Endgame with Gita Wirjawan - Niall Ferguson on Twitter, Elitism, and the Next World War

Episode Date: February 20, 2023

Could our worries and misjudgments of the present and future be due to our inability to analyze the past? Historian and prolific author, Niall Ferguson, is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University, and a senior faculty fellow of the Belfer Center for Science and International Affairs at Harvard. His famous books include “Doom: The Politics of Catastrophe” (2021), “The Square and the Tower” (2018), “The Ascent of Money” (2008), and “Civilization: The West and the Rest” (2011). The host, Gita Wirjawan, is an entrepreneur, educator, and currently a visiting scholar at Stanford University at the Walter H. Shorenstein Asia-Pacific Research Center (APARC). #Endgame #GitaWirjawan #NiallFerguson Recorded at Stanford University on January 31, 2023. ----------------- SGPP Indonesia Master of Public Policy March 2023 Intake: admissions.sgpp.ac.id [e-mail] https://wa.me/628111522504 Other "Endgame" episode Playlist: https://endgame.id/season2 https://endgame.id/season1 https://endgame.id/thetake Listen on Spotify: https://endgame.id/spotify Visit and subscribe: https://youtube.com/@SGPPIndonesia https://youtube.com/@VisinemaPictures

I propose that we stop calling it artificial intelligence, but call it instead inhuman intelligence. Because it's not human intelligence. It's a different form of intelligence. You know, cognitive dissonance is the essence of human life. And the psychologists were wrong to think that cognitive dissonance would make us ill. We live with it all the time. You know, at Davos, woke capitalism, but secretly nobody believes in it.

And in the Premier League, we think of our, football club as a kind of almost a national allegiance, and yet they're mercenaries. Hi, friends and fellows. Welcome to this special series of conversations involving personalities coming from a number of campuses, including Stanford University. The purpose of the series is really to unleash thought-provoking ideas that I think would be of tremendous value to you. I want to thank you for your support so far. and welcome to the special series. Hi, today we've got Professor Neil Ferguson,

who is a senior fellow at the Hoover Institution, Stanford University. Before that, it's taught at Oxford, London School of Economics, NYU, and Harvard. Neil, thank you so much. Great to be with you. Explain to us why you decided to become a historian. I was no good at anything else that I tried. when I went to Oxford I was 17 and I had grown up in Glasgow in the west of Scotland with a pretty idealised view of Oxford as a place of infinite possibility

where you could go to train to be Prime Minister or go to train to be the next Monty Python and or for that matter go to train to be the next editor of the Times So I went to Oxford with multiple aspirations, and I'm glad to say I tried just about everything, including playing double bass in a jazz quintet. And in the end, after two years of politics, journalism, acting, I realized I wasn't really good at any of those things. I was okay, but I wasn't really good. The only thing I was really good at was writing history assets. And so in my final year, I scrambled to make up for the lost time because I'd greatly neglected my studies in the first two years, realizing that what I, in fact, wanted to do was to write history. And it was the thing I was best at.

So it was Fault de Mier, as the French say. You came from a family of physicist. My mother is a physicist. My sister is a physicist. My father was a physician, but it was a much more scientific than literary household. On the other hand, my grandfather was a journalist, and he encouraged me to think of writing as a legitimate activity from an early age. I had a natural facility with words, and my grandfather, Thomas Hamilton, encouraged me to think of that as something worth pursuing. He had been the chief sub-editor in the Glasgow Herald, before World War II.

And during the war, had kept writing, even in his time in the Royal Air Force, wrote wonderful newspaper columns from Asia. He served in Burma and in India, and also wrote wonderful letters back to my grandmother. I was very fortunate, not only to be well loved by my parents,

but also by my grandparents. And my grandfather saw in me a lot of himself, but with the opportunities that he hadn't had. He hadn't been able to go to university. His family hadn't been able to afford it. He'd started at the bottom of the ladder of journalism in a local newspaper at the age of 16. But he was a wonderfully literary man.

He could quote long passages of Shakespeare from memory. And I used to sit in his study at Christmas time with his typewriter. from a very young age, trying to be a writer. So that part came from him. And it was at Oxford that I realized I couldn't really write fiction that well, like most obnoxious, precocious types. I tried to write a novel. I've tried writing plays. I wrote film scripts. I tried my hand at just about every kind of writing. Right. And then realized that I was a nonfiction person and that it would be history.

I'd make my career. You've written 16 books? I mean, I've read most of your books. At the last count. Yeah. We live in an era where it's so tough to get people to read. I'm just curious as to what has made you a prolific writer so that it serves as an inspiration for, you know, wannabe writers.

Well, it might be that I'm a kind of hand-loom weaver during the Industrial Revolution that I'm engaged in an obsolete or obsolescent form of production. Books require sustained concentration. And in our age, that's become steadily more difficult with the rise of the Internet of mobile devices. So I see amongst young people today

a great struggle to focus long enough to read a book. Now, it's possible that 10 years from now there really won't be a market for books because the public intellectuals will have taken to TikTok and there will be podcasts in place of reading.

And I see these trends already at work. We know from Kindle that people don't finish the books that they start. And so I'm quite pessimistic about the book as a form. On the other hand, I'm deeply loyal to it, because I don't think that one can really understand Western civilization as much more than a pile of books. I mean, ultimately the code for Western civilization is written in books. And if you haven't read the great works of Western literature, then you are essentially not part of that civilization.

I can't imagine my own existence without the vast body of knowledge that I've extracted from books. And I don't think the alternatives are nearly as good. I'll give you an example. a great deal of money went into making movies of the Lord of the Rings and as movies I'm sure they're impressive works but they are a kind of violation

of the imagination if you love the books that Tolkien wrote as I did as a boy your imagination is invaded and you have no ability to use it because Peter Jackson does it all you. So I think ultimately I'm I'm going to go down on the sinking ship of the book, like the captain who refuses to abandon the ship, because I just don't think there's any

better way of conveying complex ideas and arguments about the nature of the human condition in all its forms. I'm immersed at the moment in the novels of Thomas Hardy, which I hadn't read since I was a teenager and now I'm grown up enough to get a lot that I didn't get then. And there's nothing that you could do on the screen or in any other format that would get you even 1% of the way to the insight that Hardy gives into the human condition. I could say the same of the extraordinary works of Marcel Proust, which I only really read properly in the course of the pandemic. None of this can be turned into a move. without sacrificing all that makes it vital.

You've talked about Chad GPT. Does that pose a concern for not only you as a writer, but would that stifle even the instinct of people to even read in the future? Well, I think it's interesting that what the... AI seems to do, and I messed around a bit with chat GPT, is to produce a kind of average answer. I think that's inevitable because of the way that it operates. And so you can clearly generate an infinite number of college application essays that are B plus or maybe kind of B. But I'm not sure

it can ever generate an A essay. It's also, C. It seems clear that because of the way it works, it's quite willing to make things up, facts that are in fact wrong. I'm also led to believe that artificial intelligence can detect artificial intelligence better than I can. And so it won't be too difficult to spot the phony essays. I think if it leads to the death of the college application essay, that would be a very good thing, because those essays are awful and utterly useless. when it comes to determining someone's intelligence,

even if they wrote the essay themselves. I'm not really worried about it. For example, if I took the vast database of documents that I've accumulated over the last decade or more on the life of Henry Kissinger, just all the raw text files, even if they had all been digitized, which they haven't. But let's assume they had all been digitized.

