solve the problem if some of your liabilities are index linked or default and and so those those limited range of choices uh is going to start manifesting itself beginning in emerging markets and i think in the course of this of this year and i wish i could believe that we're going to get the kind of growth surprise that the world got after 1945 where there was tremendous uh growth uh and productivity uh grew rapidly that really helped get countries like the us out of their wartime debt burdens some people i think cling to the belief that there is some great productivity miracle coming my own sense is that that's an illusion and that actually the world the developed world certainly is is doomed to rather low productivity growth because ultimately our service dominated economy is not one that is going to to see rapid productivity growth and last but not least although we all spend a colossal amount of time online as you and i are doing right now a hell of a lot of that time is wasted because it's hard for me to see time spent on facebook especially if you spend that time at work as productivity enhancing and a lot of a lot of people in fact waste time on electronic devices rather than using them to to increase their productivity so i think the outlook is a lot less bright than it was after 1945 in in that sense and therefore that the debt problems will be much more intractable than they were in the 50s and 60s thank you very much uh we've had quite an interesting question from our audience how much do you think the lessons occurred in 19 will minimize the impact of any future pandemic or do you think short-term politics will prevent serious strategic thought well part of the story i tell in the new book doom is that we always are kind of preparing for the wrong disaster and that is because disaster comes in so many different forms and our collective political mindset is bad at coping with that kind of multifaceted set of threats we somehow prefer to obsess about one threat when i was at davos in january 2020 the entire agenda was dominated by climate change the global risk report has its top four risks climate-related risks and a pandemic had already begun and i couldn't get anybody practically anybody i think the greek prime minister was a notable exception to listen to me when i said forget about climate change right now we have to worry about a pandemic and i think it'll really repeat itself we'll we'll be worried about the next pandemic and a lot of serious people will talk a lot about pandemic preparedness and then something completely different will come along and writing doom which is a kind of general history of disaster reminded me how many different kinds of disaster uh are out there waiting to ambush us just imagine if there was a colossal volcanic eruption that hasn't been a really big volcanic eruption for more than 200 years in fact by medieval standards we've been through centuries of low level volcanic activity uh if you had a really colossal volcanic eruption uh we'd be talking about global cooling uh for the next 10 years so i i think the problem is not just that we're going to fail to learn the lessons of covert 19 i'm sure we'll learn some of them but not the right ones just as we learnt some lessons from the financial crisis but just not all of them i think we'll fail to learn a more general point which is that to be resilient or anti-fragile you need to have a kind of generalized paranoia rather than a risk management process that is excessively focused why did taiwan do better why did south korea do better partly because they'd learnt the lessons of sars and mirrors which we had not but mainly i think because if you are taiwan or south korea and your next door neighbor essentially wants to annihilate you as an autonomous polity you have a generally high level of paranoia and you are probably robust to most threats the taiwanese were right not to believe china or the world health organization when they said there was no human to human transmission in early january the rest of us were like okay nothing to worry about so i think generally it's better to be anti-fragile broadly rather than to be very meticulously prepared to re-fight the last war and i say war because i think that is another kind of disaster that we don't think enough about and yet historically it's a disaster a form of disaster that has time and again come along to punctuate the equilibrium it has come along to disrupt the trajectory of interest rates and inflation and most of us have kind of forgotten what a really big war looks like but if a really big war happened between the united states and china over taiwan and earlier today i was discussing that scenario with none other than henry kissinger then i think we'd very quickly realize that there are worse things than pandemics for the global economy so that's my my general view specifically i think the uk needs to think long and hard about how its scientific advisory structure functioned because it wasn't as if boris johnson made this up on his own he had advice from a bunch of very eminent people but if one looks back on their performance in january february march and april it's not an edifying uh story so we need to learn a little bit about what went wrong and a proper inquiry into what went wrong uh in the uk and in the us would i think reveal that it wasn't all the fault of boris johnson and donald trump that the us and the uk did badly there were reasons why the public health bureaucracy screwed up that we haven't really confronted publicly all right we've got quite a lot of questions coming in so i'll try and catch as many as possible first one as mentioned increased uncertainty associated with pandemics leads to increased political extremism based on history once the covet pandemic is over will we see a return to political moderation it's a very good question in 1920 warren harding won the u.s presidency on a normalcy platform return to normalcy was his campaign slogan and that wasn't just a reference to the spanish flu it was a reference to world war one the red scare and on many other uh things