How China Became So Powerful — Transcript

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1. 0:01back in the old days
2. 0:03this part of the world used to be the
3. 0:05economic superpower
4. 0:07of the planet there were dynasties that
5. 0:09discovered everything from the compass
6. 0:11to printing to making paper to gunpowder
7. 0:15they would lead
8. 0:16huge expeditions around the globe this
9. 0:18was
10. 0:19china the middle kingdom and right next
11. 0:21door india
12. 0:23this was the center of the global
13. 0:26economic universe
14. 0:27but around the 1800s that started
15. 0:30changing
16. 0:34over here in europe and the united
17. 0:36states there was a major
18. 0:37revolution that started taking place
19. 0:41science then machines then weapons
20. 0:44trains cars flight bombs
21. 0:47factories cities and with their new
22. 0:50power these countries
23. 0:51started to expand to take over large
24. 0:54swaths of the map
25. 0:56china remained a great civilization but
26. 0:58as the west
27. 0:59started showing up knocking on china's
28. 1:01door with their big
29. 1:03guns china couldn't really match their
30. 1:05firepower
31. 1:06and they had to concede land to britain
32. 1:08which is how we got hong kong
33. 1:10the industrial revolution didn't really
34. 1:12happen in china the same way it did in
35. 1:14the west
36. 1:15and by the middle of the 1800s china
37. 1:17began a massive decline
38. 1:19in its economic standing in the world a
39. 1:21century later that situation got way
40. 1:23worse
41. 1:24as china was invaded by its neighbor
42. 1:26japan china's economy was no longer the
43. 1:28prosperous middle kingdom
44. 1:30but rather a shadow of itself a poor
45. 1:33country that was being occupied by
46. 1:34outsiders
47. 1:35once world war ii was over the west
48. 1:38devised a new global economic and
49. 1:41financial system
50. 1:42it was modeled after the economic system
51. 1:44that was working so well in the west
52. 1:46capitalism free enterprise still with
53. 1:49some government oversight
54. 1:51and high taxes for the rich and
55. 1:52corporations but it was still capitalism
56. 1:55and after the war this capitalism would
57. 1:57go on to become
58. 1:58a miracle for many countries rebuilding
59. 2:01germany
60. 2:01france japan for many in the west
61. 2:04post-world war ii capitalism was like a
62. 2:07magic
63. 2:07elixir that was fixing everything it was
64. 2:10working so well that
65. 2:12more and more people started to believe
66. 2:13that we needed to get government
67. 2:15out of capitalism and let the market
68. 2:17just do its thing
69. 2:18one of the major advocates for this idea
70. 2:21of unfettered capitalism
71. 2:22was this guy never in history been a
72. 2:26more effective machine for eliminating
73. 2:28poverty than the free enterprise system
74. 2:29in the free market
75. 2:30a chicago-based economist named milton
76. 2:33friedman
77. 2:34if they fail they bear the cost if they
78. 2:36succeed
79. 2:38they get the benefit the idea at the
80. 2:40core
81. 2:41of this financial and economic system
82. 2:44was that
83. 2:45companies would get investment from
84. 2:47people who own shares in that company we
85. 2:49call this a corporation
86. 2:51and that the sole purpose of this
87. 2:52corporation was to make money
88. 2:54for these owners or these shareholders
89. 2:56in milton friedman's own words
90. 2:58quote the social responsibility of a
91. 3:01business
92. 3:01is to increase profits that is the role
93. 3:04of a business
94. 3:05increasing short-term gains for
95. 3:07shareholders
96. 3:08would benefit all of society according
97. 3:10to this model
98. 3:11and if you look at the data in the
99. 3:13united states and the west
100. 3:14milton friedman sort of had a point
101. 3:18and it led to huge prosperity in the
102. 3:21west
103. 3:22as the u.s economy exploded
104. 3:25wait a minute but what about china are
105. 3:27we talking about china and its economy
106. 3:28you know
107. 3:29the middle kingdom china so while the
108. 3:31u.s and western economies are thriving
109. 3:33because of this corporate
110. 3:34free market capitalism that was taking
111. 3:36over the world china was descending
112. 3:39further and further into decline instead
113. 3:41of joining the capitalism party that the
114. 3:43west was spreading throughout the world
115. 3:45china resisted turning to a one-party
116. 3:49rule
117. 3:49communist system headed by this guy
118. 3:52mao zedong who destroyed any chance
119. 3:55of china's economy ever joining the
120. 3:57prosperity happening around the world
121. 3:59by the 1970s china was a place of
122. 4:02widespread poverty
123. 4:03the once prosperous kingdom had reached
124. 4:06rock bottom
125. 4:07but that was all about to change
