 Thank you very much for coming and good evening, and welcome to this PSOAS Public lecture, which is particularly supported and I'd like to thank both the PSOAS Centre of African Studies and the PSOAS China Institute, who between them have put together and promoted this event and the reception afterwards to which you're all warmly invited. Mae'r blywedd i ei wneud, i garfodaeth geniwyr, a fyddio i gael i'r drwsfynol susafwyr y Prifysg Peter Nolan o'r University of Cambridge, ac mae'r bwysig wedi ei wneud. Peter wedi'u y Chynghwyr Professor o'r newidio'r Lleif, Ie Merythus. Mae'n iosio i'r ddaraf yr ysgolion o'r Lleif ym Mertrachol Ddodgol. Fy enw i'w cyfnodd yn ystyried cyfnodd i gael fel Calp, y Fynol Llywodraeth Cynulliad. Fy angen i'r ysgrifennidau, y cyfeirio a'r llyfr o'r llyfr o'r llyfr arfer o'r Cymru, oedd o'r Cymru o'r ysgrifennidau arfer o'r rhaglen ychydig, oedd ymddangos iawn i leweddau ymlaen, a'r byw'r bydau y meddwl a'r bydd. Peter yn ymweld eich bwysig iawn, rwy'n gwybod ei fod wedi'u cymorth â'r lleol i'ch gweithio yn ddweud i'r adrwng a'r ddull yn ddechrau i'r ddweud i'r adrwng ac yn ddweud i'r ddweud i ddechrau'u ddweud i'r ddweud. Felly eich dweud, y ddechrau'n ddweud i'r ddweud yn ddweud i ddweud i ddweud i ddweud o ddweud i'r ddweud ac yn ymddangos ymweld, ond y bydd ychydig yn llain. A'r amser yn 2009, yna'r CBE wedi'u gweithio i'r ddefnyddio'n Llyfrgellach Chino yn y llaw i'r economa gwneud. Roedd ymweld yn ddigonol. Peter efo'r ddweud o'r sgwlaeth ymddangos ar y Gwneith Gwneith Gwneith Gwneith Gwneith Gwneith, yr Ysgol Gwneith Gwneith Gwneith Gwneith, yn ydyn nhw'n gweld yn gweithio'r Gwneith Gwneith. roeddwn yn ymwneud y maes o'r Grif Llywodraeth Copan Haengen. Rwy'n meddwl i'r ffordd yn ddweud y ffordd. Mae'n maes yn ymddefnyddio'r Ddeddydd yn Sôr. Rhaid i'n gobeithio. Pita yw'r cyfrifiad o'r byd yn ymdweith. Diolch i'r ffordd o'i arnyn nhw'n gofynol i'r gweithio'r gweithful o'r ddysgars i bobl. Felly wedyn ymdweithio'r gweithio'r gweithio. Mae'r gwybod y bydd y bydd y Chino a'r West, y cyfrwyngau cyflawni, yn dweud yn ddigonol. Mae'n ddiddorol yn y ffordd o'r rhaid o'r llai o'r llangwydau ac ymddangosol yn y West. Mae'n ffordd o'r rhaid o'r ffordd o'r angen o'r anzioedd. Fy ffyrdd o'r rhaid o'r ffordd o'r FFT podcas o'r cyfrwyngau a'r angen o'r 20e yma, byddai'r chynedd syniadau, i ddod yn y 20rth ddweud. Ond ydych yn dod o'r blomberg ar-deddau, ddyn nhw'n meddwl i'r cyffredinol, yn ddechrau'r llwylau llwylau llwylau llwylau llwylau llwylau llwylau llwylau llwylau llwylau llwylau llwylau'r llythraff. Yn ymgylch i'r llwylau llythraff, yw'r hyn argyrchu, ar y llythraff bwynt yna. Rhaid i'r ddweud i'r cyffredinol Mae'r ddweud o Chino's investments in Europe have raised a red flag amongst EU leaders that China has a London fixation. I mean, who doesn't? Meanwhile, there was said to be alarm in Germany at the Chinese donation of a five and a half metre tall statue of Karl Marx unveiled in trier last week on the 200th anniversary of Marx's birthday, of Marx's birth, and all this at a time when in much of the west people seem to have lost confidence in western models of economic management and politics, not to mention the fever pitch of rhetoric around the current US president's sallies in the beginnings of a threat of a trade war over China's industrial policies. So, very important, big context, and Peter, if I can ask you to come up and talk us through some of these issues. Thank you very much. As I was scrabbling around to prepare for this lecture, I came across the following, which was the last lecture I gave here was in 2010, which was China's globalisation challenge. So, that was 2010, and the world has moved on a little bit since then. So, it's quite a long time, but very interesting to come back to the institution that I spent five years at in the early 1970s, quite memorable to think of what's happened since then in the world. And also, we're interesting to come back to SARS because it makes you think about the extraordinary changes that have happened in higher education in the west, and we're at a crossroads for all sorts of issues, but I think also a crossroads in the nature of higher education. Happy to talk about that in the discussion that people want, but that's not the main topic of my presentation. So, as Chris mentioned, this presentation takes place at an important time, and when we try and think about the context of these recent interactions between China and the United States and China and Europe and, of course, behind all that, China and Japan, it is helpful to try and situate that in a wider context of the issues that the whole global political economy faces, and I think it's reasonable to say that we really are at a crossroads in human civilisation. If we want to analyse this, I think that the most important framework for analysis, the people who give the closest, the best guide to thinking about this, curious enough novelists, I think, help a lot. I don't think many of present-day novelists help very much, but I think if we go back to the middle of the 19th century to Dickens and the tale of two cities, it is extraordinary to think about the opening words of the tale of two cities, which everybody knows, the best of times, the worst of times, etc. It's so striking that in the course of the last 10 or 15 years or so, more and more people have started to use this as a frame of reference for thinking about the challenges. It is the best of times, but it's also the worst of times. The internet, the media is wonderful, but terrible, and so many things about the world around us are deeply contradictory. We need to remember the positive things, but also think about the negative things, and it's just quite brilliant that Dickens started the tale of two cities in this fashion. The other framework, I think, for helping to think about this is the gentleman who should be noted diminished statue at the insistence of the local people. It was reduced, I think, a metre or two in height, which is very happy to hear that, so it's not such a big statue. But that person, his way of thinking, I think is extremely important in terms of dialectical method of both being able to understand simultaneously positive things about the world in which we live, but also sharply penetrating about the negative aspects of the world around us, and that applies today absolutely as much as in the 1840s, 1850s, 1848, of course, when the communist manifesto was written. The other person whose framework is quite special, but massively misunderstood, is Adam Smith, and one of the themes that I'll probably get to in the course of my talk is the way in which Smith's thinking, Adam Smith's thinking, has been absorbed into the lexicon, into the way of thinking about the world of the Chinese leadership in a quite a remarkable fashion. And of course, as anybody who is seriously familiar with political economy and the history of economic thought knows, to caricature it, Smith wrote the two books, of course that's a grotesque caricature. But if you like the wealth of nations was about the positive contributions of the market and of capitalism to human progress. But of course, to caricature the theory of moral sentiments is very different. It's about all the problematic aspects of capitalism. Indeed in that he talked about the pursuit of money, the pursuit of profit, which is the driving force of progress, as a deception. This is a deception for us, because it is bad in so many ways for social relationships, and also bad for the people who allow themselves to be focused simply on profit, greed and display. And that's Adam Smith, not Karl Marx. And in fact, in many ways, I think Smith's writing is calmer and more interesting and sharper in some ways than Karl Marx, probably reflecting the fact that he had to teach. Marx wasn't above all a teacher. He was writer and argued all the time in political meetings, whereas Smith had to teach, and I think teaching is quite helpful. So the framework in which we live is one that's deeply contradictory. We have extraordinary powerful benefits from the development of capitalism, oligopolistic competition, mainly between large firms, firms such as those that are at the core, like