universities joseph nye argues that while there's a lot of talk about china replacing the united states as the supreme global power in the near future america's military economic and soft power will continue for decades to come. [applause] >> thank you john. it's nice to be back at sis. it's an organization that i deeply admire and only exceeded by my admiration for john hammer hammer -- john hamrick who i have worked for is one of his trustees but also the defense policy board so i appreciate your being our host, john. let me say a few things about the argument in the book but i don't want to go on for too long partly because professors go on too long anyway but the most fundamental reason to have questions back and forth so if i'm too verbose john stop me. i think the question of what the american century is over is one that has intrigued a lot of people both here and in china. there is a conventional wisdom that china is going to surpass the united states and the american century. in fact if you look at a book by martin jock, a british author the title tells it all. it says when china rules the world or my harvard colleague neal ferguson says, the 21st century is the chinese century. a little bit earlier this year about a year ago i should say the financial times had a headline which said that this was the year in which china had passed the united states. i thought these ideas were wrong and part of that is what is in the book, to try to understand what the world would look like in 2041 which is 100 years after henry ruse made his famous aqua mission of the american century. so if you look at this, you can ask why bother? who cares who is number one? some people take this position but the danger is if you don't understand power relations, if you make mistakes you think you are stronger or weaker than you are you get policy draw and there's a long tradition in thinking about international relations which says that when a rising power creates fear in an established power that's the source of great conflict. this of course was the famous explanation that the cities gate for the peloponnesian war which was the event in which the ancient greek city state system tore itself apart. it seems to be the center of the ancient world in the mediterranean. this visit us he said it was caused by the rise of the power of athens and the fear that created, the spartan and many people said last year as we were celebrating the 100th anniversary of world war i one one.world war i in which the european state system tore itself apart and ceased the global power was -- the rise of germany and the fear created in britain. much too simple if you of the causes of world war i but it does indicate that when countries make mistakes about power relations are don't understand them you can have major consequences. there is a view expressed by some such as josh mearsheimer at very distinguished political scientist at the university of chicago that says that china cannot rise peacefully that china and the united states are likely to have a conflict. if so that is very bad news for our century. it would be extraordinarily disruptive and so the question of whether it's right that china is about to pass the united states and the american century is of more importance than just a matter of national pride. now, let me start by looking at this question of whether the united states is in decline. one of the problems with the word decline is that we don't know what is the yardstick or what is the measure. people talk about it all the time but if you look at a human organisms such as me, i can assure you i'm in decline. we rarely last more than 100 years but if you look at a social artifact which is what a country is, we don't know what a lifecycle looks like. there was a famous british statesman of the 18th century who after britain lost its north american -- said woe to us we are now reduced to a miserable little island like sardinia and he said this just on the eve of britain's second century which is fueled by the industrial revolution. so when people say the united states it's over and so forth how do you know? what is the lifecycle of the country and what would you know when you thought about decline? just to give you an example how very impressive thoughtful people can even get it wrong henry kissinger and richard nixon often cited as the most thoughtful statesmen we have had in terms of understanding the big picture in 1968 70 or so they thought the united states was in decline and that the world was becoming multipolar. they talked about multipolarity all the time. of course by the end of the 20th century the world with unipolar, not multipolar. what happened. [inaudible question] a bigot ron? for one thing the united states began and ended the 20th century with about a quarter of the world's economy. in between after world war ii we went up to about half the world's economy because world war ii strengthened the united states and weakened everybody else. so from the period from 1945 to 1970 indeed the u.s. share of world products went from nearly 50% back down to 25% and so in that sense as kissinger and nixon looked at it, it was indeed in decline however they extrapolated that curve as though it were going to continue and in fact it didn't. what it did is it flattened out and stayed at 25%. in that sense there few that we were in decline didn't reject the way the century is going to end so even very astute observers can make mistakes on this which is a rare mind her that i too may be mistaken what i'm saying that it helps to be self-aware as you make your mistakes. so i'm just warning you. now the other problem with decline of course is that it's a confusing term in the sense that it prefers refers to absolute decline or relative decline. and they are not the same. for example ancient rome was absolute decline. rome didn't succumb to the rise of another empire. it succumbed to hordes of our variants and the recent it succumbs to barbarians is because it had no productivity in its economy and because it had entered in a scene warfare. they were actually killing each other for power. we may be gridlock for power but we don't kill each other unless you watch house of cards. now in that sense, the argument that people make that the united states is an absolute decline has to be measured against the facts. if you look at the facts demographically we are the one rich country which will hold its position as the third largest country by the middle of this century. all the others europe, russia japan and so forth will be diminished in their demographic