Will Balance of World Power Shift From West to East?

Will Balance of World Power Shift From West to East?

Feng Yuqing

Date: Tue, 03/13/2018 - 10:28 / Keywords: Niall Ferguson, World Movers

(Yicai Global) March 13 -- As the world order has been challenged since the Second World War and Trump is unwilling to assume the responsibilities of the US to the world like in the past, a new trend could be gradually taking shape. After the West dominated the world for 500 years, has the balance turned to the East and is the rise of China becoming inevitable? Historian Niall Ferguson believes China has become an economic superpower.  What does this mean for the world?

Niall Ferguson is currently one of the most valuable and influential historians in the West. The British scholar started his academic career at Oxford and came to the US 10 years on, becoming a distinguished professor in both the history department and business school at Harvard University. He spans several fields from history and finance, academia and business to universities and media, and is also a high-yield writer. He has published over 10 monographs.

Time magazine named Ferguson, aged 40, one of the 100 most influential people in the world in 2004. In 2006, he and another economist first coined the term Chimerica, describing the symbiotic relationship between China and the US, suggesting that China’s focus on saving and the US focus on spending are intrinsically linked.

Ferguson is currently a research fellow at the Hoover Institute at Stanford University in California. We came to interview him on the campus. He was a little late, wearing a blue suit, well-proportioned, refined and graceful. I met him in New York in 2010, and he had changed little in the past eight years.

However, the international situation has changed. Although relations between the two countries have remained linked since the 2008 economic crisis, strengths between the two nations has undergone tremendous changes.

"China realized that the US did not know the answer to all the questions and did not have a perfect economic model," Ferguson said. "But the global financial system has changed dramatically. No one could challenge the US leadership before the crisis, and the world's major economic bodies were headed by the US. China has established new institutions such as the Asian Infrastructure Investment Bank (AIIB) after the financial crisis, which has the potential to become a competitor."

Ferguson has followed this trend since before the financial crisis. The continued declining share of the West in world economies, including the US and Europe, is a clear sign of a major shift in the balance of power in the global economy. The financial crisis hastened the decline of the West.

In the 2012 documentary China: Triumph and Turmoil, Ferguson examined China's history and current conditions, concluding that "China's industrial revolution is the largest and fastest in history. Chinese products are exported to all over the world and Chinese enterprises invest globally. We are experiencing a tremendous change in history a shift of economic and political power from West to East, which will affect the lives of everyone."

However, he also reminded that it is very important not to rush to conclusions that the Chinese century has already begun and the US is on its way out. China still has many difficulties to overcome. At the same time, the US may look confusing, but American businesses still remain the dominant player in the world.

"The problems facing the US are essentially political issues that can be solved but require political determination. Americans are very depressed about their political system."

"This is why they chose Trump as president?" I asked.

Ferguson replied, "They chose Donald Trump because they wanted an extraordinary politician to try to change the system. He is trying to make the change, but the system itself is resistant to change. His campaign slogan is hard to translate into reality."

China, has experienced unprecedented rapid growth not seen in human history, lifting hundreds of millions of people out of poverty and making investments in Europe, the US and Africa on an unprecedented scale. By 2017, China's investment in the US has already exceeded USD100 billion. When British banks were in crisis, it was China's capital that came forward for support. Mineral resources in Africa, Latin America and Australia are continuously contributing to China’s rapid economic development.

A huge economic power is on the rise. China has become more confident on the world stage and has insisted on free trade amid a wave of anti-globalization in Europe and the US. The US has become a questioner of the standard-bearer of free trade. As Trump took office, he canceled the Trans-Pacific Partnership Agreement and gave priority to the US. The G20 summit in Germany also acknowledged the need for protective measures to promote trade balances, which was the first time that the G20 leaders have made concessions on free trade since their first meeting in 2008.

The US and China are on a completely different path in this era of globalization, partly because the two countries have been affected differently by the wave of globalization.

"Globalization is better for China than anyone else. If one asks who the ultimate beneficiary of years of free trade and relatively free capital flows is, the answer is China. The US is also doing well, but not as good as China." Ferguson believes that it is not surprising that Americans began to question a global order that seemed more favorable to China.

Ferguson thinks people generally have a misunderstanding about globalization. "We should have a world in which there is almost no restriction on movement of goods, people and capital." But that is impossible. "The result is a very volatile world because of the completely unrestricted free flow of goods, people and capital."