that had had been abnormal about the late woodrow wilson period i joe biden is the normalcy candidate and people certainly are voted for normalcy uh back in in october november in the united states you probably have been told the narrative of polarization a great many times actually the election result was a victory for the center ground trump lost but republican candidates did quite well better than expected in uh congressional and state level elections the progressive left of the democratic party did badly uh and so actually i think the election result reflected a nationwide desire for normalcy those people who think the far left and the far right are going to continue to set the pace politically the people who warn about white white supremacist terrorist campaigns i think are probably going to be wrong i i think the real lesson of of january the 6th was not the strength of the lunatic right but actually its weakness uh they kind of got lucky that the policing was so bad around the capital uh but they didn't really know what to do when they got there so i think in my assessment that the pandemic has been bad for the populists of both the left and the right example italy where mario draghi is going to try and form a government and the populace of the left and the right couldn't sound more demure in their kind of responses matteo salvini has ceased to be the violent eurosceptic that he was uh in the uk brexit's done and now it's a matter of paying the alimony and that will be a good deal less fun than than voting for brexit was so i think um i think broadly speaking a disaster like this does actually disadvantage the extremists after a while there's a period during peak disaster when they really are emboldened and we had madness in the streets of american cities in the summer following the death of george floyd and then we had madness after the election on the right but you sense that that is going to fade actually especially if the economy does have a terrific growth spurt this year which seems very very likely i'll add one point though ultimately the us has a problem and it it's a global problem in some ways and that is the power of big tech to dominate the public sphere to dictate who has access to it is too great but it can't be healthy in a democracy for a handful of companies to have the power to essentially cancel the president of the united states while he's still in office which is what happened after january the sixth you can condemn trump's conduct as i do very very strongly but there's still something funny about the fact that it was facebook and twitter and amazon that shut him down and i think the fact that our public sphere in the u.s is now and in many other countries is now so controlled by uh those few companies is is a problem for democratic politics that we haven't yet resolved uh and that that is something that i worry about a lot especially because so many liberals in the us seem to just regard it as a good thing and if you're real liberal you cannot regard it as a good thing that a handful of corporations a small number of relatively young chief executives have the party control access to the public sphere and exclude even the president if they want to i think we may have had your answer to this but uh the question is what do you think is the biggest threat to the freedoms we enjoy in the west is it those social media corporations it's not the biggest threat the biggest threat to freedom in the world today is the chinese communist party which is in a much more powerful position uh at this stage of cold war too than its soviet counterpart was at the equivalent stage of cold war one think about uh the strengths of the people's republic of china technologically it is certainly closer to the us than the soviet union was in the late 1940s uh in terms of its economic scale it is far closer indeed it's it's potentially able to overthink the united states in terms of current dollar gdp by maybe 2030 if you believe that trends are china's friend that was something the soviets never got close to the chinese have got a game plan for displacing the us as the dominant power in the world it is ideological it is economic it is military and naval and its technological and if one considers the track record of the ccp particularly since xin ping came to power it is a pretty grim one we are seeing the creation of a totalitarian regime equipped with facial recognition technology and artificial intelligence it's actually a more powerful state than or well imagined in 1984. so if china's able to win cold war ii if it's able to extend and expand its power uh through the one belt one road strategy and in other domains through fintech for example where china is ahead of the united states that i think would be a serious threat to individual liberty in that uh the chinese communist party would be able to use data that we as westerners living in democracies had made available to their network platforms that could be used as evidence against us one day so i worry kind of more about that than i worry about uh the what i call the fatger companies facebook uh apple twitter etc because i think ultimately there's a way of fixing the excessive power of the big tech companies in the west it's not anti-trust action as we'll eventually realize you just have to reform the legislation of the 1990s that essentially allows them to be both network platforms when they want to be in publishers when they want to be that's fixable the chinese communist party is not very easily fixable and i think a confrontation with china is kind of more or less inevitable uh on the particularly given the course that the biden administration is is taking so those would be my kind of probably my my top two uh concerns uh of course the there are other threats there is no question that the the academic life of the western world has been infected by deeply a liberal strain of thinking which is hostile to free thought and free speech in precisely the institutions where those things should be sacrosanct and cambridge is not without sin in this regard that is a profound threat to liberty