Parag Khanna Transcript: June 23, 2025
Kevin Johnson/NPF (00:00:01):
None of us has the benefit of a crystal ball. But for years, Parag Khanna has used predictive analytics to examine the transformational forces among us from migration and climate to government instability and changing demographics to offer a view into the future. His book MOVE: Where People are Going for a Better Future, offers just such a provocative take on the potential impact of global mass migration. He is founder and CEO of Alpha Geo and AI powered geospatial analytics firm. That’s a mouthful, but I’ll let him explain. He’s also a prolific author, including a series of books on the future of world order. He holds a PhD from the London School of Economics and degrees from the School of Foreign Service at Georgetown University. So please join me in welcoming Parag. Thank you.
Parag Khanna/AlphaGeo (00:01:04):
So welcome to Singapore for those of you who’ve come from far and wide. A couple of disclaimers from my side. I’m happy to be on the record. No NDAs need to be signed. To the extent possible, leaving aside PowerPoint, I would insist on informality as much as possible. I enjoy these kinds of seminar-like conversations, so I’m delighted to engage with you on a wide range of topics. Anything you like really once we get through the formal proceedings that will cover everything from trade to climate to migration. I think I’m familiar with all of your publications. I’ve probably written for a lot of you over the years or been interviewed in many of your publications. So again, literally on the record, I guess you could say. I’ll start with a funny story about migration and my most recent book MOVE, it was finished in early 2020.
(00:02:02):
You may remember that vaguely what happened five years ago in the spring of 2020, and along comes a guy who wrote a book called MOVE about mass migrations and the future of human mobility. And it was supposed to be released when the great lockdown began, not a term that we had actually had conceived of before. So my editor called me up and he said, “I think we have a problem. This may be the worst timed book in world history.” I needed to wait a little while for it to actually be released because I couldn’t physically travel and do a book tour anyway. But as it turns out, it only took a year or two. Pretty much by 2022 we had 2021 data and global migration — which had literally stopped, all migration like crossing the street had stopped in the March of 2020 — but by 2022, the number of people who crossed borders had exceeded 2019 and 2019 had been the highest volume of international migration ever recorded.
(00:03:07):
So it didn’t take long for people to act like people, which is to say, to move to exercise their capacity for mobility. And that’s just a reminder of how that trends play out over different timescales. And having a linear prognosis is almost always wrong. For example, when 2020 happened, people said, this will be the end of globalization as we know it, right? It was the end of migration, it was the end of many things, but that’s been proven wrong. So however old you are in this room, I want to actually before I even start, this is a theme of the next book I’m writing so it’s almost like road testing an idea. But if you look at the past quarter century, I’ve counted the number of times that global publications, including many of your own, and analysts, academics, commentators, have declared the end of globalization.
(00:04:06):
And you would think that a claim like that would be made historically at various critical junctures, world wars and so forth. But in just the past 25 years, technically a time of global peace, the post Cold War era, I count at least five major time,s five. And each time the analysts, the commentators, the scholars, the experts were pretty unreflective about the fact that just a couple of years earlier, their own tribe had said the same thing about a different set of circumstances and been completely wrong. But undeterred, we never stop at proclaiming the end of globalization at a time when globalization only became global ever in the 1990s with the end of the Cold War. And I’ll point you to those episodes that I flag in my research. The first is the 9-11 terrorist attacks 25 years ago. Again, many of you seems like weren’t necessarily fully conscious or aware of what happened at the time.
(00:05:14):
You were so young. But people said, this is the end of globalization. East and west will never trust each other again. There will never be, we won’t ensure re-ensure global trade and so on. So it was a pretty dire moment, obviously. Then six years later, global financial crisis, that was the end of globalization. Everyone was really, really certain that that was the end of globalization. Believe me, I was around. That was Kevin. Remember that was the end of globalization for sure. It was buried. We were New Yorkers, we were there, OK? Or at least I’m a New Yorker. Are you a New Yorker? OK, there you go. Close enough. Then a few years later came, of course, Trump one. Trump one and Brexit 2016. Now that was definitely the end of globalization, terrorist, protectionism, nationalism, xenophobia, you name it. Every ism, right? So again, no reflection on the fact that after 2008, trade rebounded, capital flows rebounded, right?
