SPEAKER_00 0:00

Hey everyone. Today's guest is Caroline Elkins. She is one of the world's leading historians on empire, power, and uh institutions. She's a professor at Harvard Business School, a Pulitzer Prize winner for her work on the British Empire, and she challenges the way we think about history. In her classrooms, especially with OPM participants, she pushes a simple but uncomfortable idea. History does not repeat itself, but it definitely rhymes. And with everything that's going on in the world today, these rhymes seem to be getting louder. From the conflict in the Middle East to shifting supply chains, I think business leaders everywhere are recognizing that the times are changing. And so we hope to address a core theme on today's conversation. How should leaders think when the world order is changing? Caroline, thank you so much for making the time and welcome to the podcast. Of course, my pleasure. Thank you for having me. Yeah. So, Caroline, you often say that history does not repeat itself, but it often rhymes. So when you look at the world today, the world order, what historical rhyme should serious leaders be paying attention to, in your opinion?

SPEAKER_01 1:07

Yeah, I mean, first of all, thank you for again for having me. And and look, I think on that, if we were to look at a variety of things, right? I think we're in a real inflection moment on a variety of fronts. If we look at, say, if we take geopolitics to start with, um, we have a couple of things going on, right? We're seeing the potential sort of rise and fall of great powers with the United States sort of, you know, if you will, sort of on the on the down cycle of the curve and China clearly on the up cycle. We're seeing, which raises questions about, you know, are empires more disruptive at the start versus the tail end of things. I think we're seeing some of the things being made manifest. I mean, if we look at what's going on in Iran right now, no American government was going to touch this or or really uh, you know, sort of, if you will, poke the bear of Iran, whether it was Republican or Democrat, and yet right now we're seeing that happen. It tells us something about the nature of the United States at the moment. If we look at other elements insofar as thinking about, for example, technology, that we have both these geopolitical shifts happening at a moment where unquestionably, I think the jury is out. If anybody tells you that they know exactly how AI is going to impact the universe, they're they're they're making that up. Nobody knows exactly, but we know that we're in the middle of this momentous change. And so, you know, these kaleidoscopic shifts, and they're obviously related to one another. And so when we think about that, sure, there have been moments in time when we think about similar kinds of, if you see, almost like rise and fall. So, for example, if we took the interwar period, this current moment reminds me a lot of that period of time when the Americans were clearly the world power and they weren't quite ready to step up. And so the British were able to and and and quite welcome the fact that their empire was kind of sort of soldiered on and they they took the lead on the League of Nations when the Americans sort of bowed out, when the world became much more isolationist. And in some ways, we're seeing some of that in the patterns of China until recently not really ready to step up yet. But Xi Jinping's made some statements that makes one think maybe, okay, we're entering in a different phase. And we're seeing periods of time where similar to the interwar period, where the the pound sterling was becoming weaker as a world reserve currency. There's really nothing rivaling the dollar right now, but it's it's at the same time we have differences. And differences would be we're seeing these shifts happening at a moment of major technological change at the same time. So getting back to sort of my musing here is to get us to think about there are patterns, there are cycles that we're seeing that might look familiar, but it's not exactly the same, right? And so I think in that sense, when folks say history repeats itself, if that were the case, then we'd all be making 30% on our portfolios. We'd all be like, you could just predict things and we can't predict them. But as business leaders and as folks in the business world, we need to be very aware of what's going on. And I think most importantly, how does one think about um, how does one think about uh, you know, sort of batten, not necessarily battening down the hatches, but thinking strategically about um potential outcomes of these different kinds of sort of momentous shifts that we're seeing happening right now.

SPEAKER_00 4:14

In your opinion, is this a temporary period of instability, or do you think you can see patterns where the fundamental uh order of the world power is being restructured?