because it challenges the very concept of individual liberty by trying to superimpose on our society's notions of collective uh identity and collective guilt uh that that's a major concern to anybody at a university today you cannot imagine how different the atmosphere is uh at western universities today from the way it was when i was an undergraduate in the early 1980s when we felt absolutely no inhibition about speaking our minds and thinking the unthinkable today universes have become places where free speech is more inhibited than anywhere else in society and i find that abhorrent and ultimately universities are where we educate the elite uh if the elite is in one way or another intimidated into uh the appeasement of what for want of a better word my wife called wokism uh then we're in big trouble and we won't need the chinese communist party to finish off individual liberty we'll do it ourselves yes i think cambridge is definitely not an exception uh from that uh we've got a few more questions about china and universities should universities reject funding from chinese communist party affiliated entities well this is a gotcha question for an oxford uh alumnus uh given the story that broke this week about oxford's accepting uh money from 10 cent for its uh chair in physics i i think this is a difficult one because universities have been accepting uh money from all kinds of sources uh middle eastern autocracies uh for example uh for many years and uh it's not immediately obvious to me that we can regard 10 cent as uh as a kind of creature of the of the communist party i think the big tech companies in china are really quite independent in some ways of the government's body and that's something that xi jinping is trying to change uh but uh it's it's still a relatively early stage in that game uh and just to illustrate the point a friend of mine a couple of years ago a chinese friend who works in the tech sector explained modern china to me in the following way he said you have to understand it's not a monolith there are three chinas there's new new china which is the tech china he said people like me and we many of us have us passports and spend a lot of time in the bay area in california then there is new old china that that's the state-owned enterprises controlled by the party princelings and then there's old old china which is the unprofitable state-owned enterprises that nobody wants in the northeast and the divisions between these three groups are really the key to understanding china it's a mistake therefore to assume that everything in china is is the ccp because in fact there are meaningful divisions and the struggle for power between the ccp and big tech is one of the stories of the moment i don't think that 10 cent can in any meaningful way influence the teaching of physics at oxford by giving money to oxford if you doubt that ask any donors who've given money to major universities in the last 20 years and you ask them how much have you been able to influence the way the university has used your money and they will universally complain that there has been no influence at all possible so there's a big difference between a donation like this to uh to the university's uh uh foundation and uh the the problem that arose in harvard where members of the harvard faculty or a member of the harvard faculty turned out actually to be on the chinese government payroll that's different and we should therefore draw pretty clear distinction i'm not saying we take money from anywhere i think one looks back on donations from the qadhafi regime in in libya with a certain horror mentioning no no institutions but one in london does come to mind there's obviously a need for very careful thinking when the chinese government is so clearly pursuing a genocidal policy towards the uyghurs in xinjiang and i think that's really going to become more and more of the issue as this year unfolds the western world has not talked enough about that it is outrageous what is happening to the uyghurs in xinjiang there are concentration camps there is a pretty clear set of uh measures that correspond to the definition of genocide and under those circumstances one must think very carefully indeed about the relationship one has with any chinese government entity but as i said i think it's a little early to say that tencent is an arm of the chinese government uh next question given china seems to have emerged from the koben situation with an early economic rebound do you think this will exacerbate future china west tensions in the near future i think tensions will be significant but not necessarily for that reason cold war ii began a while back i think the u.s took a while to notice that it had begun but xi jinping and his advisers essentially began to pursue a cold war strategy the us woke up to this curiously enough under the influence of donald trump and even the new secretary of state anthony blinken acknowledges that trump's change of direction on china was right and should not be reversed by the new administration what has happened in the last year is that trump's analysis that china posed a fundamental threat to the united states and the analysis of trump's advisors including former secretary of state pompeo that ccp is a malignant actor in the world these things have been accepted far more widely outside the united states than was true a year ago if one looks at the pew group research on opinion in developed markets it has swung drastically against china wherever you look anti-chinese sentiment is actually at a higher level in sweden today than it is in the united states uh there has been a real seismic shift of of sentiment and it's true non-developed countries too think of india where border skirmishes are just a part of a wider story of deeply deteriorating relations between new delhi and beijing i think china's economic performance last year flattered to deceive the reason they got to positive growth was a a return to the old playbook of uh debt financed uh fixed asset investment b an expert boom because everybody was stuck at home in the west ordering new peliton