footprint. in energy which everybody said a few years ago we were becoming hopelessly dependent on imported energy the iea now the international energy agency says now in north america made the having no oil imports in the 20s. if you look at research development and new technologies you look at the technologies that are going to be the most important in this century. let's think of biotechnology nanotechnology and information technology 3.0. the u.s. is generally in the forefront of all of these. if you look at the universities underlying technologies and the look of the rankings that are done by let's say shanghai university, just so it's not a biased american view of the top 20 universities in the world, 15 are american and if you look at the nature of the culture in which this is embedded in entrepreneurial culture with a rich capital market which can take ideas and spread them into commercialization quickly it's hard to beat the united states on this. so these comparisons of the united states with ancient rome as though we are in absolute decline, i don't think it makes any sense. what is a little more interesting is the idea of relative decline and in that sense, we ended the 20th century with about a quarter of the world economy and the imf, the international monetary fund now projects that the united states will probably be somewhere like 18% of the world economy by the 2020s. projections like this are somewhat inaccurate but if that's true it would indicate some degree of relative decline. you could also though reframed that i sing it's the rise of the rest. it's the rise of china, india brazil and indonesia and so forth and part of that has been an objective of american policy. so whether it's relative decline for the rise of the rest, it's still going to leave the united states as the largest of the major actors and if you think about the role of the larger state in terms of leaving in the production of public goods the united states will still be crucial for that. so this is a prelude, this clarification of what absolute relative decline may be. it's a prelude to the question of will china pass the united states and thereby end the american century? if you try to judge that, it's worth noticing that very often when people make these projections, they make the projections based just on extrapolating the growth rates of gdp, gross domestic product. and that's not a very good way to calculate it. because it's not at all clear that chinese growth rates are going to stay that high. in fact they are probably going to diminish. but the point is that even if you do take these projections you have to ask if you are talking about passing the united states in power you have to ask about all three dimensions of power and power involves both economic power and military power which i lumped together as hard power and soft power, the ability to attract others and get what you want through attraction and persuasion. and let's look at each of those interned but let me spend most time on economic power because that's the one that gets the attention of the headline writers such as the people who put this on the front page of the financial tame -- the financial times a year ago. probably the financial times headline was done in something called purchasing power parity which is a good measure of welfare but not of power. you don't import oil for jet engines and purchasing power parity. you reported in the exchange rate for dollars. and even so, at some point if china with 1.3 billion people growing at some rate above 7% or around 7% doesn't stumble and if the united states with 350 million people and growing at about 2.5% doesn't stumble you would expect the lines to cross but at some point probably in the 20s. china will have a larger overall economy than the u.s., measured by exchange rates. now not everybody agrees with that. for example charles was an economist at brand has recently come up with an estimate in which he says chinese growth rates are lower. u.s. growth rates are higher. he says china won't pass the united states until 2050. i don't know. these are disputable estimates and when you plug in your estimates about growth rates you'll get the answer you want. but the point is even if china has a larger economy than the united states, let's say in the mid-20s, in gross domestic product the size of the market is only one measure of power. it's an important measure of economic power. if i have a big market and i'm trading my view and i deny you access to the market as the chinese did to the norwegians over leo shall bow -- obviously that's power but it's not the only measure of power for economic power. you also want to know about the sophistication of an economy and that is better measured by per-capita income. per-capita income, the chinese are only 20% of the united states. even when they pass us overall in terms of total size of the economy they won't be anywhere near us in per-capita. you can say what does that mean sophistication of an economy? one illustration of it is to think of the thing that most of us carry in our pockets this thing to say what's did we pay for this? the cost is probably about $700 here for the iphone and then you say where is it made? well, made in china and then you say albright how much of the $750 as china get? the components are probably for malaysia and taiwan and elsewhere. the royalties for design are american. marketing is american. it turns out china gets only a few% so we imported product that trade statistics show this is 750-dollar imports from china. in fact with value-added it's really mining chinese labor to put together components and design and ideas from elsewhere. so it's not surprising that chinese sometimes complain that they are very good at producing jobs but not steve jobs. someday they will and they are working on it now. there are some japanese entrepreneurs jack bass case in point by that as of yet their economy is not as sophisticated as ours. another example of this would be money. people say look china has $4 trillion in reserves. this means china is going to dominate world currency markets. not at the money is not convertible and not if there aren't deep and rich and liquid capital markets and not if you have to worry about political interference of those markets. so if you say do you want to hold chinese wand or dollars china has been making a major push to clear more trade but it's only seven or 8% whereas the dollar is over 80%. the difference is that people feel that there is a sophisticated financial markets and they rule of law i should