(00:06:15):
Completely forgetting that after 9-11 trade actually boomed commodities, prices, surge and so on. So that’s episode number three. COVID number four, again, end of globalization. Forget it. Nothing will ever be the same. Then as I just said, we’ll look back and we’ll see that COVID was literally just the tiniest blip, insignificant in terms of hindering global flows of people and so on. And now today, trade wars, new Cold War, whatever you want to call what’s happening right now, we’ll come up with a term for it in the next few years that’ll be definitive. But again, always wrong. Never bet against globalization is my first message. And for those of you who had any connection to the National University of Singapore to Lee Kuan Yew School where I’ve been a fellow for many years or used to be and teach there, as you know, you may know they have an in-house journal.
(00:07:10):
Does anyone remember what it’s called? It’s still published. Anyone. Global is Asian. It’s actually the name of the journal, best name for a magazine ever. You can’t take it because it’s taken, but it’s worth subscribing to. Global is Asian. So part of the mistake is of course, just discounting the bottom up reality of network building, whether it is trade, finance, capital flows, ideas, technology and so forth, the sum total of which is globalization. So being wrong about all of that all the time, which so many people in your community and mine are. And that’s just five examples from recent memory. And then part of it’s not understanding the geographical locus that drives these trends and to presume that it is still Washington or London or whatever the case may be. And to not locate it here, here. Globalization is driven here as much as anywhere else, if not more so in many ways.
(00:08:12):
So that’s just a brief preamble and a segue into a couple of points that I want to make. I just picked out five or six slides that hit at a few meta narrative of some global themes that I think are important, and this just helps us level set, get on the same page, agree or disagree, food for thought slides that you can keep. The first is that my favorite metaphor to explain most dynamics in the world today is not war. It’s tug of war. War is an episode, it’s happening right now. It happens every now and then, but it isn’t the 365, 24-7, 365 year on year reality of most of the world of most people, most of the time. It’s literally a specific episode in a specific place at a specific time. You could have five wars at once or you could have zero wars, but war is not the condition of the world.
(00:09:10):
I believe tug of war is. What is tug of war? Well, tug of war, first of all is literally the oldest sport in human history. You can find the cave paintings in Indonesia and France and across all continents, 40,000 year old cave paintings depicting tug of war. There’s literally no older sport than tug of war. So it’s my favorite metaphor because in tug of war, we we’re connected by a rope, right? The teams are connected by a rope, and the game is about controlling the rope. So that rope is the connectivity and that connectivity is globalization, right? As embodied in markets and supply chains. So we are all on a team or teams in tug of war. You could be on the team of a country, the team of a company, you could be seeking to gain the greatest market share, to import the most of something, or to export the most of something or to control the highest value, value add of something.
(00:10:06):
But that’s the tug of war. We’re all connected to each other in this one big multi rope multiplayer game of tug of war. And we’re all pulling on our different threads of the rope that is 24-7, 365, every human being, every country, every company on earth, all the time nonstop. And I think this is the appropriate office, the Hinrich Foundation, to be making this point when we’re focused on trade, everyone, every human being in some way is touched by this tug of war, whereas there could be a war somewhere else in the world, that’s remote that has no bearing on your life whatsoever. But everyone is affected by the global tug of war. As I say, it’s the value to control either market share or value add in global supply chains and trade networks. So the best research tool that has been devised to capture this, or one of the best is some of you may be familiar with this already, is the Harvard MIT Atlas of Economic Complexity.