Qualcomm, like Google, Android, Google that are at the centre of the dispute between China and the United States of America. But these firms have been fantastically progressive in transforming the nature of goods and services around us in ways which are extraordinarily positive for human welfare. And indeed, in producing a cosmopolitan culture because behind the ideas of Marx and of Smith and of so many people thinking about economics in the late 18th and 19th century was the optimistic vision of one world with a common culture that worked together for the common good. And that in some ways has happened in this era quite remarkably. But also, as we know, it is the best of times, it is the worst of times. And anybody who is remotely expert in matters concerning ecology knows we live in an extraordinary destructive time in terms of our relationship with the natural world. As one person has called it, has talked about, we face the prospects of an age of loneliness where the species are so diminished that we will live in a world where basically the same species exist across every part of the world and the richness and diversity of ecological life will be even more profoundly eroded than it is at the moment. Global warming is so obviously a fundamental problem. Endless debates about inequality. My own favourite statistics on inequality are the inequality of wealth. If you read Credit Suisse 1st Boston's report on global wealth inequality, as many of you know, simply astounding dimensions of wealth which we want to go into the data. But after 30 years of globalization this is quite astounding. And of course we have an incredible concentration of global business power. How to regulate this when companies are global, international, they have no fixed roots in the companies from which they sprang. So regulation of this incredible business power is a huge question. And perhaps most important day from an economic point of view is the risks that are faced in the global financial system. Particularly I think the risks in the west are much greater than in China. I think the Chinese risks have been exaggerated though they certainly exist. But I think we face the possibility of a major financial, massive financial disruption in the west but without the government capability to step in in the rather problematic ways it did because the government debt is now so high. This is a very, very dangerous scenario. And finally of course nationalism. I mean Mark's thought and Smith thought that international trade, development of international ideas would erode nationalism. Well that's not the case. And a conflict is between countries, people's own passports in one country or another. And the current conflict that Chris referred to is between United States of America which is a country and China which is a country. So countries remain far, far more important than anybody could imagined in the 19th century. So how to deal with this? So the theme I want to talk about which is obviously extremely schematic is the role that China can play in this process. To what degree how might China help to contribute to regulating this global capitalist system to benefit from the things that are useful, beneficial from capitalism but also to help it to serve through regulation the interests of the mass of human population for five, fifty, hundred, two hundred, a thousand years hence. What role will China play? Because it will. What will its role be? How do we understand it in the west? That's the central theme of what I want to talk about. Associated with that is the institution called Communist Party of China. In the west, many people including many scholars of China, I won't name them, it will be pointless because there is a pretty wide consensus among scholars of China in the west. But the Chinese Communist Party faces grave difficulties. Some of the most outspoken scholars have argued that the Chinese Communist Party is in terminal decline and behind these perspectives of China, behind these propositions lies an underlying sense that because the Communist Party of China which established in 1921 followed the establishment of communism in the Soviet Union and many of its features are similar to those of the Communist Party in the Soviet Union, it really is the same animal. But I think this is a grave misperception and what I want to talk about in the brief space of time that I have is about the ancient roots of the Communist Party of China and we can see this more and more and more clearly since the death of Chairman Mao and we can see more and more clearly that the 20 years from 1956 to 1976 were despite important linkages with the past which we can discuss and nevertheless it was an aberration in Chinese history, a period where the market to use the words of people fighting in that struggle was like a capitalism, a captain's like a dog in the water to be beaten with a stick and drowned. That's very very unusual in China's history, this was a very brief period, a strange period of 20 years in China's history but we can see more and more clearly to use the phrase that Chinese policymakers have used that touching stones, groping for stones to cross the river more and more clearly than the mist has cleared and we can see that the other bank of the river if you like is a world that is deeply connected as deep roots in China's history and not a great deal of connection with the ideology and philosophy of the Communist Party of the Soviet Union. So those are the two themes of what I want to talk about and because time is very short, what are the time for questions, I will present a caricature of the historical issues related to understanding China, to understanding ourselves in the west because I think to think about these questions in the way in which Senator Fulbright in his extraordinary book, The Arrogance of Power, talked about international relations and he observed and argued in the middle of the Vietnam War, he became very unpopular for various reasons not simply those connected with the war and he argued that one of the things that we pay far too little attention to in international relations is psychology and I think in order to understand China's history we understand deep questions about social psychology of the whole society in China and we need to look at ourselves and understand who we are in the west today. Trump is not there by chance, Brexit didn't happen by chance, these are reflective of much deeper forces in the west and as I will turn to at the end of my presentation I think we face a big social psychoanalytic problem issue for ourselves in the west which I think we don't understand very well ourselves but China needs to understand and needs to work very hard to understand us just as we need to work to understand them so I think that way of thinking echoes the powerful observations in Fulbright's book The Arrogance of Power. So in brief what I'll do in this in this talk is to very schematically talk about the long run history of China and the west and looking at it in four parts. The first part is an era of convergence broadly speaking in the ancient world and the similarities are more than the differences of course there are many differences but there are some very important interesting similarities in the evolutionary path of the ancient world up to the end of the Roman Empire. Then of course things change for a very long time and we have the first great divergence from the end of the Roman Empire let's say through we can almost date it really through to 1800 which is when Bolton and Watts advanced steam engine patent expired and the world really turned upside down but if we looked at the world from 1750 just 50 years early it wasn't obvious that would be the case but that 1800 was quite a dramatic point so that very long period of the divergent paths of China and the west I think we need to understand both China and also ourselves and the patterns of thought that emerge for us in the west those of us particularly who are Europeans and Americans and Japanese but particularly in Europe and then of course into North America what our cultural heritage is and we don't reflect on it I think sufficiently often and equally what was the