Sir John Major’s Speech at the Cambridge University Leadership Forum – 22 September 2008

Below is the text of Sir John Major’s speech at the Cambridge University Leadership Forum, held at Addenbrooke’s Hospital on Monday 22nd September 2008.

SIR JOHN MAJOR:
In life, change is relentless – and usually irreversible.
That is certainly true of most economic changes over recent decades: not all of them comfortable to our Western prejudices. Here is an irony: first, the West won the philosophical argument for capitalism and free markets: then, many of those whose ideology was lost have ended up benefiting more from free trade than the West.
In the Industrial Revolution, it took Britain and America fifty years to double the income per head of their population: China has done so in ten, and others are set to do the same.
Today – for the first time since 1820 – most of the world’s growth comes from the East. As growth in the Western democracies nears technical recession, much of the rest of the world will continue to grow at between 4-6%, both this year and next. There are no obvious signs that this gap in relative performance will narrow – at least for a long time.
Nor can we comfort ourselves this is simply a phenomenon based on low-cost manufacturing, the demand for raw materials and the capture of a few niche markets. It is far more substantial, not least because technology now enables the export of professional services – tax, accounting, legal services financial analysis, knowledge-based advice – that once seemed the prerogative of the high-cost economies. As an educated middle-class grows in Asia, Latin America and the Middle East, such exports will grow. Something fundamental has changed with globalisation and – more rapidly than we imagined – we are now in a more competitive world than was ever anticipated.
This hasn’t happened because the West became careless – or degenerate – quite the reverse. Not only did the West win the argument for the free market, but Western science put rocket boosters on it.
The moment in 1958 that Jack Kilby invented the integrated circuit – the semi conductor chip – we were in a new world: nothing in the 20th Century has so accelerated change. That circuit was the forerunner of silicon chips. It led to the computer revolution. To the Digital Age. Without them, there would be no Internet; no Google; no – well, the list is endless.
Similarly, spin-offs from the space race have given us global communications, satellites and – less happily – missiles to carry nuclear weapons. The revolution continues – still powered by the West: it is more likely than not that there will be further unexpected advances as a fall-out from CERN’s remarkable experiments with the Large Hadron Collider. Media fears of a “Black Hole” that would devour us all have evaporated – unless, of course, that is where some of our banks have disappeared to in recent days!
But science has not only changed how we live: medical science is changing the quality and length of our lives. A hundred years ago, no-one knew of blood groups, hormones or barbiturates. Since then, the impact of medical advance has been bewildering.
Synthetic Biology has brought science and engineering together to design and build biological functions. New technologies are delivering new and better drugs to combat disease, promoting genetic engineering, healthy food, better pesticides, the control and destruction of pollution, and advances in forensic medicine.
Scientists are examining how to combine computer chip technology with pharmaceutical research to target drugs to treat specific parts of the body. Imagine – for example – chemotherapy with only minimal side-effects.
A handful of commercial applications are apparent already: nano technology has revolutionised aspects of dentistry, dressings for burns, better sun screen protection. As a layman, it seems to be unbelievably complex: once I learned that one human hair is 80,000 nanometres wide, I realised this was a subject with a potential that is almost impossible to circumscribe.
Nano – and bio technology are changing our lives: advances in engineering techniques have given us insulin pumps for diabetes; cochlea implants for deafness; and there are realistic prospects of repairing nerve cells for those suffering from Parkinson’s and Alzheimer’s disease. It may soon be possible to replace heart muscle cells. These are developments undreamed of until recently.
As science powers ahead there are two consequences we Westerners would be wise to acknowledge.
First, the large financial resources of the developing world enable others – notably the oil wealthy – to exploit blue-skies research: the Gulf, for example, is about to pour billions into the research and development of bio and nano-technology. And – more fundamentally – scientists expect their colleagues in the East to gain parity of science with the West within three decades.
So – economics has changed – science is changing – and so too, is politics.
Fifty years ago, no-one could have predicted the present social or geo-political landscape.
