The Future is Asian

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EVENT: THE FUTURE IS ASIAN

DATE: 1.00PM-2.00PM, 6TH MARCH 2019

VENUE: MILLBANK TOWER, 21-24 MILLBANK, WESTMINSTER, SW1P 4RS

SPEAKERS: PARAG KHANNA, MARK LEONARD, JAMES ROGERS

CHAIR: DR. ALAN MENDOZA

 

ALAN MENDOZA: “Right. Ladies and Gentleman, we are going to start our discussion on this fine book in front of you which we’ll hear a lot more about today in terms of the ‘Future is Asian’, at least the theory, on this we’ll debate it, of course discuss it.

Delighted to be joined by Parag Khanna, the author of the book. Parag is the Managing Partner of FutureMap, a scenario planning and strategic advisory firm. He’s been a fellow at a whole clutch of think tanks. Brookings, New American Foundation, Lee Kuan Yew School at the National University of Singapore, where he currently resides, and advisor to the US National Intelligence Council and US Special Operations Forces.

He’s sort of a bit grown here at least having had PhD from LSE where he was speaking at yesterday as well and is very well known I think as a I would call you a ‘futurologist’, Parag. I’m not sure if you would agree with that but I think that’s my terminology for really thinking big picture issues and bringing up to speed for contemporary times.

Mark Leonard, who’s about to be in the room in a second, I’ll introduce in a moment, and my colleague James Rogers before they speak. But I think we’ll get started so over to you, Parag. Take it away.”

PARAG KHANNA: “Great, thank you. Thank you so much, Alan. It’s a pleasure to be here, I think it’s my first time joining you here at HJS and it’s really a treat. I’m looking forward to our conversation as well. And I know that this is a room of people and an institution that is devoted to thinking geo-politically and that’s certainly the underlying set of issues, nexus of issues that I’m always trying to get at different ways and angles in the books that I write.

I may or may not need this microphone but I want to make sure that you can see just a few of the slides hat I’m going to show you here. I’ll begin with just a couple of quick points really to kick off the conversation. Maybe I’ll just do it the old fashioned way. There we go.

So point number one; demographic, right? The majority of the world’s population lives in this circle and this is not even all of Asia, this is just one particular circumference that you see here. It certainly encompasses China and India and right there is 51% of the world’s population and it is always going to be more than 50% of the world population in Asia because the world population is actually beginning to plateau, as you may know, at somewhere below 10 billion people.

Next point; we live in a fundamentally dispersed geo-political order, the likes of which we’ve never actually experienced in history where you’ve truly had a global multi-polarity. Past eras of multi-polarity have been either, sort of, with the world divided among the European empires, Western societies, more broadly United States, Europe, but we never lied in a stable multi-polar system. And by stable I don’t mean sharing common values, sharing common institutions or not in conflict. The definition of order is strictly defined just the distribution of power. The fact that North America, Europe and Asia as geographies are simultaneously powerful ad represent together, across the three of them, about 80-85% of global GDP, is the key variable here and it underscores the fact we are in the first global multi-polar era that has ever really existed.

So every region matters, there are hierarchies, obviously Africa and Latin America are less significant in the world system than others but again it is, sort of, a non-colonial, non-imperial system in which networks among the principal regions and powers in the world form the geo-political structure, if you will, and again this is quite novel. Now within that, two of the regions are effectively Asian. We tend to think of the Middle East as a region unto itself and Asia, shorthand for East Asia or sometimes including South Asia, but truth is geographically there is one Asia and it encompasses much of what we, especially in this country, have come to refer to as the Middle East. The Middle East is not a geographic term, it’s a geographic goal, sort of, descriptor but it’s today more of a colonial artefact for better or worse. It really is West Asia most of it, especially the Persian Gulf countries that really matter.

So what I’ll show you here is how this much fuller geography of Asia that stretches from the West Asian countries of the Persian Gulf, through including Turkey and Iran, all the way to South East Asia and from Russia to Australia is becoming one ever more integrated Asian zone. Again, not a zone of peace, not a zone of common values but a zone that forms what in international relations theory we’d call a system. And a system is strictly a measurement of the intensity of relations among units, right? It’s nothing about their cultural commonalities because after all this is by far the most diverse region of the planet. It will never have a common currency, common institutions, common laws, common values, nothing of the sort will ever happen but it is absolutely becoming a system. And when you talk about systems in international relations, we talk about Europe as a system, North America as a system, a transatlantic system but we never talk about Asia as a system. The reason is because none of us remember the pre-colonial world of the 1400s and 1500s when Asia actually lived by this, sort of, Silk Road system and the fact that we have this term ‘Silk Road’ must indicate that at some point in history Asians actually had or at least very frequent interactions with each other.