evolutionary path of China what was the nature of its cultural heritage from that very long period of the first divergence. The second period third period the second divergence let's say from 1800 through until the late 1970s early 1980s is of course the world was turned upside down to use Christopher Hills if he wasn't writing about this but the world did turn upside down in a fashion that was astounding to Chinese people Chinese bureaucratic Chinese officials and in many ways that continued until even the death of Chairman Mao in 1976 this was still a period of great divergence and only after Chairman Mao died did people reflect on the huge complexity and difficulties of issues that the Chinese leadership and people faced in the late 70s early 1980s but of course in the west we continued our path of progress and by the time Chairman Mao died in 1976 the gap was enormous between China and the west in all sorts of ways which I'll touch upon very briefly and then finally we come to the the second period of convergence and many people started to talk about an era of convergence but I would put that in in a question mark because there are many aspects of convergence but also persistent aspects not of convergence but of difficulties that are already emerging in the relationship between China and the west and how this works out we don't know so that's the four periods of history that I'll touch upon very briefly in the course of the time available so firstly to say a little bit about this period of very long period of the ancient convergence and there were many striking similarities in the era before national unity was established in China and before this extraordinary but actually relatively brief period in terms of the the high point of unity in Europe around the Mediterranean under the Roman Empire really quite a brief period of unity of the whole area through from the Middle East North Africa and then through of course eventually into into Britain and so these two great cultural areas before the establishment of unity each went through tremendous conflict through tremendous economic change with the development in China second third fourth fifth century BC and back beyond that and of course in the inter in the eastern Mediterranean and under the Greek culture tremendous evolution of financial system of commerce of trade and alongside that progress of a commercial if you'd like a capitalist economy we can debate the meaning of that word and whether it's appropriate but in many ways it is this prompted both in the east and the west the great thinkers at almost identical time to think about fundamental questions about culture about behavior about ethics about about a good government and of course we know in the east the most powerful thoughts about how to think about this complex world particularly of trade of commerce of greed of money-seeking is of course most famously in Confucius but also of course in many other scholars but particularly of course in Confucius but the core ideas in Confucius are in a sense very clear which is that rulers should consider the common interest it used the Chinese Tianqiao weekly of everybody under heaven and of course it's a very famous space which is susceptible to many different interpretations but the idea that the rulers should serve the common interest was deeply built into the thinking of ancient Chinese scholars and government officials the second core concept in Confucius is the concept of benevolence gen which is more vital in Confucius's word to the common people even than fire and water and when professor DC Lau who was those of you who are not China scholars those of you who are not as old as me I remember professor Lau who was in Saoas in the early 70s and he wrote the wonderful introductions to the English language translations his of Laozi of Confucius and Mencius and they are really repay very very careful reading he was a great scholar went to Hong Kong in the end and he said this is the most important principle if you want to understand the Chinese bureaucracy is the welfare of the common people motivated by benevolence more vital to the common people than fire and water and of course alongside that went a a sense that government officials should sacrifice themselves they should work for the people and of course there's a famous example of the great builder of water conservancy facilities the great you who was mentioned by name in Confucius and he sacrificed his life in building infrastructure for and lived as Confucius said in low dwellings devoting his energy to the building of irrigation canals but of course there is finally a warning of the danger of corruption which is a huge theme of course for China today and as Confucius said those in authority have lost the way and the common people have for long been ruthless we must be very careful of those in authority losing track of these core principles and then of course in China we have this great period of unity extraordinary unity established under the chin and then developed under the Han dynasty where the emergence of a professional bureaucracy first took shape meritocratic bureaucracy tried through examinations and the system evolved during the Han dynasty and involved further after that and under this economic integration the market economy prospered and China achieved extraordinary innovation in all sorts of ways which I will not detail simply to point out that by 220 or thereabouts ad China's level of technology was far advanced even than that of the roman empire achieved by a bureaucracy that did things that were necessary for prosperity of the economy and society ruled by the beginnings of a professional meritocratic meritocratic bureaucracy in the west we had this parallel era of investigation of all the similar kinds of things by equally famous philosophers Aristotle of course Plato Socrates and others but their preoccupations were very similar Aristotle was preoccupied with the problems of money the problems of greed the problems of usury and what this did to damage a good society prevent a good society from stabilizing itself and he uses the term benevolence benevolence remarkably paralleling that in Confucius is the core of Aristotle's ideal society and duty to the community comes first beyond individual self interest and in a sense even more remarkably of course Plato develops this idea speculating on what it might be like to have a society that was ruled by the guardians people who worked selflessly and in egalitarian fashion without property for the common interest of the people and so China developed similar ideas and they're still there and have persisted over the course of more than 2000 years as the core standard against which Chinese officials have been judged but of course for reasons I'll come to in a second they faded from the picture in Europe and remained in the background and indeed were preserved really intact for a long time under Islam but they didn't occupy the centre of the stage and the way that they did in China then of course we get this extraordinary era of great unity of the Roman Empire and just as in China when the great unity under the Han dynasty stimulated commerce capitalism and the market economy and technical progress so the Roman Empire as Gibbon talks about in his master piece on the decline of fall of the Roman Empire for a couple of hundred years this was an extraordinary progressive economy and society it didn't achieve the technical progress that China achieved probably due to the dominance of slavery but it made tremendous economic progress tremendous progress in welfare demonstrating the power of the market operate in a great unified economy stretching from the Middle East through North Africa through in ultimately into northern Europe into this country so there are remarkable parallels in this ancient era and in the case of China they've remained deeply embedded throughout the subsequent era in its culture its ideology and its political system and the nature of the functioning of its economy most of the time but then we get this extraordinary important era for understanding China and ourselves which is a very long era of we might call the first divergence