And we gave it to an artificial program and said, Right, Volume 2 of Kissinger. Here is Volume 1 to give you an idea. Just coming up soon, right? Right, that's what I should be doing now instead of talking to you. If one gave that to a very powerful AI and said, write volume 2, I don't think it could get even close. And I'm pretty sure that in my lifetime,

and I suspect my children's lifetimes, it still won't be able to do that because I don't think the, the process of turning the messy detritus of reality into a coherent narrative is something that a computer can do. I don't think you can do that because it's not that I can do it because I've read a lot of history books and I kind of know how they work, though I doubtless have read a lot of history books. I think the essential activity of writing history is an empathetic one in which what infers from the documents and other sources, what was going on in the heads of the people who were making the decisions or taking the actions. And that just seems

to me something that artificial intelligence by definition can't do because it takes human intelligence to read human minds. I don't think the computers will ever be able to do that. They'll be able to fake it. They will certainly be able to produce something that kind of looks a lot like a history book. But when you start reading it, you'll realize that it's the work of a replicant. It may be like that now. You don't think it's going to get much better exponentially in the next, say, one or two decades. Oh, I think it will become much, much better, but less and less human the further it goes. When I was reviewing Kissinger's recent book on artificial intelligence. I propose that we stop calling it artificial intelligence, but call it instead

in human intelligence. Because it's not human intelligence. It's a different form of intelligence. It also operates entirely differently from a human brain. And so we shouldn't kid ourselves that this is going to be like human intelligence. In fact, with its progress, it will become less like human intelligence. And that's, I think, a really, really important distinction. And it certainly won't want, I think, to concern itself as much as we want to concern ourselves with the intricacies of human motivation. I'm not sure that it will understand how we think any more than we really understand how artificial intelligence thinks. You know, you've mentioned Tolstoy, Bruce, and Hardy. So many times to the point I've started picking up those books. It's pretty inspiring. I'm

I want to start diving into some of your books. Doom, your latest book. You actually mentioned my country, Indonesia. Not often enough. The toba eruption. There is this thinking within me and some others in Southeast Asia in that what would have happened 75,000 years ago, was kind of a reset for humanity at the rate that it basically vaporized most of humanity.

Right. And it allowed for humanity to pick up its pieces back together. Would that be the right way to think about, you know, how Indonesia played a part in resetting humanity? Yes, I mean, we probably came as close to extinction than the closer than any other time. For me, the fascinating thing about Indonesia is, that if you were looking at Earth from outer space and had a pretty good data set on its geological upheavals, that would be the place you wouldn't settle because it's the place with the most volcanic

activity by quite a considerable... Call us optimistic. So the paradox of Indonesia is why would so many people want to? live in a place with so many volcanoes with such an obvious risk. And the answer is that if you have that many volcanoes, you get some very fertile soil and at least some of the islands. And so life in Southeast Asia is this sort of trade-off between what will take the risk of these eruptions and earthquakes because there is some very fertile soil here. There are similar stories in other parts of the world, which explain why human beings seem to pick dangerous places to live.

I mean, why live near Vesuvius? So I became fascinated by the fact that more than anywhere else, what has become Indonesia has been subject to geological disruption, not least because the rest of us have slightly forgotten about that variable. I was discussing yesterday at the Hoover Institution, the debate on climate change, and it's a debate which is extraordinarily important, and we need to take seriously the scenarios in which,

Global warming leads to volatility and perhaps renders parts of the world uninhabitable. But that's not the only risk we face. And it's not the most dangerous risk that we face. Most of us, even people living in this part of the world where we're sitting, Northern California, forget what geology can do, what an earthquake could do around here. And I think we're kind of due a reminder. It makes me feel a bit nervous even saying it. But I think we're due a reminder of how big an earthquake can be

and how big a volcanic eruption can be. Remember, and I try to show this in the book, in periods of very high volcanic activity, when really big volcanoes were erupting, and this was true on a global scale in, say, the 1100s, that really does alter the climate. And it's one of the things we've forgotten about in our focus on man-made climate change,

that nature could come along and give us a very different kind of climate change, which would cool the planet if we saw that level of volcanic activity again. And if we do, Indonesia is going to be one of the places where it happens. So I'm kind of fascinated by life on the edge of the volcano, literally, because I think that's part of what makes Indonesia distinctive. One has to be aware, more aware than Californians are, more aware than people in Northern California are, of Earth's caprices as a planet. It's an amazingly underrated place. Well, I wrote it's the biggest country nobody talks about, right?

Yeah. Well, we just need more storytellers who tell all the stories. It's fascinating to me that this is so. So it illustrates how very distorted our perceptions of the world are, whether we sit in San Francisco or London. This is a huge country. What is it? Fourth largest in terms of population. The fourth largest. Third largest democracy. The largest democracy. Something like 17th largest economy, but could be 15th. 15th and 17th last time I looked, but that tells you that by 2050, I think at least one of the banks predicts it will be fourth or fifth or fifth.

So, I mean, this is the most important country that people hardly ever talk about. And I keep kind of asking myself why that is. Is that just some kind of lingering prejudice? No, we talk all the time about China. We talk all the time or not quite all the time, but we talk plenty about India. So there is some kind of myopia at work here. And I've been asking myself, is it that we in the West have a blind spot or and here I'm going to quote the British author Philip Pullman

is Indonesia like the witches in Philip Pullman? It can make itself invisible. It's good at making itself invisible. Is this a deliberate strategy? And I don't know which it is. I'd be very interested to get your thoughts on this. I don't think it can just be that we've got a blind spot. I think something's going on here that makes it not enough of us.

I mean, if you go to take the United States, there is about 450,000 Chinese. about 200,000 Indians, only 8,500 Indonesians. There's a lot more Singaporeans. There's a lot more South Koreans, Turks, in the United States. The moment you land in JFK or SFO, you meet up with other Asians, Filipinos.

And that, I think, is one fundamental reason why not a lot of people talk about it. The other reason I think is possibly we're just a little too content with whatever we have at home. You know, as mediocre as it might be, you know, in the eyes of many. But I think those are some of the reasons as to why we're not being talked about. That could be changing. My 11-year-old son is a voraciously interested young man. He's already planning his gap here before he goes to college. with his best friend at school.

And the best friend is of Korean heritage. And they started planning this global trip with the aid of all kinds of educational materials, including the inevitable YouTube influencers. And so this has led Thomas, my son, into foreign cuisine. And lo and behold, out of left field, he says, Dad, you have to come and watch this amazing video of street food in Jakarta.

and so for 10 minutes I sat and watched you didn't say that just because you're with me oh no no no this is completely this is some time ago actually this was last year and I can't even remember the name of this American dude who who was the influencer

because I'm 58 and all of this is beyond my camera no it wasn't I'd have I've heard of him this was somebody that you'd have heard of if you were 11 or smart 11 but there we were were watching, I mean, a pretty, I thought, quite good guide to the street food of Jakarta. And of course, Thomas has got that on his, on his itinerary, a city I've never been to.

So maybe it's changing. Maybe this is changing. And then there's barley, but that's another story. Yeah. Anyway, I want to pick your brains on history. Going, weaving through the books, the tower and square. you talked about how networks actually elitize society

right and we're seeing that you know we're being sort of like affronted by the age of the internet which has actually caused a bigger divide between a halves and a have knots with AI that we talked about do you see that as potentially further elitizing societies

around the world? The world is not flat. And with all due respect to Tom Friedman, I don't think it's going to get flat. To be fair to him, in one sense, inequalities, material inequalities have been reduced by globalisation. I mean, the world is a less unequal place. And if only because the very populous Asian economies have achieved very rapid growth. So those people who go around wringing their hands about increasing inequality have to come clean. In global terms, it's actually considerably improved since the 1980s. But the interesting thing about the internet and the access that it's given a rising proportion of the world's population to information beyond their wildest dreams at an unbelievably low cost is that it hasn't flattened the world

as much as one might have foreseen. It's only, what, 10 years or so since it was almost an axiom that the internet was good for democracy, bad for authoritarian regimes, everybody was going to be a netizen, they'd all have their own blogs, and it hasn't worked out like that. Why? Well, the book, which oddly enough I gave the wrong title, I called it the square and the tower. And everybody always calls it the tower and the square, as you just did then, which means I gave it the wrong title because clearly the tower and the square is more intuitive. But the idea behind the square and the tower was simple. The technology empowers the square.

