Below is the text of Sir John Major’s speech at the Prince’s Trust Dinner, held at Mosimann’s on Monday 29th June 2009.
SIR JOHN MAJOR:
My theme tonight is – change.
Over the past few months, we’ve lived through economic and political events that have unsettled the previous view we had of the world.
A new Presidency has revived the perception of America. But Iraq is not yet secure. Iran is in flux. We are not winning the war in Afghanistan. Pakistan is facing an upsurge in militancy. Progress on the MEPP is bedevilled by mistrust between Israel and Palestine. Meanwhile the EU is locked in yet another institutional crisis while Russia is hurting economically and, once again, moving away from the West.
The backcloth to all this is the economic firestorm of the last few months: a time in which the unthinkable has become thinkable and the future uncertain.
No-one can be quite sure where we now are in the economic cycle – but it seems probable that the steep economic decline is over and activity is stabilising at – or near – the bottom of the cycle. Certainly the world economy is not collapsing but no route out of our difficulties is yet apparent.
Some of the signals are mixed. Exports are rising from a very low baseline. Some business surveys are more positive. Economic data is less bad.
There are other positive signs. Equity is now being raised in capital markets. The Banks generally – but not universally – are now on a more sound footing. And the ‘fear factor’ – fear of a systemic collapse – has largely gone away. These are all essential components of recovery although over that recovery hovers the potent threat of protection.
But risks remain. Many financial institutions remain heavily over-borrowed. A lot of toxic debt is still hidden somewhere in Banks, Hedge Funds or Pension Funds. Its emergence would be de-stabilising.
Government debt is at record highs in many countries. In countries like the UK, this raises the risk of higher taxation or rising interest rates to fund the deficit. This risk increases in the recovery phase when both governments and the Private Sector begin seeking loan funds.
Amid these mixed signals we can be sure that the economic world we are entering will be different.
We should be under no illusions. Free trade and market forces look much less attractive to the world than they did six months ago. Millions of people feel let down – have been let down. They have saved, and been prudent, yet their security has been wrecked. The UK again illustrates the point: Jobs, Houses, Pensions – the basis of well-being for individuals – are at risk for far too many people.
In the foreseeable future, policy makers will need to show that the free market is sound: and that they know how to curb the excesses.
It is certain that regulation will be tougher – and more restrictive. It is likely investors will be more risk averse. Public sentiment has lost its affection for – as the public sees it – the profit-at-all-costs, high risk, casino capitalism of the recent boom. Managed and less buccaneering capitalism seems more attractive.
Some underlying fundamentals have not changed. China exemplifies the reality that, for over a decade, the economies of the emerging world have been star performers. Of course, the crisis hit China, too. But the speed and size of China’s fiscal stimulus suggests she is recovering well ahead of the Western economies. Certainly, unlike elsewhere, credit is expanding rapidly.
Other emerging economies will enjoy growth well ahead of their Western counterparts among them – China, India, Indonesia. Some of the smaller economies – Ukraine, the Baltic States – face more intractable problems but, in the future, we can expect most of the world’s growth to come from the East. We can no longer deny what is evident: there has been a shift of economic power. And this shift is not short-term; it is more likely to accelerate.
This hasn’t come about 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 Jack Kilby invented the integrated circuit, we were in a new world: nothing in the 20th Century 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 Silicon Valley; no Internet; no laptops; no Google; no iPods; no Blackberrys – and no PlayStations.
Similarly, spin-offs from the space race have given us global communications, satellites and – less happily – missiles to carry nuclear weapons: it is likely there will be further unexpected advances as a fall-out from experiments with the Large Hadron Collider, now due to re commence operations in October.
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 advance of medicine has been bewildering.
Whole new industries have emerged. Synthetic Biology has brought together science and engineering to design and build biological functions. New technologies are delivering better drugs to combat disease, promote 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 in order to target drugs to treat specific parts of the body. Imagine – for example – chemotherapy with only minimal side-effects.
Such science is leading a revolution in medical care: 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 sufferers of Parkinson’s and Alzheimer’s disease. It may soon be possible to replace heart muscle cells. A few years ago, all this would have seemed like Black Magic. Soon, fantasy will become reality, with investment and commercial prospects that are simply staggering.
Population growth is also effecting change. At the time of Christ, world population was about 350 million. Over the next 19 centuries, it grew by a little over one billion. Now, we are growing at nearly one billion every ten years. Most of this growing population is very poor: 3 billion – nearly one-half the present world population – live on only a handful of dollars a day.
Here is a cruel irony. As some nations reduce poverty and improve their own living standards, they drive up food prices. This is calamitous for even poorer nations. The arithmetic is simple: 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. So does the price – provoking fear and panic in poor communities.
The rich nations promise to help – but many do not live up to their promises. It cannot be right that both Europe and America spend broadly 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. This is hardly free trade.
Now, factor in future growth. Between now and 2050 it is estimated world population will grow by the equivalent of two more nations the size of China. Most of these 2½ billion people will be very poor. This is not a problem we can ignore.
Nor is climate change: hard-to-ignore science warns us that the long-term risks are real.
We had better recognise 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.
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. But – this single figure is utterly misleading: the land warms more than the sea and high altitudes 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: no-one can predict where the flood, or hurricane, or drought risks will be. This does not make it easy to persuade the polluters to stop.
Nor do the time-lags: the main perils of global warming lie far ahead. It takes decades for the oceans to adjust, and centuries for ice-sheets to melt. Yet, for all its scientific uncertainty, climate change is a challenge we cannot, dare not, ignore.
Politics is changing our world, too.
Fifty years ago, no-one could have predicted the world of today.
The Soviet Union and the United States were the two super-powers. China was isolationist. 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.
We worry about Iraq, Iran, Afghanistan, Arab-Israel and the stability of the Middle East – but talk of it as though it were one problem – which it is not – and without looking at history in order to understand the roots of conflict.
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!
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; Monarchies and Republics. 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 conversation. For some – the Salafists – Islam was perfect when founded and cannot be changed or improved.
It is a cauldron. It is not a liberal democracy.
Over the centuries we – in Europe – have chosen democracy as our form of government. Others – China, Russia, much of the Middle East, Central Asia and Africa – seem to accept, even welcome, a form of autocratic quasi-democracy, that is more concerned to enhance competition than to use social expenditure to improve what Disraeli called “the Condition of the People”.
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 – itself imperfect, despite its longevity – on other nations with their own histories and cultures.
I have not talked tonight of our own country although, no doubt, many expected me to do so. I did not – because I despair at Government that is reduced to a soap opera and Parliament to irrelevance and disaffection.
But – if you wish – please ask!