bikes or whatever and um i think that that's a temporary uh external uh demand shock next year there's going to be shifts back to domestic services as the lockdowns end and the pandemic fades and then china's going to be left with two serious problems one relatively impaired domestic consumption growth uh especially amongst migrant workers uh and b that the debt hangover which liehu vice premier liu has been talking about for as long as i have known him which must be now eight years and they still really haven't been able to do anything about that private sector debt burdens of the household and especially corporate sector are crazy um and they they can't continue this way so most people in the west at the moment are overestimating china's growth potential coming looking ahead 10 years people like michael pettis are much smarter about this michael has done terrific work identifying the pathologies of the chinese growth model when one considers the demographics as well as the debt the headwinds are formidable so i think china's problem is not its strength actually i think china's problem is its coming weakness and the sense that the party elite has of internal weakness that's going to tempt them to pursue a riskier foreign policy strategy than they did under the previous regime of hujin tower and wendy obama and i think that's where the geopolitical risk in the world is right now uh the the us is talking tough the the biden administration wants to carry on being tough on china shift from trade to human rights but essentially maintain the tough stands and we may be underestimating the readiness to take risk of an increasingly embattled regime in beijing that's very interesting we'll be talking about this quite a lot more in two weeks time because we've got jim rogers joining us who's quite a lot more optimistic about china than many others on china as well do you think their story of china's growth is an argument in favor of free markets or an argument in favor of government-controlled investment well china's growth story is something i've written a bit about i was much preoccupied with it when i was writing civilization and it requires a certain uh caution to to un-pick it to analyze it because at the core of the chinese economy is still a five-year plan and state-owned enterprises and very high levels of government control but the periphery which is uh until relatively recently been the main source of growth has been a private sector that came into existence really uh under deng xiaoping and then grew like gangbusters especially in the period after china was admitted to the world trade organization in 2001 and so in a way the answer is both because you had simultaneously a a state model of heavily infrastructure focused investment that delivered high gdp growth because that was what the local officials were told to deliver and at the same time you had an unplanned technologically driven revolution taking advantage of the really quite high quality human capital that china had had built up with jack mars a sort of personification of that it's it's therefore not either or uh the chinese problem is clearly and has been as people like michael pettis have argued for years that they need to wean the economy off the state-led fixed asset investment strategy uh and away from local government financing vehicles and that whole rickety structure of finance that lies behind the big debt mountain towards something that is more consumer-led they also have to ultimately uh dismantle some of the controls that still operate particularly the controls in the capital account which make the currency non-convertible and that's really hard to do uh the bank of england did a paper now quite a few years ago maybe five or more pointing out that if you actually did liberalize the capital account there would be so much money trying to get out of china that it would cause a global financial crisis chinese millionaires would love not to be long china they would love to diversify but they can't so i think the chinese model uh of course it produced the biggest and fastest industrial revolution in history and one should not lose sight of that but on close inspection it's a curious hybrid there's still a kind of stalinist five-year plan at the core of it but it has wrapped around it an extraordinary dynamic private sector and as i mentioned earlier there is considerable tension between those two things between new new china and new old china and at the moment new old china i mean the party has the upper hand and i think that the more that's true the greater the downward pressure on the most dynamic and healthy elements of china's economy which is which clearly in the private sector right um we've got at least two more questions so we'll see if we can get those done uh in time we've got two people asking the same question how would you compare the impact of the pandemic between developed and developing countries and you think that divide between the two countries is going to widen so are you cut out momentarily there can you ask the question again yeah no problem do you think the gap between developed and developing countries is going to divide because of kerbin 19. the interesting thing is that the gap was narrowing in all the debates about global inequality the most salient fact is that it has diminished significantly over the last 20 or more years because uh mainly because of of growth in in asia uh and so the fundamental great divergence between the west and the rest which i wrote about civilization has been extraordinarily reversed there is increased inequality within country but really not between countries this is a very important point that often gets lost sight of now along comes the pandemic and it starts to reopen that divide there is clearly uh a very very two or three speed world in respect to vaccinations and we will live to regret the fact that we did not have a coherent global strategy for vaccination because as long as we only uh vaccinate the northern hemisphere or vaccinate the developed economies and leave the southern hemisphere to fend for itself we'll be