126. 4:12so it's the 1970s and this is china's
127. 4:15new leader
128. 4:16deng zhao ping he came into power
129. 4:19hoping to turn around this 150 years
130. 4:22of humiliation in china the decline of
131. 4:25china as a superpower elsewhere in the
132. 4:27region china's neighbors
133. 4:29had economies that joined the global
134. 4:32economic party that was happening
135. 4:34in capitalism and they were thriving
136. 4:37they saw immense
137. 4:38economic miracles and pulled millions
138. 4:40out of poverty deng
139. 4:42specifically went on a visit to
140. 4:43singapore early on in his term
141. 4:46where ethnic chinese had adopted the
142. 4:49free market
143. 4:50and they were thriving he felt inspired
144. 4:53the maoist economic doctrine that had
145. 4:55failed
146. 4:56was over and it was time to see if china
147. 4:59could rebuild its economy
148. 5:01experimenting with some version of
149. 5:04capitalism but he had to do this
150. 5:05carefully so as not to disrupt the
151. 5:07one-party rule that china had created so
152. 5:10he decided to just focus on
153. 5:12one little village a sleepy village in
154. 5:15southern china
155. 5:16of just around 30 000 people right
156. 5:18across the border from the british
157. 5:20controlled hong kong
158. 5:21which at the time was thriving because
159. 5:23of its hardcore capitalistic economy
160. 5:25deng xiaoping designated this little
161. 5:28town as
162. 5:29quote a special economic zone where
163. 5:32foreign companies could set up
164. 5:34and invest in a very capitalistic
165. 5:37free market hong kong would sort of act
166. 5:39as a bridge
167. 5:40between western businesses and this
168. 5:43little gateway
169. 5:44into communist china it was still
170. 5:45socialism but with some
171. 5:48chinese capitalistic characteristics
172. 5:51what happens next is arguably the most
173. 5:54mind-blowing economic miracle ever to
174. 5:57have taken place
175. 5:58on planet earth
176. 6:03this little sleepy village that was a
177. 6:05special economic zone in china
178. 6:07exploded from a little fishing village
179. 6:10with
180. 6:11a little more than a few thousand people
181. 6:12and some rice paddies to a massive
182. 6:15city of over 10 million people the
183. 6:18average income went from one dollar a
184. 6:20day
185. 6:20to over thirty thousand dollars a year
186. 6:23this starts happening all over china and
187. 6:26meanwhile
188. 6:26milton friedman's back in the us being
189. 6:28like
190. 6:31yep told ya soon there were a bunch of
191. 6:34cities designated in china
192. 6:36for special economic activity or
193. 6:38basically capitalism in a socialist
194. 6:40country
195. 6:41and more and more foreign companies
196. 6:43flocked to china
197. 6:44for its cheap labor it became the
198. 6:46world's factory
199. 6:48china joined this trend of other asian
200. 6:50economies
201. 6:51and eventually passed them up to become
202. 6:52the second largest economy
203. 6:54on earth you can see this in a graph
204. 6:56this year asia will actually
205. 6:58pass the rest of the world in accounting
206. 7:00for more than 50
207. 7:02of global gdp it is a massive economic
208. 7:04transformation
209. 7:06and it explains why china has become so
210. 7:08powerful
211. 7:09okay but wait this is a very wonderful
212. 7:12story about capitalism and its ability
213. 7:15to lift millions of people out of
214. 7:17poverty
215. 7:18and to industrialize a country seemingly
216. 7:21overnight
217. 7:22but there's another side to this coin
218. 7:24that we need to talk about
219. 7:26i have two graphs i want to show you
220. 7:30they look like this okay let's look at
221. 7:34this one
222. 7:34first it's called the elephant graph do
223. 7:37you sort of see why
224. 7:39let's deconstruct this graph and try to
225. 7:42understand
226. 7:43what this says about the past 30 years
227. 7:46of the rise of china
228. 7:47on this axis is everyone on earth
229. 7:50ranked by their income grouped into
230. 7:53percentiles
231. 7:54so these people down here make an income
232. 7:56that is the 10th
233. 7:57percentile the lowest 10 in the world
234. 7:59and then the 20th percentile
235. 8:01and so on and so on up to these people
236. 8:03up here who are the richest in the world
237. 8:05they
238. 8:05have an income that puts them in the
239. 8:0690th percentile this axis here
240. 8:09shows how much growth in income these
241. 8:11people have had
242. 8:12over the past 35 years basically during
243. 8:15the heyday of
244. 8:16shareholder capitalism and the rise of
245. 8:18china so you'll see how this plays out
246. 8:20in just a second
247. 8:20let's start plotting how much income
248. 8:23growth each of these
249. 8:24groups saw over the past 35 years the
