 Before we start may I just ask you to check your phones make sure they're on silent or off. It's a great pleasure for me to welcome the associate editor of the Financial Times and their Chief Economic Correspondent. Correspondent is the wrong word. Commentator. And Martin Wolf whose weekly columns are widely read in this country and widely commented upon in this country. So without any further delay may I welcome you Martin. Thank you very much. It's a great pleasure to be here. I've been here once before and I can't even remember what I spoke about but I will have to look at that carefully because it probably is in direct contradiction through everything I'm now about to say. When we discussed what I talk about I gave a number of possibilities. I really didn't want to spend another hour talking about Brexit. You're welcome to ask me questions. I'm sure you will have questions about it. None of which I will be able to answer because I happen to clue what's going to happen. But you can do that in the questions and answers. I will mention it briefly in my talk. In the end after some negotiation we agreed that I would talk about the biggest possible subject short of the future of the universe on which I have no competence to speak. For that you need a good astrophysicist. So I'm going to talk about the world as a whole as I see it which I think which is economic economics and politics and to some small degree social transformation. But that will also bear to some degree on what's happening in some of our societies including notably the US and UK which in the first case will affect the entire world and in the second case will certainly affect you and Europe. So I've called this talk The Great Transformation. I'm going to speak for about 25 minutes which should I think leave us 30 minutes for questions and answers or challenges and responses. I think to start off I've got three main sections. I'm going to talk about seven fundamental transformations in the world system that are now occurring together. I will talk about the impact of these in changing the whole balance of the world system and I will finally talk about what the EU's role in particular is going to be in this transforming and in many ways very very uncomfortable world. So let me start then with these fundamental transformations. My great big theme is that we are seeing the end and I'll come to the details of this of a number of errors at the same time. One is the post 78. I tend to use 78 as the breakpoint error of globalization. Why did I use 78? Because in 78 the most important economic event of the last hundred years happened which was Deng Xiaoping's arrival in power in China. The second big event for us probably even bigger is the transformation is the rejection in a very large part of by the United States of the underpinnings of the Pax Americana which goes back of course to the Second World War and its settlement. And the third transformation is the end of what you might call the holiday from history which was of course the end of the Cold War between 1989 and 1991. And these three transformations and a number of others are all occurring at the same time and interacting with one another. And the only certainty I have is that the world that will emerge from this period of transformation, a period of transformation as profound as the interwar period the 30s and the 40s will be quite different from the world we're familiar with. How different it will be, what it will look like. I think it's really hard to predict but I think the realization has to be that the world will not be the one we've been familiar with for the past 30, 50 or 75 years. And so what are the elements in this transformation? And I will go through these very quickly because I don't have time to explain them in detail. First and the most probably the most important, gigantic and profound shifts in the global balance of economic and political power. Whether we like it or not and whether we regret it or not and it is pretty clear that many in America now have huge buyers of remorse. China is now a superpower economically in absolute size, not very different from the US with rising economic and political and military power, huge capacity to exert influence on the world and what looks like a reasonably stable and successful autocratic system. It is important to remember that scale matters. So my favorite little statistic is that if China succeeds in achieving one half of the real GDP per head of the Western world as a whole and I include in the Western world here, not just Europe and North America but also Japan, its GDP will be twice as big as US and Europe together. A country of 1.4 billion rising at this scale for all its many problems is a transformative event and it's transformative on many different levels but most importantly because it's a reversal to an order of the world that hasn't existed for centuries. The order in which Asia and above all China was the largest system in the world. The second huge change is that cumulatively and obviously over the last 40 years but quite particularly in the US and this matters enormously, we have been seeing the rise of what I've referred to in a recent column as rentier capitalism. Capitalism or any free market system always offers two ways of making money. The good way is to provide new goods and services that have never existed before, creating new markets and new opportunities. The bad way is to seize chokeholds in the economy that allow you to extract rent unearned income from the rest of society. It has become pretty obvious if you look at the performance of Western capitalism including very much its heartland in the US in terms of productivity growth, real wage growth, inequality, distribution of income at the very top, market concentration and rewards to unproductive activities that the latter form of capitalism has become increasingly dominant and that explains why Donald Trump is the