and of course the Han dynasty collapsed but it was re-established and the Tang and subsequent dynasties the system developed and the bureaucratic examination system with meritocratic meritocratic evaluation of officials performance both their selection their promotion and their performance and their demotion becoming more and more sophisticated and of course those of you who are scholars of the Chinese system will know how much debate and argument went on with the system about how to evaluate a good official what is a good official and this alone is a topic for enormous research historical research and of course there is a great wealth of such activity but these ideas are reflected in terms of the criteria by which the Chinese officials are judged by some very important and simple phrases which are deep in Chinese thinking so one of these which illustrates the core principles for the bureaucracy and for the duty of a government official completely different from case in Europe is Fan Zhong Yan and many of you who are Chinese or Chinese origin will know exactly what I'm going to say and that of course everybody you know exactly what I'm talking about so you know just got I mean I was with a Chinese person yesterday day before I just simply wrote down Xian and he said I know exactly where you're going so what it means is the government this is Fan Zhong Yan who is a very famous Song dynasty government official and he said to translate that's the the first duty of a government official is to bear hardness to bear suffering and only when you've done your duty and you've tried to work for ordinary people can you then be the last person to enjoy yourself it's very very simple everybody in Chinese culture knows and that's deeply written into what a government official ought to do of course nobody ever performed this perfectly but that's the standard by which you will be judged and you can't complain but if we go forward several hundred years a book that I came across by chance which is very interesting in terms of understanding this psychology of Chinese officials was published in 1694 as our own enlightenment was getting underway and there's a very wonderful translation of this book which is Fu Hui Chwain Shul the complete book of happiness and benevolence which actually not that many Chinese people know and this was written by a local government official about how to train government officials local government officials how you evaluated and trained them Fu Hui Chwain Shul complete book of happiness and benevolence even the title says a great deal about the purpose of an official and in that the first paragraph the author Huang Liu Hong Huang Liu Hong says the most important principle for a government official paragraph one of a huge textbook is the words of Mencius if you do not have a commiserating heart because for Mencius the heart is the key to benevolence if you do not have an benevolent a commiserating heart that can put yourself in the position of other people you will not have a commiserating government extremely simple so these principles against which officials would be judged but of course never fully matched up to go back to ancient Chinese thought to Confucius, to Mencius and others and they remained in the system right the way through in fact until today so if we read Xi Jinping if we look at the text of his speech at the 19 party congress these ideas are deeply permeating his writings and the writings of those who have to implement policies of the Chinese bureaucracy and nobody is under illusions that any government official ever in history perfectly carried out these instructions or belied these criteria but the criteria are very clear and it's very different from our own system so under this system bureaucratic system China did all sorts of things the bureaucracy did all sorts of things to serve the interests of the society and the economy in ways that are actually summarised best curious enough by Adam Smith and the wealth of nations one of the reasons why it's so appealing to the Chinese leadership and if we look at volume two of the wealth of nations little noticed by many writers in the west is a discussion about the functions of the government and Adam Smith has and I will praise him and summarise his statement and in that Smith says in a little notice but extremely important passage that the duty of a government the last he called it the third and last duty of the government is to perform those actions to do those things provide those services for society which no individual entrepreneur or group of entrepreneurs are capable of providing only then will those things if they're in so far as they are necessary produce a prosperous and happy society and he adds the qualification extremely important this duty will be different in the different periods of social and economic development and it's a brilliantly sharp formulation and it describes exactly actually what the Chinese government did so the Chinese government did all sorts of things over millennia water control was central but also a famine alleviation famine avoidance commodity price stabilisation hugely important and we know people have won Nobel prizes for their views on commodity price stabilisation for their views on famine avoidance but the Chinese bureaucratic system was doing this for a long long time before the Nobel prize was thought about China had a legal system you protected this huge internal trade and there's no way you could have the massive trade that China experienced without people who were trading being able to receive and go to court if they were not paid so the legal system protected the texture of a trade again we think in the west about our achievements in the enlightenment especially in France with the establishment of a system of encyclopedias so the encyclopedias encyclopedis in 18th century France produced these extraordinary compendiums of knowledge to spread best practice knowledge throughout the society but the Chinese government had been supporting the spread and nurturing of best practice knowledge through of course paper and printing supported and nurtured by the government for a very very long period of time before the encyclopedis appeared in Europe so under this system where when it worked well which is most of the time bureaucratic rule judged by the criterion of serving the interests of the mass of the population nurtured and stimulated but also regulated the market economy in the way that produced extraordinary extraordinary results the european the Jesuits who went to China after Marco Polo right the way through into the 18th century wrote about China in a way that they regarded as fabulous an extraordinary successful commercial civilization if you read Father Duhald the Jesuit priest writing in the 18th century who collected the reports of all the Jesuits in China missionaries in China he says the trade inland trade of just the the Yangtzei Changjiang is far greater than that of the Mediterranean and I'm sure that was correct what is noticed much less is that China had a thriving international trade which of course was a small proportion of total trade and total output but very significant and people forget that down the chinese coast from what today we call Shanghai down through to Guangzhou there are a whole series of vibrant international trading cities Changzhou, Fuzhou, Xiamen, Guangzhou, Foshan and many others all the way down the coast if you take a plane journey from Shanghai to Guangzhou you just look out the window you can see where these cities were historically and they traded across south China sea into southeast Asia and ultimately many of their products porcelain silk ironware exported to Europe I mean China exported huge amounts of ironware for example from Foshan in Guangdong which was the city of iron and steel for hundreds of years right into southeast Asia so there was a big big international trade proportionately of course not as big as domestic trade and under this system China made extraordinary technical progress again I won't go through into the details because they're widely written about particularly of course by Joseph Needham and his team in Cambridge but many of them