SPEAKER_01 4:25

Yeah, I don't think that we're in anything that's temporary. I mean, I I think that from my perspective as somebody who studies empires, you know, we are seeing the relative decline of the Americans and certainly the emergence and um acceleration of China's capability on a number of fronts, right? And so if we think about things like the degree, you know, innovation indexed, a very important one. China is a distant first on multiple, multiple measures. Distant second to that is actually India. It's not even the United States, right? And so if we look at certain things, if I look at the ways in which we think about upskilling of labor, all kinds of stuff that sort of, you know, macroeconomists or historians would look at, it's not a moment of, it's not one that should give anybody sort of massive optimism about what's happening in the United States right now. They said, you know, rise and falls of empires take time. And so, you know, will things change overnight? Certainly not, right? And, you know, will is this something that's sort of unfolding in this moment? Absolutely. And I think that we, you know, we got quite complacent, maybe complacent is not the right word, but accustomed to what it was a fair amount of continuity, right? Really from the end of the Second World War until the present day. And it's not to mis minimize the impact of the Cold War and the Soviet Union and the like. You know, the I especially when we get to the 90s, sort of the emergence of a clear hegemon also meant that there was an emergence of a very clear sort of consistency in the global order, which lends itself to things like globalization, right? And the the dropping of tariffs, and not to say they had all gone away by any stretch, but the emphasis in the leading into free trade, and we're seeing a massive retraction of that right now, that's not going to end anytime soon. And I think if you're a business leader, anybody who's in, who has any, and by the way, I can't imagine there are very many business leaders out there, no matter what your you what your industry is, that is uh unaffected by the the contraction of globalization. And then the question becomes, you know, is this going to be a period of true deglobalization like we saw in the interwar period? And I think we're seeing things that suggest maybe not. You know, China's pretty, you know, if we go back to the Shanghai Cooperative uh organization conference in September, Xi Jinping and Putin and Modi were all pretty clear in some of their side conversations of multilateral agreements. And we're seeing those play out over and over again. So I think we're going to see something that's slightly different. But, you know, the idea of a Singapore that emerged, Li Kwan Yu betting on globalization and emerging and surging through that as many of these Asian export economies have have done, I think we're we're those days are behind us, at least for now.

SPEAKER_00 7:11

You you touched on India, and I I understand you've recently come out with a new case you've written on India's possible development. Phenomenal, by the way, very lengthy and very informative. You speak in that case about how India has built world-class digital systems, but I think you also touch on the fact that it still struggles with certain foundational services. And so, in your opinion, what could leaders take away in terms of understanding, you know, how to build innovation as opposed to building durable institutions?

SPEAKER_01 7:41

Yeah, it's a great question. India, I I'm very bullish on India in the long term. And I think the look, I think that India is moving from we go back to 1947, there was a general sense that India was not going to make it right. I mean, a lot of folks looked at this and they really leaned into the process of democracy. And I think that Congress leadership really leaned into that in ways that were not always beneficial to business, to, to, to the economy. And that has changed, uh, particularly under the Modi government. And we've seen a real emphasis on a few things. And if we I, you know, put aside whatever negativity you might have about the ways in which things are being done, if we just focus strictly on the economics for our discussion and we look at the digital public rails. I mean, just extraordinary what's been done with that. Um, the ability for SMEs to be sort of enter into the economy in ways that were unfathomable before, the ability to access credit. Let's let's be clear. I mean, markets are still very fragmented in India. I think that you still, you certainly still have major issues in so far as the health of the population, the education levels of the population. This said, you know, the ways, and also I'll sort of piggyback off a point that I made before, you know, India may have missed some of the window of opportunity of export-driven growth, right? Given what's going on with globalization. However, you know, I am pretty bullish on multilateral agreements that aren't going to seem like, you know, globalization, you know, we just switch it off. It's just going to look, it's going to look different. I also think while a distant second, the fact that India is still number two in global innovation index indices, that's also not unimportant in the context of our in the context of the conversation. And so given all of that, and and you know, the last thing that folks would say is, well, you know, would you potentially double down on on services because it's such a high proportion of services that are driving the economic growth of India? And as we know, that's not an area that's going to ramp up employment. It's not going to provide lots of jobs. You know, and then there's always the question about import substitution. You know, do you really, or, you know, do you really sort of lean in heavily to that? And that's that's certainly a possibility. I mean, it it you don't have Brazil would be an example of that working sort of until it didn't because of lack of competition. And then you have Forex problems and the rest of it. But it worked in the United States. But I think, look, I think overall, India has all sorts of possibility. But I think that when I think about even the digital public rails, I compare in my mind India to, say, Kenya. I mean, when we think about mobile payment systems, a lot of folks are not familiar with the fact that it was actually Kenya and MPSA that really launched all of this. And so I think when we think about even potential leapfrogging within development terms, there are all sorts of things that are going on in India. And I think we have to be measured about it. But I think the um the real possibilities of India in the next 30 to 40 years, I don't think 2047 goals are realistic, frankly. You need 9% growth. However, I love and like the aiming high, right? And that's where people's mindsets are. And I think that the mindset shift that's happened in India, and you would know this better than I would, but certainly my work there, and I'm often there, I'm now there, usually most January's, it's extraordinary. And so I think in that sense, India's doing something right. And I think these the investment in digital public rails um is really is going to pay dividends, and we're seeing that already.

SPEAKER_00 11:05

How do you how do you see the role of a country being a democ democracy versus not being a democracy in empowering innovation and growth? You spoke about China being a leader today versus you know, India being a distant second America, probably um, you know, catching up in the recent years. What do you see the role of the government and a democratic voice in innovation?