Fast forward to today after 500 years of colonialism and the Cold War, Asia is once again becoming a system and particularly over the last 30 years since the end of the Cold War is when Asians have been rebuilding this map of connectivity. The trade volumes represented here across the Asian system, you can pick any pair of countries or sub-regions and what you’ll find is that over the last 20 years, 15 years, 10 years, 5 years, I’ve been looking at these intervals, you find that amongst every pair of countries and regions in Asia there’s been an intensification of economic activity. This only shows you trade, not even finance, infrastructure, business travel, tourism, all these other things in which there is equal patterns to underscore it. And Asians now trade much more with each other than with the rest of the world and that’s been true since before the financial crisis.

So this is now 15 years old, the fact that Asians do more business which each other than with Europe or the United States and this is extremely important to understand in the context of the trade war because from the financial crisis of 10 years ago to the trade war of today, Asians have a lot more resilience built in to their economic patterns and interactions and we tend to think of from the outside. Couple more points; one is just about diplomacy. When we talk about global governance, we often talk about the institutions that we built in the Bretton-Woods conference in the United Nations and how we measure the influence that Asians and others have in global governance by way of what their voting shares are or their allocations of seats and voice are in our institutions but what we’ve neglected is this big space in which Asians are building their own institutions. And when Asians build their own institutions that means that 5 billion people are creating new sets of rules from themselves and that’s the majority of the world’s population.

So we’ve been asking the question backwards; not what is their relevance to us, we should be asking at this point what is our relevance to them? Because most Western countries are not part of the regional comprehensive partnership which goes into effect this year and will be one of the largest trading areas in the world. I’m not calling it a free trade area because Asians don’t believe in free trade, right? They believe in managed trade and they find ways to converge without conceding necessarily in some of the areas that we would like them to in a common, global, universal system, such as what the World Trade Organisation represents. They borrow from those playbooks and codes and rules that have preceded them but they apply them to their own geographies. Here I put the Asian infrastructure Investment Bank, which now has something like 80, 85 members, including some European countries, including even Iceland and Chile, which are not particularly contiguous to Asia, just shows how popular infrastructure finance orbit has become. Just to make that simple, fundamental point here about governance, it’s not something that emerges or it sustained from London or New York or Paris. Global governance has always been a competitive landscape of evolving and competing institutions and now we have some emerging from Asia as well.

Last couple of points. This is about what some of this means for this tripolar order that I was talking about earlier. Europe still represents the largest share of global trade, mostly because of the trade intensity, the gravity of intra-European trade, but Asia’s catching up very fast. It begins with the North-East Asian triangle of Japan, China and South Korea but as I showed you in the previous slide, it really has spread to all of Asia that trade volume. Europe’s trade with Asia, importantly, is now 1.6 trillion dollars a year, that’s larger than Europe’s trade with North America.

So this traditional anchor, this axis that underpins the world economy in the post-war decades, the Trans-Atlantic zone, is not the largest zone of world trade anymore. Not by quite a lot. Eurasia is the largest zone of world trade and normally when two regions of the world will trade 1 trillion dollars or more with each other, you would expect that they would have common institutions, free-trade agreements, seamless infrastructure and so forth. None of those things actually exist right now between Europe and Asia. So imagine what will happen when the Europe-Japan free-trade agreement is fully in effect, it just launched last month. When Europe has similar free-trade agreements with ASEAN, with India, as China gradually opens up and with the Belt and Road infrastructure in place. This number 1.6 could easily be 2.5 or 3 trillion dollars a year whereas we don’t expect a whole lot of progress amongst the mature economies of Europe and North America. And this, of course, shifts Europe’s calculations and that’s why you see European countries joining the AIIB over Obama administration objections. And why you see such an aggressive push, in a way, from Europe to start to take free-trade on a much faster track with Asia.

Just to make a point about Belt and Road, getting back to geo-politics. What the Belt and Road Initiative does through all of these pipelines, high-speed railways, electricity grids and fibre-optic internet cables and so forth, is to start to unlock the pent up demand of for connectivity and for relevance in the global economy. Each country wants to play some role in the global division of labour and they can’t do so without good infrastructure. And on this map again you have 5 and a half billion people, most of whom live in post-colonial, post-Soviet republics, very frail, fragile countries whose populations have tripled since the end of World War 2 with very little new infrastructure. So China has come in and started to bridge this market failure and that’s why the Belt and Road initiative, for all of the blow back against it, is still quite welcome. There will be corrections along the way, there will be renegotiation’s of contracts, it’s happening all the time. My book is filled with stories of country by country how governments are pushing back against China in getting a better deal over time.

So we shouldn’t make a linear projection from Belt and Road infrastructure to it being a, sort of, hegemonic plot. And I’ll just jump through this, I won’t talk about the specific countries but when I looked at major countries involved in the Belt and Road, there is no pattern. One cannot make the statement ‘Belt and Road will’ or ‘Belt and Road does’ or ‘every country falls into a death trap’, right? That would a lie, it would just simply demonstrate one’s own ignorance when people say that because there is very little commonality in how countries deal with Belt and Road. It depends on the size of their economies, their proximity to China, their debt levels prior to taking on Belt and Road projects and so forth.

