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- [00:00]
Martin Jacques
Well, good evening. It's my privilege tonight to introduce John Gray, a writer of exceptional originality. John is the Emeritus professor of European Thought at the London School of Economics and the author of more than a dozen books including Heresies, Black Mass, Gray's Anatomy and the best selling Store dogs. False dawn was published in 1998 and is now this year published with a new forward. John doesn't know this, but I remember start on my own research for my book on China back at the end of 1998 in Hong Kong. And John's book was one of the first, if not the first one I read when I was trained to understand globalization. The conventional wisdom then was that globalization was ever onward and upward with barely a cloud in the sky, notwithstanding the Asian financial crisis. Of course, John has never been a disciple of conventional wisdom. In intellectual thought, the herd mentality overwhelmingly applies, including most certainly in academe. John is not one of the herd. He is a fiercely and consistently independent thinker that requires not only great intellectual self confidence but also great courage. I greatly admire John for this. This lecture is part of the Ralph Miliband series on the future of of Global capitalism and the title of John's lecture is the Crisis of global 10 years on as a taster of the morsels to come, let me quote from the new forward to False dawn, which you'll be able to get signed copies of at the end Outside In a number of respects, the US now resembles an emerging country more than the advanced economy it was some decades ago. Its industrial base is largely gone, sold off or offshored, and its public infrastructure is in visible disrepair. Because of the severity of the real estate collapse, parts of its housing stock are being abandoned and once thriving neighbourhoods are now slums. But is in politics even more than in the economy, that the chaotic conditions of some emerging economies most clearly prevail. The bailout of the banks that began in the Bush era and that has continued and expanded under the Obama administration is a prime example of the crony capitalism against which the US ceaselessly railed in emerging markets. I would like to introduce John Gray.
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John Gray
Well, thank you very much for that very generous introduction. My title tonight, the topic is 10 years on global capitalism. Ten years on from when the book was published. But I'll just say something before I talk directly to that decade long perspective. I go back two years to 2007 when the visible part of the collapse began in the United States, and at that time it was only a crisis or a collapse in some American financial institutions. But it was clear I Think to lots of people, and not only to me, that it would have global implications and that it would affect real economies. But maybe one aspect of the impact of real economies and real politics wasn't so clear at the time, but it was one that I felt it was important to highlight back in late 2007 when I started making these remarks. And perhaps I can put the concern that I had two years ago in the context of a question, in the form of a question which is something like this. What happens after a financial crisis when in many parts of the world, in the real economies of many different countries, there is a sudden increase of insecurity in the working population, a sudden increase in unemployment, sudden collapses of businesses, in other words, a sudden and negative transformation in many people's circumstances. What happens when that occurs, and the reasons for its occurrence are rather obscure. They're difficult to work out. I don't think professional economists, for the most part or even, and I know some of them myself, even participants in financial markets such as hedge fund operators, I don't think they even they fully understand the economic situation or the kind of bizarre increase in derivative products and the development of a kind of highly leveraged cyber economy, largely debt based, that preceded the crash. What happens when you have a sudden financial crisis with deep, long reverberations in the real economy, which greatly increase insecurity and anxiety and even distress and suffering in people's lives? Well, historically, what always happens is that people turn on one another. That's to say, they target other human beings in the society who they blame for the crisis. And normally they target long, familiar men, minority groups. So two years ago, and ever since then, in fact, I made myself further unpopular and got an even more enhanced reputation for profound misanthropy, cynicism and pessimism. When I said that, the one thing I was completely confident of was that all the old poisons of politics, ethnic nationalism, anti Semitism, hatred of immigrants, internal and external minorities, would come back with a vengeance? Two years later, I find myself one day before the leader of the National Front is about to appear on a frontline BBC television program as a result of what I regard as a fundamentally mistaken decision by the BBC. But putting that on one side, there's the fact that this is only symptomatic of a development which even two years ago would have been regarded as wildly implausible, apocalyptically gloomy, that a party of this kind would garner millions of votes in some contexts of European elections, more votes than the major parties or some of the major parties and that it would, in a sense, have integrated its views into the national conversation. This happened after two years, and we're still in a situation in which many of the impacts of the financial crisis on the real economy, in terms of unemployment, in terms of their impact in places like the Baltic states and Eastern Europe, through the banking system and through various structural weaknesses, have a long way to go. Things are going to get a lot worse before they get any better. And in the meantime, although this is not the 30s, it's not a rerun of the 30s in many ways. We don't have a Nazi state in control of German industry. We have neo Nazism, but not a Nazi state. We don't have Stalinism. We have a highly intelligent leader in the White House, though. I'll come back to the difficulties, some of them I think intractable, that he faces and perhaps some of the errors he's already made. It's not the 30s, and we also have new powers in the world which were subjugated colonially in the 1930s. China is an industrialized power, a very important one. So is India. Brazil has emerged now. In the 30s it was dormant. So in many respects a different situation than we were in the 30s. But in one respect it's the same, namely that sudden increases in insecurity against the background of a crisis that it's hard to understand, produce hatred, produce the politics of persecution, the politics of scapegoating. And this is happening again. And I think it will continue to happen, and I frank with you, I think it will get significantly worse. But to go back 10 years, 10 years ago, as Martin has pointed out, if one said that the globalization process, as it then was, would end in tears, that there was nothing inevitable about its advance, and on the contrary, there were deep imbalances and problems within it which more or less guaranteed actually that it would be short term, one can't predict the future. No one can. I think it was Woody Allen, rather profound thinker on these matters. He said, predicting is always difficult, especially when it concerns the future. But one can't predict the future. And he did it. But one could know, I think, just as one can now know that Afghanistan's not going to become Belgium or Switzerland or Canada, that poor country is going to go through, has gone through great sufferings, but it's not going to do well. There are certain things, just as in 1989, nineteen 1991, one could know, or even in 1985 when the Gorbachev experiment got underway, one could know, although very few people seem to have realized it, that the former Soviet Union, the Soviet Union, then the former Soviet Union was not going to become a Western style market economy. It was not going to happen. 40% of it was military, industrial, rust belt. There was environmental devastation on a colossal scale. It was not going to happen. And yet, and this is one of the recurring themes over the last 20 years, there was a profound entrenched period of illusion almost entirely in the west, not in the Soviet Union or the former Union, Soviet Union itself, which said that within only a few years, 1,000 days, three years, five years, this collapsed, imperial, semi imperial, semi authoritarian, semi totalitarian system would become a Western market economy. It was impossible from the word go, someone could know that, but one couldn't know the exact pattern of events. Well, 10 years ago. Equally, I couldn't know the exact pattern of events. But I believed then that there were several reasons why the globalization project of that time would come unstuck and probably quite quickly. Not in 30 years or 60 years or 150 years, but in a decade or two. Although I wasn't, I couldn't possibly know in what way it would. And I'll just mention a few of them that were in the first edition of False dawn, which has been reprinted unchanged, but with, as Martin mentioned, a new section updating it and making some of the comments I'm making tonight and some others. The important thing to realize is that globalization can always mean at least two things, One of them an historical process that no one controls, which is essentially the process of worldwide industrialization. That's the way I like to think of globalization. I think it's a deeper way of thinking, a more useful way of thinking than the common economic way of thinking. And then there's the economic way of thinking, which is to think of globalization as a specific economic regime at the global level, one characterized