3 Takeaways - Are America and the West Really In Decline with Niall Ferguson (#199)

Episode Date: May 28, 2024

The decline of America and Western civilization is being discussed more loudly these days. But is it true or inevitable? Is the U.S. a waning influence, unraveling from within mainly due to extreme divisiveness? Niall Ferguson, one of the world’s most renowned historians, shares his well-informed perspective. It’s a convo that demands attention.

I'm going to begin with two questions from my guest book, Civilization. Just why, beginning around 1500, did a few small polities on the western end of the Eurasian landmass come to dominate the rest of the world, including the more populous and in many ways more sophisticated societies of Eastern Eurasia. And with a good understanding of the West's past ascendancy, what's the prognosis for its future? Hi, everyone. I'm Lynn Thoman, and this is Three Takeaways.

On Three Takeaways, I talk with some of the world's best thinkers, business leaders, writers, politicians, newsmakers, and scientists. Each episode ends with three key takeaways to help us understand the world and maybe even ourselves a little better. My guest today is Neil Ferguson. He is one of the world's most renowned historians. He has extensively studied the rise and fall of civilizations. He's a fellow at the Hoover Institution at Stanford and a fellow at Harvard, where he previously served for 12 years as a professor. He's also a columnist for Bloomberg and has won

many, many prizes and awards, including an international Emmy for Best Documentary. He is the author, if I've got it right, of 16 wonderful books, including War of the World, Civilization, Kissinger, The Square and the Tower, and Doom. I'm looking forward to understanding the West's ascendancy and getting a prognosis for its future. Welcome, Neil, and thanks so much for joining Three Takeaways today. It's great to be with you, Lynne. It's wonderful to be with you. You have an interesting hypothetical exercise in your book, Civilization. If in the year 1500, you circumnavigated the globe, what would you have found in London, in China, in North and South America? But it certainly wouldn't have looked as if London was poised to become the

dominant metropolis of the next half millennium. You would have thought to yourself, what a stinky, nasty, unhealthy, backward place. And then you might have, if you'd had the equivalence of a plane, gone to Nanjing and been blown away by the sophistication of Ming China, bigger, cleaner, better built on almost every obvious metric, superior. And you certainly wouldn't have felt if you'd been able to travel on to Central or South America, that there was some enormous civilizational gap between Northwestern Europe and those regions. So this would have been a journey that could have been very misleading about what was coming for the world. And if 500 years later in the early 1900s, you circumnavigated the globe again, what would you have found? Well, you would have been circumnavigating it very likely in a British steamship.

You would have been telegraphing ahead your arrival time on a British telegraph service. And at every stage of your journey, you would have been using British technology or some American or German copy of it. Your clothes would have been based on British designs and quite possibly made of British fabric. You'd have found the world of 1900, an extraordinarily British-dominated world, not only in the formal British Empire, but in the many places outside the formal British Empire that were heavily influenced by British finance and British ideas about the way things should be done, as well as British technology. So it would have been a very Anglo-centric world that you would have encountered. I was shocked at some of your numbers that the Western empires controlled nearly 60% of all the land and the population and accounted for a staggering almost three quarters of global economic output. This was the great divergence that puts a relatively small percentage of the world's

population in a position of extraordinary dominance. Neil, what accounts for the rise of the West? Why did some countries such as the UK succeed? The answer is partly happenstance. There were six killer applications that set first Britain and then Western Europe on a different path. On the first of these, economic and political competition as a legitimate form of organization just happened kind of accidentally because the British crown was exceptionally weak by the standards of European monarchy and had to concede

all kinds of rights to merchants and landowners of England. And so this doesn't sound great, certainly not from the point of view of successive kings, but it had the unintended benefit of creating meaningful and legitimate competition in economic and political life. And that certainly wasn't something that was regarded as legitimate in, say, China. Number two was a breakthrough in the way in which we think about the world that we tend to call the scientific revolution for short. I mean, there'd be lots of technologies and advances in mathematics in other civilizations, but neither in the Muslim world nor in the Oriental world was there the breakthrough to the experimental method. And so the scientific revolution sets the whole of Western Europe on this new trajectory in which the natural

world becomes not only more intelligible, but more malleable. And that's enormously important. The idea of the rule of law specifically based on private property rights is another interesting mutation of social arrangements that really gets going in England before anywhere else. And indeed, the English system of common law is still to this day an unusual form of legal order. So that gets you to three. And that gets a lot of the divergence underway, because the other things become more obvious later on. They're more obvious by, let's say, the 18th or 19th century. Modern medicine, which is a late comer to the scientific revolution, suddenly allows life expectancy to be prolonged in an extraordinary way, doubling and then trebling. That's important. And then a couple more things. The idea that everybody