So I’ll give you some examples here or countries that are, at the present time, quite compliant with Chinese ambitions and countries that are pushing back against them and everything in between and that’s the reality of Belt and Road. So I’ll just stop right there for now and come back to some of those points during our discussion. Thank you.

ALAN MENDOZA: “Great. Now I’m going to ask Mark Leonard to speak to the subject at hand.

Mark is Co-founder and Director of the European Council on Foreign Relations, of course the first I think probably still only Pan-European think tank. He was previously Chairman of the World Economic Forum’s Global Agenda Council on Geo-economics, Director of Foreign Policy at the Centre for European Reform, founder of the Foreign Policy Centre.

Lots of titles but we’re really interested in his views having done a lot of focusing himself on China in particular but also wider Asia. Mark, over to you.”

MARK LEONARD: “Thank you very much. It’s a great pleasure to be here. Parag is not just a good friend but I think he’s one of the most interesting geo-political thinkers around at the moment because he’s got an incredible ability to burst through the solipsism of strategist in different places. He’s lived in the US, in Europe, in Asia, in the Middle East and you can see an extraordinary ability to synthesise, to look at problems from different angles and to meld geo-political thinking with a kind of deep reflections of some of the big structural changes which are taking place in the world of technology and (inaudible) and I think that has been true of all of his work and I think it is definitely true of this book as well.

So I think it’s always fun to talk and always enlightening to engage with Parag. And I think his book really quite powerful attempt to change our mental maps in the way that we think about the world and to de-centre, particularly in this country, the importance of the transatlantic relationship and our monomaniacal focus on what Donald Trump are doing and the tweets coming out the White House and to replace it with a different way of looking at the world.

I think underlying the title is this, sort of, idea that the 19th century, beginning of the 20th century, was a European century, the rest of the 20th century was an American century and that the future is going to be Asia. And both in his speech now but also in the book, Parag also challenges us to think about Asia in a much more expansive term, to think more about Eurasia and about this massive landmass which is now not just a landmass because of the Belt and Road Initiative. The road is actually maritime rather than something which is landlocked. And to go beyond thinking about China and I think it is very interesting the way that he talks about the development of a nation system and obviously on one level it’s incontestable that the future is Asia or if you look at the raw indicators of demography, market size, technology, infrastructure and on the back of this enormous wave of economic growth, from the shift in economic power from West to East, you’re seeing the balance of military power shifting in every single theatre.

So what we’re realising is that many of the things that we thought of as soft power, our ability to decide what was right and what’s wrong and what was important, was quite closely related to the hard power of the West. The fact that most countries of the world were former European colonies has got a lot to do with what was taught in their schools, the kind of basic concept which governed their societies, their moral codes, their definition of their interests. And as power shifts, so does people’s ability to emancipate themselves from those terms that I think that we’re seeing as much multi-polarity in the world of ideas and news and other things as we are in military terms.

But I’m not sure if I completely buy this idea about looking beyond China and the fact that most people don’t live in China because though I totally agree Asia is becoming more of a system of an economic space, I do have an old-fashioned that may be the most important part of Asia is China and that to try and look past it would be a bit like if you take the earlier centuries that Parag is contrasting this with. If you look at the 19th century and say ‘Europe is not Germany or Europe is not the UK’, you probably miss quite a lot of what happened in the 19th and 20th century because the rise of these great powers and their respective relationships with each other was much more important than the very impressive system which was developed in the 19th century which linked Germany and Britain and other economies together. And equally, you looked at the 20th century and you use Parag’s frame here you could say America is not just the United States, there’s Mexico and Brazil and Canada. But obviously if you want to understand how the world works, the place to look is very much the United States.

And I think maybe, I’ll just end a bit by talking about China because I do think if the future is Asian, the future of Asia is going to be determined more than anything else by a single country and how the other countries in Asia respond to it ad that country is China and I think it’s a country which is going through some revolutionary changes at the moment.

I’m going to China very often, been going there for a very long time, and I’m struck by how it has changed in the last 3 or 4 years. Xi Jinping has embarked on a revolutionary path of trying to reinvent the nature of China’s economy, it’s political system and its foreign policy and his goal is to escape the middle income trap by developing China’s technological base, reducing his dependence on foreign technology and then to use this mastery of artificial intelligence and big data to develop a different kind of technological enhance dictatorship. At the same time he is cementing China’s global role by connecting to the rest of the world through the Belt and Road Initiative which Parag was talking about. And I think that whereas, one of my Chinese friends said to me when I was talking to him a few weeks ago, he was saying (inaudible), (inaudible), even when (inaudible) wanted to assimilate into the existing world order, China doesn’t believe in that anymore under XI Jinping and the goal is really to try and create a different world order and one where there is an Asian system but their idea of an Asian system is one with a middle kingdom at its heart where a lot of the relationships which are being created now have echoes in previous Asian systems which China created in the past.