250. 8:27bottom 10 percent
251. 8:28saw their incomes grow by around 75
252. 8:31not bad these are people who live in the
253. 8:33poorest countries
254. 8:34who make the lowest income in the world
255. 8:36the 20 to 30 percentile
256. 8:39saw a huge growth in their income 125
257. 8:42percent and more over the past 35 years
258. 8:44this is like the new middle class
259. 8:46in china and other asian countries who
260. 8:48saw huge income
261. 8:50growth due to globalization they did
262. 8:52really well under this system
263. 8:54but then you start to get to the people
264. 8:56in the 50th and 60th and 70th and 80th
265. 9:00percentile
266. 9:01this is basically people who live in the
267. 9:03middle class in the west
268. 9:05their incomes have grown much slower
269. 9:08sometimes under 50 percent over the
270. 9:10course of 35 years which is
271. 9:12little over one percent a year not very
272. 9:15much income growth
273. 9:16and some of these people in the west
274. 9:18have seen their incomes shrink
275. 9:20like the blue-collar workers in detroit
276. 9:22and the rust belt whose jobs disappeared
277. 9:24to china
278. 9:25so so far you can sort of see why this
279. 9:27makes sense
280. 9:28the people in china who benefited from
281. 9:31this mass industrialization
282. 9:33saw huge benefits and the people here in
283. 9:36the united states and in the west
284. 9:38who saw jobs go overseas to china
285. 9:42saw a way slower growth in their income
286. 9:44but watch what happens next
287. 9:46when we get to the groups of people who
288. 9:48are at the 99
289. 9:50percentile basically the richest 1
290. 9:53in the world and for this i actually
291. 9:54have to stretch out the graph to get us
292. 9:57a little bit more granular
293. 9:58these are the people who have the
294. 9:59highest incomes in the world let's see
295. 10:01how
296. 10:02their income has grown over the past
297. 10:0535 years you can see that their income
298. 10:10has
299. 10:10exploded under this system they're
300. 10:13seeing
301. 10:13tripling of their income in the past 35
302. 10:16years
303. 10:16now a reminder that this is 35 years of
304. 10:18data from every economy on earth
305. 10:20this shows everyone on the planet so
306. 10:22this gives us a view of who
307. 10:24are the winners and the losers of this
308. 10:27shareholder capitalism that has
309. 10:28globalized to asia and around the world
310. 10:31the top 1 of income earners
311. 10:34saw the biggest benefits from this
312. 10:36system they are the ones who
313. 10:38disproportionately benefit
314. 10:40from shareholder capitalism and the
315. 10:42growth of globalization
316. 10:44okay so that's my first graph it's the
317. 10:46elephant graph
318. 10:47it is a very useful way to see one of
319. 10:50the results
320. 10:52of this version of capitalism and the
321. 10:54growth of china
322. 10:55the second graph looks like this
323. 11:00this shows the amount of co2 emissions
324. 11:02by country
325. 11:04you've got europe in the united states
326. 11:06and then up here you've got
327. 11:07china the world's largest emitter of co2
328. 11:10like the elephant graph this graph
329. 11:12combines loads of data to show us
330. 11:15that shareholder capitalism focuses so
331. 11:18much on short-term
332. 11:19profits for shareholders that it leaves
333. 11:21out any consideration
334. 11:23for how this economic activity affects
335. 11:25the planet we live on
336. 11:27and our ability to live on it i know
337. 11:29you've heard this message a bunch
338. 11:31and if you're like me it is hard to not
339. 11:33become sort of
340. 11:34numb to this impending crisis that we
341. 11:38don't really know what it looks like and
342. 11:39it feels like there's nothing we can do
343. 11:41but we have to do everything really
344. 11:42quickly
345. 11:43but let me just reiterate in my own
346. 11:45words that it is now
347. 11:46a certain fact that our global climate
348. 11:49is
349. 11:50changing in such a way that it will
350. 11:53very likely lead to immense shifts on
351. 11:55our
352. 11:56earth and our ability to live on our
353. 11:58earth it's already happening
354. 12:00it will continue to happen and
355. 12:03all we can do now is maybe put on the
356. 12:04brakes a little bit
357. 12:07[Music]
358. 12:09okay let me just wrap this up and give
359. 12:11you my final thought on what this all
360. 12:13means
361. 12:13i'm not showing you all these graphs
362. 12:15because i'm just like a data nerd who
363. 12:16loves to look at graphs although
364. 12:18i kind of am sorry i'm showing you these
365. 12:20graphs because the story of the rise of
366. 12:22china is often a story of how capitalism
367. 12:24has pulled
368. 12:26tens and hundreds of millions of people