(00:11:01):
And it’s updated not frequently enough I would say, but from a research standpoint, they keep on adding new products and metrics to it, and I refer to it as frequently as I can to look not necessarily just at rankings of countries per se, but to look at their technical terms adjacent to possible. So in what sectors is a economy strong in or where can it become stronger and how are its trade relationships with other countries helping it move up the value chain to displace those countries that are slightly higher up in itself. And moving up the value chain is what it’s all about. It’s what every country wants to do. What country says, I don’t want to modernize? What country says, I don’t want to add more value? Everyone does. And so that’s how it’s playing out.
(00:11:49):
So without going to every single bullet point here, overall, the point is that Asia has been moving up the value chain extremely rapidly. It is displacing incumbents in many areas. Of course we’ve seen China do this, but what comes next is the ways in which India is doing it. ASEAN countries are doing it and identifying country by country, what are the areas where they want to modernize and displace competition by way of very often gaining more capital investment, right? Investment is upstream of trade. [Unclear] and I were talking about this very sentence five minutes ago, right? Investment is upstream of trade, bringing in investment so that you can move up the value chain and export more. And literally that explains most government policy in most places in the world, most of the time for the rest of your existence on this planet earth. That’s all any country wants, is how do I move up the value chain?
(00:12:48):
It’s what obsesses everyone, any rational leader only is thinking 95% about this and 5% about other things. If you’re smart, and we obviously have a lot of smart leaders in Asia because this is what they’re thinking about 95% of the time. And so this relentless competition will carry on. And we’re seeing of course that again, incumbents, whether it is European Union, Japan, United States are all feeling the pressure as Asian countries move up the value chain. So there’s a lot more to say about all of that in terms of how industrial policy is playing out, which role models are out there for industrial policy. But industrial policy are the two words that I think everyone needs to understand very well. And it’s also within a broader paradigm around what constitutes “fair” models of governance. Because if we were having this conversation 20 years ago, people might still hold up in their heads this idea of laissez-faire, free market capitalism.
(00:13:47):
Not that any such archetype or really existed in reality per se, but we’ve had global — the flourishing of global industrial policy — at least since the mid two thousands, even in countries ever since the financial crisis, of course, even in countries that profess to not be practicing it. Think about the bailouts of the auto industry in the United States to take one example; needless to say, European countries with their subsidies and industrial supports; and Asia has been doing it all along on unashamedly right now. Everyone is doing it. Second big point I want to make that reinforces the global is Asian kind of narrative is this one, and this is what is known as the Asianization of Asia. It’s a bit of a mouthful, but Yoichi Funabashi, a great Japanese industrialist and scholar, coined this term in the 1990s and an essay in Foreign Affairs magazine.
(00:14:41):
Literally in 1993, he’d already spotted the Asianization of Asia. At the time, when Western scholars would look at Asia coming together, there was a presumption that it would be under Japanese leadership sort of tutelage. Obviously that proved not to be the case. We’ll get into the multipolar, multi-speed Asia in a moment. But I use this infograph, this graphic, in a way to represent a much more fundamental point, which is the biggest story of the 21st century to me is not the rise of China, it’s the Asianization of Asia. The rise of China is part of that story. It contributes to that story as well as to a geopolitical transformation narrative. At the same time, the rise of China is profound and systemic in two ways. One is the global geopolitical, but for the purposes of this discussion, it’s a driver, one driver of the Asianization of Asia.
(00:15:33):
And we will look back 20, 30 years from now and say it was Asia’s rise as a whole that was more significant. And that allows you to appreciate the kind of sequential, chronological story of Asia’s modern miracle, which does begin with Japan in the 1940s and ’50s and ’60s and then as followed by the tiger economies, Singapore, South Korea, Taiwan, Hong Kong, and then comes China as the third wave of growth. And now you have south and southeast Asia, us here from Pakistan through India, through Ian. That’s the fourth wave. And these are actually mutually reinforcing waves. You can go back to the 1990s, and that’s what I’m showing you here. What I did was to go look at every five year increment, take 2000, 2005, 2010, -15, -20, and look at just bilateral trade volumes among pairs of Asian states or sub regions. So one subregion is the GCC, ASEAN is another one.