And I think it’s maybe worth reflecting a bit on how Chinese people look at the world and particularly how China sees, not just the emerging Asia system, but how China sees their relationship with the US and I think that’s something which maybe people in London and in Western countries have not understood enough, how differently Donald Trump looks to Chinese people from how he looks over here. Most of my American friends, certainly all my European friends regard Donald Trump with degree of contempt, they see his as dangerous, self-defeating, sort of hopeless figure, whereas none of my Chinese friends look at Trump like that. In fact they talk about him in quite different terms, some of them even talk about him as a kind of master strategist and tactician and what they see when they look at the US as something which is very scary for them. They see Donald Trump as the first leader to be waging a three front ideological, military and strategic battle on the US and they think that when Donald Trump looks at the world, it’s not that he doesn’t think that the current order harms or doesn’t benefit the US, the problem is that it benefits China even more in relative terms and if he doesn’t do anything about it he will be the president that oversees China’s ascent to number one place in the global system. And he also looks around the entire military industrial complex, the foreign policy community, all of the different institutions and they’re so committed to the current way of thinking US role that it’s almost impossible to imagining reforming it. So therefore the logical conclusion is to try and launch a, kind of, almost Schumpeterian process of creative destruction where you destroy all of these existing institutions from the World Trade Organisation and NAFTA to NATO, the Iran nuclear deal, not as an end in itself but as first step in renegotiating the world order on bilateral terms because the US is still the most powerful country in the world and can do it from a position of strength if it deals with people bilaterally rather than meshing itself in institutions which empower the weak against it.

And the goal, therefore, is to try and recreate a different world order and what’s very interesting, so that’s what the Chinese think he’s up to, and what’s very interesting is that they think that world order is going to be very different from the world orders that we’ve had in the past and it’s sort of five main strands they see as being part of that world order. There’s this big debate that’s been ongoing for ages in China about whether we live in a uni-polar or multi-polar world. Everyone in China is now completely beyond that, they think we live in a bi-polar world with two poles, China and America. They think that we’re entering a period where alignment is over, the Cold War was about alliance versus alliances whereas in this new bi-polar world different countries are going to align with China on some issues, with America on others. They think that it will be a world defined interdependence as Parag was saying but that interdependence will be weaponised and be turned into the main way that different countries advance their interests and punish each other. They think that cheating will be central to this world, countries aren’t going to keep promises, they’ll tell lies and use conspiracy theories as Trump does. They also think the other element is going to be about strong men, one man decision making, which they know something about in China with a lot of inconsistency and radical things coming forth.

And finally maybe I’ll end with that, an era of domestically orientated foreign policy so rather than thinking about foreign policy as an attempt to influence other countries are trying to do, it’s increasingly about consolidating your base at home and dealing with your own domestic constituencies. And if this is right I think it will have profound implications for the kind of future, sort of Asian future that we have and I think this core relationship between China and how it develops itself in this new era and how the US responds to it will maybe be the key factor in what kind of Asian future we have. Thank you.”

ALAN MENDOZA: “Well thank you very much Mark for that cheery prospect sitting here in London, not in the bi-polar parts. James Rogers will complete our panel. James is the Director of the Global Britain programme here at HJS. He is a founding member of the organisation and before he returned he was at the Baltic Defence College in Estonia and the European Union Institute for Security Studies in Paris. Over to you, James.”

JAMES ROGERS: “OK thank you, Alan. I was going to say or I’m going to say that I’m going to play, a little bit, the role of the skeptic. Although I agree with Parag that Asia is going to become increasingly central to the global economy and increasingly connected to the rest of the world and to some extent the power that will produce will therefore help shape and define the future, I’m not sure that Asia is actually going to define the future.

Now, over 110 years ago Halford Mackinder told us that the future was going to belong to Eurasia and to Russia probably above all others and there have been many people over the last century that have claimed that this area or that country or another is going to be the future or is going to define the future, is going to run the future in some kind of way. But it seems to me that there’s a certain degree of continuity in who actually has power and who shapes the dominant narratives in the world. So I’m not altogether sure that what’s happening in Asia is particularly new.

In many respects what many Asian countries seem to be doing is simply to be copying the best parts of what the West has achieved and trying to replicate them in their own countries and that in turn has been compounded by foreign direct investment from countries like the US, the UK, Canada, Australia, Japan and Europe more broadly that has helped boost that on, particularly in the last 20-30 years since the end of the Cold War. So do Asian countries have what is necessary to succeed to catch up, if you will, with the Western powers in Europe and North America and to capture the very essence that has driven them forward and has made them revolutionary forces in the history of humanity in so far as the last 200-300 years have changed dramatically from the last 2,000-3,000? And I’m not altogether sure that they do.

The point is that the maritime liberal democracies of the West seem to have captured this essence and they seem to have balanced the practices and the structures of three important components; these being liberty, democracy and the civic nation and by drawing those together into a winning formula, they’ve managed to maintain this perpetual transformation that has delivered the greatest improvements in any period in history to such an extent that we live in the most affluent and protected time in history.

But I’m not altogether therefore sure that the future belongs to Asia, I think it still belongs to maritime democracies, including those in Asia and hopefully we’ll see more of them in the years to come. The only issue that strikes me as a serious issue is the degree to which we, in the maritime democracies, still believe in ourselves or whether we have become captured by other ideas and whether we can continue to sustain ourselves. And I think I’ll leave it there.”

