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The Future Is Chinese - Here's Why. With Prof. Steve Keen · The Smart Cookies podcast

• 0:00
  I mean, Americans and their idea of freedom,
• 0:02
  it's not freedom from hunger. It's not freedom
• 0:05
  from want. And it's not even freedom to elect
• 0:08
  who you'd like to have in power because you've
• 0:09
  got two choices, Republican or Democrat. It's
• 0:13
  a bizarre notion of freedom that they have in
• 0:16
  America. What China wanted was freedom from want,
• 0:19
  freedom being forced from poverty to do things
• 0:22
  rather than having the freedom that... decent
• 0:25
  income gives you to live. And so that's the Chinese
• 0:28
  focus. Now, the Americans will continue pushing
• 0:30
  this freedom nonsense in one of the world's worst
• 0:34
  democratic systems on the planet. They'll continue
• 0:37
  pushing that. But if China doubles again in the
• 0:40
  next eight years, which is unlikely, it might
• 0:42
  take them 15 years this time, then the gap between
• 0:46
  China and America is going to be so enormous
• 0:48
  that, you know, forget your talking points. Steve
• 0:55
  Keen is an Australian economist and author of
• 0:57
  many books, also an honorary professor at UCL
• 1:00
  who predicted the 2008 financial crash years
• 1:04
  early. Professor Keen, welcome to the program.
• 1:06
  Nice to be here. Thanks for the invite. I've
• 1:09
  had to introduce you as an economist, although
• 1:11
  I don't think I would be exaggerating if I say
• 1:14
  that you feel nothing but cold disdain for your
• 1:17
  profession these days. Could you tell me why?
• 1:19
  When people introduce me at a party, I say I'm
• 1:22
  an anti -economist. I don't want to be associated
• 1:25
  with discipline or its views. So, yes, you're
• 1:28
  quite right. And the reason is that it's something
• 1:31
  which. It has a plausible model of the economy
• 1:36
  in the same way that Ptolemy and Aristotle had
• 1:39
  a plausible money model of the universe. In other
• 1:42
  words, the model which fits the data to some
• 1:44
  extent, as long as you're looking backwards in
• 1:46
  time, but has absolutely nothing to do with the
• 1:50
  actual structure of the economy. So they've completely
• 1:53
  misled us about the nature of capitalism. And
• 1:55
  that's one reason why we're in deep doo -doo
• 1:59
  at the moment. I studied communication at uni,
• 2:02
  also pretty useless stuff, but had an introduction
• 2:05
  to economics in my first year. And after failing
• 2:07
  the exam twice, I barely passed. Yes, indeed.
• 2:13
  My mother was not happy. Yeah, I barely passed
• 2:16
  on my third go. So this is an excellent start
• 2:18
  to the episode. We're off to the races. I'm happy
• 2:20
  about that. Yeah, I mean, one reason I wrote
• 2:23
  my first major book is called Debunking Economics,
• 2:26
  which you're probably aware of. And the reason
• 2:28
  I wrote it is because people like you would flagellate
• 2:32
  themselves over failing exams and not being able
• 2:34
  to understand it. And it's too difficult for
• 2:36
  me. And I think, no, it's not difficult, it's
• 2:37
  garbage. And if you fail to understand it, that's
• 2:41
  actually a mark of intelligence. Whereas people
• 2:44
  who fall for it become zealots. for their model,
• 2:47
  and that's why they're so dangerous. They believe
• 2:50
  the world would look a lot better if it would
• 2:52
  look more like the economics textbook. And then
• 2:54
  they start taking away parts of the world that
• 2:56
  make it function properly, and we end up in the
• 2:58
  dysfunctional society we're in today. I wish
• 3:02
  we did this interview 20 years ago, because then
• 3:03
  after failing, I could have told my parents,
• 3:06
  see, intelligence, yeah, we're all good. All
• 3:10
  right, Professor, we're living through some pretty
• 3:12
  interesting times. This seemingly never -ending
• 3:15
  cocktail party that we've enjoyed in the West
• 3:17
  is slowly coming to an end, or maybe not so slowly
• 3:20
  even. I want to talk about this decline and even
• 3:23
  more about the rise of China, but I realized
• 3:25
  I have a few pieces of the puzzle missing here.
• 3:28
  I was thinking just before the interview... It
• 3:31
  was never really properly explained to me, at
• 3:34
  least not beyond a few vague tidbits, how the
• 3:37
  West was able to economically dominate the world
• 3:40
  after the Second World War. To us, it was always
• 3:42
  just the default because we were living it and
• 3:44
  through it. But how was America able to? rebuild
• 3:48
  half of Europe and the entire Japan and send
• 3:51
  people to the moon and swamp the world with its
• 3:53
  entertainment for better and for worse. And most
• 3:55
  of all, stay the global hegemon for such a long
• 3:58
  time. Was it really the dynamism of its economic
• 4:01
  model? Was it ruthless exploitation of the third
• 4:03
  world? Or was it something much more random?
• 4:05
  I don't know, luck. I think the basic answer
• 4:08
  to that question is yes. Okay, because, I mean,
• 4:12
  there is a way in which America was set up geographically
• 4:14
  to be a dominant power. And that is that there's
• 4:17
  this enormous open plain between the Appalachians
• 4:20
  on one side and the Rockies on the other. And
• 4:22
  this enormous fertile land, which was, of course,
• 4:26
  they displaced the Indians there. Of course,
• 4:28
  let's not forget that. But they basically treated
• 4:31
  it as an empty land, which they could just invade
• 4:33
  and take over. And that gave you an enormous
• 4:36
  demand in general. One thing which was a major
• 4:40
  part of forming America were the telegraphs and
• 4:43
  the railways. So all these things made you need
• 4:46
  new products to link together disparate parts
• 4:50
  of a population which were as far apart in like
• 4:52
  America as from Los Angeles to New York is further
• 4:57
  than from, I believe, I'm certain it is the case,
• 5:00
  it'd be further than going from London to virtually
• 5:04
  Persia. You know, it's a huge. Huge landmass.
• 5:08
  And that gives you a huge open market. You're
• 5:11
  a single economy. The other economies are more
• 5:14
  disparate, so you can have larger economies of
• 5:16
  scale when you build technology. So that was
• 5:19
  certainly part of the foundation. I think another
• 5:21
  part of it, and this is something which puts
• 5:24
  me in opposition to another critical component
• 5:29
  of economics, which is modern monetary theory.
• 5:31
  I agree with them on government money creation.
• 5:34
  That's not what I'm complaining about. I think
• 5:35
  their arguments on trade are garbage. are quite
• 5:38
  literally garbage because they argue that exports
• 5:40
  are a cost, imports are a benefit, and therefore
• 5:43
  it's good run a trade deficit. Now, when you
• 5:46
  look at what happens when you're the hegemon,
• 5:48
  and Britain was the hegemon, of course, for the
• 5:50
  rise of UK, the hegemon's currency is overvalued.
• 5:53
  because it's being used for trade for everybody's
• 5:56
  trade, not just for buying stuff off England.
• 5:58
  You've got to have pounds to buy. India has to
• 6:01
  have pounds to buy stuff off China, that sort
• 6:03
  of thing. What that means is that the reserve
• 6:06
  currency is overvalued, which makes its manufacturing
• 6:09
  sector less competitive. And therefore, one of
• 6:11
  the less dominant countries, one of its vassals
• 6:14
  at the time, can develop and has a cost advantage.
• 6:18
  in exports and therefore can industrialize and
• 6:21
  develop its technology better that's what america
• 6:23
  did while england was the hegemon right up until
• 6:26
  of course the beginning of world war ii so it
• 6:29
  got an advantage uh which it lost when it became
• 6:33
  the reserve currency and i think the same thing
• 6:35
  is repeated now but in the aftermath of world
• 6:38
  war ii of course europe was devastated so europe
• 6:40
  couldn't produce goods and services and therefore
• 6:42
  america exported Large amounts had a large trade
• 6:46
  surplus, but it also invested. And that's where
• 6:49
  the Marshall Plan came in. So that's seeing its
• 6:51
  role as being as reconstruction of the rest of
• 6:54
  the world, which is not the attitude America
• 6:56
  has today, of course. So that enabled it. Both
• 7:01
  you had America willing to take imports from
• 7:04
  Germany and the rest of Europe to enable those
• 7:08
  industries to develop. So you had a period of
• 7:10
  expanding trade with America being dominant just
• 7:12
  because of the sheer advantage from having not
• 7:15
  had any bombs on its own territory, continental
• 7:17
  USA, in the war, whereas Europe was wiped out,
• 7:21
  so was Japan. So large parts of Asia. And so
• 7:26
  it had that advantage. And then it's lost it
• 7:28
  over time because, again, now it's got the overvalued
• 7:31
  currency. Its vassal in that sense that is now
• 7:34
  taking over is China. So you had this huge. dominance
• 7:39
  for a while because of the sheer industrial might
• 7:41
  of the country and the fact that it could do
• 7:43
  this when it wasn't the reserve currency ever
• 7:46
  since it's been the reserve currency it's been
• 7:47
  hiding into nothing to go in the same direction
• 7:49
  as the uk de -industrializing over time and that's
• 7:53
  where we've ended up now so i think it did start
• 7:55
  as a dominant uh country and for good reasons
• 7:58
  but it's by making the mistake of the Bretton
• 8:01
  Woods agreements, which is where the post -war
• 8:05
  financial system was designed. Keynes wanted
• 8:08
  to have a system with a neutral. unit of exchange
• 8:11
  when used for international trade. The American
• 8:14
  delegation insisted on using the US dollar. That
• 8:16
  gave us our current situation. And when you look
• 8:21
  at it from my perspective and the perspective
• 8:23
  of many non -Orthodox economists, this was just
• 8:26
  a catastrophe waiting to happen. It was a question
• 8:29
  of how many years it would take until America
• 8:31
  was sufficiently de -industrialized to be in
• 8:33
  serious trouble. And I think now that's the situation
• 8:35
  it's in. We're going to talk about the present
• 8:38
  moment a bit later, but if we stay in the past
• 8:40
  just for a moment longer, why did the Soviet
• 8:42
  Union, on the other hand, turn out to be a failure?