by relatively free trade and relatively free capital movements. And it's that kind of conception which you get in most writing about globalization. And so people say, and I think this is true within the terms of this debate, that there was a period of globalization from the late 1870s up to the First World War. And then we've had another now, from the end of the Cold War to the present time. So if you think of globalization in that way, it's a particular economic regime. And I think it makes sense then to say that globalization comes and goes. It can break down, it can collapse. It did collapse after the first war, for example, when you had Nazism and Stalinism in Europe and Russia, Asian fascism, protectionism and so forth. And of course, the reasons it collapses, if one thinks of globalization in these terms, are to do with geopolitics, they're to do with the power and backs up the globalization project or the economic regime of the time. So the first war was, I think, essentially a death blow to European global hegemony. All the major European empires except the British Empire collapsed. The Ottomans, the Romanovs, the Habsburgs and the British lingered on for a few more decades and then succumbed. I'm glad that it succumbed, but it succumbed after the second war. And when one was thinking of globalization as an economic regime, one always has to ask the question, what is the condition? What are the prospects? What's the capacity for the hegemonic power which is maintaining it, to continue maintaining it? And even in the 1990s, even in 98, when I began to write these, when I wrote the book, when I published the book was mainly written in 96 to 98, published in 98, spring 1998, I believed that the foundations of American power were rather weak and that the interpretation of the end of the Cold War, which was being put about at that time, the triumphalist and hubristic interpretation by Fukuyama, who I knew at the time and had several supremely unprofitable and unproductive public dialogues with, I believe that the interpretation then, which was that with the disappearance essentially of the Soviet Union, the world had moved from a kind of bipolar to a unipolar system. I thought that was a complete mistake. I wrote that at the time for a variety of reasons, which ranged from reasons of economics and geopolitics and even military strategy to reasons to do with the history of ideas and the history of ideas, reasons I just mentioned briefly, because they might be important, is that people interpreted, of course, to a certain extent this was true. On a certain respect it was true. They interpreted the collapse of the former Soviet Union as a triumph for the West. Well, in certain ways it was because it meant that a pretty clapped out and discredited and illegitimate economic system, one for which even the nomenclatures that mainly benefited from it were not willing to fight, had gone. And the only systems that remained in the world were varieties of capitalism or of states in transition, with a few exceptions like North Korea and Cuba, and regime's transition to get a different hybrid, as in China. So in that sense it was a triumph for the west. But in another respect, of course, it was a defeat for the west, because what had collapsed in the form so was a Western ideology, prototypically Western ideology, namely Marxism, a version of Marxism with some Russian traits, but not, as is commonly believed, a fundamental distortion of Marxism. And what I thought from 89 onwards was that what would come out, especially when aggravated by Western mistakes, of which there were countless in dealing with the former Soviet Union, what would emerge in the end would not be a Westernized Russia. It would be a hybrid Russia, balanced precariously between east and west as a Russia had often been in the past. That's what I thought would happen. And I was particularly skeptical of the kind of confection of Western neoliberalism which was imposed on Russia and which to some extent in the Yeltsin period serious attempts were made to implement. I thought that would be disastrous. I thought it would produce a strong anti western Russia. And to some extent I think that's what that has happened. Just as, again, as a footnote here, Martin will know this, I think as well as I do, is that there's always been in the last five or ten years great admiration in Western financial circles for China. And I share some of this admiration. But the irony of course is that China is admired because for the last 20 years it's heroically despised and rejected all Western advice. That's the root of the admiration it has in the West. It's consistently rejected and on a very well or ignored on a very well founded basis. Any advice or instruction from the west. And it's to that I think that it owes a large part of its success. That's why it's admired in the west. In the Russian case, a more complex case, because Russians have always want. Many Russians have been divided. Some have wanted to be different from the west. Some have wanted to be Western. There's always been a debate in Russia. I think it was seen and it was mixed up with issues of corruption and of nomenclature, expropriation and many other complex fashions. There was an initial disaster, promoted I think, very largely from the West. But at the time there was a mood of tremendous triumphalist hubris. Not everyone shared this mood apart from me. I mean, for example, one person, not a very popular person perhaps nowadays, but looking back, he looks like a titan. George Bush Sr. The father of George W. Bush at the time, said, I thought this was so strikingly wise that no one would even hear it. He said, this is not a time for triumph. This is not a moment for congratulation. This is all going to be very, very difficult. And he was absolutely right, but no one listened to him. He was very, I think in that respect, a very prudent and if his approach had been adopted, namely an approach of pragmatism and humility from the west, not a, not an approach based on reckless deregulation, reckless exportation of a market model that didn't exist in any Western country and hadn't existed ever really, and certainly wasn't viable in Russia, if his approach had been adopted, then things maybe could have gone better, but it didn't happen and couldn't happen, perhaps because of the atmosphere of hubris and triumphalism, which was expressed in a number of ways. So let's go forward a bit from 98, towards the very end of the 90s, and things started to happen towards the end of that, of course, towards towards the end of the night, we had Russia defaulting on its sovereign debt to some extent. And that had an impact on Western financial institutions via a hedge fund, Long Term Capital Management, which had been founded by two Nobel Prize winners who developed a theory of option pricing of options. And although this might seem a kind of side issue, because what we tend in the middle of this crisis to focus, focus on is issues of greed and morality. And of course they're important. But I actually think that hubris, political hubris, ideological hubris, the hubris which came from the end of the Cold War and the seeming victory of the west and the end of the Cold War, there was also intellectual hubris, purely intellectual hubris. There was the idea that economists, by developing complex mathematical techniques, had tamed uncertainty and turned it into risk. Those of you who've done economics will know that the distinction between risk and uncertainty is a common one, made a long time. But it goes back to a Chicago thinker, Frank Knight. Risk is when you can assign probabilities to events. Uncertainty is when you can't. It's a very useful distinction. The trouble is, most of the time when you're thinking about economics, you don't know what's risk and what's uncertainty. One of the problems is that when you're talking about probabilities, you have to have a list of events to which you attach probabilities. And you can often miss out on the list the events that are the most formative, actually, of the world you're going to live in. So if the basis of the list of probabilities only, say, goes back five or 10 years, which I think was the case with Long Term Capital Management, then you'll miss out the possibility of a major power defaulting on its debt. And if you're extremely highly leveraged, which that institution was, you might suffer from it and be one of the factors which contributed to its demise. So already by the end of the 90s, there was that event and there was the East Asian economic crisis which had happened already. Cracks were showing. But they were, so to speak, in the periphery of the global economic regime. They were at the edges of it. They were in Russia, transition state, as it was called. They were in East Asia. And the response was basically to hector these other powers for not taking their medicine, for not deregulating enough. If you're in this situation, the reason is you haven't really deregulated enough, you haven't really followed the medicine enough, blah, blah, blah. And of course, looking back, if you ask yourself a rather simple question at the moment, which countries of are doing more or less well? Are they the countries that took their medicine either because they wanted to or they were too poor to resist, too weak to resist? Are they the countries that resisted, ignored it? I think the answer's clear. So a number of things have disappeared over the last 10 years. The fabled Washington Consensus, where is that now? Taken very seriously by economists, by people running financial institutions. It was promoted through the International Monetary Fund and through the World bank to some extent as well. The idea being that the secret had been discovered. For steady, continuous, uninterrupted growth, you had to have a variety of conditions in place. Now, none of these were actually in place in the U.S. none of them were balanced. Budgets weren't in place. There was always a some