The Soviet Union and the United States were the two super-powers. China was isolationist and something of an enigma. Japan had barely begun her post-war rise. Central and Eastern Europe fell under Soviet control. Germany was still divided. Latin America was a continent of revolutions. The EU was in its infancy. Much of Africa was still colonised. Oil was $3 a barrel and no-one imagined an Islamic Revolution.
Nor did we focus on two socio-political problems that are affecting our world, now and in the future, but which – because of their slow impact – can too easily be relegated to second-order importance: population growth and climate change.
I know that many regard these issues as marginal: a playground for the liberal thinker; easy to put aside. I don’t agree: if we continue to ignore their impact, we will leave a legacy to future generations for which they would be right to condemn us.
NATIONAL RESOURCES AND POPULATIONS
In the last fifty years, the population of our world has grown from less than 3 billion to over 6.5 billion. Most of this population increase is very poor.
It is hard to imagine the disparity between their life and that of someone in our own society – even if that someone were on the lowest levels of social support. Their lifestyle is lamentable: 3 billion people live on less than $2 a day.
Here is a cruel irony. As some nations grow and improve their own living standards, they drive up food prices to the further detriment of even poorer nations. The arithmetic is not complicated: if one billion Indians – one-sixth of the entire world population – together with millions of Chinese, Brazilians and Malaysians – now eat two meals a day, instead of only one, the demand for food soars.
That puts up prices – provoking panic and moving the politics of food to the front burner of controversy. The days of cheap food are gone.
The rich nations do much to help – and have pledged to do more, although many nations have not lived up to their promises. It cannot be right that both Europe and America spend broadly seven times as much on agricultural subsidies alone as the whole world donates to help the poor. Consider that: seven times as much on providing subsidised food for those already well-fed as the whole world spends on all the needs of those who often are not fed at all.
This statistic is even more bizarre when you realise such subsidies cut away the chance for poor nations to sell their agricultural produce – often their only export – into developed markets.
Now, factor in future growth. Between now and 2050 it is estimated world population will grow to 8 or even 9 billion. This is the equivalent of absorbing two more nations the size of China.
The implications for every human are staggering. At its most basic, let us recognise that the world will need all the food we can grow – even if Australian harvests recover from a ten-year drought, and Ukraine and Zimbabwe once again become the agricultural producers nature designed them to be. If Europe were brave enough to reform its agricultural policies, it would be a truly wonderful signal to the world.
CLIMATE CHANGE
Many opinion formers see climate change as an optional policy, too – but I can’t agree: hard-to-ignore science warns us that the long-term risks are real. Anyone who visits China regularly would be likely to agree: last year, China built 100 coal-fired power stations and her sky is hidden behind a fog of pollution. In some cities – simply breathing is a struggle.
Coal, oil and gas are going to dominate energy supply for decades to come – irrespective of any advances in solar energy, advanced bio-fuels, fusion and other renewables.
Since this is so, the first priority must be to develop carbon capture and storage before it leaks into the atmosphere. And then we need to store it where it is safe – probably for centuries.
As dioxides rise, scientists warn of global warming of up to five degrees: this sounds small – but isn’t: in the depth of the last ice-age the temperature fall was – five degrees. However, a single figure is utterly misleading: the land warms more than the sea and high latitudes more than low. So the impact of global warming is not uniform. Nor is it localised: innocent non-polluters may suffer – and the guilty may not.
There is much we don’t know. Climate scientists are not able to predict where the flood, or hurricane, or drought risks will be, which does not make it easy to persuade the polluters to stop.
Nor do the time-lags: the main downsides of global warming lie a century ahead. It takes decades for the oceans to adjust, and centuries for ice-sheets to melt. For all its uncertainty, climate change is a challenge we should not, dare not, ignore.
POLITICS
Politics offers too many challenges – and changes – to examine this evening. But let me say a broad word about future foreign policy.
We worry about Iraq, Iran, Arab-Israel and the stability of the Middle East – but often, it seems we let these concerns get in the way of credible policy.
We talk sometimes of the Middle East as though it were one problem – which it is not – and without looking at history in order to understand the roots of conflict.