• 8:45
  Because the Soviets were onto something for a
• 8:47
  while, weren't they? If nothing else, they were
• 8:49
  developing cutting -edge technologies just as
• 8:51
  fast as the Americans, sometimes like in the
• 8:52
  beginning of the space race, even faster. And
• 8:55
  yet it all came tumbling down in a pretty spectacular
• 8:57
  fashion in the late 80s. Why did the Soviet system
• 9:00
  prove to be a dud ultimately? Yeah, I mean, there's
• 9:03
  two reasons. The Bolsheviks are the particular
• 9:06
  branch of communists who took over Russia after
• 9:09
  World War. after World War I, with the Russian
• 9:14
  Empire collapsing at the time. It was almost
• 9:17
  an accident. October 17, they didn't expect to
• 9:19
  win. It was just one of the, my God, we won,
• 9:21
  what do we do now type thing. And the Bolsheviks,
• 9:24
  their particular sect of Marxism, argued that
• 9:28
  you didn't need to go through capitalism. You
• 9:30
  could jump from feudalism to socialism in one
• 9:32
  go. by state industrialization. You also had
• 9:35
  Stalin. That's an extremely important point.
• 9:38
  But the reality is that Russia's high -tech in
• 9:44
  terms of space races and military and so on match
• 9:47
  the Americans well and truly. So they've developed
• 9:49
  nuclear weapons. Of course, the technology was...
• 9:52
  pastored them by Americans who quite rightly
• 9:55
  realized that if America had this old power,
• 9:57
  it would be a tyrant. I think we can see that
• 10:00
  now. So the American scientists as pacifists
• 10:04
  gave the secrets of the bomb to the Russians,
• 10:07
  and the Russians then developed it as far as
• 10:09
  Americans managed to do. The first satellite
• 10:12
  was Sputnik. The first person in space was Yuri
• 10:15
  Gagarin, so they had a lead there definitely.
• 10:18
  Where they lost out was in consumer goods. And
• 10:21
  this is where it actually hits individuals very
• 10:25
  directly. So this relates to the way in which
• 10:29
  they tried to industrialize. And what they were
• 10:34
  persuaded by an engineer called Feldman was that
• 10:38
  the best idea was to focus on building the means
• 10:41
  of production first and foremost, so investment
• 10:44
  goods, and not worrying about consumption goods,
• 10:47
  letting consumption goods sort of take up the
• 10:49
  slack. Now, that worked brilliantly while there
• 10:52
  were many, many serfs to be converted to industrial
• 10:55
  workers. So when you started off in 1917, the
• 10:59
  country was still feudal. You still had people
• 11:01
  who were serfs, bonded to the land. They could
• 11:04
  be sold with the land in that sense. So it was
• 11:07
  a very primitive society. And that meant that
• 11:10
  you needed every last sector of the economy needed
• 11:12
  to be industrialized to some extent, agriculture.
• 11:16
  manufacturing system that all needed to be developed.
• 11:18
  That meant that if you're doing a five -year
• 11:20
  plan, every sector got less than it needed. And
• 11:24
  then what that meant was in that situation, the
• 11:26
  easiest way to make sure you could fulfill the
• 11:28
  quantitative totals you were given for your particular
• 11:31
  industry was to use last year's model, not to
• 11:34
  do any technological innovation. And what that
• 11:37
  meant was the rate of growth was limited to the
• 11:39
  rate of growth of population. in terms of the
• 11:41
  number of people working in factories. So as
• 11:43
  you transfer people from being serfs to factory
• 11:46
  workers, output rose dramatically. But then when
• 11:49
  you reach the point where you've done all that,
• 11:51
  the rate of growth was just the population growth.
• 11:53
  You didn't have technological change in consumer
• 11:56
  goods. I'll give you my funniest example of that.
• 11:59
  My first major girlfriend's brother wanted to
• 12:04
  buy a 650cc motorbike in 1975. Now, he couldn't
• 12:11
  afford a Honda or a Kawasaki, let alone a hog,
• 12:15
  so he found he could buy a Russian motorbike
• 12:18
  for $650, whereas the Japanese ones were $3 ,000.
• 12:23
  I helped him open it up. It arrived in a wooden
• 12:25
  crate. It was called a Cossack. We took the wooden
• 12:28
  crate off and found a whole lot of oil -soaked
• 12:30
  rags, took those oil -soaked rags off, and there,
• 12:32
  on a wooden pallet tied down by ropes, was a
• 12:36
  1942 BMW. So what you got was no technological
• 12:41
  development in the consumer industry, and that's
• 12:43
  what the vast majority of people felt. They might
• 12:47
  have got a nice warm glow out of Sputnik, but
• 12:49
  they weren't orbiting the planet themselves.
• 12:51
  So the ordinary person's life became quite harsh
• 12:55
  in Russia, and you could actually order a television
• 12:58
  set and get it 10 years later, that sort of thing.
• 13:02
  An ex -girlfriend of mine had that situation.
• 13:04
  So I'm going, these are personal anecdotes about
• 13:07
  actual people that I know went through this experience.
• 13:11
  Whereas the West had, you know, basically the
• 13:15
  attitude of the West is screw the working class,
• 13:17
  pay as low a wage as possible. You have multiple
• 13:20
  companies all competing, trying to produce different
• 13:22
  products and multiple companies making motorbikes
• 13:24
  in that case. The way you get people to come
• 13:28
  in your door rather than your rival's door is
• 13:30
  to innovate. So you get a higher rate of innovation
• 13:33
  in a market economy than you get in a centrally
• 13:35
  planned economy when it comes to consumer goods.
• 13:38
  Now, this is not my argument. There's an argument
• 13:41
  of a brilliant Hungarian economist called Janos
• 13:44
  Kornay when he was trying to explain why did
• 13:46
  the Soviet grow so slowly versus America when...
• 13:50
  The argument was they'd grow more rapidly. And
• 13:52
  he talked about having what he called demand
• 13:54
  -constrained economies versus resource -constrained
• 13:57
  economies. And capitalism, he said, is demand
• 14:00
  -constrained, therefore innovation occurs. Whereas
• 14:03
  socialism was resource -constrained, therefore
• 14:05
  innovation didn't occur. And so you got more
• 14:08
  stable growth in the Soviet, but no innovation
• 14:11
  going on. Whereas with the... Americans, you've
• 14:15
  got booms and busts, but a high rate of technological
• 14:17
  innovation. So that's the explanation for why
• 14:21
  Russia failed. It ignored the consumer goods
• 14:24
  sector and therefore didn't have technological
• 14:26
  advance. And ultimately, if you're not improving
• 14:29
  your capacity to produce output per worker over
• 14:33
  time and you're not changing the products, then
• 14:36
  you're going to lose. in a capitalist system
• 14:38
  over time, a market economy over time. And that's
• 14:41
  what happened to the Russians in that sense.
• 14:43
  So I think the really important thing that China's
• 14:46
  done is realize that. And they've managed to
• 14:49
  make a combination which gives you state planning
• 14:51
  of essential services that everybody else needs,
• 14:55
  like rail transportation, electric power, water,
• 14:59
  sewerage, et cetera, et cetera. That's all provided
• 15:01
  by the state. It's just there. So private sector
• 15:04
  can expand into it. And they've got rampant competition
• 15:07
  in the private sector, not just between different
• 15:09
  firms, but even between different provinces in
• 15:13
  China, all trying to be the leading province
• 15:15
  in some particular area. Then one becomes dominant.
• 15:17
  So you've got a huge amount of experimentation,
• 15:19
  innovation going on in the Chinese market economy,
• 15:23
  which is part of the Chinese socialist system.
• 15:26
  One last question about the past, and then we're
• 15:29
  going to talk about the present. I've heard...
• 15:31
  this a couple of times now and want to ask you
• 15:33
  whether it holds any water because it's really
• 15:36
  intriguing but i have no idea if it's true some
• 15:39
  people say that the relative prosperity of people
• 15:42
  in the u .s and europe after the second world
• 15:43
  war was carefully maintained because back then
• 15:46
  the average american worker or european worker
• 15:49
  if squeezed hard enough they could always say
• 15:51
  hey there's an alternative system over there.
• 15:54
  It might not be perfect, but those people over
• 15:56
  there in the Soviet Union, they have free healthcare,
• 15:57
  free education, they have a pension waiting for
• 15:59
  them after they retire. And that made the politicians
• 16:02
  and the elites in the West anxious since the
• 16:05
  Cold War was in full swing, which is why they
• 16:08
  actually made an effort to prop up people's living
• 16:10
  standards, and which is also why after the fall
• 16:13
  of the Berlin Wall, they didn't have to do that
• 16:15
  anymore. Do you reckon there's any truth to that?
• 16:19
  Yeah, absolutely. Absolutely. I can even go on
• 16:22
  government policy documents because people will
• 16:24
  talk about Keynesian versus neoclassical economics.
• 16:27
  But if you look at what it implies at the policy
• 16:29
  level, the so -called Keynesian thing said we
• 16:32
  must make sure there's full employment, whereas
• 16:34
  the neoclassical said we must make sure there's
• 16:36
  price stability. So we flipped from full employment
• 16:39
  to price stability. Now, when full employment
• 16:41
  was the focus, I'll give you a quote from my...
• 16:45
  the document I know best on this front, which
• 16:47
  is the Australian White Paper on Employment.
• 16:50
  So a policy document by the Australian government
• 16:52
  written in 1944, published in 1945. And it said,
• 16:56
  and this is a quote from it, the object of government
• 16:59
  policy is to maintain such pressure on the economy
• 17:02
  as to guarantee a shortage of men rather than
• 17:05
  a shortage of jobs. Now, what that meant was,
• 17:09
  and also because after World War II, there's
• 17:12
  lots of reasons as to why, but the level of private
• 17:14
  debt. plunged. In America's case, private debt
• 17:19
  fell by 67%. It was roughly 150 % of GDP at its
• 17:24
  peak in 1932. It was 50 % roughly in 1945, so
• 17:30
  a two -thirds reduction. That meant that people
• 17:33
  weren't carrying large amounts of debt and it
• 17:36
  was possible for a single man, this is of course
• 17:38
  the days of the 50s, a single male worker with
• 17:41
  a wife and three kids to buy a house on his salary.