degree of protectionism. And also there was a kind of reckless Keynesianism, if you like, going back to the Reagan period. And there was a radical deregulation under banking involving the repeal of certain banking acts in the 1930s which were put in by, in the 1930s in response to the Depression in the Clinton years. So the roots of the present crisis go back a long way, I think all the way back to the end of the Cold War. But certainly they're definitely not restricted to the Bush administration. They go back a lot further than that. And a slightly ominous sign is that many of the people involved in those deregulations of banking and financial institutions whereby, and this is a part which the governor of the bank of England mentioned only yesterday, important point where the so to speak, casino operations of banks were divided to some extent in the United States under the Glass Steagall act from their more retail everyday functions that was swept away so that banks became hedge funds or central aspects of banking activity became hedge fund activity. And in fact, hedge funds themselves had very little role in this crisis. It was the transformation of institutions that had not been hedge funds into hedge funds without anybody realizing because they didn't change their names. If you went along to the Royal bank of Scotland, it didn't say radical gambling strategies on the door, it did lots. If you borrowed money from Northern Rock when, when you went in, it didn't say Derivative Derivatives Inc. It still had Northern Rock where it was. So it wasn't clear what had actually happened. What had happened is that many of the institutions had changed their character and nature. And I think in a very luminously intelligent speech, I think the governor of the bank of England was right that the idea that we can just muddle through with essentially unaltered banking structures propped up at enormous public expense is an illusion. But there is a problem. And now I get back to the main strand of my argument with what the governor of the bank of England, Mervyn King then recommended, which is as far as I understand these matters, a kind of quite good recommendation, namely that we somehow can be done in several different ways. And there's a lot of technical stuff which I don't pretend to understand, but that the ask that, that these different activities of banks be somehow separated again, which might involve breaking up existing banking structures so that the retail angles of it are walled off from the highly speculative hedge fund or casino operations. One of the problems about doing it is that it's not clear that any one country can do it by itself. In particular, it's not clear that Britain can do it when we're although a hugely important financial player, a relatively small country. This gets us back, as it were, to globalization, which is that although the globalization as understood as a single economic regime, was the creation of state power, American state power, and is now, I think, fracturing and fragmenting before our eyes as American states power retreats in the world, although that's the case, it gradually grew too big even for American state power, even at its height, to control. And it's not really clear now how any kind of order can be superimposed on it. It's not clear how that can happen because the situation we're in now, I think geopolitically is like that at the end of the 19th century or before, before the First World War, but with one or two crucial differences. That's to say we now have a world of several great powers. America, India, China, Japan, Russia. Europe doesn't count, I'm afraid, because although it's a very pleasant place to live and has a very high level of prosperity, it hasn't shown any Capacity to act as a real actor on the global stage. But we're in a position to have several great powers, including two powers which were subjugated explicitly or otherwise at the end of the 19th century, namely China and India. America is only one of these. In military terms, it's still vastly superior to any other. But the question is how long it can maintain this against the background of fairly profound economic problems. And here, I mean, I'll make again a brief comment. I'm a great admirer of Obama as a person and even as a politician, but he has a Gorbachev like aspect, by which I mean he's come to power against a background of problems which are mostly intractable, mostly insoluble. Of course, nowadays we've, we live in a time when intellectually the very notion of decline is discredited. If you say powers decline, the moment you can identify it's a decline, you turn around and stop it declining. So we'd have that in the 17th century. There would never been Gibbons book on the decline and fall. They'd say, well they could have been, but they'd say they were just too stupid to stop it in time. They should have noticed they were declining and stopped it and reversed it. But actually, some of the reasons for American decline are built into globalization in its deep sense. The deep sense of globalization, the one that went on from 1914 up to the late 90s, despite fascism, despite world war, despite communism, is worldwide industrialization. And the impact of worldwide industrialization is to disperse economic initiative and power into other parts of the world. So it's actually a part of the logic of globalization that it undermines the hegemonic power that is promoting the globalization. That's part of the logic of it. So one could know from the start, quite apart from any errors made by American administration, quite apart from the disastrous error of the Iraq war, which had been hugely costly, apart from anything other, and quite apart from the further error which is unfolding in Afghanistan. And I it's a different case Afghanistan because the roots were in an intervention which I think could be justified back in 2001, but it's drifted into a situation which I think one can be pretty confident is not retrievable at this point. One could be pretty confident that it's not retrievable, but it's going to cost an awful lot of money, an awful lot of blood and an awful lot of anguish all around before that is accepted. But quite apart from these big errors, the inherent logic of globalization as worldwide industrialization is that it disperses power to new countries, new economies, new states. And so even if it hadn't been the case, even if there hadn't been Iraq, even if There hadn't been nine, 11, even if there hadn't been Afghanistan, there would have been a long term tendency for the US to decline as a result of the globalization which it promoted. And so, in other words, kind of slightly subtle point, but I'll make it because I think it's important. It's often thought it was thought in the 90s and even until quite recently. That's why only one, so to speak, global framework was compatible with worldwide industrialization. And the global framework was something like a global free market. Now, we never actually had a global free market. Some countries like China retained their control of the commanding heights of the economy, and I think the prudence of that has been demonstrated. And Western countries were protectionists. So we never really had a global free market. And the reason for that is not that people were hypocritical or cynical, though they were the reason it's impossible. The reason it's impossible because if you really were to have it, then all the factors of production would have to move freely. You'd have to have global worldwide free movement of labor, for example, a version of which did exist, by the way, before 1914. Of course, it was a much different world and many people were too full to travel, but most in Europe, for example, you could travel anywhere except the Ottoman Empire and the Romanov Empire, Russia and Turkey without a passport. The reason for that though was there was no welfare state in most of those countries, or not much to say. Speak of trade unions were weak and democracy was fairly weak in many of them. Not weak in the sense of being threatened, but not fully developed. Women didn't have the vote and lots of people didn't have the vote. Actually, now we're in a situation where there isn't free movement of human beings and there won't be. And many of the other dimensions of the global free market were similarly unachievable. But the idea was that something like a global free market would eventually come about. Something like a global free market would come back because deregulated liberal capitalism was the only system compatible with modernity. That was the kind of philosophical, if you like, belief which animated thinkers, a wide range of thinkers, not only Americans in the 90s, basically one economic system and one economic system alone was compatible with modern conditions as we now live. And I argued then, and it's an illusion, and one of the things I want to Put to you as I'm coming now to the next part of what I want to say, and I don't want to talk too long because I want there to be plenty of time for question and answer. One of the things I want to tell you is that now that this system is, I think, fragmenting and crumbling, it will not be replaced by another universal system of some different kind. That's to say many critics of globalization say that system didn't work, the neoliberal systems collapsed. They're right about that, of course. But they then go say what we need is a different system, another global system, global social democracy, a global green settlement of some kind. None of those things are going to happen. And the reason is rather simple. Basically it's that the differences between the world's different economies, the differences between of interests, of values, of histories and of current goals, between the different powers in the world are too great. And I think it's also the reason for that is that some of the problems which are being faced now.
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Audience Member 1
Are.