SPEAKER_01 11:33

Yeah, I mean, it's a huge debate today, right? I mean, when we look at the question of state, if you will, state-led economies. And it's a it's a wonderful question, particularly as you're doing linking it into China and other state-directed export growth models. Okay, so we can go back to Singapore immediately after the Second World War, we can look at Japan, we can look at South Korea. I want China, of course, being the big example. And now, you know, Modi taking a page out of that playbook. And, you know, if we look at the United States, you know, sort of desperately right now, and it's uh particularly if we look at this, you know, the new Cold War over semiconductors between the United States and and the CHIPS Act and and the fact that this is not a Democratic or Republican issue in the US, right? I mean, there's a real push right now, seen as an element of national security, to wean ourselves off of the dependence on places like Taiwan in particular, and China, and China the other way around, because Taiwan is the leader in semiconductor. Like nobody's even close to Taiwan, as I like to say, in the fancy chips. Like nobody's even close. All the money that that even China is pouring into this. And so where I'm taking us is the idea that, you know, some believe that you have to have a kind of, and, you know, in quotes, kind of more of a benign authoritarian model to push economies into this new 21st century era, era of really technology-driven um uh initiatives that are crucial not just for the economic growth, but also crucial for national security. And I think that, you know, we're seeing certainly globally an erosion, all the democracy indices are in decline. So I think right now we only have what was the number I saw recently, 20 or 25% of democracies that are considered true, pure democracies right now, as opposed to being compromised in one way or the other. And so I think, you know, I think the real question is, you know, always that that tension that's out there, right? Growth at any cost, right? Do you give up some of your the democratic principles in return for a government that can do things like guarantee jobs and guarantee economic growth? And at what cost does that come? And I think over time we have seen that balance or that the that questioning over and again. We're seeing some of that play out right now in India. We're seeing that playing out right now in the United States. We're also seeing demands from below in populism of demanding more of the piece of the pie, right? And sort of oftentimes the response to that is much more a sort of a almost an anti-democratic uh sort of reaction to it. It's all to say, and maybe I'm meandering a bit, but it's all to say we're in, you can tell in my response here, we're in this moment of extraordinary change, important change, where everything that we held to be absolutely true 20, 25 years ago is being upended. And along with everything else, the question of the role of democracy at a moment when the state needs to step forward and solve certain economic problems vis-a-vis, say India would be a good example, but the United States would be too, in terms of our massive inequality that's going on. Then you also have the question of in the race around technology, kind of like the arms race around nuclear capability 50 years ago, that you have to have the best and the brightest and all kinds of things, the state pouring in billions of dollars into research. And look, you know, Asian, China is doing a better job at this right now than the United States. And so the question is, final question I'll leave you with is, you know, how much of this is going to be more of a public-private partnership model in the US, SpaceX would be a great example of that, versus a really entirely state-driven model in many ways, like we're seeing in China. And I think we we, you know, we all, you know, we're we are watching it play out in real time. And so we sort of sit and watch and wait to see how that's gonna end up, what the end up results gonna be. Thank you for that, Caroline.

SPEAKER_00 15:33

Talking about Iran, the the situation in Iran today is already reshaping energy markets, shipping routes, risk calculations across the Middle East as well. And so historically, when great powers engage militarily in in strategically critical regions, what has your observation been about, you know, the second order and third order implications of that, which many of the leaders may underestimate?

SPEAKER_01 15:57

Mm-hmm. Yeah, I mean, I don't think I'm getting too far out of my skis here to say the consequences of this war are going to be dramatic and long term globally. And we're feeling this already, right? I mean, if you look at just energy prices in Asia and Africa and elsewhere, this has gone on for much longer than anybody would have th thought. Although as somebody who studies small wars for we call them small wars in quotes, you know, something that is more regionalized or localized and which are asymmetric in nature, these are always supposed to be, you know, three-week wars, maybe three months. I've yet to see one that that ends like that. This this has the potential to go on for a very long period of time. Ron holds many of the cards. And um, it's the reason why a succession of American governments, whether it was Republican with Reagan or the Bushes, or whether it was Democratic with uh in terms of the power and the party in power with uh with uh Clinton or Obama or Biden, nobody, everybody knew the moment that this any you did anything with Iran, they were going to blockade the straight information. And that's exactly what has happened. And literally just today, and I need to spend a little more time thinking about it, we see UAE pulling out of OPEC, but look, gas futures and this, it's been about a week or so since I looked at them, but they at that point they weren't predicting down below$100 a barrel until 2039. This is an end it's not again like you flip the switch. The inf the damage of infrastructure has been extraordinary. Reports recently, I was reading the BBC this morning that we're still really, it's unclear how much damage has been done even to U.S. military installations, but we certainly know from the standpoint of extracting energy, natural resources from these areas, the damage has been quite severe. And so these are the major kinds of supply-side interruptions that that can, not always, but can lead to what we think of as stagflation, which we haven't really seen as stagflationary economy since the 70s. You know, anybody you're a little younger than I am, but I can remember that growing a kit in the 70s. I mean, it was high, high uh inflation numbers and a recessionary economy with massively high interest rates. Um, it's something that should send shivers down everybody's spine. And so we we watch this carefully, but if we don't think that there's going to be long-term consequences, and I think here, I'm not sure how it's being reported where you are, but in the United States, you really have to be an avid reader and be really digging. I mean, it's not to say there's not critical articles about the war, but I think the, I mean, if we just look at the markets, the markets are yet to respond to this in any meaningful way. Um, and they will eventually, but we're not seeing that quite yet.