China did not witness the influx of a large number of immigrants in the process of globalization. China's capital account is not completely liberalized. This made China avoid a hard hit during the Asian economic crisis of the 1990s because foreign capital could not suddenly flow out on a large scale. China's experience is that in the process of globalization, there should be a corresponding boundary to control costs. Globalization has put the West in the face of the more powerful China, while also facing cultural challenges as a result of the influx of large numbers of Muslim immigrants. More importantly, in the past 10 to 20 years, globalization has accelerated and has become super-globalized. The number of immigrants in Britain has increased tenfold during this period.

"The West has accepted the free movement of people and capital. Now we find that the massive refugee crisis in Europe and the influx and outflow of hot money in and out of emerging markets and developed markets. Sometimes it creates a very unstable situation." Ferguson believes that both Britain's exit from the European Union and Trump's victory in presidential election came from the same pressure. It is not that people want to end it, but that they think globalization is going too far. The general willingness to slow globalization is actually justified because in some ways it is out of control."

Europe's opposition to globalization is also closely linked to national identity as a result of the mass influx of Muslims. The most popular name for newborn boys in England and Wales in 2016 was Muhammad, and Muslim population grew rapidly in Western Europe. At the same time, the heart of the western civilization in the cities of Paris, London and Germany constantly experienced terrorist attacks. Europe seems to be no longer what we know.

"The reality is that Islamic extremism poses an ideological threat to an open society. You cannot just deal with violence, and you also have to deal with the problem of extremism." Ferguson has a deep feeling on this issue. Ferguson's second wife, Ayaan Hirsi Ali, a Muslim refugee who came to the Netherlands from Somalia became active in the Dutch political arena, elected as a member of the Dutch lower house and was also named among the world's most influential people in 2005 by Time magazine. Because of participating in filmmaking which criticizes Islam's suppression of women and abandonment of Islam, she faces the threat of death and has to live under police protection.

"If a large number of unemployed youth live in the suburbs of Paris and Hamburg, they can easily be extremized. Europeans may have done something noble to bring in 1.3 million or 1.4 million refugees,” Ferguson said. However, they must ensure that these people have a job in the next stage and then ensure that they accept the basic principle when joining the community. We have failed to make it on this."

However, the key of the issue is whether the West is determined to integrate immigrants to accept the values of modern society? In the past few decades, the European multiculturalism, which kept accepting immigration, has become prevalent, emphasizing that each culture has its own uniqueness and does not require immigrants to follow Western rules. In the face of various internal conflicts, Europe has built a politically correct altar in a relativistic manner. Under this pluralism, Europe has gradually lost its cultural and political identities. On the other hand, under the influence of multiculturalism, minorities within Europe have gradually become communities isolated from the outside.

German Chancellor Angela Merkel said in 2010 that Germany's attempt to establish a multicultural society failed completely. She called on a large number of German Muslim immigrants from Turkey should strive to integrate into German society, learning the German language. In 2011, the Cameron administration in Britain also blamed the birth of British native Islamic extremism as a result of its cultural pluralism policy and stressed the need to re-promote the unified national identity of Britain.

Ferguson believes Western Europe has realized that it must work hard to absorb and integrate newcomers both economically and culturally.

“It is okay to believe in any religion in our country and religious tolerance has been the cornerstone of Western civilization since the Enlightenment. But this must be mutual tolerant. In other words, Muslim communities must tolerate the values and lifestyles of Western society."

The fundamental religious tolerance must be adhered to. Ferguson made it very clear with two examples for this problem that much troubled western society. The punishment to abandon Islam should be the death penalty per Shariah. But this is not in line with the value of a free society. Therefore, Muslims must accept the law of the country in Europe and the US instead of Sharia law. In addition, it has not been long since western society recognize the concept of equality between men and women, of course not the western value in 1700s, 1800s and 1900s, but gender equality is now the core value of the West. If they do not accept these generally accepted beliefs and if they say no because their religion has a completely different view which women must obey men, then that's a problem.

"I think this is a fundamental challenge to the stability of Western society." He was somewhat excited. "I believe that some in Western society have forgotten this. They tend to be tolerant on extreme. We cannot tolerant the intolerance, and our society can only work normally with mutual tolerance. For those who promote extreme hatred and violence, even if they just advocate and do nothing, they are the enemies of our society. We do not yet know how to deal with them."

The more than 70 years of peace and prosperity in Europe since the Second World War are facing great challenges. Ferguson's vision as a historian naturally goes further. In his book Civilization published in 2011, he attributed the 500 years of Western power to six stunts, competition, science, the rule of law, medicine, consumer society and work ethics, but now the West is slowly losing these qualities that made them successful.

These mechanisms and ideas have helped millions of people in East Asia and South Asia get out of poverty. China has already made five out of six, but the rule of law, Ferguson thinks it will still take some time.

In fact, work spirit in the process of taking off in China is crucial.