dealing with uh new strains of the virus from brazil and south africa and elsewhere for many potentially many years to come i think it's also the case that uh the kind of measures that had to be taken in response to the pandemic were very destructive in emerging markets in developing countries that didn't have the option that existed in the us to shut down the economy temporarily and just hand people money to tide them over i mean you couldn't do that in india and attempting to shut down the indian economy caused huge social strain when the modi government did it so i do think that if one takes a step back uh the the impact of the pandemic has been to widen those inequalities between developed and less developed countries will that be an enduring shock i don't know in some ways covert 19 is a disease taylor made to hurt developed countries more because of their age structure and so the excess mortality really ought to be significantly higher in the uk and the us that in in a youthful country like india or in most of sub-saharan africa it's hard to know from the data because they're not very reliable just how badly affected india and sub-saharan africa have been but it would seem not as badly even allowing for under counting so it cuts both ways i mean i think the economic shock has probably widened the gap between the rich and the poor but actually the pandemic has probably her develop countries more in terms of its of its human cost i'll say one last thing if one wants to talk about inequality the real story is the within country inequality which is going to be blown out even further by a combination of uh easy money as far as the eye can see and very poorly directed fiscal stimulus there's a nice paper i just saw the other day co-authored by my old friend maurice schulerick looking at how monetary policy has impacted racial inequality in the united states and it won't surprise you to hear that the uh the effect has been enormous because the monetary policy effect on assets financial assets in particular has been huge and african-americans don't own a large share of financial assets in the united states i think we'll finish off with two questions if possible the final two slightly more fun questions um who is the smartest person you fundamentally disagree with i i find myself in a kind of uh 20-year argument it's nearly 20 years now with larry summers uh and larry is one of the the smartest people i have ever met uh and yet we we frequently disagree and i think even when we agree we find ways to disagree because larry is like me an instinctive controversialist who who thinks that truth comes from disagreement from argument and so we always are happily uh disagreeing it's very odd that in the last two weeks we've actually agreed it won't last okay the final question is do you think we should accept that one thing we should learn from history is that we do not learn from history it's funny you should ask that that's a version of alan taylor's ajp taylor's famous uh i pursue that the only thing men learn from history is how to make new mistakes nowadays we'd say people not men i went to oxford because i'd read agp taylor as a boy and wanted desperately to be taught by him but in those days there was no internet and so i wasn't able to know that he'd left modern some time before i applied i i guess that was my introduction to the importance of doing your doing your homework taylor continues to be an inspiration to me because i think he was one of the most brilliant writers of history who's ever lived and one one thing that made him brilliant was his love of paradox and and really it's just one of taylor's throwaway lines that we only learned from history how to make new mistakes he didn't really believe that uh the truth is as as uh the other great oxonian r.g collingwood said we we study history precisely in order to learn from it and to to learn by juxtaposing our age with the experiences of the past so no i i don't actually think uh that we can't learn from history i feel passionately that the opposite is true and that actually history may be the only thing that we can learn from uh when it comes particularly when it comes to policy questions and that's why for so long i've been an advocate of applied history what has gone wrong in history departments in many parts of the world is that they've retreated from a concern with contemporary problems or if they've addressed contemporary problems they've done it by applying anachronistic value judgments to the past it's not our business to look back on the past and say how wicked they were because there was slavery or whatever it is our business to look at the past and try to understand what it can teach us about uh the present and the the lesson has to be a more interesting one that than that slavery is bad which seems i think a fairly straightforward proposition so i i passionately think that we can do applied history it's what i've spent my career doing because i think policymakers who don't attempt to learn from history or learn from it in a half-assed way by not really studying but just having a vague idea that you know dictators are a bad thing and appeasement is a bad thing that that that tends to lead to the policy disasters uh so doom is a book really for of applied history aimed not just at students of history but at policymakers in the hope that there'll be just a few more out there trying to learn from history in the coming years well thank you very much that's our time of sorry to everybody whose questions i can get to um but it's great they provoked such interest from our members i had a big list of questions myself and i've barely been able to start it so thank you very much that's been a fascinating event i i think i agree with a lot of what you say about learning from history i think that's something very important to do so thank you very much and uh have a have a good day thank you for joining us thanks a lot same to you

Channel: The Marshall Society

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Id: 8x1DC2ACdDo

Length: 59min 15sec (3555 seconds)

Published: Thu Feb 11 2021