president of the United States. The supporters didn't realize that and it also explains the extraordinary success of people like Elizabeth Warren on the left-hand side. The third event and I wrote a lot about this in my most recent book is if you like the summation of or at least the end point of some of the processes I described under my second which was the shattering and transformative financial crisis of 2007 and 2009. This had at least two immensely important and enduring consequences. First it has become pretty clear that it was a breakpoint or at least it reinforced an already existing breakpoint in terms of the underlying growth performance of the developed world. The productivity growth of the Western world has never regained so far it hasn't changed so far at all the dynamism it showed in the previous 20 years. The second consequence of the financial crisis is I think more profound still and can be seen most visibly in the countries that bought in to liberalize finance most profoundly, namely the US and UK. Most often when those in charge of the economic system screw up, the great majority of people don't really notice because it doesn't affect them in a very quick, very powerful and very vicious way. Financial crises are different. A financial crisis has an immediate and dramatic effect on the great majority of ordinary people and they are aware, fully aware in this crisis of two things. One, something incomprehensible has happened, three things. Two, the people in charge really, really screwed up. God knows how but they did and third, the only people who get rescued are the people in charge. It is a devastating shock to confidence in elites which takes a very long time to heal and it hasn't healed. It hasn't healed. It was a theme of the last chapter of my book on the crisis, the shifts and the shocks. I recommend the last chapter at least. The fifth transformation, again I'm focusing on the west since this is our world and the west remains the dominant element in the world system is of course associated with that in the western world but this has also occurred to a very substantial degree outside it is the rise of populism, nativism, nationalism and authoritarianism. Now part of this is of course a reversal across much of the world in emerging and developing countries, the reversal of the great wave of democratization that seems so encouraging to many of us after the actually it started in the early 80s and was accelerated by the collapse of the Soviet Union and in many societies where democracy was relatively shallow this produced many disappointments. It turned out to be much more difficult to make democratic systems work and they turned out to be much more fragile than one hoped. So you've got a wave of countries including Central and Eastern Europe, Turkey, the Philippines, India, God help us all over Latin America where authoritarianism has returned. But as Freedom House has pointed out in its wonderful surveys of democracy in its fate these phenomena, populism, nativism and an inclination towards authoritarianism are also to be seen in the western world and indeed in the heartland of the western world probably no country in their analysis has seen a greater decline in this respect from a very high level admittedly than the United States itself. We will see what happens and it will be remarkable in the impeachment process now under way. This again seems to me a profound and enduring transformation which affects every significant country in the west to a greater or lesser extent. In Italy for example, properly defined populist parties won two-thirds of the votes in the last general election which is a truly remarkable fact. Even in Germany the AFD on the right and the linker on the left now make up a very significant proportion of the election. Macron only beat Marine Le Pen two to one in the last election. It could be much worse next time. In Spain there's a very significant rise of a ultra-hard-right party I could go on and on and on. It takes in my view one really big recession, one really big crisis in Europe for these parties to be very close to power. The sixth transformation is and I'm returning to economics is a looming and remarkable technological transformation driven by information technology notably in artificial intelligence. And I think the only thing we can agree on is that while we don't know what this will mean it is likely to lead to further massive upheavals in economies that have already found it very difficult to cope with the upheavals of the last three or four decades. It will for example in my view and this is as near a certainty as can be finish off the deindustrialization process. There will be no one left working in factories anywhere in the West 20-25 years from now. They're all going to be robots and that's a pretty big deal and I'm not discussing all these white collar jobs that will be transformed. My friend Richard Baldwin, one of the best international economists has done a wonderful book under hideous title called Globotics which discusses the potential implications of this revolution for jobs and incomes in our economies and you have to take it seriously they could be very profound. And then finally unless you've been living under a rock you will all be aware that there is growing awareness of the issue of environmental limits on the entire global economic system. These seven things together create immense challenges for political stability, stability of the world order, our ability to cooperate and my view is we're failing them all. It's clear we're failing them all. We have moved into a highly unstable world system whose future is now in the balance. So let me now just discuss four of those consequences of all these forces that I have mentioned. The first is I've already indicated twice but it's worth stressing the election of Donald Trump, a man with no political experience and no political knowledge who was