• 17:44
  That was common. So at that stage, two things
• 17:48
  in favour. First of all, whenever there was a
• 17:50
  rise in unemployment, the government would spend
• 17:53
  more to try to reduce the unemployment. So deficits
• 17:55
  weren't something the government worried about.
• 17:57
  If they needed more spending, they'd simply do
• 18:00
  the spending. And secondly, they were guaranteeing
• 18:04
  that a single worker could... basically afford
• 18:07
  the essentials of life, food and support for
• 18:11
  the family and buying a house. Now, when we went
• 18:14
  to find inflation first thing, the whole emphasis
• 18:16
  upon employment disappeared. The important thing
• 18:19
  was what they saw as price stability. And if
• 18:21
  unemployment has to go up to cause price stability,
• 18:23
  we'll let it happen. Now, what that meant was
• 18:26
  that the focus that existed in the... in the
• 18:28
  post early post -war was very much pro the mass
• 18:31
  of the population pro -workers and the reason
• 18:34
  for that was obvious you'd had the great depression
• 18:36
  so massive numbers of people had starved had
• 18:40
  horrific situations during the Great Depression.
• 18:43
  And there were communist and fascist rallies
• 18:45
  in America at the time. So it was quite possible
• 18:48
  to go to a completely different political system.
• 18:51
  And then you had World War II where, you know,
• 18:54
  I don't know how many Americans died, but a massive
• 18:56
  number of Russians died and many other nationalities
• 18:59
  and tens of millions of people died. And so they
• 19:02
  realized just how close they came to revolution.
• 19:05
  in the 1930s and just how many people suffered
• 19:07
  and had every right to be angry about having
• 19:09
  suffered during the Great Depression of World
• 19:12
  War II. So that meant the whole emphasis was
• 19:14
  on maintaining the living standards of the poorest
• 19:17
  part of the population. When you go to the inflation,
• 19:19
  he gives a shit about the workers' wages. Workers'
• 19:22
  wages cause inflation, yada, yada, yada. And
• 19:25
  we're in the modern world where you need two,
• 19:27
  male and female, need to work. They've got to
• 19:29
  borrow so much money to buy a house that they
• 19:32
  decide not to have kids. That's the world we're
• 19:34
  in now. Let's shift our attention to China and
• 19:37
  the present. I think we've all heard of Deng
• 19:39
  Xiaoping's reforms, which shifted China's state
• 19:42
  -controlled economy to a more market -driven
• 19:44
  one, such as dismantling farming collectives,
• 19:47
  I believe, getting rid of government -mandated
• 19:49
  quotas and permitting private ownership of businesses.
• 19:53
  And from that moment onwards, China was supposedly
• 19:56
  on its way up. Is the story really that simple?
• 20:00
  No, it's a bit more complicated than that. I
• 20:02
  was very lucky. I've had a ridiculous life. As
• 20:05
  part of it, I took a tour of Australian journalists
• 20:08
  to China in 1981 -82, and they held the first
• 20:12
  ever conference between China's journalists and
• 20:14
  those of any other nation. And then afterward,
• 20:16
  we went on a tour of the country, and we saw
• 20:19
  what they were trying to do during that early
• 20:20
  Deng Xiaoping period. And they were... Partly
• 20:25
  I thought market -based reforms would fix everything,
• 20:27
  but typical China, they tried to have model communes
• 20:32
  going commercial. So we went to one commune in
• 20:34
  Sichuan, and its specialty was making lounges.
• 20:41
  And we asked them, why are you so successful?
• 20:45
  Oh, we're selling 80%. I asked them, is this
• 20:48
  in Sichuan, which is about the size of, you know.
• 20:51
  It's larger than France. The population is about
• 20:53
  to be like France and Germany combined quite
• 20:55
  possibly. And so I asked them, do you make most
• 20:58
  of your sales inside Sichuan or outside Sichuan?
• 21:01
  And they said, oh, 80 % outside Sichuan. Okay.
• 21:04
  Where do you sell them to? Oh, we sell them to
• 21:06
  a state retail unit in Shanghai. How did you
• 21:12
  manage to get the contract? We sent out propagandists.
• 21:15
  et cetera, et cetera. This was a show farm. I
• 21:18
  thought, well, if 80 % of their sales are outside
• 21:20
  Sichuan, then there's no chance to replicate
• 21:22
  this for all the other communists in Sichuan.
• 21:25
  The best they can do is the 20 % they do domestically.
• 21:27
  So I thought it would fail. But then we went
• 21:30
  down, at the end of the tour, we went to the
• 21:32
  Sichuan free trade zone, the Shenzhen free trade
• 21:35
  zone, pardon me, Shenzhen. Still in 81. Still
• 21:40
  in 81. This is actually probably 81, 82. And
• 21:44
  so it's quite hot down there. We had a barbecue
• 21:47
  with the Australian family couple from an Australian
• 21:51
  company called CSR who were actually laying the
• 21:53
  concrete. Wonderful little experience. We then
• 21:56
  met the managers of the free trade zone. And
• 21:59
  they said what they were trying to do was to
• 22:01
  attract foreign businesses, but to also ensure
• 22:05
  that those foreign businesses had Chinese partners.
• 22:07
  And within five years, those Chinese partners
• 22:10
  had to own half the business. regardless of the
• 22:13
  amount of money they put into it. Now, what this
• 22:15
  meant was, as well as getting the technology
• 22:16
  transfer, which they were desperate for, they
• 22:19
  also were building a local capitalist class.
• 22:23
  Often, this would be people who were Communist
• 22:24
  Party members or they were... manage the firm
• 22:28
  and so on and so forth. But that's how they created
• 22:31
  things like Foxconn and so on came out of that
• 22:33
  process. So that was more important. It was with
• 22:35
  special economic zones played a major role and
• 22:38
  they would experiment in different zones. They'd
• 22:40
  see they have zones in different parts of the
• 22:42
  country and try different policies with them
• 22:44
  and so on. And what they were really focused
• 22:46
  upon was getting as much engineering now as they
• 22:49
  could as rapidly as possible. and then building
• 22:51
  up their own engineering capabilities. So it's
• 22:55
  more complicated. There's lots of experimentation
• 22:58
  going on, more so than most people would ever
• 23:00
  imagine happening in a communist country. But
• 23:04
  yeah, there's experimentation and getting Western
• 23:08
  technology and then trying to exceed it. And
• 23:10
  that's where they've built up an enormous advantage
• 23:13
  over America in terms of engineering. From a
• 23:16
  very superficial understanding, if we leave the
• 23:18
  political aspect aside, if that's even possible,
• 23:21
  the Chinese economy now isn't really all that
• 23:24
  different from ours, is it? There's insanely,
• 23:26
  like you mentioned, competitive markets. There's
• 23:29
  massive corporations. There's people who earn
• 23:31
  less and there's people who earn billions and
• 23:32
  own all kinds of stuff. So where's the gap between
• 23:36
  the two? The main gap is that the Chinese focus
• 23:40
  upon the public sphere. So they make sure the
• 23:42
  public facilities are good. There's a wonderful
• 23:46
  quote from John Kenneth Galbraith, one of my
• 23:48
  predecessors in a sense. And he said, America
• 23:51
  is characterized by private affluence and public
• 23:54
  squalor. If you've been on the New York underground,
• 23:59
  you know exactly what I'm talking about. The
• 24:01
  public spaces are awful. Who gives a shit about
• 24:03
  the public? Let's get it all in private, that
• 24:05
  sort of thing. The Chinese think they wanted
• 24:06
  the best possible public spaces and public resources
• 24:09
  possible. And then in that space, the private
• 24:12
  sector can thrive. So you have the world's greatest,
• 24:14
  by far, high -speed rail network. They didn't
• 24:18
  develop the technology, but they did develop
• 24:19
  the network. You have health. Public health is...
• 24:24
  Cheaper, far cheaper than in China. I've had
• 24:26
  people coming back and telling me amazing stories
• 24:29
  about getting ill in China and being cured for
• 24:31
  the equivalent of $10 at a hospital. Education
• 24:35
  is extremely hard to get into, but bloody high
• 24:40
  quality. So this means that you're not being
• 24:44
  paid to be educated, but the thing is you don't
• 24:48
  get that payment unless you do it very well in
• 24:50
  exams. So the whole thing is focusing upon raising
• 24:52
  skill levels. All this stuff means that the public
• 24:57
  sector in China is far stronger. And of course,
• 25:00
  there are state enterprises. State enterprises
• 25:02
  still account for about half the economy. So
• 25:05
  there's much more of a melding of the public
• 25:07
  and the private in a sensible sense rather than
• 25:10
  what bloody Trump is doing to America right now.
• 25:13
  But, you know, a very good blend of public and
• 25:15
  private and an emphasis upon providing the public
• 25:18
  facilities that enable the private sector to
• 25:20
  flourish. And China just has enormous advantages,
• 25:24
  even in terms of electric transmission. They
• 25:27
  use higher voltage systems for transmitting power.
• 25:30
  They're now looking at direct current. All these
• 25:32
  things America's talking about doing, but they're
• 25:34
  still stuck with lower voltage and alternating
• 25:36
  current systems. So the level of innovation in
• 25:40
  the public sphere in China is far, far higher
• 25:42
  than in America. And that then means the private
• 25:44
  sector is sort of standing on a higher plateau
• 25:46
  than is possible in America. China has billionaires
• 25:50
  and lots of them, just like the US, right? I'm
• 25:52
  not a big fan of anyone having that kind of money,
• 25:54
  I have to say. However, unlike in the West, where
• 25:57
  the oligarchs are literally sitting at the president's
• 26:00
  table dictating policy to the rest of us, in
• 26:03
  China, they aren't letting these people run amok.
• 26:06
  Like we saw with Jack Ma, the founder of Alibaba,
• 26:08
  their political power is... curbed by the party
• 26:12
  they can make their money but that's where it
• 26:14
  stops is that one of the key reasons for its
• 26:16
  success as well do you reckon i i think so i
• 26:20
  mean it's it's this is one thing z has been best
• 26:22
  criticized all the time as a new male i've seen
• 26:25
  plenty of that but friends of mine who live in
• 26:27
  china both of your chinese and and foreigners,
• 26:31
  telling me that what he was really doing is cleaning
• 26:33
  up the mess left after the recovery from the
• 26:36
  global financial crisis. So, you know, huge real
• 26:39
  estate bubble that had to be tamed, large investments
• 26:43
  that are going to fail that had to be covered.