That is the realm of informal networks. And it challenges established hierarchical structures. Talking of technology, is there any worse technology than the leaf blower? If I could ban one thing. we can keep that or we can edit that. The leaf blower is a curse. I have raked many a leaf in my time. And raking is an uplifting activity that we should encourage.

The leaf blower is almost without a doubt a bad thing for the climate. But it's also without a bad thing for the sanity of people recording podcasts. The interesting thing about the way the Internet evolved is that it illustrates a central theme of the square and the tower that networks may begin by being decentralized or as they say in the jargon distributed. But they can shape shift shift incredibly quickly into being hierarchical.

And that's what happened to the Internet. World Wide Web was supposed to be a very decentralized layer sitting on top of a very decentralized internet. That was how Tim Berners-Lee imagined it. But he and the architects of the internet before him did not foresee the advent of network platforms that would highly centralize the distribution of information. Amazon, e-commerce, Google, search, Facebook social networking.

In the space of around a decade, the internet got centralization. And that's the surprise. Now, because at Google, they devised a way of making money from Web 2 through advertising, the owners of those network platforms became colossally wealthy, extraordinarily rapidly. And if you were smart enough to buy the stock of the companies early on, so did you. But I think that's the answer to the question. in terms not only of power,

and you have great power if you own a network platform, but also in terms of wealth, because the Internet ceased to be a distributed network, it became a new hierarchy, one that in many ways challenged the established hierarchy of the US federal government, and certainly now co-exists as a kind of parallel hierarchy alongside it. I want to put this in a bigger...

context in terms of liberal democracy. We're seeing the major liberal democracy countries flushed with liquidity. We're talking about what, $90 to $100 trillion worth of liquidity. And it just seems that that liquidity is not being democratized to the rest. And I'm talking about the rest that is hungry and thirsty, not only for capital, but for democratization. With that tie into your hypothesis then, then the more networked you are, the more elitist that you become at the exclusion of many others who actually want to, you know, move up the value chain. And isn't that a mockery?

Is that something that needs to be remedied or can be remedied? I wrote a book called The Ascent of Money, which was published in 2008 at the time of the global financial crisis. And one of the things that I learned in writing that book and learned some more about when I updated it 10 years later was that in a scenario of potential depression, which the world certainly faced at the end of 2008, The remedy of monetary easing, quantitative easing, of zero interest rate policy and large-scale asset purchases by central banks, that remedy had the unintended consequence of rewarding the owners of financial assets. And so the great sting in the tale of avoiding a Great Depression, which the Central Banks did credit to Ben Bernanke and his counterparts, was that inequality was clearly magnified. Now, in a counterfactual of Great Depression 2,

something like 1929 to 33, we'd all have been much worse off. And so it's not really like there was a choice. But in avoiding Great Depression 2, we ended up magnifying what were already pretty big inequalities. I mean, just to illustrate the point, in the United States, the average or median household had seen a complete stagnation of its inflation-adjusted income since 1999. It was essentially the same in 2016 as it had been in 1999, whereas the people in the 0.1% of the income distribution had seen enormous gains through that same period. So I think that's part of the answer to your question. And I don't think there's an easy solution to the problem, so long as a pretty big proportion of the world's population has a pretty big proportion of the world's population has a. no financial assets or indeed no assets at all.

I mean, even the most basic form of property ownership, which is owning your home, is that that's something enjoyed not by a majority of human beings. I mean, but the people who own their own their own homes were made whole pretty quickly after the financial crisis. And so the biggest and simplest problem of all is that most people don't have any wealth. So they don't benefit other than through being employed. and ideally getting paid in some stable currency, they don't benefit from the kind of measures

that we took to stabilize the global economy. But I think there's another point. The democratization of information is pretty real. You could be in a very poor part of Indonesia or for that matter, sub-Saharan Africa. But if you have access to the Internet, then you do have access to a vast library that for previous generations

would only have been accessible to an elite of the world's population. The puzzle to me is why that accessibility of knowledge hasn't translated into somewhat higher social mobility. And that may be because, and here I hypothesize, sitting on the campus of one of the world's elite universities,

that may be because mere access to knowledge is not the same as educational mobility. That is to say, we still structure advancement through knowledge with things called degrees and certificates. Those are conferred by schools and universities and in that sense, access to information doesn't help you if you can't afford to pay the school fees or the college fees. I think that may explain just as well the persisting inequalities

because if it were just about information, that that's been radically democratized. I mean, I've said this a few times in that there is this paradox of how the democratization of information hasn't led to the democratization of ideas. And I think, and I take this from what you've written in that it's largely because of the polarization of conversations. And the algorithms just keep on amplifying narratives that are thick with hatred, anger,

divisiveness. As a result of which, you know, there's not a spectrum of ideas. There's only a polarization of ideas. And that's, I think, what's partly causing inequality. I think one of the other paradoxes of our time is that this lowering of barriers to entry to the public square or public sphere ought to have produced benefits. But in fact, what's happened, and I think that's because of the next, the next, network platforms algorithms and their incentives through particularly the ad-based revenue model to get eyeballs to stay on screens has created the notorious polarization of our times.

And this is something that I deal with in the square and the tower that there isn't a great deal to be done on Twitter, to take one example, with statements of of common sense and moderation. You won't get many followers that way. And I think that's one way in which the public sphere has been structured in an adverse way by the advent of network platforms. And we haven't worked out what to do about that, except sort of vaguely hope that the existing platforms will be superseded by other ones that won't be.

be as bad as opposed to other ones that will be even worse. I spent quite a bit of time back in 2017, 18, 19, thinking about ways to solve that problem and came to the conclusion that in the United States, we'd created not just an engine of polarization, but something worse than that. We'd created giant engines of censorship. Yeah. Because polarization is not really the problem. Look, English-speaking representative governments have been characterized by adversarial systems from the 18th century, if not earlier. And we shouldn't be surprised that American or British politicians say mean things about one another. They were doing that in the 18th and 19th century. And indeed, in some ways, the 19th century was more vehement time in American

in politics than our time. That's not the problem. The problem is that because we have a different set of rules for the internet, as opposed to the traditional public sphere of newspapers, magazines, etc., because we have a different set of rules there, the gatekeepers, the people who run the platforms, have massive discretion to set their own limits as to what is considered legitimate speech. And we see how that has very quickly produced a culture of censorship in the realm of not only politics, but also public health. So I'm much more concerned about this covert restriction of free speech than I am by polarization. I actually think polarizations, a feature, not a bug of certainly Anglo-American democracy. I think if we can't

say certain things on major platforms which have really large penetration without risk of cancellation, we are no longer a liberal democracy. Now, you used the term liberal democracy and I wanted to challenge you. I'm not sure we are a liberal democracy anymore. I'm not sure we're liberal. I'm with you. I'm not sure. I mean, it's going. It's, it's so. It's, I'm talking about, but I don't think we're there. In lots of different ways, the liberal element has weakened. And I don't think this is all the fault of the right. I think there's an illiberal tendency on the left.