are not well known I'll just pick out two the first is the Chinese iron industry so Don Wagner who now lives and works in Denmark has produced extraordinary accounts and you can just google Don Don Wagner and he's produced wonderful research on the Chinese iron and steel industry pointing out the technical progress that was made and the continuous progress in output and production and all kinds of technologies little iterative changes in technologies and by the end of the Han Dynasty China already had the blast furnace which didn't arrive in Europe until the 14th or 15th century and Chinese industry was very large it had huge production centres in Guangdong in Sichuan in Shanxi and other parts of Dabiesha other parts of the country and while Don says we can't estimate with any degree of accuracy total output in China it's very likely that China's output of iron right up until the 18th century was considerably greater than that of Europe's and there's no question that China's technical progress was precocious and it kept making technical progress but of course China didn't have the industrial revolution which took place in one country in Britain at a very particular period in the end of the 18th century the porcelain industry is another industry which is extremely interesting in terms of understanding China's innovation and technical progress and we tend to think of porcelain as being fabulous pieces of pottery in the British Museum or in the Perseval David Institute of well no longer sorry what was the Perseval David Institute and these are wonderful wonderful pieces but of course that was a tiny fraction of the Chinese porcelain industry a large amount of porcelain was produced for the middle class the kind of things that probably wouldn't have been in the Perseval David but it was a very big industry not run by the government run by entrepreneurs and of course a much bigger industry producing ordinary everyday porcelain for ordinary people simple porcelain and you can see right the way through into the 19th century innovation technical progress reducing costs improving glazes all kinds of things that were science but were trying to improve things in a way that reduced costs and provided things that people wanted to consume and it's actually been very little study but it's beginning to be studied rather better a single we all know about you know famous cities like Jingde, China but a single province like Fujian had 80 or 90 local potteries 80 or 19 local places where pottery is made in quite substantial amounts so this is just two examples I could go on with many other examples so this was a virtuous interaction of the state and the market if you want to put it in Adam Smith's terms the invisible hand of market competition in all these areas plus the visible hand of state regulation to do things that the markets couldn't do and to regulate the market in an ethical fashion but Europe of course in this period well after the collapse of the Roman Empire we never had we live in brexit this is still with us we still live in an extraordinary tumultuous divided society in all sorts of ways we you know drink cappuccino or whatever it might be but it still is we know one culture and that division was even more violent and deep compared to today but not perhaps to our more recent history and so we got the establishment in Europe in this early chaotic era of the zero sum philosophy that really in many ways is with us right the way through to the present day and if we want to think about writers who in the west try to encapsulate this Dante's probably the best writing now quite late in this era late 13 30 14th century and not just in the divine comedy but I think particularly in his book on monarchy which is an astounding book and in it he writes with fantastic passion about what he regards as a horrible society around him in the 14th late 14th and late 13 30 14th century and lamenting the destruction of the great unity of the Roman Empire but that's a long way in the past and he writes with great passion he said if only we were unified of course he hopes unity will be through religion water how much better it will be than this horrible greedy violent divided society and polity that I observe as he said in the monarchy probably written in the early 14th century and of course it's there an even more poetic form in the divine comedy and of course we then get this extraordinary phenomenon which is Christianity emerging in this era to which there's really no counterpart in China but which is very very puzzling to Chinese people and we could have long discussion about why in the meaning of Christianity in Europe this was a period when for a very long period of time the rulers were basically illiterate where the values were military values and this is a completely different political economy context over a very long period of time from that in China and then of course something else happens which is in Europe through absorption from China Europe developed technologies that in China never had the same impact as they had in Europe which are military technologies which of course really started to to progress very fast in 16th, 17th and 18th century and then we get the next phase of intra European relationships which is this astounding age of violence in the age of absolutism so we can look at beautiful buildings in Vienna or in Copenhagen or wherever it might be but it was an era of intense rivalry zero flum conflict but now not with not with if you read John Keegan's The Face of Battle and you compare Agincourt with Waterloo what a difference you know instead of hitting people with a club we had these incredible instruments of extreme violence produced in Europe to which there is no no counterpart anywhere else in the world and of course they also permitted our conquest of other parts of the world and these of course were then written about by Edward Gibbon in the 18th century his the great work of enlightenment the decline and fall of the roman empire was a lament for a lost world of Europe of the ancient world particularly the age of augustus in in this sort of peak of civilization under the roman empire but he wasn't writing saying what a great society we have in Europe he was saying it's a very fractured and in many ways deeply unsatisfactory society writing in the 1770s 1780s and the decline and fall of the roman empire so that's the very different political context in Europe but of course so by let's say 11th or 13th or 12th or 13th century there was a huge technological gap between Europe and China but gradually gradually Europe started to absorb technologies from China and build on those technologies and in a wide variety of spheres these innovations which to a considerable degree came from China were incorporated into the european economic system and by let's say 1700s 1750 probably european technology was pretty much on a par with China but it was a very very long period of catch-up and then of course comes this astonishing turning point at the end of the 18th century in Britain not in Italy not in Germany not in France but in Britain and Britain had the industrial revolution the steam engine from 1800 so it's a huge question China had all the basic prerequisites for the steam engine Joseph Needham gave a famous talk to the new common society in dartworth on the prenatal origins of the steam engine and he identifies the key elements of the steam engine the reciprocating steam engine as the double acting piston bellows and the interconversion of rotary circular to horizontal rectilinear motion and of course China had these for a long time before europe did and in Needham's view he thinks that these key elements passed along the silk road and of course were evolved and developed and perfected within Europe but many of the key aspects of what was the key instrument of the British industrial revolution were technologically perfectly available in China so the massive historical question is why in this extraordinary period this happened in Britain but not in other parts of Europe or indeed not in China and we can happily discuss that but what I emphasise this is a very long period and european catch up technologically was very