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John Gray
Again rather intractable and difficult problems. And the attempt to the belief that they're fully soluble can only produce deep disillusionment. The belief that Obama can prevent American unemployment, even with the figures being somewhat fuzzy, going over 10% or 12%, the belief that, that he can prevent whole states going bankrupt as California more or less have. The belief that he can somehow alter the position of the baby boomers who found their lifetime plans for savings and so forth and retirement gone up in smoke before them. The belief that he can do any of these things, I think is ill founded because America's position has changed just too fundamentally, too radically. It's no longer in a position to borrow unlimited in an unlimited way, even though for the time being it's racking up enormous amounts of debt. So one can anticipate really rather painful disillusionment with all of its unpredictable political implications. And in different contexts, different societies will face similar issues. People will turn to states, turn to governments for protection, and find that governments can only protect them to a certain degree or not at all. And then one has the problems that I mentioned earlier. By the way, I promise you at some point I'll try and come up with something optimistic, but. So where are we now? Where are we in the position that we find ourselves now? Well, as I mentioned earlier, I don't think that the real economy impact of the financial crisis has yet fed through fully much higher unemployment, some of it affecting graduates. And also we're moving into a period where many countries are going to slash public spending, state spending, many contexts we're going to find a situation in which taxes go up but also public spending is actually reduced, which is almost unprecedented. You have to go back, I think to the 1930s, even the 70s, and I lived through the 70s, they were pretty rough in some ways. In Britain, even then one didn't have massive real cuts. But if you look at countries like Ireland, not just Iceland, which is a special case in some ways, but Ireland seeing actual cuts in incomes, actual cuts in public services, and these I think would happen whichever government wins the next election in Great Britain or whether there's a hung parliament, it'll happen anyway because the essential situation is of massive unsustainable debt. And one of the problems, as I've said, and I keep going back to this, is that one of the problems is it was assumed, and here we get back to the intellectual hubris that I was talking about, that if only one could free up markets globally, they would somehow be self stabilizing, self stabilizing, that if there was any problem in them, it would work. It's come out in the wash, as it were. I think one of the relevances of Keynes here, there's been something of a revival of Keynes, but I don't think it's sort of intellectually that deeper revival because it's not really based on a close reading of Keynes. There'll be a number of interesting studies come out, one by two Americans called animal spirits, where he says what Keynes would have said. If you could bring Keynes back from the grave or back from his deathbed. By the way, his last recorded words were, I wish I'd drunk more champagne. If you could bring him back and give him a glass of champagne and ask what he would say. They say he would say, well, the economists of the 90s forgot animal spirits. Well, there was behavioral economics, behavioral finance. I don't think they actually forgot. Animal spirits means moods, emotions, the ways in which boom, bust emotions, various types of emotions, get caught up with market movements and make themselves reinforce, forcing to the point at which they then collapse. Now that of course is a feature of markets which Keynes understood not only as an economist but as a speculator. He was an active speculator for his college. He made them an awful lot of money and lost an awful lot. He died at the right time, after he'd made them an awful lot. So they were all terribly grateful. If he died when he lost them a lot, it might have been different. But he understood markets better probably than most economists. He's a supremely gifted man and supremely cultivated man. But the essence of his critique of orthodox theories of the time was not actually to do with animal spirits, with the way moods get reinforced. In fact, that wasn't part of it, but it wasn't the essence of it. The essence of it, in my view, goes back to his work as a probability theorist. He also wrote a book called Treatise on Probability. Basically, he tried to set out a theory of rational degrees of belief or degrees of rational belief. And at the end of it or after it, he said, I failed. If you read what he says in the general Theory, he says when we ask about the future price of copper or interest rates a few years from now, or whether there's going to be European war, it's not that we can sign probability. He says, we simply don't know. We simply don't know. That's a very important thing because from that fact one can sort of conclude that there will always be instability in markets, there will always be crashes. As the governor of the bank of England said yesterday, banks will always fail. And therefore you need to have a set of institutions based on that fact. The fact that we can't know the future. We can know that certain things that I've said earlier are not going to happen post communist Russia becoming Sweden or Afghanistan becoming Switzerland or something like that. But we can't know enough to predict in advance when things are going to happen or the full range of events. All we can know for sure, and I think we can know this for sure, is that there will be further crises. That's history as normal. Now again, I'm sort of sometimes criticized as taking an apocalyptic view of events. It's kind of rather odd in a way, because an apocalyptic view is by the end of history. What I'm saying is that history doesn't end. Crises are normal. They're normal in capitalism, they're normal in banking, they're normal in history. That's normal. So what one needs are institutions and policies robust enough to deal with them. And I think for a time after the Second World War, which was a very wrenching experience, I'm not old enough to have been in it, but I've talked to people who were. That was a very. And the 30s were extremely wrenching in many ways. From that set of terrible experiences which was followed by triumph, Nazism was destroyed. A great achievement came a set of institutions which were based on the clear recognition that large scale economic fluctuation and depressions were politically and humanly extremely dangerous and costly. And that's an important, very profound and important insight. So you shouldn't base policies in welfare or regulation or anywhere else on the assumption that you've moved into the period of the long boom. Any of you remember the long boom? Capital L, capital B, the great moderation, Capital G, Capital M, all versions of the end of history. Capital E, capital H, all nonsense from beginning to end, dangerous nonsense from beginning to end. Because what it meant was that to the extent they were taken seriously, and they were, they were taken seriously. For example, after the fall of the Berlin Wall, I know for a fact that a number of American foundations had their foreign policy programs axed because no need for a foreign policy, no dangers, no risks, no problems. Get rid of it. Well, if you knew a little bit more about history, as George Bush senior did, having been in the Second World War and quite a knowledgeable man, you would say, well, yes, one set of problems have been resolved. But a big state like the former Soviet Union, melting away, all kinds of conflicts which have been repressed or frozen will re emerge and new conflicts will emerge that even weren't there before and we have to cope with them. And some of them will be extremely intractable. That's what you would expect. But as I say, although George Bush Sr. Took that view, not very many people did. So you need to build in to your basic institutions and even to some extent into your mindset the idea that booms don't go on forever, crises are normal, since they happen, we should be prepared, prepared for them. But during the 90s and really right up to 2007, that was considered a kind of outre attitude. That was considered a view which went against the enormous success that had been achieved. There were critics, there were economists all along said it's built on shallow foundations, too much debt or imbalances between China and America, there are various problems, but the prevailing climate, the prevailing intellectual climate was one which discounted any large crisis. If you said a large crisis is possible or even likely, you marginalized yourself to a very considerable extent because no one wanted to hear that it was. Lots of people were making money from the fact, from the institutions, about policies that existed at the time. But beyond that, and I think it's not just greed, it was intellectual hubris. The idea that we've solved a problem, the problem of devising market institutions that are self regulating, self stabilizing, which only need light touch regulation, which are not going to go mad or even we've solved that problem which has defeated everyone else. And of course that was against the background of profound Ignorance. Most of us didn't really understand what was going on. But also even people involved. I mean, I knew a major hedge fund operator who, after the crisis, Tobe went back to the market and said I'd never heard of these special purpose vehicles. I didn't know what they were and nor did anyone else, he said, except a few of the people who devised them. So essentially operating in an environment that no one understood, but which they believed on the basis of a kind of series of theories, mathematical theories, which claim to have tamed risk to the point that it was tamed uncertainty to the point that it wasn't uncertain anymore. But now calculable risk have turned the deep uncertainty of the human future into calculable risk. They believed that it would all work out and it didn't. So where will we go now? I've now got less than 10 minutes to go and I'll just make a few brief remarks bearing in mind the cautionary observations of Woody Allen about where I think things might go next. I've already made one or two remarks. I don't