And the way in which political discourse now takes place through network platforms has made this problem much worse. And it's hard to even discuss it, because we can't even have a rational retrospective discussion about the COVID-19 pandemic, make a pretty big disaster, which we did not manage well, because in the course of that crisis, the network platforms decided that they would rule on what was legitimate science and what was not. This led to massive groupthink on a whole range of issues. It was deleterious at the time, but what's even worse is our inability to have an honest retrospective discussion

about it. And that troubles me a lot. I worry that that's the thing that's not being addressed as it should be. We should recognize that there were dual failures in 2020, 2021. It was the obvious failure to contain a rapidly spreading and dangerous virus, but we also really failed to allow a rational debate to occur about the problem that we faced. And all kinds of crazy ideas were privileged, even promoted by platforms, and sensible ideas were demoted or simply silenced. And we haven't reckoned with that at all.

And it's now 2023. It's three years since this pandemic began. And we seem no closer to reckoning with what happened than we were at the end of 2020. Would you then be concerned with the possible discount to the liberal democracy by way of the fact that a lot fewer people are learning from the wisdom of the 107 billion people that have died? And the fact that right now, for purposes of attaining leadership, what matters more is sensationalization as opposed to intellectualization? that kind of speaks of the quality of leaderships, right, all across the world going forward. That should be a discount to liberal democracy.

The central idea of Western political thought, going back to the ancient world, revivified in the Renaissance, developed further in the Enlightenment, and then further still in the age of classical liberalism was this. democracy was highly vulnerable to a demagogic leadership, that that leadership would offer the people, snake oil, promises of egalitarian outcomes, the overthrow of corrupt elites, the tearing up of worthless constitutions. All of this is something that the founding fathers talked endlessly about when they were trying to devise a republic that wouldn't succumb to those pathologies. I remember arriving at Oxford at age 17 to read history.

And the first thing I was asked to do was to read L'Anseigneuré and La Revolution by Tockville. And of course, one can't read that. without reading his democracy in America too. That was at first baffling. I remember struggling a bit with those texts, wondering why I was being asked to read them as a freshman. But of course, I was being introduced to these central ideas about the nature of democracy and its pitfalls. And we've forgotten all that. We're right in the midst of one of those classical challenges. So we here have a problem, which is an age-old problem,

which both the Greeks and the Romans understood, which Machiavelli understood, which the great thinkers of the Enlightenment understood, which the founding fathers understood. It's the most basic problem of politics. Democratic regimes will be illiberal at the drop of a hat, because you can always quickly drum up a crowd in favor of, I alone can fix this.

the great message of demagogues through the ages. Trust in me, give me the power, the constitutional constraints are a bore, the elites are corrupt, I'll drain the swamp. And the amazing thing is, we've so lost touch with our roots that a really large proportion of people

don't see how dangerous this is. In the same way that a really large number of people on the left don't see how dangerous it is when Samuel Moyne, an eminent scholar at Yale, writes an op-ed in the New York Times saying, the problem with the Constitution is that it's not democratic enough. We really have to get rid of the way in which the Senate is elected, at the electoral college. Oh, and there's something we need to fix about the Supreme Court, etc., etc., etc.,

which is just as bad. Through the ages, people on the left have said, these barriers to democracy must be removed because they favour elites. And so there are these twin threats from left and right to a constitutional order devised in the late 18th and early 19th centuries to protect individual liberty, to prevent the excessive power of the central government. All of these things. And they play out with an electorate with a population that is essentially estranged from its

heritage. We should be allergic to all this stuff. We should have it hardwired into us that that's a really bad idea. It's a bad idea to have a president who can override the Constitution, just as it's a bad idea to have a Congress that is all-powerful. But these ideas are out there and they get a lot of retweets. I think we're sort of like at risk at the rate that, you know, it's becoming more and more difficult to align talent with power all over the world. I'm not talking about just the developing economies, but also in the developed economies. And at that rate, it's going to be much harder as for anybody to ensure the distribution of not power, but the other essential public goods, be it education, intellect,

integrity, moral value, social value, health care, welfare, because you're not likely to have the right kind of talent in that power pocket, be it the leadership position or the governance. Isn't that a bit of a discount to whatever we've been trying to achieve? I think it's become a commonplace that the wrong people go into politics because the incentives are so skewed. I'll tell a story about a good friend of mine who rose to a position of considerable prominence in a European country. And I remember, I think it was at his wife's 50th birthday party. She complained, you'll never home, we never have a vacation, the money's terrible, you're constantly attacked in the press.

And he said, you see how good power is. that I would be willing to put up with all that to have it. That's, I think, a very good comment on politics in the 21st century. As a vocation, and it becomes a vocation for people, they leave college and they go straight into politics, it has very poor financial rewards. It involves a great deal of disruption to one's private life, if indeed one is left with a private life at all.

And so you would only do it if you really liked power. That is a different dynamic from, let us say, the 19th century dynamic when people went into public life with an ethic of service, often having considerable material comfort already. or if they didn't have that, went into politics because they had a powerful moral impulse to make the world a better place. I mean, I'm sure there still are some people that go into politics to make the world a better place, but one doesn't feel that they are the dominant group, certainly in the developed world.

Now, it's not as if authoritarian regimes do a better job of the dominant group. selecting for competence, never mind talent. The problem in authoritarian regimes is that ultimately the struggle for power leads to the promotion of those who, in the case of someone like Vladimir Putin, are most expert at palace intrigue and the suppression of opposing. So I don't think there's a kind of ideal system that one could turn to. You know, some naive young people in the West say, oh, we can only solve the problem of climate change with authoritarian governments. And my response to that is, have you looked at the emissions from China lately? I think that one solution to the problem is the Swiss solution, and that is to make central government so weak that it doesn't matter that

mediocrates occupy, occupy key roles. The interesting thing is how few Switzerland's there are. Almost all the developed democracies have become relatively centralized states. Switzerland's the only exception to this rule. The United States, if Topfield were to see it today, would appall him because it's become so centralized, just the way that he warned against in the old regime and the revolution. So I think we are stuck with relatively centralized systems with power-hungry people running them. And the only ways that we can check their wilder impulses are through such decentralized institutions as remain.

And that includes the legal system. So the rule of law is key here. And that's why we have to put up with lawyers and recognize the Supreme Court's legitimate. because it's probably the only thing that really reigns in are the power-hungry people who control the levers of power. I'm not an optimist in this respect. It seems to me difficult to imagine how one fixes this.

I have chosen not to go into politics, partly because I wasn't very good at it at Oxford, but also because I'm not sure I would inflict on my children what I see inflicted on the children of those who go into politics. I care for them too much. Maybe I should put the interests of country above their interests. I've never really been able to do that. In a post-truth era, the search for power is a lot more important

than the search for truth. and in the famous words of Leke one you. In the old days, people would go to politics as a crusade. Now people tend to do it for vocation. And I'm not sure we should make politics a vocation. I think it would be much better if we could revert to that old American view of public service as something that you do to give back. I think that still exists in part.

of American life, not least because it's possible to become quite powerful in America without getting elected. And this is a peculiar feature of the American system that allows very talented people who could never get elected to exercise considerable influence. And that sense of public service is one of the more impressive things I've encountered since moving to the United States. I mean, I think here of my late friend Ash Carter, talented scientist, but also a really successful public servant who served as a Secretary of Defense with great distinction. Ash Carter was not motivated by power. I never saw that in him. He was motivated by a powerful ethos of public service.

and that's the best of America. That is the thing that I find really very impressive about the American system. I'm writing the biography of a man who'd never have got elected to anything, except maybe the Harvard faculty, Henry Kissinger, but who became a Secretary of State and before that national security advisor, an extraordinarily effective statesman, controversial, but that comes, I think, with the territory. But without question motivated by a sense of public responsibility.