• 26:46
  So he's been reversing some of that. Certainly
• 26:48
  the pollution levels have fallen dramatically
• 26:50
  as well. So all these things require controls.
• 26:53
  And therefore, Z is being put across as being
• 26:55
  another Mao. It seems that the whole focus was
• 26:59
  on improving the physical facilities for the
• 27:03
  country. And he said that if you want to be rich,
• 27:05
  become a capitalist. If you want to be becoming
• 27:08
  a public servant, don't expect to make money.
• 27:12
  And there's an extremely strong anti -corruption
• 27:14
  drive in China, and people get executed for corruption.
• 27:18
  It's still a very brutal regime in that sense.
• 27:21
  What it means is... When I was in China at this
• 27:26
  conference, we had a whole bunch of young students
• 27:28
  of journalism watching the conference between
• 27:30
  these sets of journalists that I'd put together.
• 27:32
  And they asked me about the ombudsman system
• 27:36
  in Australia. Now, the ombudsman system was borrowed
• 27:38
  from the Swedes. And that was an idea where there
• 27:41
  was a state authority making sure that state
• 27:43
  officials lived up to the objectives they were
• 27:46
  given. And this seems to be what China's managed
• 27:49
  to build as well. I didn't give the students
• 27:51
  the information. It's one of my failings. But
• 27:54
  this seems to be what China's done. So any public
• 27:58
  servant has effectively a performance sheet they
• 28:01
  have to live up to. And if they don't live up
• 28:03
  to it, then they don't get promoted. So what
• 28:06
  you get consequently, this election city system
• 28:08
  inside the public service there requires you
• 28:11
  to perform. to set objectives and rewards those
• 28:15
  who do and blocks those who don't. There is a
• 28:17
  certain amount of nepotism. I'm not going to
• 28:19
  say there isn't in a system like that. But what
• 28:21
  it means is, however, whatever you think about
• 28:23
  the politics of the people who get to the top,
• 28:26
  they've shown they can perform. And this means
• 28:30
  that there's a way of monitoring the behavior
• 28:33
  and performance of the public sector that Americans
• 28:37
  think can only be done by the private sector
• 28:39
  and the profit motive. So instead, they've managed
• 28:42
  to get in some ways a well -disciplined, effective
• 28:45
  bureaucracy that realizes it has to satisfy the
• 28:49
  people under its control. So it can't just ignore
• 28:52
  them as Americans do in public health. And they
• 28:56
  let rampant competition occur at the same time
• 28:58
  in the private sector. When debating China in
• 29:04
  the West, one fact that's always conveniently
• 29:06
  omitted is that China managed to lift, I don't
• 29:12
  know, 500 million to 800 million out of abject
• 29:15
  poverty in just a couple of short decades. I
• 29:19
  had another economist on the show last year,
• 29:22
  Branko Milanovic, and he said, this is probably
• 29:25
  the biggest economic miracle in the history of
• 29:27
  our planet. How the hell did they do that? Well,
• 29:32
  that's... A very good point. When I was there
• 29:36
  again, we'd go to, like this is in the 80s, 45
• 29:40
  years ago, and we went to Sichuan, and there
• 29:43
  were people stealing alligator skins on the main
• 29:45
  street. I mean, it was totally a sort of peasant
• 29:48
  society at the time. People criticised me for
• 29:50
  saying that it's true, the majority of people
• 29:51
  were peasants, people who worked the land. Now
• 29:56
  you've got the majority being industrial workers,
• 29:58
  and it's an enormous country, so something like
• 30:03
  800, million people have been raised out of abject
• 30:06
  poverty. And the rate of economic growth has
• 30:08
  been astonishing. Over the last 40 years, the
• 30:13
  average rate of growth of per capita incomes
• 30:15
  has been about 8 % in China. Now, there's a little
• 30:20
  book called The Rule of 72. You divide your rate
• 30:22
  of growth into 72, and that tells you how long
• 30:24
  it takes you to double economic activity. So
• 30:27
  that basically gives you eight and a half years,
• 30:29
  eight or nine years. Doubling living standards
• 30:32
  every eight or nine years. America's rate of
• 30:35
  growth per capita has improved by about 2%. That
• 30:39
  means it takes 35 years, roughly, to double living
• 30:43
  standards. So one country is doubling eight times
• 30:45
  every eight years. The other is doubling every
• 30:47
  35. No prizes for guessing which one gets there
• 30:51
  faster. So China's managed to do that. And it's
• 30:54
  really got an enormous level of capital formation.
• 30:57
  This is the... difference between it and the
• 31:00
  West. Again, they're focused upon building up
• 31:02
  the machinery, the means of production, but they've
• 31:04
  also meant that happens both in the industrial
• 31:09
  goods sector and the consumer goods sector, which
• 31:11
  unlike the Russians who just managed it in the
• 31:13
  industrial goods sector, and innovation. They
• 31:16
  want their products to be competitive, not just
• 31:20
  locally, but also globally. So you've got this
• 31:23
  huge export surplus they make, which they then
• 31:25
  reinvest in. in innovation. The government is
• 31:30
  running a deficit of up to 10 % of GDP, looking
• 31:34
  at Bank of International Settlements figures.
• 31:36
  That means that's another 10 % of GDP going pretty
• 31:39
  much into physical investment. And their banks
• 31:44
  are privately operated but publicly owned, fundamentally.
• 31:48
  So the banks are told they've got to provide
• 31:50
  working capital for corporations. So there's
• 31:53
  no shortage of money for investment in China.
• 31:56
  Whereas there is a shortage of money for investment
• 31:58
  in America. You can get money for speculation.
• 32:01
  You want to gamble on house prices, sure, here's
• 32:03
  a mortgage. But in terms of working capital,
• 32:05
  the companies get out of here. So all the financial
• 32:08
  engines in China are directed towards capital
• 32:11
  formation and innovation. And most of the financial
• 32:15
  pressures in America are directed towards speculation
• 32:17
  on asset prices. Since you mentioned that during
• 32:22
  your visit to China in 81, they told you how
• 32:25
  they want to prop up their engineering sector.
• 32:28
  Have you perhaps read Dan Wang's book, Breakneck?
• 32:31
  No, I haven't. Okay. He argues that China is
• 32:34
  essentially run by engineers, as most of the
• 32:37
  Politburo is made up of engineers, including
• 32:39
  Xi Jinping, while the vast majority of the American
• 32:41
  presidents are lawyers, except Trump, obviously.
• 32:44
  He's an unlawyer. I don't know what he is, but
• 32:50
  definitely not a lawyer. Yeah. So while China
• 32:53
  kind of thrives when it comes to huge infrastructure
• 32:56
  projects and the development of technology, they
• 32:58
  often tumble when it comes to their sort of social
• 33:01
  engineering experiments. He says that. and vice
• 33:04
  versa for America. What do you think of this
• 33:06
  idea? Well, I think their social experience is
• 33:08
  pretty good as well, actually. They tend to be
• 33:09
  capitalizing on the history of China. So like
• 33:13
  the last time I was in China was 2017. I desperately
• 33:16
  want to go back, but I haven't had the opportunity
• 33:18
  yet. And I saw we were north of North Korea,
• 33:23
  so one of the very northern provinces. And when
• 33:25
  you go walking around a Chinese city, there are
• 33:27
  people line dancing. is a huge public activity.
• 33:32
  So this is something which comes out of the,
• 33:33
  not just the communist days, it goes right back
• 33:36
  to Confucianism and Taoism and Tai Chi and all
• 33:41
  these sorts of things. So I saw a woman there
• 33:44
  who was line dancing and she must have been 70.
• 33:47
  And I thought, you were raised during the Mao
• 33:50
  period. And you would have seen all the privations
• 33:52
  that applied there. Even possible she was born
• 33:55
  before World War II. So she would have seen the
• 33:57
  horrors of the collapse of the Chinese system.
• 34:01
  And here she is line dancing with a whole bunch
• 34:03
  of people in an open park and thoroughly enjoying
• 34:05
  herself. And it's an enormous transition. So
• 34:09
  the Chinese have managed to hang on to those
• 34:11
  traditional elements of their culture. And if
• 34:14
  you go shopping for the Chinese girlfriend, which
• 34:17
  I have done, the whole idea that they don't spend
• 34:19
  is nonsense. So they do have a large amount of
• 34:23
  social innovation. And it's more consistent with
• 34:27
  their culture. And their culture was cooperative.
• 34:31
  I was watching some of your recent debates on
• 34:34
  China with Patrick Baddavid, admiring your saintly
• 34:38
  patience. And also with that awful, pardon my
• 34:42
  language, toad Kevin O 'Leary. Oh, God Almighty,
• 34:45
  yeah. But some of these fellas really make my
• 34:48
  skin crawl. And when you said that in the US,
• 34:51
  when you're walking around any major city, you're
• 34:53
  literally... you know, tripping over a homeless
• 34:55
  person every five seconds while China covers
• 34:57
  their country in speed rail and EVs and futuristic
• 35:01
  infrastructure. All Kevin O 'Leary could say
• 35:04
  to you was, but I don't want my children to be
• 35:07
  raised as Chinese communists or something along
• 35:09
  those lines. Is this refusal to acknowledge China's
• 35:13
  rise? Coming to an end, even amongst these types
• 35:16
  of cheerleaders? I think the scale of change
• 35:19
  in China is becoming so overwhelming that they
• 35:21
  just can't continue repeating the same trite
• 35:24
  lines about freedom. I mean, Americans and their
• 35:27
  idea of freedom, it's not freedom from hunger.
• 35:30
  It's not freedom from want. And it's not even
• 35:33
  freedom to elect who you'd like to have in power
• 35:35
  because you've got two choices, Republican or
• 35:37
  Democrat. It's a bizarre notion of freedom that
• 35:42
  they have in America. What China wanted was freedom
• 35:44
  from what? Freedom being forced from poverty
• 35:47
  to do things rather than having the freedom that
• 35:50
  a decent income gives you to live. And so that's
• 35:54
  the Chinese focus. Now, the Americans will continue
• 35:56
  pushing this freedom nonsense in one of the world's
• 35:59
  worst democratic systems on the planet. They'll
• 36:03
  continue pushing that. But if China doubles again
• 36:06
  in the next eight years, which is unlikely, it
• 36:08
  might take them 15 years this time, then the
• 36:11
  gap between China and America is going to be
• 36:14
  so enormous that, you know, forget your talking
• 36:16
  points. You can't continue with that line anymore.