a celebrity television figure and a serial bankrupt, I mean a serial bankrupt to whom no serious banker would lend and I know lots of them. Not only is he president he is quite likely to be a re-elected president and among other things he completely rejects the post war consensus on how the world system should work and the US role within it. Monsieur Macron said something extraordinarily in politic yesterday and the Germans duly wrapped him on the knuckles but his remark that NATO is brain-dead well I don't know why he needed the brain in it. It certainly is not clear that it's alive as a treaty system today. It's as dead as the League of Nations in my view in the 30s. Second we are at the beginning of regardless of what happens in the trade conflict today or tomorrow of a long-term strategic rivalry across geopolitical and geo-economics, geopolitics and geo-economics between the two superpowers in which both will be demanding of other countries that they align with them against the other and that is going to make not only the world very difficult it's going to make the choices for many countries agonizing. I've just returned from and I'm about to write about what it feels like to be Japan now what it feels like is China is our most important economic partner now and in future the US is our most important security power security ally help that's what it feels like it's what it feels like to be Australia what it feels like to be New Zealand and it's not very difficult to see that over time it's going to be what it feels like to be Europe Germany's trade with China is as large as its trade with the US and it's a much more dynamic market do the maths. Third consequence I said I wouldn't mention it this but a third consequence of all the forces I've mentioned of course is Brexit the British economy as a result of the economic developments I mentioned we were a central place for Ronche capitalism above all Ronche finance we were deeply affected by the financial crisis our elite was completely discredited and we've come together to agree on one thing it's all the fault of Europe. Well what's surprising about that that's what masses of human beings always do find someone foreign to blame and that's Brexit. If you've got a sufficiently specious and dishonest politicians and my god we do nothing is surprising that we've ended up in this black hole rabbit hole of Brexit and fourth most fundamentally perhaps the whole system of global cooperation both within the West and between the West and other powers notably China is falling to pieces at just the point when the environmental challenges are becoming most serious and most biting so I write feeble pieces desperately urging intelligent climate policies in the absolute certainty that the possibility of there being real has diminishing by the day most notably this week again many events this week are so seminal Donald Trump's formal withdrawal from the Paris Accord and the US remains the world's second largest emitter it counts for about a quarter of world emissions and the chances the rest of the world will make up for a US behaving in this way are basically zero so as I say to my friend my people friends of mine I don't have many left you think global warming is not a problem I say I say don't worry about it if it is we're not going to do anything about it so what does all this mean to the you and my remaining three or four minutes well it's very very difficult to be an association of nations essentially designed trusting an alliance with a superpower across the Atlantic in a world of growing nationalism and populism which believes in the international rule of law multilateralism peace and the cooperation of nations when everyone else is going in the opposite direction this is a really tough world for the EU system to survive so I think broadly speaking is first it has to realize that it is on its own surrounded by pretty hostile neighbors and that includes of course Russia America and the future Britain second for this reason it really really really has to stay together which means in particular since this has been a hot issue of the week that the Germans and Italians have to agree on a way to make the euro system recession proof which is what the debate on the banking union is really about and at the moment it isn't a really serious recession in the euro zone will be very very hard to manage because the monetary policy system is totally exhausted it there's really no room for that but somehow or other and pretty urgently I think the EU will have to reinforce itself in this uncomfortable world and my own view lies with Macron is among other things it is going to have to become a military power of some kind and third despite all that it has to continue to try and be a bridge and it's better positioned to be so above all between the US and China than anyone else it's strong enough economically self-sufficient enough has good enough relations with both at least to try to manage as best it can the burgeoning conflict between the two super super powers so finally how is all this going to end I have no idea and anyone who says they do know is lying because that's what periods of transformation mean in 1935 the only thing you could have said with certainty is this will not end well unless the US gets fully and actively engaged as a cooperative global power in 1935 any intelligent person would have said the chances of that if you look at their politics at the time would basically zero given their history the isolationism and their relatively strong insular position in what was then a completely self-sufficient economic superpower but that's not how it ended it ended very differently I hope to that somehow this will end very differently but at least we have to start by realizing what a profoundly transforming world we now live in and think about our personal and national and supranational policies in that light thank you for listening