ALAN MENDOZA: “OK, right. Parag, as a chief protagonist, would you like to come back to what Mark and James have said and we’ll open up to the floor.”

PARAG KHANNA: “Very interesting responses, thank you so much. Let me start with Mark’s comments. So I think that by making the analogies to the central powers in historical systems we again fall back into Euro-centrism. Of course you can’t understand the European system without the role of Germany, you can’t understand the Western system without the United States but that’s why 50% of my book is about China and the other 50% is the rest. The goal is to bridge that gap between the synonymity, the conflation. We have conflated China with all of Asia because we live in the moment. We live in a very narrow mindset. But when you look at the 5 billion people of Asia with only 1.5 being Chinese and you see the shifting patterns of growth rates, one can’t simply presume this linear pathway from China’s strength today to its eternal dominance and the fact is rather than look at all, even remotely without even making a single reference ever to European or Western history, we should look first and foremost at Asian history if we want to understand Asian dynamics.

We have 4,000 years of Asian history which has been multi-polar because you have a region that looks nothing like Europe. You have a region of 6 or 7 unique civilisational clusters, many of which are mutually unintelligible with each other across this vast Asian space. There is very little risk since the Mongol empire, it was the only power to have dominated all of Asia. So even when you look at China in history and we make all of these analogies to Chinese world order, Chinese (inaudible), middle kingdom, tributary system, these things are absolutely irrelevant to most Asians who were not part of that system, it was very geographically limited in scope and Asians have a long history of being able to push back strongly against each other. So we also make the mistake of believing that simply because China may want something, China may want to revise the global system, China may want to be number one, China may want to dominate, right? That doesn’t mean those things will actually happen and we tend to think that China gets whatever it wants, right? Again because we live in the moment and we make them into these ten foot tall monsters. But if that were true, how would we already have this massive push back that we have today against China? Because we do live in a different world. This is not a world of neo-colonialism, this is not a world in which the analogies between the Belt and Road Initiative and the British East India Company necessarily apply. This re-colonial world, the lesser powers, the peripheral states, the colonies don’t get to say no. But in today’s world, even countries with absolutely no leverage whatsoever over China, like Myanmar or Pakistan and whatnot, can start to rip up contracts, renegotiate debt, cancel projects and go on the marketplace and look for alternative providers.

And so, this leads to me again to another broad point, which is that at no point do I ever state, the title of the book perhaps suggests otherwise, but I believe in multi-polarity, I showed you a whole chart depicting what the physical geography of multi-polarity looks like. The economic underpinnings of that multi-polarity are absolutely crystal clear, they leave zero room for debate that United States remains a global economic and strategic power, that Europe is most certainly a central economic and regulatory actor in the world and that Asia has multiple poles of power within it. We have to first and foremost to agree and grasp that much more complex geo-political landscape. The very formulation of a G2, of US-China, is wrong on its face, it’s simply economically incorrect and that is the single most important underpinning of power, especially in a world of nuclear deterrence and of sovereignty in all of the other ways in which countries can resist each other.

So what China wants? And I agree with you that more time one spends in China, the more one is convinced that these may be aspirations that China has. That in all of human history and imperial history tells us almost nothing about what will be, right? Because for those of us who remember just 20 years ago, we were talking about America the hyper-power, America the colossus, because America had this freedom agenda, had invaded Afghanistan and Iraq, but as someone who personally served in Iraq and Afghanistan advising US Special Operations Forces I’m here to tell you something you already know which is that empires don’t always get what they want, right? And they learned that lesson the hard way.

So there is zero correlation to me between the vision that China may have and the reality globally to say nothing of just the reality in Asia itself because we don’t spend enough time looking at not only the voices, again these are far weaker countries, even India is insignificant compared to China, but the dynamics between Russia, India, South Korea, Japan, Australia, ASEAN countries and so forth, and the ways in which they all operate in a much more complex and fluid system that serves to limit, in some ways, Chinese expansionism, all that does add up to something and then we bring in the US factor which I by no means think is irrelevant and that itself lends support and leads in some ways some of the dynamics underway that helped to restrain China. So to me we don’t live G1, we’ll never have a uni-polar world ever again, we’ll have a multi-polar world but multi does not mean bi-polar, it will mean multi multi-polar. Again, there are hierarchies within that depending on what geography but we’re not going to live in a China-centric world, nor a US-centric world and the more we look at all of these new kinds of alignments, we’ll come to that.

Final couple of points on what James has said. The thing is that part of, now let’s take the same arguments and apply in the intellectual domain, right? Which is to say that again it’s not about one system replacing the other because there are no commonly identifiable Asian values or systems. There are more people living in democracies in Asia than in authoritarian countries. There are more people living in democracies in Asia than the rest of the planet Earth. In just the next few months you will pick up the newspapers sequentially and you will read about the Indian elections, the Indonesian elections, the Philippines elections, that’s 1.8 billion people right there. To say nothing of Japan, South Korea, Australia and New Zealand, which of course are not necessarily culturally what we identify as Asian but very much play a role in shaping how Asian governance norms evolve.