(00:16:35):
You’re all in the news business. So you know that three weeks ago there was the GCC-ASEAN Summit in Kuala Lumpur, not the kind of thing that makes Western headlines, but to me is a profound representation of this Asianization of Asia. Even though that summit happened in Kuala Lumpur and did get a fair bit of attention. Bear in mind that what’s known as the supercycle, particularly the commodities supercycle, began in the 1990s. That’s when Asian demand started to grow so significantly on the back of industrialization. And the Gulf countries began to export more oil and gas across the Indian Ocean than they did to western economies. And now of course, United States, not least due to the shale revolution and so forth, imports almost zero oil from the Gulf countries. Whereas of course, as we’re seeing it being pointed out in the news today, particularly because of Iran, most Iranian oil and gas and most Gulf oil and gas goes to India, Southeast Asia and East Asian countries.
(00:17:34):
So there are complementarities, if economics is about the optimization of land, labor, capital, and other factor inputs. If you just look at this map and look at the countries on this map and you were to layer in raw materials and other things, think about what place, where else in the world do you have, well, five and a half billion people, so you’ve got labor. You’ve got land, you’ve got capital, you have natural resources, you have industrial capacity, you have technology, you have ideas and innovation and know-how. All of those factors are present and are being constantly optimized by way of these cross-border investment and trade flows. So Asia has now accounts for 65/70%, correct me if I’m wrong, of its own internal trade. And that is coming from a very low base because 35 years ago only is when the Cold war ended. You’re coming on the back of 500 years of colonialism and the Cold War when Asians were not as integrated.
(00:18:37):
We didn’t talk about the silk roads during the Cold War, did we? And during colonialism, those were also ruptured in favor of more extractive colonial relationships with Western powers. So you’re coming on the back of 500 years of separation in many ways, and in just 35 years, that’s all it took to overcome 500 years of drift. And Asians now do more with other Asians than they do with the rest of the world. It only took 35 years, which is spectacular given the cultural diversity. Look at yourselves, what other region of the world is as heterogeneous? And yet despite that, all the internal obstacles, barriers, suspicions, lack of mutual cultural knowledge, different regulations, obviously a lot of that has been overcome in a very short period of time. So I think the Asianization of Asia is a great story and it continues to unfold. This Venn diagram is just showing some of the nesting of Asian-centric institutions that are enabling all of this. A lot of regional organizations, whether it is again ASEAN, ASEAN Plus Three, Regional Comprehensive Economic Partnership and so forth, will borrow piecemeal from the code. It’s called the legal code of the WTO or other foundational global bodies. But of course, exceptions are made, carve outs are made.
(00:20:07):
And then Asian institutions tend to embody these Asian rules and they start to globalize themselves. So if you look for example, the AIIB, you’ll see here, it’s kind of surprising. I didn’t know Finland thought of itself as Asian. Well, it’s not. But the point is that whether it’s Italy, Finland, Switzerland, you’ve obviously got some Latin American countries here too, all want to be a part of the Asian story. So now instead of Asian countries elevating to join western institutions, it’s western countries or countries from all across the developing world wanting to be part of Asian institutions so that they can benefit from Asian trade linkages, Asian capital flows, and so on. So outside in has become inside out. And this also is part of the Asianization of Asia. I mentioned the four waves of Asian growth earlier just to reinforce Japan, then the tigers, then China, then south and Southeast Asia. So here we are in this fourth wave, and it’s still early days, right? You have two and a half billion people across south and southeast Asia. Again, our home region right here with enormous growth potential younger demographics than China, except for Thailand.
(00:21:32):
High growth rates, rapidly reforming economies, practicing what is known as open regionalism, right? Regional integration that’s accelerating as I mentioned earlier, but still wanting to be part of, as I show you here, both the RCEP and the TPP and so forth. So I think that’s part of the promise of the story. But now of course, no ASEAN country alone could compete with China. When people talk about Vietnam, they like to say little China and so on. But cliches aside, as you know, it’s a very small country, still very poor. Yes, it’s absorbing a huge amount of FDI as much as it can handle in terms of its energy, capacity and so forth. But no one country alone. But ASEAN collectively, 10 countries, 700 million people, attracts far more greenfield FDI today than China does, right? And has a GDP I think slightly larger, if I’m not mistaken, than India or neck and neck.