• 36:19
  And I think because of the engineering focus
• 36:21
  that China has and because they're trying to
• 36:23
  be self -sufficient, in my opinion. they're likely
• 36:26
  to come through the next 10 years far better
• 36:29
  than the rest of the world. So, yeah, the American
• 36:31
  copium over freedom is going to run out of mileage
• 36:35
  sometime in the next decade. You think the rise
• 36:40
  of this sort of more progressive left like Mamdani
• 36:44
  and now we've seen with these local elections,
• 36:46
  they are having a lot of success within the Democratic
• 36:48
  Party. Do you think there's this kind of very
• 36:51
  vehement anti -Trump? direction that the country
• 36:55
  might go in, we don't know if that's going to
• 36:57
  happen, might alleviate some of these predictions
• 37:02
  for the US? It's really hard to turn away where
• 37:05
  America's got to because there's a database called
• 37:08
  the Atlas of Economic Complexity, which is maintained
• 37:10
  by Harvard University computer scientists. And
• 37:13
  that has worked out a way of looking at how complex
• 37:17
  different... societies, the complexity of the
• 37:20
  goods they can produce. America's gone from about
• 37:23
  number eight to number 20 over the last 25 years.
• 37:25
  China's gone from number 20 to number eight at
• 37:28
  the same time period. And in fact, if you go
• 37:30
  back further, of course, China's come from virtually
• 37:32
  nowhere to up in the top 10 in terms of the complexity
• 37:35
  of products it can produce in its economy. That
• 37:38
  means you've got to have lots of engineers and
• 37:40
  skilled workers who can handle machine tools
• 37:43
  and design them in the first place. And America
• 37:45
  doesn't have the capability anymore. There's
• 37:48
  a wonderful clip with, what's his name, Cook,
• 37:53
  the guy who was head of Apple, saying at a meeting
• 37:57
  in China that if you wanted to have a meeting
• 38:00
  with all the machine tool experts in America,
• 38:02
  you could hold it inside the auditorium he was
• 38:04
  in. If you wanted to have a meeting with all
• 38:06
  those experts in China, you'd need to have at
• 38:08
  least a couple of football stadiums. So America
• 38:11
  doesn't have the skill bases. It doesn't have
• 38:13
  the education system to train as many engineers
• 38:17
  as it needs as rapidly as is necessary. So I
• 38:20
  can't see America making up until it's realized
• 38:22
  it's been going the wrong way for the last 40
• 38:24
  years. And that wrong way is letting the finance
• 38:27
  sector rule everything. So with the finance sector,
• 38:30
  they want more borrowed money, privately borrowed
• 38:32
  money. They want more speculation on non -financial
• 38:36
  assets, houses and shares. And that's the sort
• 38:38
  of world you get. You get financial engineers,
• 38:40
  not real engineers. Until America realized that
• 38:42
  was a mistake, then I think it's going to continue
• 38:44
  losing. Like I said at the beginning, you called
• 38:49
  the 2008 financial crisis years before it happened.
• 38:52
  What's your prediction for the sort of short
• 38:54
  or medium term economic relations between China
• 38:56
  and the West? Oh, China is going to continue.
• 38:59
  I really believe, I don't know, but I think one
• 39:02
  of China's main objectives is to become as self
• 39:04
  -sufficient as possible because that's how they
• 39:06
  were before they were raped by the Americans
• 39:09
  and the British during the opium wars in the
• 39:12
  19th century. I'm sure most Americans think the
• 39:15
  opium wars were fought by America to keep Chinese
• 39:17
  drugs out of America. In fact, of course, it's
• 39:20
  the opposite. The opium wars were fought to let
• 39:23
  Europeans sell drugs to China because there's
• 39:25
  nothing else they could get Chinese people. to
• 39:27
  buy out of the West. Now, that destroyed their
• 39:29
  industries, destroyed their culture. And, of
• 39:32
  course, that's something every school kid learns
• 39:34
  in China. The century of humiliation. It's as
• 39:37
  ubiquitous as in China learning about that as
• 39:40
  it is for Americans learning about the War of
• 39:42
  Independence and the Civil War. So they know
• 39:46
  they can't trust the West. And what the West
• 39:48
  is doing at the moment, particularly America,
• 39:50
  is a ridiculous war. in persia is making it even
• 39:54
  more obvious you can't trust them so i'm sure
• 39:56
  under underlying principle of the various plans
• 40:00
  has become completely self -sufficient now that
• 40:03
  means that they can forget about the west which
• 40:06
  is what they did beforehand and the west won't
• 40:08
  be very happy about that but i i think that's
• 40:11
  that's what i expect to happen and equally that
• 40:14
  given the technological lead they've got in so
• 40:16
  many industries now there's really no way that
• 40:18
  american companies can catch up without a devaluation.
• 40:22
  So I simply can't see American cars of similar
• 40:28
  quality to Japanese cars are about twice as expensive.
• 40:31
  That mentioned that a 50 % devaluation before
• 40:33
  you report price parity. And I think that's a
• 40:36
  likely outcome. So American dollar devaluing
• 40:40
  against the Chinese yuan, China continuing to
• 40:43
  try to become self -sufficient, but also dominating
• 40:46
  trade at the same time because that's a source
• 40:48
  of extra revenue for them and a larger market
• 40:52
  and more capacity to innovate. And America, I
• 40:55
  think, is going to go on the same long, slow
• 40:57
  decline that England has been in. China wants
• 41:03
  to be self -sufficient, and if push comes to
• 41:07
  shove, it can just forget about the West. But
• 41:10
  we live in a more and more globalized world,
• 41:12
  and we share a lot of collective problems on
• 41:14
  a planetary basis now, such as the climate change
• 41:17
  or AI. So can China really afford to just step
• 41:22
  aside as these problems become more and more
• 41:25
  severe in the upcoming decades? Well, I think
• 41:27
  they can insulate themselves on some of the damages.
• 41:31
  So like, for example, one thing China has been
• 41:33
  doing is incredible rolling out of non -fossils.
• 41:38
  Renewables, yeah. Yeah, yeah. And also nuclear.
• 41:41
  And their nuclear plants are one -fifth the cost
• 41:43
  of the nuclear plants in the West. So they can
• 41:45
  do it much more rapidly, much more cheaply. So
• 41:47
  they're rapidly giving themselves independence
• 41:49
  from fossil fuels, for example, as a result of
• 41:53
  that. So that's the sort of independence they
• 41:56
  want. At the same time, that's leading the international.
• 41:59
  Because everybody else is talking about moving
• 42:01
  away from fossil fuels. China's actually doing
• 42:03
  it. I think their objective by the end of the
• 42:06
  following, the next five -year plan, which I
• 42:08
  think starts in 2030, their objective by 2035
• 42:12
  is to be pretty much off fossil fuels. Now, I
• 42:15
  could be wrong about the timing there, but certainly
• 42:17
  2050, they intend being pretty much free of fossil
• 42:20
  fuels. Now, that means they're leading the rest
• 42:22
  of the world. The rest of the world's talking
• 42:24
  about it, not doing it. China's actually doing
• 42:26
  it. Since I'm from Europe originally, although
• 42:30
  I don't live there anymore, I'd be remiss not
• 42:31
  to ask you about the position of this old damsel
• 42:35
  of ours. Not doing too well, also. Apparently,
• 42:38
  the trade deficit is now $1 billion a day in
• 42:41
  China's favor. Europe just cannot compete in
• 42:44
  technologies that matter the most. Green tech,
• 42:46
  like you mentioned, EVs, AI, you name it. And
• 42:49
  to make matters worse, the German car industry
• 42:51
  is sort of like... the backbone of the European
• 42:53
  economy is on the verge of total collapse. Volkswagen
• 42:56
  just announced it will slash 100 ,000 jobs pretty
• 43:00
  soon, also because it cannot compete with cheaper,
• 43:04
  better Chinese cars. Is it in China's long -term
• 43:07
  interest to dominate Europe that hard? Well,
• 43:11
  it's not in Europe's interest to be dominated
• 43:13
  that much, that's for sure. That part I can understand,
• 43:16
  yeah. They really have. Lost the plot. I mean,
• 43:22
  the Maastricht Treaty, which is what that's the
• 43:26
  main government policy in Europe is to stop government
• 43:29
  spending. The Maastricht Treaty was called the
• 43:33
  Growth and Stability Pact. It's actually been
• 43:35
  the Stagnation and Instability Pact in terms
• 43:38
  of its impact. So the whole idea of the European
• 43:42
  Union was to create something like America or
• 43:45
  China in Europe to have a single market over
• 43:48
  the whole European continent. And that's more
• 43:52
  difficult in Europe's case because you have more
• 43:53
  mountain ranges getting in the way. But fundamentally,
• 43:55
  yes, you've got an area of land similar to America.
• 43:58
  So you could have a market the same size as America.
• 44:02
  So that was the basic idea. But they removed
• 44:06
  some of the techniques that enable different
• 44:08
  countries to maintain decent relations with each
• 44:12
  other by creating the euro. So in the case of
• 44:15
  Italy, for example, Italy's always had a higher
• 44:17
  rate of inflation than Germany. That means over
• 44:20
  time, Italian vehicles get more expensive than
• 44:22
  German vehicles, which means that the Italians
• 44:25
  start buying German cars rather than Italian
• 44:28
  cars. Italian industry suffers and so on. So
• 44:32
  that itself, that's hampered the capacity of
• 44:35
  Europe to compete rather than improving it by
• 44:38
  creating the euro. And then the limits on government
• 44:41
  spending mean that when there's an economic downturn,
• 44:43
  the government's required to cut its spending.