There is a tendency, and I see this in some of the journalism of the time, to represent him as euphoric, high on power. But that line about power being the great Aphrodisiac is just a joke. And it's one of many jokes that his critics have taken out of context. What strikes me as I write his biography is how incredibly hard the work was. I mean, the work of ending the Vietnam War was just unbelievably grueling. Same for trying to achieve some kind of peace in the Middle East after the 1973 war. You don't do that kind of work purely in order to enjoy power in itself.

You do it out of a sense of some public duty. Your book on him, just that's what makes you a brilliant counterfactual historian. I mean, I would never have thought of him as an idealist. And just reading that book just opens my eyes about the other side that a lot of people. And it's largely, I think, because of the narrative that we've all owned all this time through whatever we've been reading. I want to refer to the article you wrote a couple of days ago on. this fear-mongering about de-globalization and how you countered that argument at, you know, the World Economic Forum and you're alluding to the song Dynamite by MTS. Talk about that.

Well, globalization's demise a bit like the death of Mark Twain. I mean, the rumors of it have been greatly exaggerated. I was invited to participate in a panel on the opening day of the World Economic Forum and divorce, and its premise was that there was a crisis of globalization, that was de-globalization happening. And we were in the midst of a polycrisis. This is an awful word. And of course, French in origin that has become fashionable.

And I revolt against this kind of phony narrative. as an historian. Because number one, you have to show that de-globalization is happening before it's worth having a conversation about it. Two, the term polycrisis implying some some generalized multidimensional crisis that's greater than the sum of its parts seems absurdly unhistorical. I mean, it's 2023. Which year ending in a three? Would you prefer to live in. I'll start with the year of Kissinger's birth, 1923. Any takers? I mean, one can go through it. How about 1933? Any takers? Hey, what about the polycrisis of 1943? And one goes on through the decades, realizing that if the term polycrisis is being used to distinguish our time from any previous time,

It's absurd. You wouldn't choose any of those years over 23. What's being referred to as a polycrisis is just history. Look, we had a pandemic. Then a war happened. Not a World War, a regional war. Pretty bloody one, but by the standards of the 20th century, the war in Ukraine is small.

So I think the polycrisis is a delusion. It's just a kind of journalistic narrative designed to make our times seem more interesting than it is. Oh, wow, we're living in a poly crisis. How amazing. I'm really glad I came to the World Economic Forum. Come on. Let's be serious.

De-globalization. Where is it? Has trade relative to industrial output declined? Or relative to GDP? Has it declined? No. It's flatlined a little bit since around about the financial crisis. But that's trade in goods.

Trade and services continues to grow. And I give the example of BT. a band one of these South Korean boy bands of which I really hadn't heard until recently. I'm more in the classical music or modern jazz departments.

But my 11-year-old son got into BTS and started playing it in the car on the way to school. I always give my children the right to be DJ in the car because it educates me but it also empowers them and encourages them to develop their musical tastes. So he's into

BTS. So we're driving along listening to dynamite and permission to dance. And I'm thinking globalization's in crisis. Okay. And I'm sitting here in a German car, it's a Volkswagen beat, listening to a South Korean band, singing what sounds a bit like Motown,

but their English is so clearly inflected with Asian accents. It's globalization to the max. It's amazing to think that a ban from South Korea can be so successful not only in the United States, but all around the world. And so the more I thought about it, the more absurd this idea of de-globalization started to seem.

I can see that globalization isn't advancing as rapidly as it did, say, between 2001 and 2008. But the idea that it's gone into reverse, I think, is a delusion born of too many headlines about trade wars or tech wars. Yeah, I mean, there's considerable friction between the two largest economies, the US and China. But that doesn't mean that trade between the US and China has declined. Actually, the Chinese share of the US trade deficits exactly where it was in the period before the pandemic. So I think this whole thing is just a case of people writing articles who don't really look at spreadsheets. And I do believe in the data.

I'm kind of ultimately an economic historian at heart. And before I'm really ready to have a debate about any of these issues, I want to see the data. Show me the de-globalization. Where is it happening? and if you can't, then it's like the polycrisis. I would argue in that when the world order was unipolar, it was a lot easier to multilateralize. And we witnessed very robust spike in globalization.

But I don't disagree with you in that as much as the world order would have become much more multipolar. Ironically, it's become much more difficult to multilateralize in a multipolar world. I'm agreeing with you in that it's not a cause for de-globalization, but I think it's just going to be tough to multilateralizing it. I think we have to recognize that Chimerica, which was that economic fusion of the U.S. and the People's Republic, that happened, let's say, around the time of China's admission to the World Trade Organization, though it had been going on before then, turns out to be able to coexist

with Cold War II. So the US and China are in many ways in something like a Cold War with one another, and yet the trade continues. And the investment continues. And so this makes it different from Cold War I, because in Cold War I, the Soviet Union wasn't interested in Western Capital until things got really desperate towards the end. And trade with the Soviet Union was negligible. This is a different setup. And because of the tensions between the US and China on strategic sectors, particularly advanced semiconductors, there will be quite significant reorientation of supply chains. And I think that trend will continue. But it's not as if we're really going to completely bring back manufacturing to the US.

That isn't going to happen. it's going to go to other countries. Some nearer, hence Frenchwaring, but some still pretty far away. And we'll see it, in that sense, I think a more multilateral globalization. It will be less China-centered over the next 10 years.

But the idea that globalization itself is about to be turned off, I think the lesson of the 20th century is that that would only happen if the US and China went to war. I don't think that that's going to happen. One can't completely rule it out. But I don't think it's going to happen certainly in the near future, not least because I don't think that people's liberation army is remotely ready for prime time.

And I think China's leaders remain fairly risk-averse. So in the absence of a 1914-like moment, I think it's fair to say that you can have Cold War-type relations without globalization coming to an end. In fact, globalization, particularly in services, is just going to keep going. Because when you think about it, we're only at the early stages of exploiting all the opportunities created by information technology. We haven't talked about it yet, but I'm very interested in financial technology. In a country like Indonesia, there's still a large part of the population outside the financial system. Who can't really, in that sense, can't really develop economically. In Hernandez-Dissotas terms, they can't really use whatever wealth they have as collateral.

That can all change. And the whole world of finance can become so much more efficient so that cross-border flows, remittances, for example, will start flowing at much lower costs. In that sense, I think we're still on the threshold of a much bigger revolution in the globalization of services and especially financial services than we've yet seen. Yeah.

I mean, if you've alluded to some empirical evidence in that, you know, Apple's production in China has only come down from 100% to 90%. I thought that was a very revealing statistic that the Financial Times published the other day that the manufacturer of iPods and Apple laptops and ubiquitous iPhone, I mean, that manufacturing was 100% in China. And it's now maybe 90%. I mean, that is hardly de-globalization. And it's not like they're doing it in California tomorrow.

it's just moving to mother Asian, mainly Asian economy. One of the reason is that I think the other parts of the world that are supposed to be on short or re-short or French short, they're just not able

to do it. Yet. You know, they don't have the kind of marginal productivity that's needed for anybody to dislocate. I mean, there is no other China. There isn't another China. It's not there in India. It's not there.

in Indonesia. It's not there in Asia for the most part. But that's, you know, that's, I think, an encouragement to Southeast Asia to up its game.

I mean, the opportunity is there in a way that it wasn't before. And I think that will start to lead to improvements and governance

and infrastructure and so on. As those countries see that, that the US corporations in particular are looking for new places to invest.