(00:22:34):
So half the population of China, more FDI than China receives less than half the population of India equivalent GDP. So huge potential in this region. And of course though, interestingly enough, if ASEAN were a country, it would be the most unequal country in the world. Just do this thought experiment. I’ll give, let me give you the analogs first. In the United States, the richest state per capita is Maryland, outside of Washington, DC; it’s like a lot of government contracting and lobbyists and so forth. They pay themselves very well. The per capita income, median income is $60,000 a year. The poorest state in America is Mississippi, $30,000 median income. So that’s a two to one gap, OK? Park that to the side. Europe, richest country, Luxembourg, something like $150,000 a year per capita income, great place for money laundering and whatever else they do in Luxembourg. Poorest country in Europe, Moldova or Albania, no, Moldova is poor than Albania.
(00:23:41):
So call it, I dunno, say $20,000-$30,000 a year. So that’s call it a seven to one gap. ASEAN richest country, Singapore, fine throw in Brunei, whatever, $80,000-$90,000 a year. Poorest country, East Timor, Myanmar, what, $3,00-$4,000 a year. So you’ve got about a 30 to one gap, 30 to one. So there’s no place in the world with higher inequality than ASEAN if it were a country. Africa doesn’t have nearly the number of billionaires, so not even close in terms of inequality. But where do you see, show me the anti inequality protest. Show me the Occupy Wall Street right here in Asia. Where is it? I think it’s because people appreciate where they’ve come from. They know what their baseline has been, how poor they have been. They see the overall momentum and progress. They see that alleviating poverty, reducing poverty by way of creating opportunity, investing, infrastructure, all of those things, education, healthcare, and so on, leaning in on that and raising the floor is more important than lowering the ceiling, which is the kind of the pie is expanded to its maximum.
(00:25:06):
And now we have to fight over the pie. Whereas here in Asia, the pie is still growing, right? So let it continue to grow and let the tide lift all boats, not just through free market mechanisms, not at all, but obviously through heavy government investment and private sector investment. And lo and behold, if you look at the budgets, the fiscal allocation to things like basic infrastructure across south and southeast Asia, India’s higher than pretty much any other place in the world right now. 18-20% of Indian budget goes into infra and similar numbers across the region. That’s where the action is. So that’s again, part of this story here, is that despite this vast inequality, there’s still a huge opportunity to uplift the many hundreds of millions of citizens of ASEAN countries that are still, let’s call it, disconnected or not fully empowered, not fully participating in the economy.
(00:26:05):
And I think that is part of what drives this enormous potential. And that’s within countries now across borders. You have very significant efforts that a common ASEAN energy grid, obviously railways and connectivity and transportation and so forth, all of that supported by the government, supported by investors, and also by China, by the Belt and Road Initiative. And part of the Asianization of Asia story is that these four ways of growth, Japan, tigers, China, South and Southeast Asia are not blocs, right? They’re reinforcing each other. We are each other’s largest trade partners and investors. So it’s not even despite geopolitical rivalries. I think of Asia as a sponge more than a set of rival blocs. So a final couple of points just to this is the point about this reinforcing. So again, China has been offshoring as much or more than anyone from itself in order to capitalize on lower wages in this region and the growing market in the region, and the fact that this region is part of TPP and other trade agreements and so on.