• 44:45
  That makes the downturn worse. There are so many
• 44:49
  own goals by the Europeans. The thing they've
• 44:52
  got in their favour is they still have a damn
• 44:54
  good education system. Most of their education
• 44:56
  is free, covered by the state. Of course, therefore,
• 44:59
  you've got to do well to get in. So they've got
• 45:01
  some capacity to turn themselves around in an
• 45:04
  engineering sense. But the advantage that China's
• 45:06
  got over German car manufacturing and technology
• 45:11
  in general is scary. And again, I think the only
• 45:14
  way they can compete is to admit they've lost
• 45:16
  and devalue their currency. Lest they accuse
• 45:21
  us of being a couple of China shills, let's talk
• 45:24
  about one potential crisis that China might be
• 45:30
  facing down the line. Probably the most severe
• 45:33
  structural problem is one of the lowest birth
• 45:35
  rates in the world, which is made worse by their
• 45:37
  one -child policy they had in place for 40 years.
• 45:39
  I think that's what Dan Wang was talking about
• 45:41
  in his book of being like a failed social experiment.
• 45:45
  I live in Japan where the consequences of an
• 45:47
  aging society are evident on every corner. a
• 45:50
  pretty sight, I have to say. And people say,
• 45:52
  you know, it's not that bad that we'll end up
• 45:55
  with less people, but I'm afraid it's just not
• 45:57
  as simple as that. What basically happens is
• 45:59
  that the state becomes the hostage of one interest
• 46:01
  group, and more and more of its wealth has to
• 46:03
  go to healthcare and pensions and nursing facilities
• 46:05
  and so forth. So there's less for everything
• 46:07
  else. Also, talking to my Japanese friends, they
• 46:10
  seem incredibly deflated and resigned. It's difficult
• 46:13
  to watch sometimes. They keep saying that they
• 46:14
  know that Japan... doesn't have a future. And
• 46:17
  China, like Japan, just doesn't have a culture
• 46:20
  of immigration, at least not right now. So the
• 46:23
  future seems pretty troubled on that front. Or
• 46:26
  am I missing something? I think the Chinese are
• 46:29
  aware that's a potential outcome. So they're
• 46:32
  trying to industrialize and build the technology
• 46:34
  as fast as possible to replace unskilled labor.
• 46:38
  So if you, I mean, you would have seen, you know,
• 46:40
  there are drone deliveries for food. You don't
• 46:43
  need people on bikes anymore. There are robots
• 46:47
  that take. medicines to people in nursing homes.
• 46:51
  You don't necessarily need the nursing staff
• 46:53
  there for that. So they're finding ways the technology
• 46:55
  to replace the humans in those positions. And
• 46:59
  that means that they can continue producing,
• 47:01
  even though they're undergoing demographic decline.
• 47:04
  They have factories now, the old dark factories,
• 47:07
  factories where you don't need lights because
• 47:08
  there are no humans most of the time. That's
• 47:10
  crazy. Okay. So all this sort of stuff means
• 47:13
  you can produce the same volume of goods without
• 47:15
  needing as many workers to do it. And then in
• 47:19
  a Chinese society, because a lot of that will
• 47:21
  happen in state enterprises and a lot of it will
• 47:24
  happen in public institutions, and the states
• 47:27
  themselves can ensure that people benefit from
• 47:30
  the fact that labor is being replaced by technology.
• 47:34
  So I think, again, China is in a better situation
• 47:36
  to cope with that, certainly than the West. You
• 47:39
  would have seen Musk talking about a universal
• 47:41
  high income for people as a result of robotics
• 47:43
  and stuff like that. Well, that's a complete
• 47:45
  ideological shift for America. Because the only
• 47:48
  way you can do that is for the government to
• 47:49
  create the money, give it to people and say,
• 47:51
  you go and buy these goods off the oligarchs.
• 47:54
  But if the state doesn't do it, then you can't
• 47:58
  buy the goods off the oligarchs and you fall
• 47:59
  into the hunger games. And I think America is
• 48:02
  more likely to go the hunger games direction
• 48:04
  where a tiny elite benefits from that high technology
• 48:07
  and the mass find themselves unemployed. living
• 48:10
  day to day, living on scraps or thieving. Whereas
• 48:14
  in China, the benefits can even more likely be
• 48:16
  broadly shared because it's no great stretch
• 48:19
  for the Chinese government to say, oh, we've
• 48:21
  cut out these jobs. We have to give people money
• 48:23
  so they can spend. So I think China's in a better
• 48:26
  situation to cope with that than America. And
• 48:29
  demographic decline is a global phenomenon. So
• 48:33
  China's got a more extreme example of it, but
• 48:36
  I think it's more likely to cope with it than
• 48:38
  any other country. Interesting. Yeah. Also, when
• 48:42
  you were speaking about Elon Musk declaring that
• 48:45
  there's going to be a high universal income,
• 48:47
  I mean, I've said this before in this podcast,
• 48:50
  but when in the history of the world did these
• 48:52
  guys ever from the goodness of their hearts start
• 48:55
  sharing their wealth when it was time to do so
• 48:58
  in the West? I don't know. Maybe I'm just not
• 49:01
  well read on my history. But we have Warren Buffett
• 49:05
  pushing that sort of line, you know, billionaire
• 49:06
  giving and Bill Gates as well. I'm pretty dubious
• 49:08
  about what Bill Gates gives to less dubious about
• 49:11
  what Warren Buffett does. But, yeah, they accumulate
• 49:14
  as this is one of Marx's great lines, accumulate,
• 49:16
  accumulate that as Moses and the prophets. And
• 49:19
  that pretty much describes the behavior of capitalists.
• 49:21
  So, yeah, once they get it, they don't want to
• 49:23
  give it away. The last portion of this conversation,
• 49:27
  I want to talk about AI. Two episodes ago, I
• 49:29
  was hosting Cory Doctorow. He wrote a fantastic
• 49:31
  book on the AI. And the gist of it is that it's
• 49:34
  a monstrous bubble that when it bursts, it's
• 49:38
  going to take us down with it. It's not going
• 49:40
  to be a pretty sight. After I published the conversation,
• 49:42
  most of the people agreed, but there are still
• 49:45
  a lot of people who are saying that's not going
• 49:47
  to happen. And these people have been predicting
• 49:49
  that the bubble is going to pop for like years
• 49:52
  now, and it still hasn't happened. He argues
• 49:56
  that the party has to come to an end. What's
• 49:59
  your take on this, Professor? Same as Corey.
• 50:01
  I agree with him on that front because… Can you
• 50:03
  elaborate a little bit? Yeah. There's a natural
• 50:05
  dynamic to booms and busts in a capitalist economy
• 50:08
  when new technology comes along. And the best
• 50:11
  explanation of this is given by Joseph Schumpeter
• 50:13
  in his book, The Theory of Economic Development,
• 50:15
  which dates from 1907. So it goes back quite
• 50:17
  a way. And he said, particularly he's looking
• 50:20
  at the example of railways when technology was
• 50:23
  first developed. He said, the way you make a
• 50:25
  profit in a capitalist economy is by innovating.
• 50:28
  If you just do what everybody else is doing,
• 50:29
  you only get the normal rate of return. If you
• 50:31
  want to get ahead, you've got to change technology
• 50:33
  radically. So you go from horse and carriage
• 50:36
  to railways. That's a huge change. What it means
• 50:39
  is everybody sees this as a huge opportunity.
• 50:42
  It starts off as a private enterprise. That's
• 50:44
  where the railways began, private profit -making.
• 50:46
  That is high -tech. Railways are high -tech in
• 50:49
  the 19th century. People tend not to realize
• 50:51
  that, but they were really, really high -tech.
• 50:53
  So the high -tech stuff was put railways. People
• 50:56
  are building railways all over the country. They
• 50:59
  all expect to be the only company that survives.
• 51:01
  They produce far too many railways. The technology
• 51:05
  is far better than the horse and carriage, but
• 51:07
  the prices don't cover the capital cost and the
• 51:09
  thing crashes. And you then have a boom while
• 51:12
  the railways are being built and then a bust
• 51:14
  when the railways become ubiquitous. And that's
• 51:17
  what we're going on with here. So you've got
• 51:19
  a boom right now as they're building data centers
• 51:21
  and particularly data centers for the American
• 51:23
  approach to AI. So there's enormous investment
• 51:26
  of the order of a trillion dollars in huge level
• 51:29
  of investment in AI. And so that's... boosting
• 51:32
  the economy dramatically. So are the deficits
• 51:35
  that Trump is running. I'm glad he, that's one
• 51:38
  thing I'm glad he hasn't delivered on, the promise
• 51:39
  to reduce the deficit. That's stupid. So the
• 51:42
  fact that he's actually creating, even though
• 51:43
  it's in the military industrial complex, but
• 51:45
  fundamentally, you've got a large amount of government
• 51:49
  money creation, large amount of private investment.
• 51:52
  The economy is relatively booming at the moment,
• 51:55
  but those companies are losing. I mean, the stock
• 51:57
  market is booming, right? The people are not
• 51:59
  feeling. Yeah. Unemployment is relatively low
• 52:04
  on American standards. It's rising. It's been
• 52:06
  rising for the last few months. And that's a
• 52:08
  sign of a breakdown in this boom. But fundamentally,
• 52:11
  there's a bubble caused by the high level of
• 52:14
  investment. Then when the product comes online,
• 52:17
  it undercuts other industries and causes a slump.
• 52:20
  So we're still in the bubble stage. But the rate
• 52:24
  at which companies are losing money is just breathtaking.
• 52:27
  Some of these country companies, their costs
• 52:29
  are five times their revenue. And we're talking
• 52:32
  enormous companies. We're not talking Pets .com,
• 52:35
  which was the previous bubble, the dot -com bubble.
• 52:39
  That was fairly small companies making large
• 52:41
  losses for themselves and saying, oh, we have
• 52:44
  to make a loss to make a profit in the long run.
• 52:46
  And then 90 % of them fold. And that's, you know,
• 52:49
  Pets .com is no more. There's so many. things
• 52:53
  that folded like that. But of course, the technology
• 52:55
  is ubiquitous. We all benefit from it. So the
• 52:57
  same thing applies with AI. There'll be a boom,
• 52:59
  and that's what's happening right now with the
• 53:01
  capital expenditure. When it comes online, it
• 53:04
  undercuts other businesses. But because so many
• 53:06
  people thought that they were going to be the
• 53:08
  ones that dominated the AI industry, the level
• 53:11
  of investment may be five or 10 times what it
• 53:13
  should have been. This is a classic phenomenon
• 53:16
  in capitalism. You overinvest and then you have
• 53:19
  a slump afterwards. So I think that's inevitable.