add behind the dollar which there is not yet behind it -- someday there will be but the argument that this economy is equal to the other economy if you don't think about sophistication in the economy you are making a mistake. i could go on with that but i would simply note that to take us back to an earlier point, that this projection of china having a larger market than the u.s. by the 2020s depends upon a high rate of chinese economic growth. and there is a questionnaire which is if you take previous countries that have had high rates of economic growth where japan had 10% economic growth at one point, if you take those countries overall and you ask how long does it take to return to modest rates of economic growth, harry summers did in estimate in which they looked at this experience of other high-growth countries and their estimate is that china would grow at about 3.9% just on the statistics, not any particular things about china in the next decade. some people think that's too low. others think it's too high but what's interesting is that the projections that we have of the chinese officially now say 7% of those is the new normal, i don't think so. i think it's going to be lower than that. in addition to that problem you have the problem that china faces in terms of democracy. because of the one-child policy china's workforce, for labor force come is picking and you were having more people in the next decade who will be either very old or very young and the number of workers to support them goes down. that leaves the chinese to say that they feared they may grow old before they grow rich. yet another problem that they face is that they need to change the growth model. the export led growth which has been very successful for them so far has to be replaced by a more domestic consumption oriented growth and they have to get away from imitating technology whether it's stolen or purchased, and begin to develop the capacity to develop their own technologies. and they are making progress on this. they still have a long way to go. if they are not able to do that then they will run into what is sometimes called the middle income trap where essentially they do with very well up to a point but to get beyond that point they have to develop this indigenous capacity. xi jinping talks about this. he says we have to make sure we don't fall into the middle income trap. it's easier to talk about it than it is to implement the policies to do something about it. and then finally china has a problem as we make these projections ahead of how is it going to handle the difficulties or issues related to political participation? we know that when economies and societies reach a per-capita income of around $10,000 per-capita that they are increased demands for political participation. if you are india you are poor but you also inherited from the british a constitution which gives you a design to solve this problem. china hasn't a care that how you solve this problem and i'm sure they would like to have good answers but they really haven't. not only xi jinping nozzie answer to this. as we project ahead they are not only statistical points i look at but there are also a lot of unknowns. when people say that china will pass the u.s. in economic power i say maybe. i doubt it. if you turned into military power, there you find that the u.s. military expenditure is four times chinese military expenditure and if you take the king elated capital goods, what we have purchased in the past, the ratio is more like 10 to one in the american favor. now china is investing, it's increasing its military budget in double digits for over a decade. this means that it is increasing its capabilities. they are probably going to show up primarily at first in regional capabilities rather than in global capabilities. so the job that the u.s. navy has two protect allies and to have a presence in the south china sea and the east china sea is becoming more difficult. not impossible but more difficult as the chinese capability grows. that is china going to be a military power to rival the u.s. globally, not very liked way. another way of thinking that this is that china is going to be importing more of its oil from the middle east as the u.s. imports less and it's going to worry about sea lions and the increases in chinese military investment may help with protecting sea lanes through the straits of malacca. i doubt that they are going to be relevant for the straits of four minutes. i suspect that we'll still be a need for the american position they are. so military capacity will increase. it will give us more pressure but i don't think you are going to see a china which equals the rivals the u.s. as a global military power in a quarter-century which is the time horizon that i'm looking at are you and then finally let me turn to soft power which is the ability to get what you want through attraction and persuasion rather than coercion. china has been making major efforts to increase its soft power. in 2007 who jin tao told the 17th party congress of the chinese communist party that china needed to increase its soft power. if you are a country whose hard power is growing mightily the first thing is going to happen is you are going to neighbors into coalitions to protect themselves against you but if you can combine that growth of your hard power with an increase in your soft power for attractiveness you are less likely to frighten people and the coalitions are less likely to be affected as they otherwise would he. so who jin tao's decision to invest in soft party -- power has led to billions of dollars to create things like confucius institutes were things like the turning china central television into an al-jazeera global station and chin watt doing the same thing. and chin's watt doing the same thing. that's interesting that the chinese are not getting a good return on their investment. the chinese polls taken by the bbc or pew and so forth reputable polling sources show that chinese soft power attractiveness goes up in africa somewhat in latin america but not in asia and not in europe or north america. so you say why is this? i think there are two reasons that determined that in which china would have to overcome if it really wants to equal the united states and soft power. one is china has to unleash its civil society. a lot of american soft power or european soft power comes not from government broadcasting. it comes from essentially foundations, universities hollywood cultural industries and so forth to china with communist party control is very loath to