(00:27:12):
So there’s a logic that puts south and southeast Asia really in the sweet spot in the world economy, young demographics, low wages, participation in trade agreements, attracting a lot of foreign investment reform oriented governments, high infrastructure investment, shrewd industrial policy, political stability. This is like your basic laundry list, accumulated over 75 years of World Bank studies there I saved you the trouble of reading them all. You could stick it in LLM put 75 years of World Bank boring reports on how to modernize an economy and distill it to eight things. Those are your eight things right there. And at any given time in history, there is a part of the world that’s having its moment in the sun where the stars are aligning, where these things are happening. And right now it is here. And so it’s a great time obviously to be here. Final couple points as to why the future is Asian, because the present is obviously Asian already, but the demographics are really a special characteristic, not only in the obvious size as we know most human beings alive today are Asians in Asia, every day the world becomes more demographically Asian simply by virtue of aging populations passing away elsewhere in the world and more children being born in Asia.
(00:28:37):
That’s just a fact. But the crazy thing is that it’s happening in the context of a world population plateau, because it would be one thing if the demographic pie were a balloon, rather we’re expanding. And if we were going to reach 15 billion people, which is what demographers thought 30 years ago, but as you may know, the number that we’re putting at peak humanity is probably 10 billion people now, and we’re already eight and a half billion people. So most human beings that will ever be alive, ever at the same time are alive today, right now. And we will reach that peak humanity, not in 2080 or 2090, but more like 2050 or 2060, which in demographic time is pretty much tomorrow. And if you live in an OECD country in a western economy or society of the “north,” you’re already past peak humanity and your fertility rate is sub replacement as it is of course in Japan, as we all know, in Korea, also in the United States and all of Europe.
(00:29:40):
So we’re already, most countries are already at peak humanity except for here in Asia where we still have higher fertility or at least some countries, not China, not Japan, are still growing. And so when you were looking for where is the economic action in the real economy, not the financial economy, the real economy, you need to look for where the people are and where the urbanization is and of, that’s of course here in Asia, but in particular where the young people are because young people are literally the future and most young people as to reinforce the previous point are Asian. So what this slide is showing you is that if you take youth, global youth, you would say it’s millennials, it’s Gen Z, and it’s Gen Alpha. Sorry, if you’re Gen X, so millennials, Gen Z, and Gen Alpha three cohorts define youth. So people below 43, 44, those still considered young.
(00:30:38):
So if you take just one slice of that, millennials working age millennials, that’s what I’m showing you here. So the entire rest of the planet doesn’t have nearly as many just working age millennials as Asia does, leaving aside Gen Z and Gen Alpha, which are even bigger than working age Millennials. So the Asian demographic advantage is incomparably larger than any other part of the planet, right? And the gap continues to grow. So where Asians are, will more or less shape a huge part of the demographic future of humanity. And unless you think robots will do everything and you can tax the robots and it’ll all be fine, OK? That’s one very narrow path that a couple of cities or provinces may be lucky enough to go down depending on where Elon Musk is meddling at any given time. But by and large, you still want to know where the people are.
(00:31:40):
So now let me bring in the final factor in this puzzle, which is climate change. So unfortunately for Asia, this is the region that’s also the most exposed to physical climate risk, flood, storm, heat, fire, drought, sea level rise cumulatively. This is a map showing you, oh, it’s known as the suitability index, which is the change in the habitability of a location. As temperatures rise, we’re now heading on a two to 2.5 degree Celsius baseline or above the baseline trajectory. With climate change, it’ll probably just get worse and worse, but it will be sort of exacerbated in a non-linear way, so it’ll get exponentially worse than the way things already are, and that’s going to affect the billions of Asians. Look for example, again, south Southeast Asia geographies in terms of the cumulative impact of heat, wet bulb effects and so on. That’s going to have an impact on economic performance and on migration.
(00:32:42):
If you look at the peak heat waves during particularly well this time of year-ish in India, this is in Southeast Asia, this is from last year. It’s having a very significant impact. I did a column January this year for the FT Financial Times about India’s GDP. If you recalculate it, looking at a kind of bottom up view of the impact that droughts have on agriculture, heat waves have on electricity grid stress and labor productivity. And you look at the geography of the labor force in India and the climate impact in those states. And then so attach a certain climate discount rate to each state’s economic performance and add it up and forecast to the year 2030. You get a correction on India’s GDP of about $500 billion, which is a lot of money for an economy that’s supposed to be $8 trillion. That’s a very, very significant haircut.