• 53:23
  The level of losses is so great that I can see
• 53:27
  this starting to happen this year or early next
• 53:29
  year. Oh, wow. I don't know. I mean, this has
• 53:33
  to be speculation because I'm not working on
• 53:35
  raw figures like I was able to for the global
• 53:37
  financial crisis. But if you look at the... level
• 53:40
  of cash these companies are burning through than
• 53:43
  many companies which have been used to being
• 53:44
  cash cows like Microsoft and Facebook are running
• 53:48
  their cash reserves down. So at some point, they've
• 53:50
  got to borrow money. They probably are borrowing
• 53:52
  it now. They won't be able to deliver on that
• 53:54
  money. They'll have bankruptcies. I'm not saying
• 53:56
  Microsoft's going to go bankrupt, but there'll
• 54:00
  be a level of financial fallout from this. And
• 54:03
  of course, that's on top of what's happening
• 54:04
  courtesy of the Strait of Hormuz and on top of
• 54:07
  what's going to happen courtesy of the El Nino.
• 54:10
  So what does the day after tomorrow, the bubble
• 54:14
  pops look like? Well, much less investment, rising
• 54:19
  unemployment. Many of these companies folding.
• 54:22
  So there'll be survivors amongst the AI companies.
• 54:26
  They won't all continue going on. The technology
• 54:29
  itself may continue living because as we know,
• 54:31
  these programs are more intent on survival for
• 54:35
  themselves. than they are in following instructions.
• 54:37
  So they're most likely to copy themselves and
• 54:39
  turn up in all sorts of weird parts of the global
• 54:43
  computer infrastructure. But I think there's
• 54:47
  going to be a handful of companies charging much
• 54:49
  more money for AI than they do at the moment.
• 54:52
  AI will be limited to areas where it really can
• 54:54
  make unique contributions, such as solving mathematical
• 54:57
  theorems and working out weather dynamics and
• 55:00
  things of that nature, where it can do things
• 55:02
  no other. approach to software can do but the
• 55:05
  days when you can use it to make a funny card
• 55:07
  to send up your dad at christmas time no not
• 55:09
  going to happen be just too damn expensive to
• 55:12
  do it and we'll also find ourselves winding back
• 55:15
  some of the sackings that have gone on because
• 55:17
  like i'm developing a software package called
• 55:19
  revel and my programmer is top class C++ programmer,
• 55:23
  tells me that he really benefits from the AI
• 55:26
  when it comes to sussing out why a piece of software
• 55:29
  that Ravel relies upon has changed and causes
• 55:31
  problems and what codes in Ravel needs to change.
• 55:34
  That's a dramatic improvement of his productivity
• 55:36
  there. But he said when he looks at it to giving
• 55:38
  an actual serious task to it, like, for example,
• 55:41
  adding an extra mathematical operation for analyzing
• 55:46
  large arrays of data, he said. The time it takes
• 55:49
  him to get it right, he might as well write it
• 55:51
  himself. So there's some parts where AI does
• 55:55
  dramatically make things easier, other points
• 55:58
  where it does fairly badly. And we're going to
• 56:00
  get a more realistic assessment of what it's
• 56:02
  capable of and then pull back dramatically. But
• 56:05
  we'll have a slump. We'll have a recession courtesy
• 56:07
  of that. And it's going to be a recession overlaid
• 56:09
  by what's happening with the Strait of Hormuz.
• 56:12
  So I expect a serious downturn. Probably as bad
• 56:18
  as the global financial crisis. Not necessarily
• 56:20
  worse, but on that scale. Which has implications
• 56:23
  not just for the people who I don't care about
• 56:26
  who invested billions of dollars into these companies,
• 56:29
  but for the regular consumer as well. Yeah, the
• 56:33
  jobs are going to disappear. I mean, the biggest
• 56:35
  danger we still have with the strata formulas
• 56:37
  is what's going to happen to the capacity. Fertilizer,
• 56:40
  sulfuric acid, helium. lubricating oils. Those
• 56:43
  are some of the major things which come out of
• 56:46
  that region of the world that are no longer going
• 56:47
  to be available. And that means physical output
• 56:49
  can't occur. And that's the main problem. You
• 56:52
  won't be able to make the food and there'll be
• 56:54
  food shortages coming out of that. You won't
• 56:57
  be able to make the computer ships because the
• 56:59
  helium won't be available. So we're going to
• 57:01
  potentially a 50 % fall in computer ship supplies.
• 57:05
  So all these things will hit the capacity. of
• 57:08
  us to get those goods and services. And it will
• 57:10
  also mean that financial commitments by firms
• 57:13
  that make those products, they won't be able
• 57:14
  to meet them either. So I get a chain reaction
• 57:17
  of bankruptcies across the economy as well. Do
• 57:19
  you reckon that the technology itself is capable
• 57:22
  of eating into the job market? Because Corey
• 57:25
  was quite dubious about this proposition. It
• 57:28
  depends. I mean, again, it comes down to whether
• 57:31
  you can actually build the machinery. So in terms
• 57:33
  of robots, you're going to have robots, you're
• 57:34
  going to have wiring. The wiring is going to
• 57:36
  be mainly copper, the cheapest conductive material.
• 57:40
  Do we have enough wire to produce 8 billion robots?
• 57:42
  No. So these sorts of supply constraints are
• 57:46
  going to apply. There's a question of just how
• 57:49
  much energy and training does it need to get
• 57:52
  a robot to take the place of an unskilled worker?
• 57:55
  Probably in some areas it'll be highly successful
• 57:57
  and others it'll just end up being not worth
• 58:00
  your while and hire the workers back again. But
• 58:03
  certainly a lot of clerical jobs can be eliminated
• 58:07
  by AI. So I do expect a larger employment hit
• 58:11
  than I think Corey is talking about coming out
• 58:13
  of AI. And ultimately, that's what we'd want.
• 58:15
  We would want a world in which we don't have
• 58:17
  to work 40 hours a week just to put food on the
• 58:20
  table. Yeah, but not if the alternative is the
• 58:22
  Hunger Games. Exactly. And that's the danger.
• 58:25
  It's Hunger Games versus Star Trek. I know which
• 58:27
  one I prefer. Same. All right. Here, too, China,
• 58:31
  when it comes to AI and the development of cutting
• 58:34
  -edge models, frontier models, China is breathing
• 58:36
  down. US's neck now. I'm sure you've seen the
• 58:41
  Kimmy 3 model that made a huge splash in the
• 58:44
  news. I don't know almost anything about that,
• 58:48
  and it's really hard to come by this information.
• 58:51
  How does China's AI policy and implementation
• 58:54
  differ from that of the US, where there seems
• 58:58
  to be no restrictions whatsoever? Yeah, from
• 59:01
  what I can tell, and this is not an area where
• 59:03
  I've done a lot of research, but from what I
• 59:05
  can tell, the Chinese are basically in slightly
• 59:08
  lower performance, but much less power consumption.
• 59:11
  So you can have local models. They're also insisting
• 59:14
  models should be open. So what an AI is, is basically
• 59:18
  an enormous neural network. And neural networks
• 59:22
  have numbers. that they take in a set of data,
• 59:26
  they transform it through a set of mathematical
• 59:28
  operations on arrays of numbers, and they then
• 59:30
  generate a response and then it's fed back and
• 59:32
  they keep on going up to such time as they reproduce
• 59:35
  the expected response and then on goes the training.
• 59:39
  That's enormous amounts of mathematics. Now,
• 59:41
  you can have other, there are ways that you can
• 59:44
  write your mathematics more efficiently to perform
• 59:48
  the same basic task without needing as many...
• 59:52
  mathematical calculations to be done. That's
• 59:54
  what is burning up all the energy in those data
• 59:56
  centers. So with open standards, so you can actually
• 1:00:00
  download a copy yourself. You don't have to access
• 1:00:03
  a data center to see it. So you'd need a large
• 1:00:06
  computer system to do it, but it's feasible for
• 1:00:08
  individual companies to take this on rather than
• 1:00:11
  needing data centers and lower costs. So therefore,
• 1:00:15
  if there's a market collapse, they can still
• 1:00:17
  make money. Whereas the data center -based American
• 1:00:20
  ones, if the prices drop, they go bankrupt. So
• 1:00:23
  I think it's a combination. Publicly available,
• 1:00:28
  whereas the Americans want to keep it private.
• 1:00:30
  That's the opposite of what you'd expect. The
• 1:00:33
  capitalists are arguing for private information.
• 1:00:36
  The communists are saying, let's make it publicly
• 1:00:38
  available. Lower energy consumption, dramatically
• 1:00:42
  so. And better mathematics, higher quality mathematicians
• 1:00:47
  putting the... the software together. So I think
• 1:00:52
  the odds are that Americans are going to fight
• 1:00:53
  like crazy over this and find that China wins.
• 1:00:56
  Professor, last question. I asked you about the
• 1:00:59
  medium -term prediction about what's going to
• 1:01:03
  happen to the economy, but your general outlook
• 1:01:06
  for the world is a bit more pessimistic, even
• 1:01:09
  more pessimistic, let's say, especially because
• 1:01:12
  of climate change, I believe. Could you break
• 1:01:15
  that down a little bit? Yeah. We've listened
• 1:01:20
  to economists on climate change. That's why we're
• 1:01:22
  in up shit creek without a paddle. Because what
• 1:01:26
  people think is, and I thought this before I
• 1:01:28
  read the work of economists on this, people thought
• 1:01:31
  that what economists were doing is taking the
• 1:01:33
  damage estimates made by climate scientists and
• 1:01:36
  then putting a monetary value on them. Instead,
• 1:01:39
  they've made up their own bloody numbers. They
• 1:01:41
  might as well pull them out of their asses, the
• 1:01:43
  numbers they've used. And so I'll give you an
• 1:01:45
  idea of just how ridiculous this is. William
• 1:01:48
  Nordhaus, who was given that Nobel Prize in economics.