So this, I mean, my mind is an entirely good thing. I mean, it'll diversify U.S. supply chains away from China, but in the process, it's going to help with the development of the rest of Asia. The owners is on us. I want to go through the globe geopolitically. You started talking about China. You've alluded to the fact that there is an end to the strategic ambiguity. But you stopped short of saying that China was going to end.

invade anytime soon. Taiwan, that is. Is it because of your other reference in that Xi Jinping has been able to show an ability to make a U-turn? Or the war with all is just not there? Or perhaps what he's seen with respect to what's happened to Russia in the context of Ukraine or other factors. Well, it's more than 50 years now since the Shanghai Communique, since the U.S. and China essentially agreed to disagree about Taiwan. And if one goes back to the 1970s, one can see why strategic ambiguity emerged from the vantage point of Mao Zedong and Joe and Lai when they were negotiating with Kissinger and Nixon. It was important to assume. the one China principle and ultimately to stifle Taiwan's tendency towards independence,

but they cleverly made the timeline very long. And from the U.S. side, the price of essentially accepting Taiwan's demotion ejection. from the UN was worth paying if by improving relations with the People's Republic of China you could change the strategic balance in the Cold War

that was a good trade and it's worked fantastically well much better I think than even Kisinger foresaw in that Taiwan has flourished in that ambiguous status it may not be independent

but it certainly functions autonomously it's become a democracy which it sure wasn't in 1972 and it's become one of the most dynamic economies in Asia and if one visits Taipei it's really quite uplifting Chinese people running a really successful democracy what's not to like if that's based on ambiguity and the ambiguity is kind of encapsulated in on the one side

the Shanghai communicate on the other side Taiwan Relations Act where Congress says it will it will not allow the status quoted be changed by force. If that's been the basis for Taiwan's success, why change it? And I don't understand those in the United States who want to get rid of strategic ambiguity. I include Richard Haas of the Council and Foreign Relations to this because he kind of started this with an article in 2020. But it goes right up to the top because on multiple occasions, President Biden has seemed to want to make an unambiguous commitment to Taiwan's defense, just as Nancy Pelosi, the former Speaker of the House, seem to want to treat Taiwan as de facto independent on her visit.

You could say that both sides are rocking the boat, because it's clear that China has repeatedly sent planes into Taiwanese airspace, that China has sought to interfere, certainly sought to interfere in the 2020 election, probably will do in 2024. But I think the US equally has rocked the boat with this pretty blatant deviation from the strategic ambiguity of the last 50 years. This is nuts. It makes no sense for either side to get into a showdown over Taiwan, in particular because it would be the Cuban missile crisis of Cold War II. And in some ways, a more risky showdown, certainly from the US position. because it would be like the Cuban missile crisis reversed.

This time the island's near the other side. Cuba was near the US a long way from the Soviet Union, but Taiwan's a long way from the US close to China. And it's China that would perhaps do what the US did in 62 impose a blockade. They would call it a quarantine, but they would blockade the island. And then we'd be the ones who would have to send the naval force, a very long way indeed, to try and challenge that blockade. in the same way as in 1962, such a showdown would have a real risk of going nuclear.

It's hard to see why the escalation ladder would stop at the conventional level. Everybody who thinks and writes about that scenario knows that however the war plays out, its economic consequences are totally disastrous for both sides. So my message is a very simple one, and I've been saying this for at least two, if not three years, Why do this? When strategic ambiguity has served everybody pretty well, why get into a game of chicken over Taiwan? We only just avoided World War III in 1962. We only just, by luck, avoided it.

There was a Soviet submarine commander who was ready to fire a nuclear-armed torpedo at U.S. naval vessels on the surface. It was just luck that a superior officer was able to counterman the order. Why would we want to play that game of Russian roulette again over Taiwan? So, yeah, I'm going to just keep on arguing for the status quo that served as well. I think it should be the basis for the next 10 years and beyond of cross-straight relations. And all parties concerned, not only the US and China and Taiwan, but also the other Asian countries. Indeed, all American allies should want this. to be kept on ice and not turn into the great geopolitical flashpoint of Cold War II.

You don't see this being an important legacy for Xi Jinping as an overriding variable. He clearly... I mean, at the rate that there's a lot less collective nature of leadership in China. Yeah, he clearly sees this as the capstone or... the most important legacy that he wants to to leave. It's the reason he's extended his term in office as president. And I think that's precisely what makes the whole thing so dangerous. Every time a U.S. legislator goes to Taipei,

you're pushing Xi Jinping a little closer to have. to take action because this is one of his, if not his greatest preoccupation, one of his greatest preoccupations. Now, I don't think judging by his conduct since he became president that Xi Jinping is somebody who's bad at calculating risk. I thought it was very revealing that when it was clear that the dissatisfaction of the population was spilling over into protests, he was ready to jettison a zero COVID policy to which he had linked his name very directly. So he clearly somebody capable of cost-benefit analysis,

and I think this is the key to Taiwan. We have to make the cost of an invasion or blockade prohibitively high to him ex ante. In other words, we need to get our deterrence right. We got it very wrong in Ukraine. Sometimes people say what a great job Joe Biden did with the war in Ukraine. That's wrong. It was a disastrous failure of deterrence. And now the US administration is trying to clear up a mess that I think was avoidable. Well, we certainly don't want to repeat that mistake with Taiwan.

So I think it's important to make sure that the cost of invasion or blockade is prohibitively high. I don't think we're there yet. And I don't think we can dither because I think it's important that this happened fast. But that's really the key. If the cost is sufficiently prohibitive, one doesn't really see him risking it

because the downside risk of failure is absolutely unimaginable. And I don't think he would survive a failure. In fact, I think the regime of the Chinese Communist Party would be in considerable danger if it failed. So, yes, it's important to him, but not so important that he's going to bet the party's future on it.

I want to switch to Ukraine, since you brought it up. You've drawn a symmetry with the war in Finland, 1939. Talk about that. Well, when the war broke out, I wasn't surprised because I had seen on a visit to Kiev in September of, of 2021, the path to war. One could see that we in the United States were not saying the right things that would deter Putin,

that Putin had set his mind on doing this, that Russians didn't regard the status quo as sustainable. So the war didn't surprise me. In fact, my first column of 2022 on January, the second or third, was it began, war is coming, and I predicted a great northern war. I have been very surprised by the resilience and the tenacity and the unity of the Ukrainian people and the effectiveness of the Ukrainian army. I did not expect them to put up such a sustained fight.

And I think I yield to no one in my admiration of President Zelensky, who transformed himself from a political lightweight, former sitcom star, into a Chilean figure. It's been remarkable. However, it is still David v. Goliath in terms of raw resources. And it's only become more so because in the course of nearly a year of war, the Ukrainian economy is contracted by perhaps as much as a third. And the Russian economy by an order of magnitude less. It contracted last year by 3.something percent, according to the IMF. So the odds are still pretty clearly in Russia's favour.

I worry a lot about the Finnish story repeating itself. In 1939, the Finns inflicted a tremendous defeat on the Red Army and the Soviet Army. And thoroughly, in fact, more in many ways than has been true in Ukraine and the past year, thoroughly hammered the invaders. But then the following year, the tables were turned by sheer weight of numbers and firepower. And ultimately, the Finns lost that war. And I've worried all along that something along these lines could happen again, that after year one, when it goes remarkably well, year two could be different. There are a bunch of reasons to fear that, one is economic. The other is just that Western support is not an open-ended commitment

on which Zelensky can depend. It's held up pretty well so far, but not least because the winter in Europe was not as severe as foreseen. I wouldn't want to bet my strategy if I was Zelensky on Western support being consistent and sustained for another year. Having said all that, I don't think Putin, Stalin and his army sure ain't the Red Army. They are struggling not only to raise troops for a renewed offensive, but more importantly, to arm them. I mean, if you're having to import your weaponry from Iran and North Korea, something's gone very wrong with your own industrial base. Sanctions have not been as effective as they were predicted to be, but, they are gradually undermining Russia's capacity to keep its war machine going.