So it’s not an Asian system in opposition to a Western system. They have, as you rightly said James, they have adapted and they’ve learned and they continue to adapt and learn but applying to their own circumstances and the models that they have other than China are not meant to stand in opposition to Western values at all. In fact they’ve learned from them and in some ways they’ve improved on them and I try to document that in the book but I won’t push that too far.

So final point is that they will have, even the democracies will have a different view of the sort of teleological balance between democracy, rule of law and individual liberty, right? And for countries that have very conservative and cautious approach to liberalism and reform, which is even the democracies, they’re going to favour rule of law ultimately because if you back test the correlation between economic growth, which is their foremost objective, and these factors you’ll find that rule of law matters more. Now we may not find that to be entirely virtuous, we have managed to marry those forces together and maybe one day they will as well because again I’m not pausing their system as the opposite, I’m pausing that they’ve learned from centuries of tutelage by Europe and by living in the American world order, right? So they’ve indoctrinated, they’ve been (inaudible) many of those virtues And so for me it’s a much more fluid, pluralistic system in which there’s a lot of mutual flows but it is no means neither a China-centric nor a US-centric.”

ALAN MENDOZA: “Quick comment from you two, perhaps?”

MARK LEONARD: “I think we should probably open up because there’s 15 minutes left. We can go back and forth quite a lot. I mean it’s clearly going to be a multi-polar system and there’ll be lots of attempts to balance Chinese power in all sorts of different ways and China hasn’t always been great at not limiting its own rise by making mistakes, upsetting people in different ways. But at the same time it is pretty obvious that the gap between China and any other power is vast and the system which is being created is a Sino-centric system. Even in India and in other countries, even Japan, even the countries there, they are terrified by China’s rise. We’re completely addicted to it and their infrastructure, their technology, their way of life is being built in Chinese terms and in every other part of the world, China is emerging as the number one trade partner for everybody.

So I do think that is a new reality and the way the US responds to that is obviously going to be the big question of the next few decades. And therefore what everyone else does, I think, will have to find its place within this core system and the fact that the US approach to it is to try and maintain American primacy by enlisting all of the other powers that you are talking about as balances to China, I think, plays into the Chinese idea that they live in a bi-polar world but as I said they don’t think it’s going to be a bi-polar world like the Cold War because they expect countries to screw them around and play Tito-like games, playing China and America off against each other in all sorts of different ways. And that can also be dangerous and unpredictable as well and lead to mistakes so I think it’s going to be quite choppy.”

ALAN MENDOZA: “Anything quick from you, James?”

JAMES ROGERS: “Yeah, I guess I was saying in relation to the point I made that, I guess the point I was trying to get to is that China is often seen now increasingly in the West and I think more broadly to some extent the ‘future’, that the world is going to become almost uni-polar or China is the next big thing. And to give you an example, only this week I spoke to two people, one being the leader of a British think tank and the other being an academic that actually said to me ‘I rather like the social credit system’. My mouth actually fell open. This is like an Orwellian state with telescreens and everything. I mean this strikes me as being quite different to the norms and the conventions that we have adopted here in the UK and more broadly across the Western world and the liberal world more generally.

So this shows there is this kind of growth, this kind of belief in the future of China and I’m trying to say is, or take South Korea is a country within a human lifetime, a single generation, that has gone from being one of the poorest countries in the world to being one of richest and one of the free-ist and one of the most technologically developed. So that shows that in Asia you can actually succeed even more than China has by adopting the kind of model that we have here in the UK or more broadly across the Western world and you don’t need to adopt or keep the authoritarian model like China has. And that, I guess, is the point I’m trying to make.”

ALAN MENDOZA: “OK, multiple views here. Let’s open up. I’m going to take a few questions at a time. Could you give your name and affiliation if you have one? We’ll start here.”

AUDIENCE MEMBER 1: “David (inaudible), semi-retired teacher. Very little mention of India except Parag said it was insignificant compared with China. Is that not a sleeping giant? It’s very much closer to the West in its culture than China is. How do you see that?”

ALAN MENDOZA: “OK, any other questions to take in this round? Yes.”

AUDIENCE MEMBER 2: “Nicholas (inaudible), I’m just a teacher but I’m also enthusiastic about (inaudible). My question is for Parag. Your system, your future or coming system of Asia is completely dependent on connections (inaudible) about cities and (inaudible) forming a part of the system. With the nation-state back in a big political way, how do you see the tension between non-national and national states affecting the system (inaudible)?”

ALAN MENDOZA: “OK, so one more to take. If not I will do one. It seems to me that a lot of the divide has come up with the China question here. But when we were speaking earlier, you made it quite clear and in fact the book is quite clear this is not a substitute for China. Asia is not China. At the start you put your polls up, West Asia, lots of different options there.