late in the day and many of the habits of politics and thinking about international relations evolved in our psychology essentially as a zero for some fashion emerging out of the chaos and conflict in medieval Europe I will very briefly very very briefly summarise so we can finish and have time for some questions the second divergence and then spend a bit more time on at the end on the second convergence so the second divergence in the sense everybody knows so there's not too much point in going through the story in great detail which is we know everybody knows who has the remotest understanding of China that something profound happened to China partially for internal reasons partially for external reasons we can debate in discussion the proportionate contribution to China's drama of the late 1930s century but it was a drama and it was a profound psychosocial shock for the Chinese intellectual class for the bureaucracy in the late 1930s century we can see this vividly in the May 4th movement after 1911 so this was a drama for the Chinese people for their leaders for the bureaucracy and it's deeply written into the Chinese culture and even more in some ways puzzling for Chinese people is that even though the communist party seized power in 1949 the way in which the communist party gongchan dda common property party which was a fatal fateful decision to call the party the common property party gongchan dda it didn't have to be that it could have been some other term but in 1921 this faithful decision to translate the term communist and communism as common property is a common property which is still with the communist party today is a huge legacy great importance and nobody at the time realized how important it was philosophically speaking so in this extraordinary period from mid fifties from 1956 to 1976 china attempted to do something which had never happened before which is to abolish the market to as we said capitalism treated like a dog in the water to be beaten and to drown but this was a very unusual and increasingly as people as we move away from it we can see that this 20 years was an aberration a very very unusual unknown approach in china's history and at the end of that period we won't go into the stories about the struggles and who argued for what but by the time chen mal died china had huge levels of poverty as everybody knows we won't bother to go into the statistics but shocking dimensions of poverty and from being an economy that may have produced about a third of global GDP china produced less than 3% of global GDP in 1980 astounding transformation of the world compared to the 18th century ruled by the communist party had not allowed china to catch up and so china had a double psychological if you like psychosocial challenge to deal with which is the long period of humiliation and then the humiliation and drama of the failure of its economy under a non-market economy to catch up in significant ways with the west and to transform the well-being of the people in the west as we know after the first industrial revolution based on the steam engine we had a second industrial revolution if you like a third industrial revolution going through into the post-war period right the way through into the 1970s and during this period the west used its military technologies to establish a second era of colonial imperialism which people in so are so extremely familiar with but behind that was military technology which of course advanced extraordinarily in the late 19th century into the 20th century which is the material basis for our expanding our empires British of course in the forefront of France we don't need to go into that in in sauce but military technologies and their progress were central and then of course for china and this of course was very puzzling for china to observe because in the late 19th century we became democratic the mass of the population apart from women of course until after 1918 but the mass of males adult males voted by the end of the century and our parliaments in the west voted to conquer everybody else quite happy if you read you know joseph chamber non-imperialism was applauded to the skies for using our weaponry and our technology to conquer and of course to help other countries but conquest was a reality of this extraordinary period now voted upon by our democratic system and applauded by our representatives in parliament but even more amazing to observe from china and other parts of the world not just from china was that in 1914 the democratic governments of europe voted to slaughter each other that really was an extraordinary thing in the history of the world zero sum reaching an extraordinary apogee of violence of course having done it in 1914 we did it again in 1939 to 1945 and of course at the end of that we dropped atomic bombs on Hiroshima and Nagasaki and many other aspects of this that we could talk about so this era of western dominance militarily economically right up to the late 1980s and of course of international institutions the brettinwood institutions were dominated by the west then finally we come to this era that we live in now and all the challenges that it presents for us the chinese story is reasonably well known and china has if we want to capture it in a sort of simple character to a fashion we can say that china has gradually opened up liberalised and reformed its economy gradually allowed the market to have a greater and greater role and so when china today argues that it is predominantly a market economy there's a lot of merit in that argument that china's non-state sector is far more important in terms of its contribution to gdp than the state sector and the market has indeed gradually gradually expanded and the market forces do indeed in many ways occupy a central position in the chinese economy today but as historically in china the state still plays a very important role state-owned enterprises are a minor share of the economy that very important in terms of china's industrial policy and this of course is a key question in the arguments between the united states and china and between europe and china so key parts of the economy particularly the financial sector but also oil and gas electricity transport mining metals telecoms the media are all very difficult for international companies to operate in and it's well known this is explicit industrial policy to try to build national champions in selected areas of the economy extremely important is infrastructure just it has been historically in china so if we look at china's records since the 1980s of building health institutions education roads railways airports water supply sewage electricity all of which are vital for people's welfare they've played a central role a much more important role in china than in most developing countries the most obvious comparator obviously is with india and if we look at the way in which these have been reflected in human welfare it's hard impossible to dispute that in fundamental aspects of human welfare in terms of people's longevity in terms of life expectancy in terms of basic indicators of education and human well-being china has made tremendous progress in this era and china's state action and infrastructure have been a very important part as they were historically of the approach the philosophy of ruling the country in this reform period the development challenges that china faces everybody knows including the end of rural surplus labour moving out of the lewis phase of development huge pollution which is being dealt with but is still enormous and also the challenge on the international front that despite china's progress as gdp arguably is second largest in the world global firms still occupy a central role in the chinese economy just to take one example or two examples if we take metallic communications and banking system china has far more advanced online financial activities than we do in the west and most of it is done through mobile devices and so there are chinese corporate entities that have an oligopoly in in online banking the instruments through which online banking and e-commerce take place and we all know the names of these powerful institutions