So I think there's another analogy which may be more appropriate. And that's just the Korean War, which was the first hot war, the first real hot war of Cold War I. This is the first real hot war of Cold War II. And maybe as happened then, after a very violent first year, in years two and three, it turns into a war of attrition with lower levels of conflict. and ultimately a kind of fizzling out. Remember, no great peace deal was ever reached, but the fighting stopped and demilitarized zone

was created that exists to this day. I could imagine that endgame here in Ukraine. But it's a very, very difficult thing to predict how this war ends. When a war has lasted six months, its probability of only lasting another six months It's about one and three based on all the wars since the 1800s. And it's pretty clear that this war isn't going to end in February.

So I think it's going to last into maybe next year before the two sides are capable of contemplating compromise. The Ukrainians clearly are not ready even to talk about talks. They want war crimes trials, Putin gone, reparations. those are the things you can only get if you achieve unconditional surrender from the other side. And I don't see how that could possibly be attained by Ukraine, even with increased Western support. So my sense from conversations I've had in the last few weeks is that this war has some way to go. Both sides still think they can win it. There will be offensives from both sides.

It won't be pretty. It's going to have a kind of World War I quality to it in some theatres. And at some point, the exhaustion on both sides will force a negotiation to happen. I just don't see anywhere around that. You know, Jay Powell has increased the interest rate by more than 4% in the last 9 to 10 months. What do you think of the economic argument that this hike in interest rate will make it very costly for the government? and the people. Not to mention the amount of debt that needs to be shouldered, what, a little over

$30 trillion there and about $20 trillion in the Western European countries. Those two are vested in sustaining this, you know, unnecessary war. I mean, what do you think of that economic argument? Well, a terrible mistake was made of both this land monetary policy. in early 2021 at the moment when highly efficacious

vaccines were arriving and the end of the pandemic was in sight both the US government and the Federal Reserve kept pouring

on the fuel and that's why we have an inflation problem and that inflation problem has probably peaked because, belatedly, but having been renewed in his job, Jay Powell decided he'd be Paul Volcker. I mean, he was way late to the party, but once he showed up, he started to get the punchbow out. Now, it's become a commonplace that monetary policy acts with long and variable lags. We'll see how long and how variable this year. There are those who think that

like Sully, the pilot who landed the plane on the Hudson with both engines out, he'll land the plane that will land the economy without a recession but with inflation heading back down towards 2%. I mean, there are people who think he's going to pull that off. That would be a remarkable achievement if he did it. I'm not quite there yet because it seems to me that he could still turn out to be Arthur Burns, who was the Fed chair in the 1970s. Arthur Burns tightened monetary policy. He knew there was an inflation problem, but he just didn't ever do enough

to kill the inflation monster, which kept coming back for more. In the 70s, there were three peaks of inflation. And on the way down, each time it looked like the Fed had done it, only for inflation to go right back up. and I think we're not yet at the point when I can say confidently he's not Burns, he's Volker. He might be lucky and luck has a lot to do with this. If nothing else much happens this year, if this is the quiet year that we've all been longing for, a boring year where nothing much happens,

and although the war keeps going, it doesn't escalate, and nothing goes up in smoke over Taiwan and nothing goes up and smoke over Iran. It's a boring year. maybe then inflation does come down and the Fed pulls it off I still think we probably do get a recession but

one can't really have massive confidence about that there's so much momentum still in the economy and the labour market is still remarkably tight but if something happens and this was the problem for the Fed in the 70s stuff keeps

happening right I mean, you don't need a polycrisis to be clear. You just need something, let's say, you know, we just saw what presumably were Israeli strikes on Iranian missile facilities. You could see more of that. I could imagine more of that. The situation in the Middle East is totally unstable. The attempt to resuscitate the Iran nuclear deal has failed.

Everyone knows it. Therefore, nothing really remains to stop Iran from persistent. suing a nuclear weapons capability if it wishes to do so. The regime has crushed the protests. We spent a lot of time last year cheering on protesters in the streets of Iranian cities. Pretty much all in jail now are dead. So I'm kind of worried about where that ends up, because it's not obvious to me why an equilibrium in the Middle East would exist under these circumstances. And of course Israel now has in Benjamin Netanyahu, a prime minister who has made his life's work to prevent Iran becoming a threat, a real threat to Israel.

So a lot depends on things that J-PAL doesn't control. The idea that FOMC sort of sits there with all the levers at its disposal is quite wrong. They are at the mercy of events just as they were last year, beyond their control. And that, I think, will determine whether he's Burns or Volcker in future history books. If he's lucky, he probably is the second Volker. Unlucky, second burns. I actually wanted to ask you if that has any bearing on the length with which the United States

and Western European countries would sustain the war in Ukraine at the rate that interest rates are creeping up. What's interesting about the interaction of monetary and fiscal policy is the nasty fiscal arithmetic that I remember Robert Barrow writing a paper about many years. years ago. And the fiscal arithmetic is very nasty as you raise rates with the maturity of the federal debt relatively short, quite quickly borrowing costs for the federal government soar. It's quite conceivable that this decade, the federal government will be spending more interest payments than on defense. And I've always said, I've been saying this for 20 years,

your empire's in trouble when the debt service exceeds the defense budget. So we're kind of get there, I think, the way things are going. Now, we know from Japan that the central bank can do a lot to limit the risk to government by simply buying the bonds. And it wouldn't surprise me if at some point along the way, we have to give up the quantitative tightening and the Fed balance sheet starts to creep upwards again because ultimately the Fed ends up in yield curve control. I mean, that wouldn't surprise me because the debt management issues are very real if you carry on down this path of reducing the Fed's holding

of bonds and keeping rates high. And I know there are people out there who think the Fed's going to cut rates later this year, but I would not, you know, I wouldn't bet my hedge fund on that if I had one. So this is, I think, the thing to watch. Remember, the midterms were a big disappointment for Republicans, but they do control the House of Representatives and with a pretty measly thin majority, which empowers, you've guessed it, precisely the people who are fiscal hawks

when there's a Democrat in the White House. They're not fiscal hawks when there's a Republican in the White House, but they are fiscal hawks when there's a Democrat in the White House. And that means that we're already hearing from Kevin McCarthy, the new speaker, about all the ways in which the House Republicans want to constrain spending. So there's going to be a squeeze on fiscal policy of a political nature.

All of this is going to make the debates on the debt ceiling both familiar, because we've seen this movie before, but also different because this is a much more dangerous environment to play around with the creditworthiness of the federal government. So watch this space. It's going to become more and more of a source. story in the coming weeks and months. And this is where the bond market, my old friend, re-enters the fray. I mean, this was James Carvel's great line way, way back in the 90s,

that if there was reincarnation, he wanted to come back, not as the Pope or the Queen of England, but as the bond market, because it really rules. Well, it's been kind of asleep. Yeah. Through the past couple of decades. It's going to wake up soon. I can hear the stirring, I can hear the stirring bond market. The last geopolitical question I have is, with respect to South China Sea. I mean, you kind of expressed optimism with respect to Taiwan. Would you be more optimistic about the South China Sea?

