Interview: Joshua Cooper Ramo

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Interview: Joshua Cooper Ramo

Joshua Cooper Ramo on the Beijing Consensus in the Age of Networks.

Interview: Joshua Cooper Ramo

Joshua Cooper Ramo is CEO of Kissinger Associates, the strategic advisory firm founded by former U.S. Secretary of State Henry Kissinger. Prior to entering the advisory business, Ramo traveled and observed the world through his positions at Newsweek and Time Magazine. When he left journalism, he moved to China, intrigued by the dynamics of its rapid growth. That model of Chinese development he later came to define in his influential paper “The Beijing Consensus” (2004). Mandarin-speaking, Ramo is an international best-selling author and has been called “one of China’s leading foreign-born scholars.” The Diplomat recently interviewed Ramo on the Beijing Consensus and his most recent book, The Seventh Sense: Power, Fortune, and Survival in the Age of Networks.

The Diplomat: In 2004, you coined the phrase “The Beijing Consensus.” Have the characteristics of the model remained the same since then or have changes occurred?

Joshua Cooper Ramo: The essential idea of the Beijing Consensus, that China’s national conditions and political environment would demand a unique development model, remains the same. It is worth remembering for a moment the essential Washington Consensus idea, that there was a single prescriptive economic model that would produce reliable growth for all nations were it uniformly followed. This idea was really an early and important tenant of post-Cold War globalization, and it was matched by ideas like Democratic Peace Theory, which suggested that the rapid development of a single political model for domestic order was not only desirable but possible. Today, we live in a world in deep crisis. And much of this comes from the over-simple assumptions baked into universalizing ideas about political and economic structure. What works in the financial markets of London, we now all see, is not such an easy match after all for the puzzles of Greek finance. The political solutions that have buttressed several hundred years of European history cannot be installed as easily as a McDonald’s in the countries of the Middle East.

The Beijing Consensus had a number of important precepts that appear to me still valid. Easily the most important—and clearly obvious of these—is that the mental model of many Westerners who considered China a decade ago, was a flawed and oversimplified projection. The idea that China would transform easily into a Western-looking political and economic system really was a common view then; and one still finds in places a strong belief that any attempt for China to find a unique path will result in failure. The notion that China would easily acquiesce to a security order the country had not helped create was a similar misjudgment. The Beijing Consensus was not meant as a judgment about China’s path or choices; rather it was meant as a dispassionate description of what was obvious to many Chinese: That while universal or particular values may obtain in China’s future order, the direction of the nation will surely be heavily influenced by uncountable forces of history, politics, economics, and social pressure.

Clearly the biggest change since 2004 has been the end of the era of easy globalization, something Chinese leaders addressed in the preface to the 13th Five Year Plan. The country is now trying to find a way to balance the demands of a connected world economy with a sense that future prosperity will depend greatly on China’s domestic capacity for production and prosperity. If the great economic endowment of the country in the last period was a low-cost labor base, the endowment today is the domestic market, and it is on the basis of the potentially powerful source of growth that current efforts must be calculated. In the original Beijing Consensus I wrote: “There are really only two points I want to make in this essay… The first was that China is pioneering a new route towards development that is based on innovation, asymmetry, human-up development, and a focus on the balance of individual rights and responsibilities. The second is this: China’s weaknesses are its future.” This second point also remains valid. The tremendous deficiencies of Chinese life will really be decisive in the next stage of development, as China’s own leaders often acknowledge. The struggle to fully achieve a new development model today, as those of us who work and live in China can attest, is as much about what does exist as what does not.

In the last decade or so, how much ground has the development model gained in Asia?

It is hard to say that a coherent development model has emerged anywhere in Asia, let alone a “China Model” development perspective. Clearly in the period after the 1997 crisis and even more sharply since the 2008 crisis, the idea of a Washington-knows-best approach to development has come under pressure. This is becoming a more acute problem with every passing year of the current crisis, as old economic tools fail to solve what once appeared very tractable problems. I described a great deal of this in my last book The Age of the Unthinkable, which discussed the way in which complex systems interact in ways that constantly produce surprise, contagion, and instability—every bit as naturally as they produce miracles of connection or medicine or technology. The challenge now is to begin to develop economic development policies that tap the benefits of complex interaction while managing many of the risks. Today we operate on two poles of this debate: Brexit would be an example of a furious desire to just unplug and escape the perils of connection; TPP [the Trans-Pacific Partnership] reflects a sense that more connection is linked to more prosperity. We know neither case is true. And increasingly we see that both fail the acid test of global affairs, which is domestic politics. The idea of the Beijing Consensus is less that every nation will follow China’s development model, but that it legitimizes the notion of particularity as opposed to the universality of a Washington model.