should really have more than one set of clothes and perhaps indeed a very large amount of clothing if they can afford it. That's important because it turns out that we have a very, very unlimited appetite for clothing. And without that, you can't have an industrial revolution, which is all about producing vast quantities of really cheap clothing for a market that previously hadn't existed. And finally, there's this thing which Max Weber spotted, the work ethic, the idea that work is actually a really important and desirable activity, that you should work beyond your immediate needs of subsistence. Now, the critically important thing is that these six ideas and institutions happen to originate in countries like England and the Netherlands, Western Europe, and then spread wherever people from there settled. So you get

in North America, you get in Australasia. And it's sort of monopolized by people from those parts of the world, right the way through the 1600s, 1700s, 1800s. And then you start getting non-European experiments with at least some of the institutions, beginning in Japan. Japan's the first non-Western society to say, we should try this. We should download at least some of these killer applications. And that's what happens. And then by the time you get into the late 20th century, there's this scramble, this rush to copy the ideas and institutions of what by then we call Western civilization. And it turns out that wherever

you download them and use them, they work. If you have those things I just described, your country will become rapidly more prosperous and your people will live longer and better lives. And you talk more about what you call those institutional blueprints, including democracy, property rights, and the rule of law. There were, as you point out, a series of 20th century experiments with the same people and the same cultures. There were two sets of Germany's East and West, two Korea's North and South, Chinas, mainland China and Taiwan. What happened and why? Well, the great thing about my theory is that it's quite testable. We ran a series of experiments that weren't really thought of experiments, but they turned out that way in which we would give

the same people different institutions. And you mentioned the classic examples. There are two Germanys, one of which is essentially integrated into the Western world of democracy and rule of law, limited government and market economics. And then there's East Germany, which is part of the Korean War. There are two Koreas, one of which is fully Marxist-Leninist, the other one of which, although it's not democratic, is a part of the American alliance system and becomes democratic. And in each case, with amazing speed, the outcomes diverge. And you could equally make this argument about mainland China and Taiwan. So we see in a great many different places, these experiments in which one people is given a couple of different systems. And what proves that ideas and forward between West and East Germany. And it never ceased to amaze me that the same people could produce such different cars. You looked at the West Germans hurtling around the Autobahn and in these extraordinarily powerful BMWs and Mercedes-Benz cars. Then you crossed over into East Berlin and people were puttering around in what looked like lawnmowers the Tremant

one of the worst cars ever designed and this was all Germans so when I thought hard about the key question of the Great Divergence I was driven inexorably to conclude that it's institutions and kind of the ideas that inform them that really matter

because they determine the incentives and it doesn't matter how long a cultural tradition you may have. And the Germans had a pretty long cultural tradition in common. As soon as the institutions are different, then behavior completely changes. I learned so much from your book. What I hadn't realized also was the differences between North and South America. Both were colonized by Europeans and had existing peoples. Can you compare how the colonization by the British in North America was different from the colonization by the Spanish and Portuguese in South America and what the outcomes have been? And was it due to the North simply being more fertile or having

more natural resources? A lot of speculation has gone into this question because it became obvious fairly early on that there were going to be very different outcomes in British America as compared with Spanish or Portuguese America. If you ask a counterfactual question, what if the British settlers had gone to South America and the Spanish and Portuguese had gone to North America, would it have turned out very differently? I think the answer is it would have turned out very differently. Because the natural resource endowments of South America are pretty good. I mean, it's not like some great barren wasteland. On the contrary, the difference is that the two or three groups of settlers arrive with very different models for colonization.

And the single biggest difference that I could identify was that in North America, the land was distributed far more equally than it was in South America. In South America, where the Spanish conquistadores settled, enormous estates were established for those who came first, and they stayed enormous, and latecomers got nothing or next to nothing, and ended up crowded into cities like Buenos Aires. In North America, it was possible to arrive with nothing as an indentured servant and after seven years, acquire 100 acres of land. Now, this was all based on, some would argue, mass expropriation from indigenous peoples. But the British did not think of themselves as doing that because they didn't

see much evidence of agriculture. Predominant mode of organization was more hunter-gathering. And so they regarded themselves as essentially taking virgin land and turning it into agricultural land. And this habit of parceling it out in relatively small packages and giving it to newcomers as a sort of payoff for having survived the seasoning process, which new immigrants went through. That's really the big difference. And when you look at the impact of this more widely distributed land ownership, it's huge because it creates completely different incentives. It leads to much more rapid gains in productivity in the agricultural sector. It creates a foundation for a financial system in which there's a relatively large number of people with property and therefore the ability to borrow

because property gives you collateral. And I remember talking about this many years ago now with Hernando de Soto, the great Peruvian economist. And he was racking his brains about how you could give the poor of Latin America the basis for entry into the financial system. And I realized, well, that's it. I mean, people who were relatively poor in North America did have some access to the financial system because they were able to accumulate property in a way that immigrants to Central and South America weren't. China was one of the most advanced countries in the world, as you mentioned, 500 years ago. What happened?