give the freedom to these aspects of civil society which unleashes their old creativity. and the other problem that china has is if you look at nationalism and disputes with neighbors china has been particularly in the coastal areas but also with india on the borders has disputes and because of rising nationalism in china which is helping to legitimize the communist party and may become more important as the growth rate slowed its very hard for them to compromise. so it's one thing to put up a confucius institute in manila to attract people to the troops or a set of traditional chinese culture but it's hard for philippine consumers of this culture to feel warm toward china if china is chasing philippine fishing boats out of scarbrough shoal at the same time. then we saw the same thing in vietnam when the oil -- that at led to anti-chinese riots. so you can say why doesn't china see this? why doesn't it accommodate this and smoothed over and my chinese friends tell me because at home there is a quite fierce competition about who is more nationalistic than them so if you become somebody who says let's do this peacefully you were going to lose your burkett it constitution at home. until china is able to unleash its civil society and find ways to manage these disputes without a nationalistic overlay they have now then i think china is going to live behind its soft power as well. so i would say in all three dimensions of power economic power measured by sophistication as well as size military power looked at globally as well as regionally and soft power considering both the civil society and territorial nationalism. i don't think china is going to pass united states in overall power. i once had lunch with lee kuan yew. he and i sat on a european company board at the same time. having lunch with him was one of the real treat of going to these board meetings. i asked him what did he think? was china going to pass the united states this century are not? and he said no i think they are going to give you a real run for your money but he said i don't think you are going to pass them. i said well why? he said well china can draw upon the talents of 1.3 billion people. he said that the u.s. can draw upon the talents of 7 billion people and what's more it can recombine them with the diversity which leads to much more creativity than you could ever get with a nikon nationalism. this of course by a -- and i think there's something in that. so long as the united states keeps its openness and doesn't succumb to fear or hubris i think lee kuan yew is probably right. so conclude this let me say that if i go back to this opening question is that the chinese century, will it end the american, is it going to produce a result like germany and britain did 100 years ago, no i don't think so. one thing that is worth noticing is that germany had already passed britain in industrial production by 1900 so germany was really on the heels of passing britain and the british felt that. if my analysis is correct then china is not about to pass us and if that's correct then we have time to manage this relationship. so we don't have to succumb to fear and overreaction and my great worry is that when people talk about decline, talk about the century over they generate fear and anxiety's which create the wrong types of policies. we can manage the problems of china. in china creates a number of problems but it also creates opportunities and things where we can benefit from working with china. international financial stability, managing climate change managing the rise and control of pandemics, handling transnational terrorism. all these are areas where we in china can find common cause at the same time that we may be disputing territorial limits in the south china sea or the east china sea so we are going to have to learn to have both cooperation and competition with china at the same time but if we come to much to fear as we fear that we are in decline for the chinese believe this we could get policies that could mess up what otherwise is a relation which can be managed. so that's part of what i was trying to get at by writing this book which summarizes some thinking i'm doing about america's role in the world very much longer time than the narrow 130 or 140 pages of the book would say that i think the message about how do we think of america's role in the world and in pretty her how do we relate to the country that's most like we do seem challenging to us a think as they message that policymakers need to take seriously so thank you all for your attention. [applause] >> thank you very much. this was a splendid recounting of your book and i know there are going to be many questions from the audience but i'm just going to get things started if i may. let me just begin by asking a question. how much does our torture domestic politics shape international perceptions of america's power? >> well it's a good question and i think too much is the short answer. we often damage ourselves by making us look weaker or dumber than we are. that's hard, but if you take this asian international investment bank where we decided that people shouldn't join this chinese bank, there were headlines in asia saying this was a sign of american decline. i said no its just a sign of american stupidity. we have done stupid things for centuries. what we should have said is let this bank go forward but make sure that it's a transparent international institutions so that if the british and the germans and others join it there's a much more likelihood that it will be held to a certain accounting standards that there would be less chinese corruption in it and the idea that we would spend political capital to try to stop it is just. now i'm behind that was the fact that when we read in 2010 to increase quotas for china and other emerging markets and the imf congress didn't pass it. four years we have been sitting on this which again is. it doesn't cost as much of anything but becomes wrapped up with issues of sovereignty and control and so forth. or take the law of the sea treaty which you can have as many chairmen of the joint chiefs of staff and former secretaries of state and defense comment testified that this is in our interest and we go out in preaching and east asia that china should obey the law of the sea treaty and then they say excuse me happy ratified back? no read why? because the american people don't want to? no. as the majority of the senate not want to? no a few senators decided it was an affront to our sovereignty so we do a lot of really things in our domestic political