think there is going to be. I hope there's more global cooperation, especially on environmental issues, and that interacts with one that connects with One point I'm going to make straight away, if you like. Part of the attempt of governments throughout the world to refloat the economy was undoubtedly necessary. I don't think there was any real alternative to bailing out. Maybe it was done in the wrong way, maybe it was done, maybe in Britain and America it contained various errors of policy. But there was a major crisis, probably within days or hours, some people even say of a breakdown in global financial institutions. Something had to be done. So I think policy staved off catastrophe. That was a success. You've got to give credit where credit is due. But refloating the world's economies by restarting growth of the sort that existed before the crisis, I don't think is going to. Why not? Well, first of all, that was debt. Sustained growth. It was largely based on debt. It's going to be jolly difficult to run up debts at a higher level to get us back to that debt finance growth. You can electronically print more money and that's happening. And I think it's necessary. By the way, I'm not one of those who say that it's unnecessary or mistake. As far as I understand it, it's essential that that be done. But of course it runs the risk of inflation later down the road. Now we're in a semi deflationary environment. It's hard to imagine, but a year from now, two years from now, three years from now, might be in a different world, might have inflation back. And I think the idea that planners, policy makers, even with the best of intentions, even extremely intelligent ones, which you sometimes have, can really say, well, what we'll go for is, I think, probably 2.7% inflation. That's what we'll aim at not going to happen. Because these changes occur when human expectations change suddenly and people stop trusting the policy, and then you have a collapse that can also happen in currency markets. I'm not confidently predicting the crisis of the dollar, but I certainly think it's entirely possible. Entirely possible. But there's another reason why, and perhaps a more fundamental reason connected with globalization as worldwide industrialization. Why I don't think we're just restarting growth on the previous pattern. It's going to work for very long, if it can be done at all. Maybe it can be done for a few years. But the reason is before the crisis, we had very high prices for energy and natural resources or commodities, very high prices. Now, they were partly speculatively driven. That, of course is true, but we're hearing increasingly from a variety of sources now. The theories of some people about peak oil doesn't mean there's no oil left in the world. Plenty of oil left in the world, but actually easily extracted. Conventional oil may already have peaked in terms of reserves. That's to say the maximum extraction may have already. Rate of extraction may have already occurred. The idea that the world can return to a path of rapid growth without seeing a revival of commodity prices and energy prices, I think is fantastic. That will happen partly again, probably speculatively driven, but essentially over time, demand driven. Because in all of this worldwide industrialization is going on in China and India and elsewhere, and I don't attack it, I don't criticize it. I'm not one of those who say they shouldn't do what we did. I'm not saying they should do. I'm not saying emerging countries should do what we did. I'm not saying that either. Whatever they do should be their decision and their choices, whichever way it goes. But I think worldwide industrialization is a very, very powerful tendency connected with all kinds of human aspirations and geopolitical changes. And it's not going to be stopped by Western preaching, Western hectoring, or any political decisions. If it's stopped, it will be by environmental crisis, by a planetary backlash coming through climate change. And so I think one of the features which one can anticipate in the next 10 years and certainly the next 20 years, but probably even the next 10 years because some kind of growth will be continued or re begun for a while, at least in some important countries. I'm pretty convinced of this, is that the prices of natural resources will go back up, the price of energy will go back up, including oil, especially orbitals of natural gas, et cetera. They will go back up. There will be increased difficulties in many parts of the world concerning water. And as climate change begins to bite, there'll be issues connected with arable land and coastal inundation and so forth. So one can anticipate an intensification of resource scarcity with geopolitical ramifications. I mean, things like wealthy states buying up arable land in poor states. It's already happening and I think it will continue to happen.
- [51:18]
Audience Member 2
So.
- [51:20]
John Gray
I don't think, as it were, resuming the path of growth that existed before is really feasible, not at least for very long or not without serious problems coming up on the horizon. And it's there, I think that we actually now we should really be thinking about that, not blithely assuming that what we've got to do is get the machine, get the car back on the road, which is essentially what all politicians are doing. I mean, their first and many policymakers, their first imperative is to get economic growth of the sort that faltered in 2008, 2009, going again. And one can understand why, not just politically, but because one of the things which is very important to avoid, if it can be avoided, is mass unemployment. Really, mass unemployment would be catastrophic, partly for the reasons I mentioned right at the start, because I'm sure it would provoke a poisonous politics Again, I'm sure it would provoke all kinds of new. So again, I'm not attacking politicians. They're not idiots, they're not criminals. Actually, most of them in many parts are not even cynics. They really believe in much of what they're doing. But looking forward to the next phase of this process of the collapse of the existing model or regime of globalization against a background of continuing industrialization, continuing globalization in the sense of worldwide industrialization, seems to me that the next steps will be ones in which combine. The next phase will be one in which combines a revival of world. I don't mean tomorrow or next week. I don't know when it will happen. It could be years. But I'm pretty sure it's the next phase because first of all, worldwide industrialization continuing in China and elsewhere and in India, and secondly, demand for, therefore demand for Minerals, raw materials, natural resources, water, oil, energy, all the things that feed into energy will continue to rise. And these are finite resources. And human population is also rising pretty quickly. 2 billion more people in the next 20 years. So against that background, one can only anticipate much higher prices. And that combined with the monetary expansion of the last year or so and probably continuing on, even increased monetary expansion, if the present expansion doesn't prove to be adequate in generating the growth, actual cost could be a recipe for a period of fairly rapid inflation, but also, and more significantly, maybe a conflict between countries, between states. So I think that's what we should be thinking about now. I mean, I don't sort of have that many answers I can't whip out of my pocket. This is what we should do. The whole point is, I think we have to be flexible and pragmatic and not look to some brand new system to replace the one that's collapsed because there isn't a single size that fits all. And we're not in a situation where one part of the world can dictate to the rest. We're in a situation where there can be international cooperation and discussion and agreement, but within limits. Because there are deep differences of interests, of historical development, conflicts of a geopolitical kind, as well as less rational human conflicts in the world, which are not going to go away. So there isn't going to be some new system. Instead, I think what I would like to recommend is greater clarity, greater realism, greater clarity, greater pragmatism, greater flexibility in dealing with events as they come up. So this is a big upheaval. The only one of the few predictions I would make with reasonably high degree of confidence is that just as today, we're in a different world than the world we were in 10 years ago when the book was first published. Ten years from now, we'll be in a different world again. I don't believe these pressures or conflicts or instabilities or imbalances or problems I've talked about are the sorts of problems that take enormously long time to work out. The incremental theory of history works in only a few countries. In most countries, the history of the last century was a history of revolution. If you were a European living in most European countries, not even to speak of Asian countries, you were 70 or 80. Now, how many regimes would you have lived under? 2, 3, 4, 5? Quite possible if you're 80 years old. So the history is really of the 20th century. See, real people who think they're realists and pragmatists are kind of gruff, sensible chaps. They're mostly men say, well, you know, things take a long time and they go rather slowly and inch by inch. It's not the way history actually worked in the 20th century. That's not what happened when the Soviet Union suddenly melted down. It's not what happened in China when there was long periods of. Of civil war, foreign invasion, Sino, Japanese war, mostly. The history of the 20th century was a history of revolutionary people. And I think that this is similar now. We're in similar circumstances now. Changes partly because of the Internet, partly global communications, and for other reasons happen quite quickly. So 10 years from now, I think we'll be in a completely different world, but it won't be the end of the world. Let me go back to where I started back in the 80s. There was a phrase which used to go around a bit in Eastern Europe as communism was come to an end and everyone was looking forward to it and some thought it would never happen. And I thought it would happen. But one of the sayings that I heard there was. That was a very good saying. I see it's still very useful. Don't put too many of your hopes in the end of the world. It never happens, it just goes on. Thank you very much.