(00:33:54):
And it’s perfectly plausible. It’s certainly more plausible than simply saying the way, quite frankly, the World Bank, the IMF, S&P and others do, which is to ape each other’s statistics and say, oh yes, India is going to grow 10% uninterrupted over the next five, 10 years because who said so? Because who said, so did you take into account climate? Did you take into account labor automation? Did you take into account tariffs? No, they’re just making it up. So you have to recalculate everything from the bottom up. I’m just giving you one particular climate recalculation, but add up these compounding impacts and it can be quite worrying from a demographic and economic standpoint. And so I expect, I think I have it here, I’ll come back to it in a minute. Well, I’ll start with this. So I expect there to be very significant, continue to be very significant migration flows.
(00:34:48):
This was a map I developed for the MOVE book. I started in the year 2000. So 25 years, well, 20 years at the time of net interregional migration flow. So the total number of people that have relocated from one region to another region over the past 20 years, and also within regions actually. And so the broader message is that we’ve never seen this volume and these vectors in this intensity of migration in world history, right? You’ve never seen as many, as you well know, most of the population of the Gulf countries is already South Asian. You’ve never seen this many Latin Americans in North America, this many Africans in Europe, this many south and southeast Asians in Europe, right? I dunno how often you travel to Europe. I went to high school in Germany and I lived in Hamburg for a while, and I was definitely the only Indian guy around in at least my neighborhood of Hamburg.
(00:35:51):
But today I go to Germany all the time, and it’s like little India, and that’s just in one short period of time, one generation. And so this is unprecedented, these flows of people across regions. Bear in mind that the largest origin, geography of migration already is Asia and will continue to be Asia. So I put up this here, the Indian diaspora, and if you take that as a proxy for the South Asian diaspora as a whole, which to which you would add then maybe say 20% above and beyond, the Indian is already become, is soon to surpass the Chinese diaspora as the largest in the world. We’ve all kind of grown up in a world where the Chinese diaspora is the largest, but it’s concentrated here, of course in Southeast Asia, but it’s international. The South Asian diaspora will be larger than the Indian, than the Chinese diaspora and is completely global in every corner of the planet Earth owing to everything from British colonialism actually being the number one reason.
(00:36:58):
Then labor shortages, then certain post-colonial kinships or sort of coincidences like English language and even less geopolitical suspicion, quite frankly towards South Asians and the certain skill sets that they have, whether it’s IT or nursing, which are sectors that are in high demand around the world. I have friends in German private equity who now go and recruit for us, it’s a commonplace to think of nurses hailing from the Philippines and so on. But of course the Philippines can’t supply enough nurses for an aging world. It’s only a country of a hundred million people. And as wages rise in the Philippines, it’s perfectly plausible for a young Filipino lady who wants to be a nurse to just get a high paying job in the Philippines. She doesn’t have to leave, but India is much poor and is 15 times larger in population one to five and has a lot of young women who are poor and want to get out of India.
(00:38:05):
So it’s your perfect sweet spot. So now I’ve got German friends who go recruit, tie up with training centers in India and pull nurses out and then do more training in the UAE and then farm them out to hospitals in Germany. So all across Europe, all across Canada. The next 10, 5, 10 years, you’ll see a lot more Indian nurses relative to say Filipino nurses and so on. So I think one of the biggest demographic stories, the demographic story many ways is the Asian diaspora spreading around the world. I think one of the stories that I think is super interesting to track, because migration is something that will never be regulated or governed from in a centralized top-down way ever. It will always be sovereign, right? I will always control my borders against the movement of people. I will always determine who can come in and come out.