but if you think about the mobile devices and the conflict with the united states of america not with europe because europe is so weak in this area the mobile devices may be made in china but inside them is western particularly american technology qualcom google android and of course many of them apple technology so even though china looks as though it's very powerful it in fact has a long long way to go to catch up a second example which is very vivid is if you look at some of the tallest buildings in china such as the two hundred story plus buildings in shahai they're produced by chinese construction companies but inside those two buildings hundred hundred twenty stories are high speed elevator systems one of which is otis united technologies one of which is midst of this year electric if you look at the air conditioning systems a carrier again part of united technologies supplies the air conditioning system electricity system by schneider and by zeemans the windows modern energy efficient windows nipon sheet glass which bought pilkingdoms of britain and if you look at the the resins around the windows for these giant buildings with a lot of world a lot of windows a lot of high technology windows the resin is predominantly supplied by evenic a giant global company based in germany so it looks like it's chinese high technology in fact inside it inside it is very powerful western technology so china still faces a big challenge in terms of technology catch up with the west in fact if we look around us in this country chinese firms have a negligible share of our own market in the west in high income countries and as we speak it is quite clear that china's efforts to try to nurture high technology global firms under the 20 china innovation in china 2025 has produced a very very strong negative blowback pushback from the west so it's a very complicated time and behind all of this is the the threat in which we can debate which has been written about more and more explicitly particularly by graham allison but he's by no means the only person which has been talked about explicitly by the chinese leadership of a the thucydides trap of a new paloponnesian war and it's simply interesting that so many people have started to talk about it and of course the possibility of violent military conflict is horrendous and the possibility is very low but so is the possibility in most people's view of a financial crisis in the west and a famous book was talked about black swans well you only need one black swan of military conflict and that's enough so while the prospects while the possibility of violent conflict whatever form it might take is very low you only need one and the result will be a disaster and certainly both in america and in china the possibility of a new paloponnesian war a clash of civilizations has been quite publicly and explicitly talked about so the meeting that we were talking about china development forum graham allison was a speaker who's written on the thucydides trap from harvard now an old scholar but it's interesting that he was invited to come and talk about it because in a way the more you talk about it the less chance of happening one hopes but again as full bright said the danger with conflict is that the wars typically begin many years before the fighting starts the wars start in people's minds so either a good or a bad sign that so much discussion has taken place about the new paloponnesian war but it constitutes a very very big backdrop to chinese thinking then finally we come to the west and it is fatuous to say the west is has been out of distance by china i mean it's just farcical but and the west still has very many so many powerful features but i think the least understood is the the fact that our our global businesses those with their headquarters in america and in europe and in japan are still very very powerful in the global business system if you look for example at the euws annual report on the top 2500 companies in the world by research and development spending this is the core of global research and development technical progress over 90 percent of the research and development spending by global firms is from our firms european american and japanese and koreans if you take the most important sector which is inside everything including everything in this room everything on your person which is the software control systems in terms of spending on software by global corporate by global businesses in that the core of american of global corporate expenditure on research and development an astounding 77 percent last year's data is from american companies particularly in silicon valley and of course that is the most important item in this conflict which is what goes inside everything so we're still very strong particularly america much stronger than europe so if you if you like the west is in no sense eclipped and the west of course still has very great power in global institutions christine lagarde was not only elected for a first five-year term to be the director managing director of the imf but a second five-year term which is quite astonishing really given the importance of the imf and the fact that we're all supposed to be one world cooperating together but finally we face enormous challenges in the west i think there's no doubt about it i think the financial system is still in a very very dangerous place and behind that danger is what we can above all call regulatory capture of the financial system particularly by a u s powerful u s banks and we all know their names they're very influential very powerful in all sorts of ways that are not obvious to most people but very powerful and if we want to understand the liberalisation of the global financial system up until the financial crisis and the way in which the financial crisis was responded to which is basically to restimulate the asset price bubble we have to think deeply about our own political economy and about the nature of our political system that gives so much voice to a small group of very very powerful firms and also our political system which gives those who are property owners which is a majority of the population a very strong interest in maintaining the asset price bubble and you know any of you who are fortunate enough to own property will know what this story means equally those of you who don't will know what it means not to have property but the core of wealth is contained in property and so in terms of the electoral process it doesn't matter it's the green the blue or the gray party they have a very strong interest whether it's in Germany or Sweden or Denmark or Britain or United States of America or Australia or Canada to ensure that the asset price bubble is stimulated that's what zero interest rate means and as a result we live in a very very dangerous edge of another financial crisis in the west and if it does happen who knows who knows but very difficult to predict go back to 2008 look at the financial the economists cover in October 2008 it had a picture of somebody standing on the cover of the of the economist looking into a dark hole and the the title of that issue was staring into the abyss when the financial system goes i hope so prices start to crumble there's nothing you can do catch a falling knife you can't catch a falling knife and we forget that at our peril the financial system which is the alter ego of the real world of reducing goods and services sits in an extraordinary complicated and dangerous intermeshing with the world of real goods and services and if the one of the most vivid accounts of this is in a day at Turner's book on between death and the devil who was the regulator as he said he got it wrong he said i was the regulator of the British financial system i couldn't see it coming and he was very sophisticated economist and he just said i didn't know didn't understand it so that's where we stand today we know about the equality of income and wealth stagnation of real incomes everybody knows this story the nature and conditions of work have changed in unimaginable fashion for people you know even for younger people but for people who are older astonishing bewildering changes in the nature of