disputes and institutions which i think does diminish power below what it otherwise would be. >> joe let me dig down. it seems we do have a challenge when we are a representative democracy bottom up. it's hard to get a sense of national conviction and purpose if we don't have an enemy that seems to focus us but it's pretty pathetic to think that we need enemies to get their -- as a nation. >> i think that's right and i do worry that we are going to create an enemy in china because we feel we need one. if my analysis is correct, we don't need a chinese enemy. china will cause us problems but so do other countries. but china is not like nazi germany or not like stalin's russia. it's not an existential threat to us and it's not about to pass us. in that case we can be more relaxed and we don't have to put them in the enemy's role. as you said if we don't have them who's going to do at? >> you know the chinese will say quite openly that managed democracy is more efficient than a popular democracy. how do you think this is going to play out? >> well i think that's a great phrase for the chinese to use until you realize how rampant the corruption is there and if i'm correct that they are going to have a problem with managing this demand for participation in this per-capita income reaches $10,000. i think that slogan isn't going to sound so good. for all our problems the united states still has the capacity for change and even further problems with the gridlock that people say we are worse than ever, well not necessarily. thomas jefferson opposed george washington's treaty with england and worked with the congress to try to defund it so we have been doing this for a long time. but more to the point even if you say there is a downward trend since the 1970s or 80s 80s, it's worth remembering that obama's first congress passed health care whether you like it or don't like it that they passed it and passed a stimulus bill and changed the position of the military. there were a lot of major changes. not a stagnant society. in the meantime health care costs have. favorite economy has recovered and unemployment is at 5 .5% and a lot of the strength of this country is not just in washington. it's around the country so if you ask me what i rather play the political hand of washington for all its faults were the political hand of beijing i would much rather have the dash political ends. >> we are coming up and sometime this spring or summer to move on on. tpp transpacific partnership. a big big regional free-trade agreement with principles underlying it is the goal. the narrative that is being used in washington by the administration is that if this is about who sets the rules? does china set the rules for trade or do we set the rules? that might be the way we should talk about it in the united states but that must sound pretty weird overseas. do you have a thought on this? >> i think the chinese often will bring that up. they say is you're rebalanced toward asia containment and we say no. they say why his tpp aimed against us? i think the answer to that is the proper answer to that is we should be willing to have chinese participation. i think the administration has said so when china is able to live up to those standards so if you think of it is open-ended trade agreements open-ended in the sense that they are not permanently exclusive, excluding others then it's more understandable. >> let me go to one last question and i will turn to all of you. it's not only from the book but here's the kind of intellect that would give assault perspective and sacred one of the great problems of being the world's only superpower and having to deal with regional support powers is that we have to integrate for, five and six crises simultaneously whereas the regional competitors worry about one or two. do we have the attention span as a nation to be a global superpower? >> i think it's hard. if you look at the bush administration, friends of mine who were in the bush administration say it wasn't a deliberate neglect of asia. it's just every time you went to the situation room the agenda was something to do with afghanistan or iran. it just ate up the time of talking to people and you can increase the bureaucracy but the top level decision-maker has only 24 hours. obama and his team came in talking about rebalancing toward asia which is a better word than pivot which is always not a very good word because it means turning away but if you look at john kerry's address book not his address book, his travel log you wouldn't ask if this is a the rebalancing toward asia. he has obviously absorbed by the middle east. it may be the right decision but if you ask can we do both at the same time it's very hard with the top level decision-makers. >> forgive me one last question i know you haven't had a chance to study this yet joe but it looks like there was a surprisingly detailed agreement with iran. i think it's all too fresh for us to know what we think you about it but do you have an initial impression? >> again i would like to see i have just what i received on my iphone this afternoon but i think if you say the major options were to try to reach an agreement which would keep iran a year away from nuclear weapons with a detailed inspection regime and so forth versus just continuing the sanctions but during the sanctions the iranians keep building centrifuges versus the bolton option, the bomb iran which is maybe one year, three years but then they go back and do the same thing again. i think those three abstract options that one is the best but before making a final decision i would like to see what they decide on the details. >> joe thank you. but may open up the floor here. maam let's start with you. in kind of a dusty pink sweater. the microphone is coming over to you. >> one question i have is in china there are hundreds of different languages and dialects whereas in the united states almost everybody speaks english. does that make any difference to how well china can do in the future having so many different languages and dialects? >> well i think dialects do present a problem in china but they have been able to overcome that. i don't think that's a major problem. i think more of her problem is how they are going to deal with minorities and wang shone into that which is more than just a linguistic problem. it's how would they integrate so i wouldn't focus as much on the language part is the minorities part. [inaudible] >> i don't have that off the top of my head. doug paul probably does. >> when we bring the microphone over here. >> thank y