369. 12:27out of poverty and it has and that's
370. 12:29amazing
371. 12:29but these graphs give us a view
372. 12:32of what it has also done what this
373. 12:35version of capitalism
374. 12:36also incentivizes and results in if
375. 12:39we're going to consider the effects
376. 12:41of this version of capitalism we have to
377. 12:43look at
378. 12:44all of its effects not just some of them
379. 12:46so what's the solution
380. 12:48is it socialism no it's not
381. 12:52it is simply a new version of capitalism
382. 12:54a reframing of how we think about
383. 12:57business and globalization one that old
384. 12:59milton friedman
385. 13:00would despise and one that more and more
386. 13:03businesses are
387. 13:04actually realizing we must adopt the
388. 13:06solution isn't to scrap capitalism
389. 13:08altogether
390. 13:09but instead to expand it to not just
391. 13:12focus on
392. 13:13shareholders and delivering them
393. 13:14short-term profits as quickly and as
394. 13:16efficiently as possible
395. 13:17but to also focus on other people who
396. 13:20are affected
397. 13:21by the business you can call these
398. 13:23stakeholders
399. 13:24this is like the customers and the
400. 13:27suppliers and the employees and the
401. 13:29government and the overall economy and
402. 13:31the planet and of course shareholders
403. 13:34this is called stakeholder capitalism
404. 13:36and it's basically just an
405. 13:37acknowledgement
406. 13:38that businesses that focus only on
407. 13:40profits for shareholders
408. 13:42don't end up benefiting everyone there
409. 13:44are winners and losers
410. 13:46it's not good for a huge swath of the
411. 13:48population
412. 13:49nor for the changing climate oh and by
413. 13:51the way this isn't some fringe liberal
414. 13:53idea
415. 13:54some of the biggest companies here in
416. 13:55the united states like walmart apple
417. 13:57jpmorgan have signed on to adopting a
418. 14:00new model
419. 14:01of capitalism this is changing and in
420. 14:04the next five to ten years
421. 14:06i believe we will see a new version of
422. 14:08how businesses interact in the economy
423. 14:11so you're probably wondering listen i
424. 14:12clicked on a video about the rise of
425. 14:14china and we're ending here with
426. 14:16stakeholder capitalism
427. 14:18the rise of china is a story of
428. 14:20capitalism
429. 14:21a certain version of capitalism it's a
430. 14:23story about how
431. 14:25capitalism can morph and change
432. 14:27depending on what
433. 14:28effects we want businesses to play in
434. 14:30our society
435. 14:31if we want to produce the most amount of
436. 14:33wealth in the most efficient way
437. 14:35then the old shareholder model actually
438. 14:37really works well for that
439. 14:39but if you want businesses to benefit
440. 14:41everyone including our children
441. 14:43and our grandchildren and their ability
442. 14:45to live on this planet then our
443. 14:46capitalism
444. 14:47needs to pull in more priorities than
445. 14:49just profits for shareholders
446. 14:51what may be right for one stage in the
447. 14:54development of an economy may not be
448. 14:55right for another stage
449. 14:56the so-called greenhouse effect is
450. 14:58created by carbon dioxide a colorless
451. 15:01odorless gas
452. 15:02so i got to dig through a lot of data
453. 15:04for this video
454. 15:05and i was able to partner with the world
455. 15:07economic forum
456. 15:08which is a think tank that i respect
457. 15:11they actually pioneered this idea of
458. 15:13stakeholder capitalism decades ago
459. 15:15well before apple and walmart realized
460. 15:17that it was a good idea
461. 15:18the head of the world economic forum
462. 15:20just launched a book
463. 15:21called literally stakeholder capitalism
464. 15:24it's an in-depth
465. 15:24look at not only the rise of asia and
466. 15:27china but also other major trends that
467. 15:29help us understand the need to upgrade
468. 15:30our capitalism
469. 15:31the book is really good it's packed with
470. 15:33useful information and graphics
471. 15:35it's easy to read and to comprehend i'm
472. 15:38going to put a link in the description
473. 15:39where you can learn more
474. 15:40it is available for you to purchase now
475. 15:43if you want to get a deeper look
476. 15:45into the future of our economy thank you
477. 15:47world economic forum for
478. 15:49partnering with me on this video uh the
479. 15:51davos summit happened this week
480. 15:53and um i'm really glad that i was able
481. 15:55to
482. 15:56be a part of it so hope you're all doing
483. 15:59well
484. 15:59having a good year so far 2021
485. 16:03there's a new president down the road
486. 16:05and it's kind of exciting and i'll see
487. 16:08you in the next one