In its diversity, there are tensions between Christian, Muslim and Jew; Arab, Persian, Kurd and Turk; Shia and Sunni; between Monarchies and Republics; Secular and Islamic societies. Some countries have oil, some not. Some are large, others small.
The Middle East embraces nations in which references to the Prophet Mohammed, or the Old and New Testaments, are part of everyday language. For some – the Salafists – Islam was perfect when Mohammed founded it and cannot be changed or improved.
It is a cauldron. It is not a liberal democracy.
We – in Europe – choose democracy. Others – China, Russia, much of the Middle East, Central Asia and Africa – seem to accept, even welcome, a form of autocratic quasi-democracy, accompanied by an authoritarianism that relegates social expenditures below the need to enhance competition.
As we go forward, the West will need to take account of this. We cannot – other than by example – presume to impose our own democratic system of government – which has evolved over centuries – on others with their own histories and cultures.
Often we conflate Islam and fundamentalism: and yet fundamentalism is a perversion of Islam, that threatens it as much as us. Bin Laden hates the Saudis even more than he hates the Americans!
It might be a good time to recalibrate foreign as well as economic policy. We have a political genius for compromise – for bringing together competing ambitions. It is a gift of value, and one we should use to maximum effect.
RUSSIA
Not least with Russia. For generations, the Soviet Union was the enemy: the Warsaw Pact and NATO pointed nuclear missiles at one another and a Cold War froze relationships.
Then she imploded. The rump of Russia imploded, too. Then, oil wealth became Putin’s Aladdin’s Cave: a basket case economy became the sixth largest in the world.
Now – post Georgia – there is fear of a new Cold War as the Russian Phoenix flexes her muscles.
It is arguable who started the Georgia conflict: unarguable that Russia over-reacted. Now the world must deal with the political dilemma. Over-reaction may provoke Russia. Under-reaction may encourage her into more adventures. It is a fine balance.
How should we react? We can’t be blind to Russian misbehaviour, but – for the time being – I believe we should leave the response to the diplomats – not least since the financial markets have already delivered an unmistakeable message.
When Russia interfered over Yukos, Shell and TNK/BP, her own stock market suffered badly. Then came her incursion into Georgia.
(i) In one day the market wiped US$ 16 billion off Gazprom, and US$ 6 billion off Rosneft (State-owned oil company).
(ii) In one week, FEX reserves fell by US$ 16.4 billion.
Post Georgia:
– Hopes of a rally are low.
– Investors are wary.
– Russia is finding it difficult to raise capital overseas.
All this may give Russia pause to think and – while she does – those who wish to chastise Russia might also bear in mind that – as a nation – she is indispensable to:
– Action on climate change.
– Hindering drugs from Afghanistan.
– Preventing Iran from getting the bomb.
CONCLUSION
My theme has been that – in order to frame future policy – we need to understand changes in a world re-shaping economically, and re-balancing politically.
Inevitably, there is much I have not touched upon: the high price of oil that will give Sovereign Wealth Funds an extra US$ 1 trillion to invest for every year the oil price stays above US$ 80 a barrel. Nor have I touched on the risks of nuclear or biological terrorism. Or the insecurities created by the arc of uncertainty from Syria to Pakistan.
All these will create headaches for modern governments, but let me add a little balance: despite the economic downturn, we have just enjoyed fifteen years of high growth – hundreds of millions have been lifted from poverty.
One advantage of global markets is that investment across nations minimises the risk of wars. Science is raising the quality of life. In the last forty years – since 1968 – life expectancy has risen faster than in the previous 4,000 years.
China and the US have huge inter-locking economic interests. (I never thought I’d see China fund America’s deficits). Japan and China are beginning to repair old scars. Democracy is expanding. And Africa is growing faster than at any time in our lifetimes.
Sometimes, I think we should be more self-confident and more aware of what has been achieved. We should not fear change.
In a preface to some famous essays, Sir Francis Bacon flatteringly observed to his Patron that “You have planted things that are likely to last”.
So have we – in our own time. The Free Market. Democracy. The English language. All gifts from the West to the world – with Britain a principal donor.
Through all our history, change has been our ally: if we embrace it in the future as we have in the past – it can be so again.