But people once thought that only Nordic and North Americans had a work ethic that dates back more than a hundred years ago by Max Weber's The Protestant Ethic and the Spirit of Capitalism. Even in the more recent 1930s, people could still find at authoritative reports explaining why Asians were so lazy. China's take-off witnessed the hard work of the Chinese people. In fact, after the right marketization environment, the hard work by the Chinese people has created the greatest economic miracle in history.

"Anyone teaching at a US university can also confirm that Chinese students work longer and harder," explains Ferguson. "This shows that work ethics is not culturally or ethnically specific. In fact, Americans were once the most hard-working people in the world, and now they obviously lag behind Asians, and the Europeans are behind the Americans."

Ferguson himself is extremely hardworking. He starts writing at 6 o'clock every morning, and now has written 14 monographs, most of them bestsellers. He attributes his success to hard work.

"I'm not particularly talented, but I work very hard."

Ferguson grew up in the last Protestant family in western Scotland. His father as a doctor worked very hard giving meticulous care to patients.

"He is my role model, making me feel that through working hard can I be successful."

Ferguson later met with mentors like David Landers, a Harvard economic historian, during his academic career. His words made Ferguson feel lucky. "Most people work to live and we live to work."

What motivates Ferguson to keep writing?

There are two possible answers to this question. One dates back to the great British writer Dr. Samuel Johnson. He said "No man but a blockhead ever wrote except for money." I doubt if I were a rich man, I would not write 14 books. But I'm not, so I have to pay for the children's tuition and mortgage payments with money earned by writing."

The other answer may be closer to Ferguson's inner heart.

"I educate myself by writing books. I have found that reading and thinking and writing my thoughts are the best way to learn how the world works. I have a belief if we study history hard and seriously enough we can better understand the complexities of human society and the world it operates."

Best-sellers are a combination of the two, which means I can sell my knowledge to other people and pay tuition in this way.

"I have learned knowledge myself and also educated my children."

As a historian, Ferguson is worried that no one is leaving enough time for reading right now. Young people usually do not read any lengthy books, even though most of the world's knowledge is contained in long books. It is not in Facebook nor in twitter.

The working spirit of Chinese is impressive. Now it is not only hard work, but also invention and innovation. The potential of Chinese people is fully exerted under the market mechanism. Silicon Valley is a stone's throw away from Stanford University, home to Google Inc., Facebook and Apple Inc. and the birthplace of innovation in the US and the world. For a long time, Chinese enterprises imitated the inventions and innovations here and copied them at home and quickly gained success. When Google is here, China has Baidu Inc. After Twitter appeared, China had Weibo. After YouTube China has Youku. The enthusiasm for innovation has been ignited in a mass entrepreneurship China. China's high-speed rail, mobile payments, bike sharing and online shopping have been called the new four big inventions. China leads the cashless society ahead of the US and China's patent applications have also reached an unprecedented record.

"I think one major mistake the US made in the past two or three decades was that they believed Chinese could only make products but could not innovate. Everything in the world would still be like Apple phones which are assembled in China, but the US owns the intellectual property. I think this seriously underestimated China." Ferguson even believes that one day it might be Chinese design, made in California. Baidu, Alibaba Group Holding Ltd, Tencent Holdings Ltd, and the US Facebook, Amazon, Netflix, Google are in some respects almost equal, which means that the balance of power is gradually changing. Once it was in Silicon Valley, and only in Silicon Valley; now there are evenly matched Chinese companies, in large-scale, and in some ways more profitable.

"I am very interested in that China is becoming a source of technological innovation that is level with Silicon Valley."

Just as the world's financial center moved from Venice in Italy to London in the past, history will not stagnate. It is clear that the central position of the financial world has moved away from Western Europe. Ferguson believes Shanghai is likely to become the new financial center in the future.

Then will the balance of the world shift from West to East?

"I came to the conclusion that there is no such thing as a balance of world in history. History does not go straight, and if you study history, you know that it often moves on in a curve. Things can go very well, but it can get really bad. There will be an unexpected crisis and impact which is unforeseen today."

Even so, did the western public realize the relative decline of the West? Are the Trump's victory as the US president and the British withdrawal from the European Union the remedy or manifestation of relative decline of the West?

Ferguson's answer was beyond my expectations. "I think this is a reaction to the decline. Voters like the slogan 'Make America Great Again' because they feel it is not that great. To a certain extent, both Brexit and Trump's victory as US president is a response of voters to the decline of the West and the desire to do something about it. I do not think they can make any changes."

He paused. "Then the question is, if populism does not work, what is the next remedy? We have no answer at the moment."

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Keywords: Niall Ferguson, World Movers