- [57:31]
Martin Jacques
Thank you very much for that, John.
- [57:33]
Audience Member 3
That was extremely interesting. If I could set the ball rolling by asking a question which is.
- [57:45]
Martin Jacques
Let'S.
- [57:46]
Audience Member 3
Ignore Woody Allen a bit more. And if I can press you a bit on the last point part of your lecture, which is your thoughts about the future. If I can press you a bit more on your thoughts about the future.
- [58:02]
Martin Jacques
I mean, now when there's a discussion.
- [58:06]
Audience Member 3
About sort of what's happening, it's extremely short term and extremely narrowly conceived. Are we getting out of the global financial crisis that that's the way it's perceived? Now, what you're clearly saying is something much more profound than that. The global financial crisis both marks the end of something and also the beginning of something. Now, if you were looking historically, you can talk about 1870 to 1940 as a period in some senses, or 1929 to the outbreak of the Second World War in another sense, or what you were talking about the long boom from the late 40s to around about 1973, or the neoliberal period and so on.
- [58:48]
Martin Jacques
Now, casting your mind forwards, what sort of period?
- [58:55]
Audience Member 3
How do you think we'll see this period of whatever it's going to be, 10 years, 20 years, it could be quite a long period of fundamental instability. How would you see that in More.
- [59:05]
John Gray
Conceptual terms, I'd call it a fairly long period of disorderly globalization. That's to say globalization in the sense of worldwide industrialization, new technologies of communications, because it's in part a technologically driven process, will continue, won't stop. Technologies will continue to get more efficient, quicker and cheaper, many of them than the new communications technologies, but against the background also maybe of the inputs, the natural resource inputs, oil scarce minerals and others getting more expensive. Actually what I expect, I know this sounds rather vague, but is a fairly long period of disorderly globalization. And the reason it partly be disorderly is, and you've written about this in your book on China, Martin, is that one of the changes which is taking place now, the emergence of China and the tilting of economic power from west to east, not only from America, but also from Western Europe and Japan, as an old, as a non western but early industrialized country, two new rapidly industrialized countries in the east, that's not a change which happens even every few decades. It's a change which happens every few centuries. A big change, at least over 100 years, 250 years. I mean, some people say that actually Europe only and Britain only emerged as economic drivers, as it were, in the 18th century. So it might not be centuries, but it might not be many centuries. But it's a huge gigantic change. So it's virgin territory that we're in in that respect. There's been long periods of economic growth in India and China and elsewhere in the past, but they haven't been in the global context that they're now in. And they're not against the background of global communications of the kind that we have and which will continue. So I expect a long period of disorderly globalization. And if you ask me again, this might sound rather modest or even downbeat. You say what's the main thing that we should aim for? One of the main things is just avoiding major conflict. Avoiding major conflict is very important. And that could happen. It probably happen in ways that no one, me included, could anticipate in advance. But there are some context. For example, if it's true, I'm not a scientist, so I don't know, and maybe they don't know. But if it's true that the Antarctic will be open for shipping and exploitation exploration in 10 years time, I'll tell you what I anticipate. I anticipate quite a lot of conflict over who controls it. Will it be military conflict? I hope not. But there'll be conflict all right. And some of the countries that seem like Good guys might look different. Canada, Denmark, all these wonderful social democratic countries, they want their peace as well as Russia and other countries which have never been in that part of the world before. So I think actually a major thing to start thinking about is how to avoid conflict, conflicts like that. There are other different kind of areas, maybe more obvious. I mean one thing which people, mainly economists always say is they say the relationship between China and America in terms of them being joined at the hip economically, a kind of tacit deal in terms of America keeping its markets open in return for large amounts of Chinese purchases of bonds that will remain. Stable over coming years. Most of them say that. Of course there are reasons why they say it because if there was a sudden attempt to get out of the dollar trap, the dollar would crash and the remaining assets would be worth less. It would be self defeating, we all know that. But if the policies of American policies basically involve running up more and more debt, if a policy of benign neglect towards the dollar were to lead to a loss in confidence in the dollar and the dollar were to start sliding anyway, if the only way the levels of debt that have been run up in the U.S. for example, is ultimately by writing them off by inflation, why should, and will subsequent Chinese governments, which will be internally divided, factionalized, they're not monolithic any more than any other. The Communist Party is not monolithic. Can we confidently predict that they will not try and get out of the dollar trap, even maybe make a mistake? Can we confidently. I think on the contrary, it's more likely than not that something like that will happen over the next 10, 15, 20 years. And that would be a huge change. And yet if you talk to most people, it's completely impossible. Why is it impossible? Because it's against the rational self interest of the players involved. Well, there's one thing I've learned through observing politics is that believing in rational self interest as a guide to what's going to happen is slightly less reasonable than believing in the Virgin Mary. People develop rational self interest only when every other alternative has been fully exhausted and often not even then. So you know, things happen. There are in the undeterred, mistakes are made, policies are factionalized, messages don't get through. And also there is the non rational undertow of politics, the national myths and traumas of different countries which feed into decisions that are taken or not taken. So that's an area where I think there could be a major, I mean a major change. That's less predictable though than the one I, I mean the one I Mentioned first was the revival of environmental constitution. It's only two years ago since everybody was talking about peak oil, then a financial crisis, deflation, demand collapsed. For a while everybody said no peak oil. Well, the geology of the earth didn't change in those few months, nor did most of the economic factors and extra extraction factors. So that poses a real challenge. And I think there we need to be thinking technologically, we need to be thinking about new technologies, cleaner technologies. We need to exert all of our technological virtuosity. I mean, not because technology can get us out of it. There are lots of things technology can't do, lots of things it can't normally repair destroyed biosphere. You might be able to bring tigers back by using their DNA, but you probably won't be able to bring back their habitat once it's been destroyed by climate change. And technology certainly can't make human beings more reasonable. But technology will be part of the way we negotiate the resource and climate change problems which are undoubtedly going to be faced now. Technology will be a very important factor. So I think we need to be thinking about these, these now. So that's, I mean, in the next 20 years, that's more or less. What are they? These two of the things I would focus on as well as I know this is a very unpleasant thought. The likelihood in a number of countries, many countries perhaps with different degrees of severity and threat, but of a reversion to far right politics, which I started from. I think that could happen. I don't mean Mongolia said, oh, Nazism in the foot the way it existed in the 30s, but I can't believe that high levels of insecurity and threat and puzzlement and battlement and the failure of politicians to solve problems which is not always because they're corrupt or weak, but because the problems aren't fully soluble. I can't believe that situation won't energize far right movements.
- [67:04]
Audience Member 1
Thank you, John.
- [67:05]
Audience Member 3
Actually, we already have the reversion to far right politics.
- [67:07]
John Gray
We've already got it in Italy.
- [67:10]
Audience Member 3
Right, who's anxious to ask a question?
- [67:15]
John Gray
Right, we've got a microphone.
- [67:17]
Martin Jacques
I'm going to take three at a.
- [67:18]
John Gray
Time because that's good.
- [67:21]
Martin Jacques
Yeah, right Behind. Behind first because you've had your hand up from the beginning.
- [67:27]
Mike Joffe
Thank you very much for very interesting talk. You started off.
- [67:30]
Martin Jacques
Could you give your names, by the way, before you?
- [67:32]
Mike Joffe
Mike Joffe from Imperial College.
- [67:34]
John Gray
Thank you.