Well, it depends what you mean by optimistic. I don't think... I mean, less probability of friction. I think that the US does not have a good way of stopping China, militarizing the South China Sea. Yeah. because to stop the building of air bases on islands there, you'd have to do something.

And while the US Navy is happy to do freedom of navigation operations, I don't think anybody is about to go and lob a missile at a military installation in the South China Sea. So I think China has established its ability to construct facilities there pretty much with impunity. The roles are reversed in the case of Taiwan where I think China would be having to fire the first shot if it really wanted to enforce a blockade. So I wouldn't say I'm optimistically because I think the US allowed China to get away with not murder, but with large-scale militarization of the South China Sea. And I think that's just going to continue. I think what we see at the moment is an uneasy equilibrium where both sides realize they should dial it back

because neither wants a major confrontation over Taiwan or the South China Sea for that matter. So it feels as if 2023 ought to be a relatively quiet year in U.S.-China relations. Wolf warrior diplomacy is clearly off. People who are associated with it are in the mail room at the Chinese Foreign Office these days. And about that I'm relatively optimistic. optimistic. On a more serious note, you're a fan of Arsenal. Much more serious. Talk about Arteta as compared to the great winger.

Well, I'm a Scotsman, so I didn't grow up supporting Arsenal. I only came to Arsenal after I had lived in England for a while and realized that if I was going to raise sons right, I had to have a football team for them to support and we alighted on Arsenal as the, as the Wangar era was waning and his powers were fading. And so we've had a painful, well, it feels like a decade of relative decline, vanishing from the champions. We should be rewarded for being patient. Well, we Arsenal fans have been patient and we now are being rewarded by a remarkable transformation.

that Artetta has brought about since becoming manager, it's been fascinating to watch the making of a team. I'm fascinated by teamwork. I think the essence of leadership is knowing how to build teamwork and knowing how to hire talent that doesn't have so much ego that it can't slot into the team. In the business world, one of my heroes

the subject of an earlier book Siegman Warburg understood this very well and Artetta gets this too he's turned it into a team again instead of a collection of more or less talented stars and watching that teamwork in action is deeply impressive to me

will it be enough to get them to the premiership to win the premiership I'm not going to be overconfident here I don't want to jinx it I also sense that Manchester the city are a formidable, formidable rival, and it's not over. And it's, it's, it's, it's, it's going to be a very stressful time for us, Arsenal fans. Can we hang on to that lead? I mean, I'm already

checking my calendar for the date of the city fixture. Three more days. Well, there are only five points ahead. It's not enough. It's not enough for anybody's, although they've only played 19 matches. It's not enough for anyone to relax. But this is the respect to perhaps close our conversation in which history is more like football than it is like literature, fictional for that matter, drama. One does not know, one cannot know, what the outcome will be of any season, of any game. It's fascinating, isn't it, to see the FA Cup play out, Arsenal gone. A classic near-giant-killing moment for lowly Wrexham against Sheffield United.

And I love that unpredictability about the game, particularly the game in England. I mean, come on, we know who's going to win in Scotland. We know who's going to win in Germany. It's quite boring, actually. But the Premier League remains extraordinarily interesting because it's so competitive. It's not that long ago, 2016, that Leicester won the Premier League. So I'm fascinated by uncertainty. Most of us want calculable risk.

We want to have a kind of sense of where the future is going to be. But you can't have it. There's much, much more uncertainty in our daily lives and in the historical process than we're comfortable with. Nobody understands that better than a dedicated football fan who is loyal to a club. Because you just know 90 minutes of agony could culminate in ecstasy. it could culminate in crushing disappointment. And we live that sometimes twice a week through the football season.

It's a great preparation for understanding the historical process. Anybody serious about history should follow the Premier League very closely indeed and realize that an awful lot of what we call history has the same, the same agonizing,

the same agonizing uncertainty. The days of, of perennial dominance are gone. To what extent would you attribute that to the abundance of money? Right. Well, people can follow Arsenal or any of the top Premier Leagues all over the world without ever setting foot in London or Manchester or Liverpool. I grew up a fan of a different sport, rugby union,

which has a far, far smaller pot of gold to play with. and indeed was largely an amateur game in Scotland when I was growing up. And part of me has nostalgia for those days of amateur sportsmanship when the Scottish rugby team played really for nothing more than love of the sport. They certainly weren't getting paid for it back in the 1970s. But we have to recognise that football has always been a professional game. I mean, 100 years ago, people played with the round ball for money. And the advent of really big money, which has, I guess, been a future of my lifetime,

has changed a great many things, including the quality of the football. I mean, it is quite sobering if you're used to watching Arsenal to watch a non-premier league game. It's terrible. It's more like watching my son's 11-year-old team. play. So the best football is very, very, very good. We probably saw the greatest football game of our lives in the World Cup final. I've certainly never seen a better game than Argentina, France. That had everything. And it had everything because it had such staggeringly good players. So as long as the big clubs can afford the best players and pretty much the top five or so

can, I don't see how one side could be dominant for very long. You're one signing away. from having the edge. And that's course why it's the transfer market that's in today's news. Is it, you know, cognitive dissonance is the essence of human life. And the psychologists were wrong to think that cognitive dissonance would make us ill. We live with it all the time. At Davos, woke capitalism, but secretly nobody believes in it. And in the Premier League, we think of our football club as,

kind of almost a national allegiance. And yet they're mercenaries. And they're bought and sold. And they have a life. What is the lifespan of a first team player in the Premier League, two, three seasons? I mean, so cognitive dissonance. We love the club.

We sing as if it's a kind of second country to which we belong. And we're really watching a bunch of mercenaries, highly paid mercenaries, with the lifespans of mayflies. No loyalty. Ultimately. Loyalty to the money.

It's, it's, the loyalty is there amongst the fans. But you, you know, the illusion is that the players have that same sentiment. And maybe Artetta's skill has been to create a genuine commitment on the part of the players. Erdogard seems to have that. And I think most of the key players do, but, but we shouldn't delude ourselves. What we're watching is a business, a very good business. It provides wonderful entertainment. But, you know, at least if we try to understand modernity,

I was in Rome in the fall with my younger kids, showing them the Coliseum, we should just remember that part of the nature of modernity isn't modern at all. the bread and the circuses are still a big motivation, a big source of satisfaction to us. We can endure, and they're having to endure in Britain, quite a lot of disappointment if we've got Saturday to look forward to. In that sense, we are quite Roman. We talked earlier about the threats to democracy. And I think, you know, we have a lot to learn from the ancient world as we sit.

in the Emirates watching Arsenal play. We're not that different from the ancient Romans. And this is the last thing I want to say. The reason that history is worth studying is that while technology changes, human nature doesn't. We can understand the Romans.

We can understand Shakespeare. We can read texts from centuries ago and we understand them. Because they're about things that don't change even as technology changes. The nature of power. what it is that entertains us, what it is that seduces us, love, fear, death, all of those things are perennial, and that's the best argument for writing and reading history books.

Well, I'm going to pray and burn candles and sin so that Arsenal stays like this for a good while. Well, I'm not sure how far prayer is really going to decipher this. It's all really about whether Harlan gets injured between now. Yeah, or Osaka. At the end of the season. Thank you so much, Neil. It's been a fascinating discussion. Thank you.

That was Neil Ferguson from the Hoover Institution. Thank you. This is end game. Certainly not for today. No, unless you go to New Zealand, thing in great beauty and a beautiful thing I mean are they silk I don't know it's like the best diving spot in the world I think January January or if you want to see the dragon commoda dragon yeah that's in July August okay I'll run it past the family board thank you