SPEAKER_00 18:29

Talking about the means used to disrupt the global um global equation, I think what we've recognized from some of the books that you authored, you know, is that Britain in the past justified intervention after intervention, you know, by leaning on a language of civilization, stability and order. And when you look at what's happened uh with the current US policy in Venezuela, or even just uh the the the broader uh picture in the hemisphere as well, do you somewhere see uh history rhyming here?

SPEAKER_01 18:59

Yeah, I mean, I I think that what the Brits were up to with this fundamental belief in their empire, which was, as we know, the largest the world has ever seen, of a fairly consistent through line of a civilizing mission, right? That they were, this was not about exploitation or or making Britain wealthier, that this was about saving the world and all that that sort of so-called liberal imperial language around white man's burden and the rest of it. That's not, you know, really, there's a little of that in this with the current administration in the United States, but it seems to be much more scattered shot. It seems to be, I'm not sure this current administration lays awake at night worrying about human rights violations. And so, you know, the idea of expansionary impulses by the current administration in the United States strikes me as much about symptoms of an empire in decline as it does about an empire looking to fashion itself around a narrative of a white man's burden, of punching above its weight, insofar as, I mean, England was this, you know, Britain was this tiny little craggy rock of a nation somewhere in the cold waters of the northern Atlantic, right? That's not the United States. And so, in some ways, the United States, when you look at this kind of aggression, it signals to me weakness, not strength. And so to me, that would be some of the difference in this. We could have a longer conversation, maybe there's a little overlap. But I, I, you know, and that also should make us a bit nervous. We're also seeing the decline of a Soviet empire or or or bit up and then decline. And, you know, this this is similar kinds of things that we're seeing playing out in Ukraine and elsewhere, where we have sort of the decline of a large empire that been declined that was over, so to speak, but um Putin is trying to see a resurgence of this. And so I think, you know, I would always encourage people to be thinking that sometimes military aggression is not a sign of strength, but a sign of weakness. And what is it signaling to us? Um, and so that would be some of the differences that I would see between, say, Britain in the 19th and early 20th century versus what we're seeing right now.

SPEAKER_00 21:08

My last question in closing for you is what do you think leaders should keep their eyes out on and focus on, given the change that they're seeing in the world order today?

SPEAKER_01 21:16

Yeah, I think that leaders, I mean business leaders, I think business leaders should be thinking about uh resilience and should really be thinking about what are put some of the potential worst case scenarios and are you prepared for it? They may not play out, but are you ready for it? And it's gonna be different depending upon different industries. And so I think in that sense, it's a very different kind of mindset right now than say what we had even 10 years ago, you know, folks who were even here five years ago, three years ago. And that doesn't mean that the world is better or worse. It's just different. And I think adopting that kind of different mindset, I think really being quite intentional of bringing folks in who know some of this to sit with business leadership. To say, okay, look at, let's look at your portfolio of where you're most exposed. How do we think about that five years from now, 10 years from now? Let's play out these different scenarios. How do we think about that? That's a very different kind of mindset than, as I said, three or five years ago, where it was the go-go go-go days of globalization and reasonably predictable sort of rules of the road, if you will, right? It was a rules-based order that has been disrupted. And I think that understanding that and how that impacts your business, I think is fundamental for any leader today.

SPEAKER_00 22:29

Thank you very much, Caroline. You've taken time out of a very busy day. We're very grateful for that and appreciative of the same. Thank you for sharing your thoughts and just just participating on this podcast. It's my pleasure. My pleasure.

SPEAKER_01 22:40

And thank you for having me.

SPEAKER_00 22:41

Yeah. All right. Be well. Okay. Thank you. Take care now.

unknown 22:44

Okay.

SPEAKER_00 22:45

Bye bye.