How do you think, we’ve spoke a lot of the geo part of the geo-politics, how does the politics of that work for the others essentially in the region, as it is becoming an internal system, to, if you like, provide some kind of political counter-balance or counter-option to China? How does that work?”

PARAG KHANNA: “OK. Great questions. I’ll start with yours Alan. So, one doesn’t have to necessarily find a political counter weight in the sense that, and this gets to James’ anecdote about the professor who likes the social credit system, there is a difference between countries importing certain technologies from China and becoming like China. You can export surveillance technology, social credit system. It doesn’t mean that suddenly India will cease to be democracy overnight, right?

So I think again we are treating the world, and Asia in particular, as just a board game, a flat board game like Risk, in which culture, history, language, their local dynamics, play no role whatsoever. Whoever conquers that tech market in that country, whether it’s Ali Baba or it’s Amazon, right? It’s Huawei or it’s whatever, it’s (inaudible) or it’s Google, and the world is just these chips moving on and that’s not actually the way things work because the law of technology diffusion is so rapid that, you know, today we talk about a bi-polar AI arms race. The more you know about technology the more you realise that in fact these technologies diffuse so rapidly that they’re beyond anyone’s control and you’ll have an AI marketplace. You already do actually in some way, it just doesn’t get talked about but in a couple years we may even be looking back and saying ‘wait a minute, we forgot about all of those other AI vendors in the marketplace that are offering a cheaper option and won’t steal your data, right? And so in the political marketplace as well there isn’t really a need to pause at some kind of an opposing model to China because wherever you go in Asia, again the other billions of Asia, you don’t see people saying ‘I want to have a Chinese government’, right? You hear them saying ‘it would be great to have industrial policy like China, it would be great to have these special economic zones in Chinese cities’ and so forth but it doesn’t mean I want to have a Chinese communist party ruling over me, right? And again just remember billions of people in Asia with decades of history of throwing governments out, there are only a couple countries in Asia including, of course, China where people are literally afraid of their governments. But in the rest of Asia they are not, right?

So I don’t actually share this dystopian, nightmarish view because Asians have a wide range of cultures. And India, you know we looked at Modi and his illiberal tendencies, he may not be Prime Minister in a few months from now the way he’s going, right? So let’s be absolutely clear that again false choice, Chinese systems versus liberal system, billions of people in the world don’t wake up in the morning think they live in that choice and in fact they don’t. So I don’t have to worry at all about that.

The same applies in other domains as well, just to say again India is a good example of that. Where do I see it fitting in? Again it’s an important pillar of the system but it’s a perfect example of multi-alignment. It does see itself cooperating with the US in some areas, China in other areas. It’s the second largest shareholder in the AIIB but it refuses to join the Belt and Road Initiative and it participates in the Quad with the US and Australia and Japan but it’s also increasing its strategic, it’s in massive maritime investments in order to be the dominant maritime power in the Indian Ocean. Again when we talk about the Indian Ocean and our typical geo-political conversations these days, we say ‘well China wants to build an ocean-going fleet, a Bluewater Navy’. Of course it wants to patrol the supply chains, it’s going to dominate the Indian Ocean like the Ming Dynasty treasure fleets and for us it’s some kind of a straight line from here to there. At no point do we think about ‘wait a minute, Britain is not going to allow that, America is not going to allow that, for damn sure that India is not going to allow that’. So at what point do you leap to that conclusion about China when you have this massive obstacle to China’s Indian Ocean dominance known as India, right? So that’s a critical factor.

I won’t say too much about cities and so forth, I think it just reinforces the point. What I do in the book is to kind of go through the key financial centres and technological centres in Asia and show how the rates of investment and technology transfer are helping to build this system because there’s so many complementarities among Asian economies.”

ALAN MENDOZA: “OK, Mark?”

MARK LEONARD: “I think the questions were for Parag.”

ALAN MENDOZA: “Well do you want to say anything on those?”

MARK LEONARD: “Not particularly.”

ALAN MENDOZA: “OK well hang on, let me just challenge your one point then. So you were saying about the Chinese view of the world on the strong man system, you know, would be coming to the fore. Parag said, basically, that’s not going to happen in Asia. How does that conflict work at (inaudible) for that difference in thought?”

MARK LEONARD: “Well it has happened in Asia. You’ve got Modi, every single Asian country has got a strong man and most countries in the world are getting strong men, including all the non-Asian countries that Parag calls Asian countries like Turkey. All the West Asian countries have got strong men.”

PARAG KHANNA: “But is it because of China?”

MARK LEONARD: “Well it’s because if you have a world that’s moving away from ideas that we’re going to have the rule of law and multilateral institutions towards one which is more about geo-political competition where you have strong men who are assertive then you want your own strong man. You don’t want to be the one country that plays nice and gets messed around by everybody else so there is a sort of domino effect. And you know, it is very interesting, a very similar point, in most Asian countries you’ve got the kids of previous generations of leaders in Korea, in Japan, in China and they’re all highly nationalistic and aggressive and that’s the sort of dynamic that we’re emerging towards because there is a big power transition going on. Everybody wants to defend their interests, the US is kind of withdrawing from a lot of the historical positions it has adopted, it’s struggling to maintain its position in Asia and that’s one of the reasons why it’s withdrawing from all the other theatres in order to maintain its primacy in a different way so people are kind of testing it.