Jin Liqun, president of the newly founded Asian Infrastructure Investment Bank (AIIB), stated that its bank incorporates the lessons learned from developed nations and the experiences from developing countries such as China. To what extent can the AIIB be seen as the institutionalization of the Beijing Consensus?

It is too early to say much about the AIIB. President Jin has been very thoughtful about balancing the roles of an international institution with the various pressures one would expect in such a situation. The bank is certainly a welcome player on the global development stage, what remains to be seen is in what direction its efforts are applied.

For a developing nation, can the consensus serve as a long-term economic role model? For example, when a middle class becomes powerful through newly acquired economic independence, it could demand democratization of the political system, or when an economy aims to truly compete globally, it needs to liberalize its capital account. In both examples, a country could drift away from key notions of the Beijing Consensus, while embracing more Washington Consensus-like traits instead.

There is no more important goal of economic development than the creation of a prosperous, confident, and engaged middle class. Such an aim reflects the political truth that a large middle class provides the stability and long-termism that permits investment in political, environmental, social and technological systems that have a positive-sum return. The challenge for any development model is to adjust as time goes on to increasing demands for participation. Legitimacy of the model depends on this sort of acceptance, and is as true in Beijing as it is in Washington or Berlin. The specific problems of capital account management or democratization, for example, are less about picking a Washington or Beijing model and more about finding a suitable balance between open and closed. The Washington Consensus mandated opening many floodgates at once. The Beijing view is that such a process should be pursued with caution. Certainly there are many opinions about the pace at which China is now exploring such developments.

You recently published a book called The Seventh Sense. It deals with the disruptive force of technology-driven networks. Such networks and authoritarian governments often clash. In China for example, Facebook is blocked and Sina Weibo is heavily monitored and censored. How does The Seventh Sense fit in the Beijing Consensus?

Two dominant facts confront anyone who gazes at the world today. The first is that our institutions are everywhere in crisis and that the problems they confront seem to get worse when treated with the usual solutions. The most expensive war on terror in human history has not eradicated terrorism. The most aggressive monetary policy ever deployed, intended to firm economies and support middle class recovery, has produced more fragile financial systems and weakened the middle class. Attempts to expand political engagement have produced more extremism. And all around us are a long list of problems —from pandemics to weapons proliferation—that we can see and apparently do nothing about. No institution today is more respected than it was a decade ago. The second apparent fact is the unstoppable spread of networks, of connected systems for everything from finance to information to DNA. My contention in the book is that these facts are linked. Network systems represent a profound new way to organize power—as profound and different as the systems that emerged from the industrial revolution and the Enlightenment once were.

What I am to do in the book is explain just how these systems work, and to describe a new sense that some people and institutions seem to have, that lets them use and master this new force. I call this “The Seventh Sense.” (Nietzsche once spoke of a Sixth Sense for history that he said was needed to survive an industrial age. I think this Seventh Sense for connection will be the key to prosperity in our age.)

The essential puzzle for the management of any network system is to manage the question of openness. What we know is that networks crave speed and efficiency, so anything that slows this down appears to be a tremendous problem for development. This is why it might be argued, for instance, that a poorly functioning search engine for data might be more of a liability to a country than a poorly functioning capital market. Network economics present a new challenge and aspect to many nations. The desire for a China-model network will have to be balanced with certain inarguable laws of network power, and it is this puzzle that the country is now considering.

Many large networks that can be disruptive are American-bred, for example LinkedIn, Uber, Twitter, YouTube, Google, and Facebook. Do you think that The Seventh Sense supports a U.S. soft-power model, which is based on democratization?

Today we have nine different platforms with more than one billion users—Microsoft Windows, Microsoft Office, Facebook, WhatsApp, Google Maps, Gmail, Google Chrome, YouTube, and Skype. These are all American. Moreover, they all operate with a powerful logic: The more people who use them, the more attractive and valuable they become, which militates against the emergence of competitors. Each of these systems has dominant market share. And you can see why: If I told you, you needed to search for a disease cure on some local search engine in Country A or you could use Google with its global footprint, it is clear what the best choice would be. The important thing to understand here is that these same power laws obtain for many connected systems, not just the Internet. In The Seventh Sense, I use everything from adventures with the best computer hackers to the insights of the wisest diplomats to show what this means for world order, and for the future of war and peace.

I think it is too early to say that is certainly locks in American power. We are at a very early period. And I also do not believe in the idea of “Soft Power”—that somehow nations are swayed by cultural charm or the desire to watch American TV or wear Levis as Dr. Nye has suggested. Nations make decisions based on considerations of power, domestic politics, and large structural forces that may be well beyond their control. The transition to a world of connected system of all sorts is such a transition, and is in coldly realistic terms about the costs and benefits of inclusion in various networks that nations will pursue their interests. As we have already seen in cases such as Brexit or various global territorial disputes, there is nothing “soft” about such historically significant adjustments.