Part of the story of the great divergence, as people like Ken Pomerantz have argued, is that you have to explain what's going on in China as well. There's an argument that says that Chinese institutions, particularly institutions of social order and agriculture, created a kind of vast poverty trap in which the majority of the population were kept in a state of illiteracy and subsistence agriculture, which made them highly vulnerable to events such as famines or any natural disaster, really. I think there's quite a lot to be said for that. The Chinese argument today, if you were to ask a Chinese official, is, well, actually, China was tremendously sophisticated and advanced. But then you, Westerners, imposed a century of humiliation,

starting with the opium wars and continuing right down until 1949. And we've been trying to recover from your depredations ever since. This isn't true. In reality, the reason that it was possible for, say, the British East India Company to so easily penetrate the Chinese empire in the 19th century was that it was already so weak. The Qing empire is an interesting thing. It's not entirely weak, and it has, in fact, considerable expansionary power, but it's susceptible to political disasters like the Taiping Rebellion, which is probably the most bloody civil conflict of the 19th century, maybe the most bloody conflict of any kind. And that's hugely disruptive of social order in large parts of China. So I think the correct

answer, and this is, I think, more and more the view of serious economic historians of China, is that there are serious endogenous weaknesses in the imperial system. And that causes per capita income in China to be declining in absolute terms from perhaps as far back as 1300 or 1400. So the Chinese are really dirt poor in the 19th century relative to just about everybody else. And their social and political institutions just can't withstand the shock of European armaments. And that's the story. It does involve humiliation, but you have to recognize that there was already profound fragility to make it possible. How about Africa? Africa is very, very big. Its natural features make complex politics difficult. There are huge infrastructural challenges. And so it's just a

hard place to do even agriculture. So the natural setup is the most challenging. And then there is on top of that, a different social and religious structure, which involves the substantial Islamic presence in some parts of Africa, and then an increasing Christian influence, partly through missionaries in other parts. At the core of the sub-Saharan problem is that there is a market for African slaves in at least two different places. There's the Arab market, and then there becomes the Caribbean American market. And once you can have a business based on trading human labor, it does get in the way of the development of other activities. And I think a really important thing to recognize is that this problem of slavery is a very long running one. And I think Africa is in a very, very unhappy, unstable position. And that's caused a long standing and persistent problem. So it's a little bit more complex than blaming colonial structures, because it's really the widespread use of slave labor,

not only in the Western world, that is the problem. As you've studied history, the rise and collapse of civilizations, what has caused their collapse or decline? Well, that's a terrific subject of debate. I think if one takes a step back and asks, you know, what do civilizations have in common? One answer that suggests itself is that there isn't a straightforward arc that they all follow. We kind of assume that there is. We kind of assume that there's a life cycle of empire, of civilization, that they have a sort of vigorous youth and they're in the prime of their lives and then they age and then finally die. But that's what we do as individuals. It is not actually what polities do

because civilizations or empires, which are sort of structured civilizations, can vary enormously in their lifespan. I would offer the insight that there is a kind of interplay between those forces that allow a frontier to expand and those forces that cause the core to rot, to corrode. And understanding those dynamics helps us as long as we remember that the timeframe seems variable in a very extreme way, it's helpful to look at certain measures of social cohesion. It's helpful to look at measures of the capacity to mobilize resources. And one of my favorites is that once a society is spending more on debt service, on servicing, paying the interest on its public debt than it's spending on defense or national security, it's probably in trouble. And this is interesting because the situation of the United States is precisely that this year,

for the first time, really, the United States is now going to spend more on interest payments than on defense in 2024. History suggests that that's not a good idea. And you can sort of go back through the Spanish Habsburg Empire. You can look at Bourbon, France. You can look at the Ottoman Empire. You can look at the Romanov Russian Empire. There's a lot of examples here where you can actually just cause your unraveling by misjudging your public finances. Most polities need to be understood at least partly in terms of public finance, because it's the channels of public finance that allocate the burdens through taxation as well as through borrowing. They