So I think the strong men thing is going to be an obvious feature of the next few years and, you know, it’s obviously true that culture is a very powerful mediator for the flow of ideas but I do think that the Chinese economic system is now as influential around the world as the Washington Consensus was in previous decades. Even the US is moving away from a laissez-faire approach towards having an industrial strategy, all European countries are thinking of that, their kind of industrial strategies.

And what you were saying about technology is not necessarily born out by the complete dominance of the Facebooks and the Googles and the other companies which have made it impossible for all European countries to have indigenous technology scenes. And what James was saying about social credit, I mean it’s obviously horrific. You go to some of these AI companies (inaudible) the technologies they’re developing, they’re very, very frightening but they’re not that different in terms of their intrusion into our everyday lives and distortion of our behaviour from the algorithmic surveillance capitalism which is being developed by the private sector in the US. And in all countries, what we’re seeing is a kind of merging of things which have been developed but for commercial reasons and the use being that they’re put to by intelligence agencies. Why is it that American intelligence agencies are so desperate to stop people signing contracts with Huawei for 5G technology? Because they know what they did to their own technology companies in recent years. So I do think that it’s very difficult to imagine a Pakistani rival to (inaudible) emerging.

So I think over time what you will see is a winner take all economy, that China has basically managed to create a pole which is big enough by closing its market to the US and is therefore able to promote its norms through those technologies and I think they will get adapted to the local cultural space but it is pretty clear that they will have some kind of sway and will change the way that countries around China are being governed. And I was very struck when I was in Pakistan last year talking about the Safe Cities Project where they are literally taking a lot of the technologies which were developed in Xinjiang and implementing them in the biggest 13 cities in Pakistan.”

ALAN MENDOZA: “James. Thought from you?”

JAMES ROGERS: “Well maybe in relation to that point you just made, Mark. I think there is a difference between the social credit system and the ethos and the ideas behind it and Facebook or Instagram or any of the other social media. And in the West, I think, primarily those were designed in way to connect people initially and of course to make money. In the case of the social credit system, it designed to discipline thoughts, expressions and ideas and to make people afraid.

So there is a difference and having that trickle into our way of doing things or even if we empower it through cooperation or investing into those kinds of companies, I don’t think that’s a very good thing for us to be doing because of the blow back effect that will inevitably be had to the countries around the region and to us ourselves. There is a difference even if you use similar technologies.”

MARK LEONARD: “I mean there isn’t a social credit system, what you have is a bunch of different technologies being developed and different experiments around the country. We have a kind of Orwellian nightmare of a single system being developed and you can see glimpses of it in different places. But what is, I think, clear is first they don’t have a proper credit system so part of the creation of the social credit system is about trying to create credit ratings so that you can deal with the massive debt crisis that they have in the country at the moment. But also you’ve got an authoritarian government that is using the internet and new technologies to be much more responsive and to not make the mistakes that other authoritarian governments have done and it’s quite frightening.

At the same time, given some of the debates we’ve been having about Facebook and the way that it’s destroying a lot of our civic life, our media, our newspapers, you know, to counter-pose this kind of benign system with an evil system is simplifying things. What you’re seeing in both countries, in both things, is development of new technologies which are highly disruptive with some wonderful qualities to them but things which are very destructive to the fabric of our civic life and you also have governments that are trying to use them and to catch up with them. And obviously I’m not trying to pretend that there’s a sort of moral equivalence between the kind of authoritarian system in China and the systems here but there are all sorts of highly illiberal things that are now possible as a result of the way Western intelligence agencies are engaging with companies. And there are all sorts of things that we don’t understand because the problem with these new algorithms and systems is that they are completely impenetrable, nobody understands them, they are unaccountable, they’re not regulated. And by the time we start experiencing negative elements of them it’s usually too late because these things have become so firmly embedded in our system.

So I think that we have a big challenge dealing with that and working out how to get a grip on these things in the West. As we do worry about the social credit system, which I find totally horrendous, I’ve visited a lot of these companies when I’ve been in China and have seen the way they’ve worked in other places but I’m not sure that the distinctions are massive as you say it is and I think there a lot of dangers in unregulated technology in the West as well.”

ALAN MENDOZA: “Right. We are out of time but I wanted to, this debate, this microcosm of the debate here shows why Parag’s book is so interesting because it can be taken in literally any direction. You have written a very broad book which by design is (inaudible), we should probably do 20 different sessions on the book in terms of covering each area but that’s a testimony to you and your work, for having to put that out.

You’ll be pleased to hear that you can buy the book outside and Parag will no doubt sign some words of wisdom for you so do make an orderly round. I want to thank Parag, Mark and James for their contributions today and for all of you for having joining us. Thank you so much.”

HJS



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