- [67:34]
Mike Joffe
You started off very lucidly explaining how the current state of at least some kind of economic theory was at the root of the hubris that you talked about. Could you comment please on what you see the prospects for economics and the state of the economics profession, particularly not so much to get us back to the kind of growth that we had before, which given your views about, but also understanding the processes of growth well enough to be able to manage the future ecological crisis.
- [68:07]
John Gray
Thank you.
- [68:08]
Martin Jacques
The gentleman in front.
- [68:10]
Audience Member 4
I mean, you sort of mentioned that you've placed an awful lot of emphasis on the kind of return of far right politics and the idea of conflict. I mean, first of all, I mean, it's striking actually. Let's not forget that the BNP number of people voting for the BNP actually fell during the past elections, actually the share of their vote, which more complex questions to do with the collapse of faith in the political class. But also what's been striking about this recession generally, particularly across Western Europe, has been the lack of conflict. There's been a distinct lack of industrial disputes, people happily accepted collaboration in terms of accepting wage cuts and so on. I mean, what makes you so convinced? Why is this obsession that we suddenly going to turn on each other when that hasn't happened yet, which has been historically very unique about this crisis?
- [68:55]
John Gray
Should I answer those one more at the back?
- [68:58]
Audience Member 5
Yeah, I just wanted to ask you, I think on the first question you said that the idea of a global economic system does not exist anymore, it's fragmenting. Whereas the other idea of globalization, which is worldwide industrialization, it's a nice way to put it, but if you are in a business school anywhere on the planet right now, seems like the former idea still exists and the intellectual loyalty is to maddening levels still. So within academia and also particularly in the developing world, if you go to India, because it's perceived that the crisis didn't affect India that much, which is primarily true, but the crisis was more in the Western world. The belief in the free market and free trade still exists to the same level. So I just want to get your view on that.
- [69:51]
John Gray
Should I answer those? Yeah, well, there are a number here which are all good questions and are to some extent related. For example, the question about, I guess the economics profession and the persistence of the earlier views of the, of the earlier models of globalization, despite the shock that's occurred in the last couple of years, are connected now. I'm not an economist. I've read a lot of economics and studied it quite a bit, but I'm not an economist. But I'm not terribly optimistic that there'll be any fundamental change in economics in the next few years. And there's a number of reasons behind, because part of the prestige of economics in the last 20 or 30 years has been that it could claim a kind of status of a science, which means that, as I say, it can domesticate uncertainty, turn it into risk, it could be highly quantitative, develop mathematical models and so on. Whereas what I actually think is it needs to link up with things that aren't science, like history, like the study of culture, like the study of religion and nationalism, all of which are very important in economic life. In which part they explain economic growth. Actually, I think to some extent they feed into periods of rapid economic growth. And if you go back to the great classical economists, Scottish economists, Marx and up to Keynes, they were all sort of soaked in history and in the history of economic thought. And that's less true now. I think there are not many people, even in the economics profession study the history of economics thought. Not as much as they used to anyway. In fact, although I'm strongly critical of Marx, I often find the most refreshing conversations are with ex Marxists, because at least they've studied history of economic thought. They know it didn't start when they began preparing their vita. So I'm not terribly optimistic. And this connects with ideas. Keynes said this, didn't he? He had this wonderful phrase, he said practical men, we know practical men and women now they turn around and they hear voices from the past gibbering the ideas of a previous period will outlast the point at which they're useful. We can be in actually a radically different world than the world in which those ideas were developed and actually carry on using the ideas. Because there's intellectual capital, there's, there's investment of intellectual capital. There is institutions are organized around the reproduction of certain ideas and the propagation of certain ideas that can go on for a long time. And that's one of the reasons I think it's actually difficult to navigate the world in which we're in now. If you had believed certain of the models which were around in the last, last 20 or 30 years, that actually what has happened in China couldn't have happened. If you said you've got to have something like a Western style legal system to have sustained economic growth for 10 or 20 years, what about this, the biggest industrialization and the quickest in human history, how did that happen? I've yet, by the way, to get an answer to that question, if you really need a Western legal system, is the one secretly there hidden, nobody knows about, or is there some other set of explanations? I think there's some other set of explanations. And this connects up with something which is rather important. I mentioned briefly, which is the cultural limitations of Western social science. I'm not a relativist. I don't think there's no such thing as human nature. I don't think all values are culturally. I think there are such things as. There is such a thing as human anthropology. There are even universal humans values of some kind. Humans flourish and fail to flourish in certain contexts independently of their culture. Whichever culture you're in, you don't. I don't think people. I think a culture which is immemorially had torture isn't one in which people who are tortured don't mind it or in which people who are raped don't mind it. I don't think any of that. But there are deep, I think, cultural distortions in Western social science which should be corrected. But I think it'll take a long time. So that, I think answers two of the questions, at least briefly. Why has there been so little conflict up till now? It's a reasonable question. Well, because actually comparatively little has happened up till now. Unemployment hasn't risen catastrophically, although in America, in some parts of America it is rising pretty quickly and has risen pretty quickly. But most people have a feeling of pervasive insecurity or more greater insecurity than they've had. There hasn't been large scale dislocation yet. But I think it's fairly. I mean even people who think, as some economists do, that over the next year or two will come out of the problems we're now expect significantly higher unemployment. And you know, in places like Ukraine or Latvia, post communist countries, it could be quite significantly higher, substantially higher. And if that's in other words, just at the start of the period where maybe not just at the start, we've only had the very first phase of the period in which the financial crisis has fed into the real economy. And the there's been a big effort which has partly worked to prevent it having catastrophic effects. Quantitative easing, electronic money creation and bailing out of the banks and so on. But despite that, there is going to be higher unemployment. So if, I mean, if I'm wrong and if, let's say the trajectory of growth recovers in the next year or two, if unemployment stops growing and tailors off, then there won't be. I agree with you, there won't be. But if in important cases this doesn't happen, and one of the reasons I think this is, I sort of find it hard to see a really massive increase in spending in the us. And remember, although China has managed to maintain growth better than other countries, it's still heavily dependent on exports. So it's not decoupled. It isn't decoupled. So there can still be these global effects. And if they work out the way I suspect they might, then I think the politics of the poisonous politics will have more of a future. But I agree with you so far, one could say it's been less than one has feared. And I also agree with you that of course the vote of the BNP was down. And I think that's a encouraging fact. But what you also said actually is also important, which is that the reason they've made the advances they have in the places they have is disillusionment with the mainstream parties. And so that this is. It's a situation which I think is not terribly stable and I don't think it's one we can afford to be complacent about.
- [77:12]
Mary Helen Pombo
The Financial Services Authority and the bank of England seem to be increasingly looking to the bank for International Settlements, namely the BIZ hosted FSB Financial Stability Board, to take on a role as global regulator and global enforcer. Given your prediction of a breakdown of cooperation among nations, is it safe to say that you don't believe any organization will be permitted to take on such a global role?
- [77:35]
Audience Member 3
And there was. Who else had the handout?
- [77:37]
Martin Jacques
Yep.
- [77:43]
Mary Helen Pombo
Hi, my name is Mary Helen pombo. I'm an MSc student of gender Development Globalization. And I was curious to know how you think the system that you forgot foresee, that is flexible and fragmented, would affect global inequalities.
- [78:03]
Audience Member 3
One last question, Anyone?
- [78:08]
John Gray
Oh, sorry, yeah.
