Let’s start with Niall Ferguson’s Civilization. I’ve read a lot of reviews focusing on the “six killer apps” that helped the West get to where it is. I take it that there’s more to it than that?

What I found interesting and what I like about this book is the fact that Niall takes a very broad look at the East-West theme. When people are looking at this issue of East versus West, or West versus the Rest, they tend to focus either on politics (which is very important and we’ll talk about that when we discuss Richard McGregor’s book on the Chinese Communist Party) or on economics. But there has not been anything that I have read that has been more all-encompassing: looking at religion, looking at East versus West not just as US versus China, but also bringing in other elements like Islam, cultural aspects, historical context, work ethic, Calvinism. So that’s what really drew me to this book. If I were to be critical of an economist’s perspective, it’s that we tend to have a very narrow lens. What Niall has done is added additional pillars to the discourse by bringing in the historical context, covering religion, technological advance, and many other things that are relevant but would fall outside the purview of an economist or a political scientist.

Is his view that the West is in trouble?

That’s a running theme in Niall’s recent work. But I think it’s more about what’s happening in the Rest, and China in particular. The central question he seeks to address is why, over the past several centuries, the West succeeded and mastered economic success whereas other regions have faltered, stalled and even declined. You have to remember it’s not the first time places like China and India have been the largest economies in the world. This was the case in the 1820s. What he’s trying to get at – and what is interesting not just in Niall’s work but across all the books I have chosen – is: Why should it be different for China this time? What mistakes did they make last time? How is it that Western countries actually surpassed China and India to become the biggest economies? Also, what happened to Japan? About 20 years ago everyone was talking about Japan taking over as the lead global economic powerhouse. Why is that we think China can do better than Japan did? Niall is posing tough questions about China’s rise, in the context of historical evidence.

Let’s go on to the Ian Bremmer book, The End of the Free Market. Does he think state authoritarianism will enable China or some of these Arab countries with large sovereign wealth funds to control the world economy?

Let me tell you my understanding of Ian Bremmer’s view, both from hearing him speak and from reading his book. Bremmer looks at the East-West theme largely through a political lens. One of his quips encapsulates his fundamental view: “In the Rest the state controls the corporations whereas in the West the corporations control the state.” My reading of his work is that in the West, the influence of the corporations has led to an erosion of political culture: they’ve infiltrated the political discourse. On some level, Ian is quite enamoured of China’s state capitalism, of the role of the Sovereign Wealth Funds, of the implications of the state controlling the corporations.

I would say it’s pretty clear that governments like China are not obsessed with profit maximisation per se, they’re obsessed with volume maximisation. In that sense they have a bigger utility function – one with a longer term horizon (instead of a myopic view). It’s not just “we’ve got to make profits”. It’s about China, the grand society. I found this type of perspective very interesting. However, I think Ian would argue that there are still very big economic risks to the success of the emerging world that could cause things to unravel.

What do you mean?

To give you a specific example, I think Ian would say (and many economists would agree) that one of the key reasons that China has done extremely well is because her wages have been very low. A confluence of factors – low wages, a large population and state-controlled capitalism – have worked well for China. At very minimum, these three factors have made it possible for China to perform phenomenally. The problem is that we’re now seeing wages rising. And even though you have state capitalism, there is still a risk that the whole thing falls apart. In an environment where wages are rising fast, you end up not only with inflationary pressure but widening income inequalities, and this can be very problematic for the state capitalism model. I think Ian, like most of us, would say that China is not out of the woods.

Do you sympathise with his idea that state authoritarianism has advantages?

Yes, I’ve written about that. But when you say advantages, it depends what you’re talking about. If you’re asking me if democracy is a prerequisite for economic development, clearly it’s not. China is not democratic, nor is Singapore, nor was Chile in the manner in which we define democratic process. There are numerous countries around the world that have achieved long-term, sustained economic growth and lifted millions of people out of poverty without living in a classical democracy. So that’s not up for debate. The question is, as a long-term strategy is it possible for countries to have sustained economic growth with a large role for the state? Also, what happens when you have a large, critical middle class who demand greater political franchise? We don’t know what the answer to that is. I would say that the larger the middle class becomes in China, the more demands they will make for democracy, and the political transition will always be tricky. However, I don’t think we’re quite there yet.