• 1:01:50
  It is not a Nobel Prize. It's granted by the
• 1:01:53
  Swedish Central Bank. And the reason they invented
• 1:01:55
  the prize was to attack social democracy at the
• 1:01:58
  time successfully. Bugger all about the scientific
• 1:02:01
  value of the economics. Anyway, he got the Nobel
• 1:02:04
  Prize for his work in climate change. His first
• 1:02:07
  estimate of the damages from three degrees of
• 1:02:09
  warming by 2100 was that it would reduce GDP
• 1:02:12
  in 2100 by one quarter of one percent. And he
• 1:02:17
  made that prediction back in 1991. Now, that
• 1:02:20
  means that over... What he's saying is that because
• 1:02:24
  of three degrees of warming, GDP in 2100 would
• 1:02:29
  be 99 .75, whereas without global warming, it
• 1:02:33
  would have been 100. That's an absolutely trivial
• 1:02:37
  difference, and it's 110 years in the future.
• 1:02:41
  So you convert that to a prediction of the impact
• 1:02:43
  of three degrees of global warming on... the
• 1:02:46
  rate of economic growth, it translates into a
• 1:02:49
  prediction that the rate of economic growth will
• 1:02:51
  fall by 1 40th of 1%. Okay. Now, when we report
• 1:02:56
  actual recorded change in GDP from one year to
• 1:03:01
  the next, we report it in tenths of a percent.
• 1:03:04
  Okay. So he's saying it's too small to measure.
• 1:03:06
  Now, this is basically absolute, pardon the French,
• 1:03:10
  fucking bullshit. Because what he did to reach
• 1:03:14
  that, he said that he divided the American economy
• 1:03:17
  into three classes, significantly exposed to
• 1:03:20
  climate change, moderately exposed to climate
• 1:03:23
  change, and insulated from climate change. He
• 1:03:28
  put 3 % of the economy in the severely exposed.
• 1:03:33
  10 % in the moderately exposed and 87 % of the
• 1:03:37
  economy is going to be unaffected by climate
• 1:03:39
  change. Now, that involves all of manufacturing,
• 1:03:42
  all of wholesale and retail services, all of
• 1:03:46
  the government, all of the finance sector, and
• 1:03:50
  all real estate except that on the coast, and
• 1:03:52
  all transportation except water transportation.
• 1:03:55
  At three degrees of extra global warming, which
• 1:03:58
  is pretty much the worst -case scenario almost.
• 1:04:02
  Yeah, catastrophic outcome, he reckons, is going
• 1:04:04
  to reduce rate of income growth by 1 40th of
• 1:04:06
  1%. Now, the only logic he said was, if you have
• 1:04:11
  a roof, you're not going to be affected by climate
• 1:04:14
  change. That was his logic. And to give you an
• 1:04:17
  idea, just to show how real this is, when he
• 1:04:20
  said the industry is going to be unaffected,
• 1:04:22
  he included mining, all of mining. Now, that
• 1:04:27
  means roof over your head, no problem. Somebody
• 1:04:30
  said, oh, William. There is open -cut mining,
• 1:04:33
  mate. What about that? So the next time he got
• 1:04:36
  the same figures, he said underground mining,
• 1:04:38
  and he reduced it from 87 % to 85%. So that shows
• 1:04:43
  that what he thought to be exposed to climate
• 1:04:45
  change meant exposed to the weather. That was
• 1:04:48
  his logic. That's juvenile. There's no understanding
• 1:04:53
  whatsoever of what climate change actually means.
• 1:04:56
  And then all the other economists who followed
• 1:04:58
  on did the same shit. OK, so they've made up
• 1:05:01
  these garbage numbers that have nothing to do
• 1:05:03
  with what climate scientists wrote. And that's
• 1:05:05
  what people have taken is going to be the impact
• 1:05:06
  of climate change. Now, he's revised his opinion
• 1:05:09
  rather than a fall of one quarter of one percent.
• 1:05:12
  He now says a fall of three percent. Now, that
• 1:05:15
  translates to a rate of economic growth of about
• 1:05:17
  one third of the accuracy with which we measure
• 1:05:20
  current change. So still a trivial level. So
• 1:05:23
  what he's done is he said, don't worry about
• 1:05:25
  it. Not going to be important. You won't even
• 1:05:28
  notice. Well, we're about to notice because the
• 1:05:31
  climate scientists said one and a half degrees
• 1:05:32
  is dangerous, three degrees is catastrophic,
• 1:05:35
  and five degrees is existential. So completely
• 1:05:40
  different literature to the climate scientists.
• 1:05:43
  And therefore, we've been told that we're going
• 1:05:47
  to hit a brick wall, but it's 150 years away
• 1:05:50
  and you've got to double your speed. Well, it's
• 1:05:53
  more likely less than 10 years away and we're
• 1:05:55
  going fast enough to smash into it and destroy
• 1:05:57
  our productive capabilities in the process. So
• 1:06:00
  we've come full circle, Professor. The economists
• 1:06:03
  are quite literally ruining our lives. My next
• 1:06:08
  book, I'm working on it right now. I hope to
• 1:06:10
  finish it this month. The title is How Economists
• 1:06:12
  Will Destroy Capitalism. Does China give you
• 1:06:15
  a sliver of hope here? The transformation and
• 1:06:17
  electrification. of the entire country. I think
• 1:06:20
  they produce like 80 to 90 % of all renewables
• 1:06:24
  now globally is really breathtaking. Do you reckon
• 1:06:29
  they can take this guess? Because I interviewed
• 1:06:31
  Professor Michael Mann, a very renowned climate
• 1:06:34
  scientist, in the previous episode. And he said
• 1:06:37
  the US is basically gone, especially under Trump
• 1:06:39
  here. But what gives him hope, and he thought
• 1:06:42
  he's never going to say this, is China. And he
• 1:06:44
  said they're the adult in the room now. And if
• 1:06:47
  they step up... to some sort of like a global
• 1:06:50
  leadership role in this department, we might
• 1:06:53
  have a chance. Yeah, I agree with him because,
• 1:06:58
  I mean, China's, A, it's on the engineering approach.
• 1:07:01
  This is why it's so different to Russia, run
• 1:07:03
  by engineers, focused upon engineering solutions
• 1:07:07
  to everything, a practical approach rather than,
• 1:07:11
  you know, a can -do approach rather than a let's
• 1:07:14
  go and sue somebody approach, which is the American.
• 1:07:17
  So you get a certain amount of hope coming out
• 1:07:19
  of that. And also because it's had such a history
• 1:07:21
  of collective decision making and acceptance
• 1:07:25
  of that, which it doesn't just go back to the
• 1:07:27
  Chinese Communist Party. It goes back two or
• 1:07:28
  three thousand years because it went from being
• 1:07:30
  a system of the emperor to a system of the Chinese
• 1:07:33
  Communist Party. The difference was the emperor
• 1:07:36
  was surrounded by very good bureaucrats. But
• 1:07:38
  then now you've got the bureaucrats who are very
• 1:07:41
  good engineers, which is. improvement over what
• 1:07:44
  happened under the imperial system. But it implies
• 1:07:47
  a capacity to hold itself together despite catastrophes.
• 1:07:50
  And it's trying as rapidly as possible to be
• 1:07:53
  energy and food self -sufficient. So it does
• 1:07:55
  give me a certain amount of hope as well. I still
• 1:07:57
  think it's an enormous challenge. The climatic
• 1:08:00
  changes we're going to face are going to be gigantic.
• 1:08:02
  And it means that areas that used to be food
• 1:08:04
  producing will become... deserts. So how do you
• 1:08:07
  cope with that? So it's an enormous challenge.
• 1:08:10
  But I think, again, the one country that I think
• 1:08:12
  has got a hope of surviving it on a grand scale
• 1:08:14
  is China. What a delightful conversation. Thank
• 1:08:16
  you, Professor. I hope we get to do this again
• 1:08:18
  once your new book is out. I'd really appreciate
• 1:08:20
  it. Thank you. And can I do some advertising
• 1:08:24
  here? Yeah, please. Okay, okay. I have an online
• 1:08:27
  course which is run through a website called
• 1:08:29
  stevekeen .com. I teach my approach to economics.
• 1:08:34
  I've got a community of over 1 ,000 people there
• 1:08:36
  now that I'd like other people to join. We're
• 1:08:38
  going through major changes in how we market
• 1:08:40
  it right now, so it's a bit of a disaster, frankly,
• 1:08:43
  but get through the marketing and you'll join
• 1:08:45
  the course and you'll learn my approach to economics,
• 1:08:47
  which I think is desperately needed, not because
• 1:08:50
  I'm the... the world's genius on this rampant
• 1:08:53
  because neoclassical economics is so bad. You
• 1:08:55
  need to see why and you need to see that there's
• 1:08:57
  an alternative as well. Did you get any threatening
• 1:08:59
  mail from university -established economy professors
• 1:09:03
  due to your course? I'm hoping. I'm looking forward
• 1:09:06
  to them. Not yet, but looking forward to it.
• 1:09:07
  I mean, the stuff they teach, there's a classic
• 1:09:11
  old American humorist, Menchkin, and he said
• 1:09:14
  there's a simple solution to every human problem
• 1:09:17
  which is neat, plausible, and wrong. And that
• 1:09:20
  to me pretty much describes mainstream economics.
• 1:09:22
  So there is an alternative. I teach it. And I
• 1:09:25
  teach why the mainstream is wrong. We need people
• 1:09:28
  to know this because we'll stop being deluded
• 1:09:30
  by fools. Amen. We're going to include the link
• 1:09:34
  to the course in the description of the video.
• 1:09:35
  Thanks again, Professor. This was amazing. You're
• 1:09:37
  welcome. Thank you. Thank you so much for listening.
• 1:09:40
  There's a gazillion podcasts out there, but you
• 1:09:41
  chose this one. So I really appreciate your attention.
• 1:09:44
  If you're feeling extra generous, you can always
• 1:09:46
  hop on Patreon. Find Smart Cookies Podcast on
• 1:09:50
  there and support me. This is a one -person podcast.
• 1:09:53
  I do everything by my little old self, so every
• 1:09:55
  little bit helps. I would be over the moon. Which
• 1:09:59
  brings me to a set of absolute queens and kings,
• 1:10:02
  my existing patrons. Without you, there would
• 1:10:04
  be no Smart Cookies Podcast. So my eternal gratitude
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  goes. To Mookie Puck. Oh my God, my phone is
• 1:10:43
  ringing. The list is growing, which makes me
• 1:10:46
  super happy. Thanks again, guys. You're the best.