- [78:12]
Audience Member 1
Hi. Dear Amelie, affiliated from London Metropolitan University. Thank you, Professor Gray, for your eloquence, but you really confused me very much more than enlightening me. And I have a very brief question you mentioned. Rich countries are buying arable lands from the poor countries. What will be the political, social and economic implication of that? And can you link that with the second version of your definition of globalization, the particular global economic regime? Thank you.
- [78:55]
Audience Member 3
One very last question right at the back.
- [79:05]
Audience Member 2
Hi, Madge Lateef. I'm an alumnus of the lsc. I wonder, Professor Gray, whether it can just be devil's advocate for a second whether we are at risk of throwing the baby out with the bath water. In other words, the title of your lecture is the Crisis of Global Capitalism. And a major tenant in your discussion is what is the financial crisis? And there is an argument that one could make to say that this crisis Actually, whilst it has had a wide effect, the roots of it are quite narrow. It started in the US residential market and then was transmitted globally because of globalization. And also complex mathematical theories that you referred to in terms of risk diversification and at least the case of Northern Rock that you cite, you call it a hedge fund? Actually, I don't know. I can't name any other hedge fund or financial institution that would have 50 times a leverage ratio. So in other words, is the problem really more down to improper regulation, poor oversight on behalf of authorities, principally in the UK and the US and other parts of Europe? And could that not be one potential source clearly to the crisis that would alleviate the need for a wholesale rethink of global financial architecture? Global economic architecture rather.
- [80:32]
John Gray
Thank you. Well, we haven't got much time. I'll try to. They're all important and serious questions, but my answers to each will be necessarily brief as well as perhaps bleak. One questioner raised the issue about mentioned what I said about rich countries buying land in poor countries. And I think food is going to be an issue, an increasing issue over the next, if only because of an enormous predicted and expected growth in human numbers, 2 billion more in the next 20 years against a background of likely continuing climate change. So how that connects with the first question, which in a sense was about inequality, will I wouldn't say there's a new system coming into being. I'll get back to the question whether the old system is really going, but I don't think a new one's coming into being. If anything's happening, it's just a sort of non system that's coming into being not out of chaos. We're not moving into out of chaos, but a situation in which different powers are linked together by various agreements, sometimes bilateral, sometimes through transnational institutions. And sometimes if the transnational institutions don't suit the great powers, they will bypass the institutions and make deals with each other. So there'll be a background of continuing cooperation. There isn't going to be all out war between the powers, lots of cooperation, but kind of shifting strategic balances between different countries. And I think one feature of this situation is it might be harder for poor countries even than it's been and for small countries especially because the big players will be the ones that count. They'll make deals with each other and they'll also make deals through transnational institutions which may change and be reformed and have new members and bring emerging countries or countries that have emerged rapidly like China and India into greater positions of authority and so on. But it won't be a sort of new system. It'll be a highly labile circumstance, not of complete chaos, but of continuous negotiation and geopolitical game playing. And geopolitical game playing about energy, about access to sea routes, about access to arable land, for example, pipeline politics and so forth can be very, very important. And of course, when you have several players, it's not easy to work out. I'm not a tremendous believer in game theory, but it does teach you something. It can be quite unstable. So that's what I think and that's. I don't envisage any huge diminution globally of inequality. Although of course it's true that economic growth in China, although it's associated with high levels of inequality in China globally, of course, reduces inequality in important respects. So that's important. I think a really interesting question is what happens to inequalities in advanced countries, not just of income but also of opportunity and mobility? Because at least in Britain, we have certainly no more social mobility than we had 20 or 30 years ago, maybe less. And how will this work out? If we have a period, I think, and most people, I think most economists even would agree that this is likely a period, a long period, maybe a decade of very, very stringent public spending on education, for example, how will that impact on inequality in the society? How will that work? I think that they are very important issues. Now, finally, I mean, is this all a storm and a teacup, a global teacup, but a big teacup, but a teacup, is it simply a failure in the financial markets, particularly in two countries, triggered by certain intellectual mistakes and failures of oversight? Well, I guess it's possible, but of course it has large implications because I think one thing which is important not to forget is that globalization as a global free market, it was a project promoted by a superpower. It was an American project, above all American project. And the setback in American power has been really rather fundamental. Now, I've often been a critic of American policy and I still am in certain respects, but I'm not one who says that this event is all good. It's not all good because actually, as I just said a moment ago, if you have five or six different countries competing with each other, China, India, Japan, China, Russia, China, Europe, America, not to speak of Iran and middle level countries and so on, it's potentially a more. It's a more pluralistic world. And in that sense it's good. But also it can be quite unstable. But it's the one we've got the one we moved into. There isn't going to be a situation in which there is a single hegemonic power. The situation that the US had or seemed to have in the post Cold War period is not going to be inherited by any other power. China's not going to replace them, India's not going to replace. No one's going to replace what the Americans were then. So it is a different world again, more like I think the end of the 19th century. It has some, although there are different players now. Obviously, as I mentioned on several occasions, it's more like that than anything we've seen in the last few decades. So even if it started, I mean, you might say what does this mean? Even if it started only as a perturbation in financial markets arising from mistaken theories of risk management and failures of oversight, it accentuates or promotes large scale geopolitical changes in the world. And I think they're underway now and can't really be stopped. And it's not really a question of what I think or what I want or what I want to promote. They're out in the world. These changes, they're actually taking place will continue, I think, to take place regardless of what we want, because they're bound up with this deeper sense of globalization is worldwide industrialization. And in looking ahead a few decades, as far as that's possible, I think the really most serious problems I would want to, I think are going to come up are in a way they're bound up with these geopolitical issues, but they're really questions of the extent to which worldwide industrialization can be made consistent with environmental stability. Because worldwide industrialization is not going to be reversed by any political decisions or any green movements or any lectures that anyone wants to give to emerging countries and so on. It's immensely powerful movement because partly because it's been beneficial in many contexts. People live longer, have better standards of living. They don't want to go back and won't go back. Why should they? But they don't want to anyway to go back to the life they had before. But it's coming up against quite rapidly in many parts of the world, against environmental limitations, flood, drought, heavy levels of pollution, and of course significant processes, not just risks, but actual ongoing observable processes, not only in computer models, but actually in the real world of environmental damage and instability. And that's the really big one I think we should be thinking about. Because how do we adapt to a circumstance in which the levels of development which have been achieved by the affluent minority in the world can't be achieved elsewhere or even sustained in the affluent societies for long. I mean, that's the really big question. And I don't think most. I mean, there are economists who've begun to think about it, but in general, economics things works with price, not scarcity. Scarcity is a function of price. I don't think that, except it's often the case, obviously. But when you reach points of finitude, when it costs more to get a barrel of oil out than the. It takes more energy to get the barrel of oil out than the energy you get anywhere near that yet. But we are in a situation in which I think we will see prices going up. And it's not obvious what the alternatives. Everyone assumes there are alternatives actually to including greens. They assume that there are alternatives which can be made operable pretty quickly. I doubt that actually myself, especially the quickly. I doubt that's the case. I think we're in for great difficulties and at that point, that's the point when globalization in its deepest sense will come into question. But humans are fairly resilient animals. We're all the rather inventive. So there'll be plenty of opportunity for problem solving. I think in the next 20 years, we're certainly not going to be here. You remember what the second part of Francis Fukuyama's book was? It was about the last man, or let's say the last person. He said the last person. The person. He took it from Nietzsche, who's been created all over the world. As someone faced with the existential horror of permanent boredom now, I can definitely promise you you won't suffer that evil. Thank you.