allocate the various goodies that the state can dish out. And I think most trouble comes from imbalances in public finance. And people don't pay enough attention to it because it's boring, but important. So critical. How do you see the US today in other ways, in addition to the public spending? One of the big questions is how far the United States is seriously pathologically divided. And I think people without a sense of historical perspective are quite quick to say, we've never been more divided, and this is terrible. The polarization is terrible. The inequality is terrible. And therefore, we must be on the way to civil war. I think that's probably wrong, because I think by a great many measures,

the United States was certainly much more divided at the time of Lincoln, at the time of the Civil War, but it was pretty divided 50 years ago. Late 60s, early 70s were a time of really deep division and probably more violence in cities and on campuses than we see today. So I'm not ready to say that we're in this specially divided state. I think it may be that these periods of polarization are a feature, not a bug of American history. Indeed, worrying about decline is sort of a feature of American history. And it may turn out, as it did in the 1970s, to be a temporary aberration. What's really interesting about the United States is that it doesn't follow this nice arc of rise, zenith, decline. It has these kind of quite volatile spikes.

Probably in the 1970s, not everybody, a lot of people thought the US was in deep trouble losing the Cold War. And at the very least, there was convergence happening with the Soviet Union. It was all wrong. I mean, actually, the US was just in the 1970s embarking on the great information technology revolution. I mean, people just missed that because they were fixated on Vietnam or Watergate. And those things turn out not to be as important as semiconductors and then the internet. So I think the US has probably got greater strengths than we currently want to acknowledge because we're fixated on our endless political fighting on social media. And what I'm struck by is the fact that even while we're having these arguments, the US is winning the artificial

intelligence race. The US is winning the energy race. The US has, of the 20 biggest companies in the world by market capitalization, 18. So the US is great at looking like it's in trouble and then turning out to be just fine. And I'm hoping that's still true. Are there other countries or issues that you worry about? I think that what happens in the People's Republic of China over the next 10 or 20 years will be very decisive for the world, because it's still a Marxist-Leninist one-party state with an excessive amount of power in the hands of a very few people, and one in particular, Xi Jinping, I think mistakes by him and those

immediately around him could have absolutely disastrous consequences. So I think what happens in China's key, I think if you look at the demographics and the debt dynamics and the likely growth rate over that 20-year period, it looks pretty bleak. The population of China is going to probably half between now and 2100. It's hard to have economic dynamism under those conditions. So my instinct here is that if the US avoids a hot war over Taiwan and just sits back and does detente and containment, it'll win the second Cold War, which it's currently in. And it'll win because the Chinese War, which it's currently in. And it'll win because the Chinese system ultimately will unravel the way these systems always do because

they're excessively centralized. And they don't have all the killer apps. Because remember, although the Chinese have some of the six things we began by talking about, I mean, they clearly copied modern medicine and they copied the consumer society, though not that successfully. They've copied the work society, though not that successfully. They've copied the work ethic. They all work like crazy. But they don't have competition in politics and even in economics, it's restricted. And they don't have the rule of law based on private property rights. They just don't. You have to have all six or it doesn't work. Neil, what are the three takeaways you'd like to leave the audience with today?

They're in Latin, and they sum up our lot as human beings. Conceptio culpa, nasci pena, la bovita, nikesi mori. I saw this in an extraordinary painting by an artist named Salvatore Rosa, who painted a depiction of death shortly after most of his family fell victim to the plague. And it translates as conception is sin, birth is pain, life is work, death is inevitable. Those are my four takeaways. One should bear all that in mind as one proceeds through this veil of tears, make the most of it. For most people still today, most people in the world have a very, very, very tough existence bounded by those constraints. Those of us who get to go on podcasts and have conversations like this are the lucky few. And even for us, death is inevitable. Very depressing.

I find it quite uplifting. But that's because I think if you stare that in the face, this is why the 17th century philosophers like to have a skull on their desks. Keep in mind those constraints and make the most of the time you have. Neil, thank you so much. I have really learned so much from your books. I think my favorite was Civilization, but I've really enjoyed all of them. Thanks very much indeed, Lynn. I've enjoyed our conversation too. If you're enjoying the podcast, and I really hope you are, please review us on Apple Podcasts

or Spotify or wherever you get your podcasts. It really helps get the word out. If you're interested, you can also sign up for the Three Takeaways newsletter at threetakeaways.com, where you can also listen to previous episodes. You can also follow us on LinkedIn, X, Instagram, and Facebook. I'm Lynn Toman, and this is Three Takeaways. Thanks for listening.