work and if we look at our own country while our firms are powerful British american german firms are powerful what are they so we take this country our leading firms and this just just talk about britain is shelled british company is unilever a british company which is probably going to move its headquarters to to holland is hsbc which came to this country from hong kong and is in many ways the world's most successful bank but it's bought the middle and bank and it has a very weak tradition it's foot it's it's roots are in asia hong kong and shanghai banking court anglo american which came from south africa and it's it's a global company which has very little business in this country bat british american tobacco which produces you know very controversial product it has this headquarters in london and it's it's a british company technically but it's global it's global bp british petroleum diageo you can just call vodafone and one of the few companies which has a reasonably deep roots in britain is rolls royce for defence reasons but even rolls royce has a very powerful position in united states of america so these so-called british companies no longer are rooted in britain they are truly global and in terms of big firms that's about it you tell me what else there is to think about most global firms with their headquarters in britain are global they have very little connection with their own political system so that when the prime minister says come along and talk to say well if you want i'll come and talk to you but you know we're global you know this is just a small part of our life and then we think of this country which is the same as other countries we have you know the number of famous companies that have gone gec ici pilkington rexam middenbank the list goes on and on and on so these are now inside other companies from france germany america and so on so who we are in the west is bewildering if i give a talk on these things to a political i'm not saying you know to a narrowly political organization and different from today um usually at the end of my talk there's a long silence and then suddenly you know somebody will say excuse me is that really what it's like and i said yeah that's what it's like and me people are utterly bewildered by it and you can't it's not surprising it's a it is this is an incredible talk about a new era sin sredat this is an incredible new era for us in the west and most people don't know what's going on as bob says something is happening and you don't know what it is do you mr jones you know bob got everything right still gets it all right he's right and if we look at our position in europe in this country um compare it with china it's it's astonishing the e you in 1980 produced 30 percent of global gd to p today 16.7 percent 30 percent to 16.7 percent britain 3.8 percent now 2.3 percent china 2.3 percent in 1980 today 17.8 percent significantly above the total e use share of global gdp you can debate whether you know the imf statistic p p p is right up but the picture again is bob says you don't need a weatherman to know which way the wind blows it's very clear however it's blowing it's very clear it's very very clear and people underneath it they can taste it they can understand it and so what they can't stand but they can taste it so this is the age of anxiety in the west and so what are the prospects firstly the era of comprehensive western dominance happened very late in our history basically from 1800 onwards british industrial the british industrial revolution the british steam engine not the german or the french and that was generalized in the west and into america but this is a very short era only about 200 years and the global financial crisis signalled a turning point in world history that maybe was as significant as the end of bolton and what's patent in 1800 on this advanced steam engine china's tradition of positive some thinking of a positive interaction between the state and the market over a very long period of time in which the period of chairman maw is an exception to the pattern of chinese history perhaps if we try to engage with it can make as china hopes and believes a positive and helpful contribution to the issues i touched upon at the beginning which is the challenges that we face as a species how to regulate in all its different aspects this tumultuous global system preserve as china's tragedy historically the power of the visible hand the benefits of the miserable hand to stimulate innovation and technical progress which was evidenced historically in the blast furnace evidenced in china's advance in portland evidenced in all these different aspects of chinese technology which found their way to europe and it was a positive symbiotic relationship between nurturing the market and trying to regulate the market in an ethically driven fashion in the ways that i've talked about which in a sense confuses but particularly mentions these ideas perhaps were at least as important in understanding that philosophy of regulation pragmatic regulating the market but stimulating the market and perhaps in the west we can try and learn from that and interact with it positively so the final theme final sentences are we talk about china and the west and the crossroads of civilization and china talks about a new era she ensured that but it's not just a new era for china this is a new era for us in the west and we have to really try to think very deeply about who we are where we're going what will our part be more and more modest part actually in regulation the global political economy and we need to understand china much better in order to be able to work with china to help to regulate of course endless just as the ideals of the chinese bureaucracy were never met in practice so we'll understanding is a long complicated process it won't just be you know a deal with president trump it's a long complicated process but especially in universities we have very big contribution and duty to help this process of mutual understanding and not to nurture the ideas of conflict but i think the final observation is that i think china has to also work very very hard to understand us better to understand that for us just as for china the drama of the late 19th and 30th century and even through to Chairman Mao was a huge psychosocial phenomenon the shock of the advanced of the west and also the the deep difficulty of dealing with 20 years under Chairman Mao which produced which but at the end of which china was an impoverished country which had not caught up with the west these were huge psychosocial issues for the chinese intellectual and ordinary people but we now face a deep psychosocial challenge in the west and i think china has to work much harder to understand us the final observation is that the 19th party congress last november contained a very very long and detailed account of what the chinese government hoped to do the challenges it faced in the western media there was no serious reporting of the content it was simply about the position of the chinese leadership of the president Xi Jinping i didnt read a single serious commentary on the content of his speech at the 19 party congress now you can say that's our fault our media didn't do a good job but you also have to say china didn't do a good job china should have communicated better and so both sides it's you know it's not a one-way process so mutual understanding requires both parties to work harder and china's communication has not worked i mean it's you know susie children it's just it's seek the truth from the facts you know that communication was not very effective so we didn't understand we didn't read but china didn't communicate very well and that's the context in which we have to work in fact in in one of my books the public has put in a you know the sistine chapel and the fingers don't touch and you've got to make sure that they do touch it sounds trite but it's not trite because our future is at stake and the future of all the species that's at stake and so it is across roads and our duty in universities is to try to work as hard as we can to understand these sorts of things and try to make sure the fingers touch okay