(00:38:57):
Every country in the world obeys that. So what you want to be looking at is bilateral migration trees. These are known as skills transfer agreements that countries sign. So Germany says we need more software engineers. So Olaf Schultz, last December, went to India and signed an agreement to bring in 90,000 software engineers from India to Germany, right? Greece wants Indian construction workers, Russia wants Indian farmers, Japan wants Filipino nurses. And these bilateral agreements that have mapped out some of the supply demand complementarities here, this is the real mechanical story of professional migration as it’s playing out and think it’s very pragmatic and very exciting and it’s leading to demographic changes. So on that note, a bit of a non-sequitur, but I wanted to cover geopolitics, macroeconomics, regionalism, climate, and migration in just a few minutes. And with that, open to your questions. Thank you.
Ravi Dutta Mishra/Indian Express (00:40:05):
I’m Ravi with The Indian Express. I just wanted you to expand a bit on the metric that you mentioned. India should have been an 8 billion, sorry, 8 billion economy and climate is what your accounting, that 500 billion would’ve would’ve been lost or will be lost because of climate. So exactly how did you arrive at
Parag Khanna/AlphaGeo (00:40:30):
That number? So the Ministry of Finance projects, I think nine to 10% growth per annum, and that translates into 8.25 trillion in US dollar GDP forecast for I think 2030, something like that. OK, so let’s take that as a baseline. So there are models that look at the impact. So these are academic papers and studies that look at India and they’ll say, OK, when you have drought, acute drought events, the impact on farming output and revenue in the agricultural sector is X. A discount of say 10%. Then you have the similar body of academic research that will look at the impact of power outages because of excess demand and leading to blackouts, brownouts in India and what impact that has on the secondary sector, which is industrial manufacturing. So call that a 5% discount during acute events and less productivity loss from that or output loss from that.
(00:41:38):
Then you have a third body of literature that looks at heat, stress and impact on labor force. So this could be delivery drivers and stuff. So one of the things I put on that slide was that in Indian earnings calls, they’re saying that when there’s acute heat waves, the companies that do food delivery and so forth, the grocery delivery generate less revenue because they have to give workers time off. They can’t even work outside, it’s just too hot. Same thing in the construction sector. So there’s a discount rate for that too. So then you’ve got your three functions in mathematical econometric functions, basically, which you then apply to each part of the country geographically that is going to be most affected by those trends in the next five to 10 years. How do you know that? Well, climate models, climate models are spectacularly accurate. They’re literally, every month climate models get more and more accurate in telling us exactly when heat waves, when droughts, when floods, and when hurricanes are going to hit.
(00:42:37):
So you can then apply that function to each part of the economy. So we then take downscaled models of the Indian economy. So where do people work? Where are people working in agriculture, in manufacturing services, primary, secondary, tertiary? What is the actual quantum of climate impact forecast in those locations? What discount function will you apply to the growth projection for that sector in that state? And then you’d literally re-aggregate from the bottom up the entire state, the entire republic of India, and you get your revised GDP, and we came up with 7.75 trillion versus 8.25 trillion. So that’s exactly how we did it. So I walked through it in the article and we’ve got obviously a lot of methodology backing that up. It’s actually not our methodology. This is what everyone does. But the point is that if you’re sitting, if your job is just to read what the World Bank’s latest annual economic outlook is, which always comes out in the beginning of the year, and people say, oh wow, the world economy is set to grow only 2.3% this year, and 75% of that will be emerging markets and on.
(00:43:43):
And if you just want to regurgitate that, fine, you’re welcome to do that. But it’s wrong. It’s wrong because it doesn’t factor in these very, very systemic disruptions. And when you’re talking about the world’s fastest growing large economy, which is India, it matters to be wrong. It matters to be wrong for the United States too. We’re always wrong about the US also to be clear, and it all gets picked up in the revisions. But it’s funny how methodologies are so poor and slow to update like GDP and how we calculate and so forth, rather than taking into account the learning from all the ways in which we are wrong. And this is a great area to be applying neural networks and other kinds of tools to get better at economic forecasting.
Kevin Johnson/NPF (00:44:30):
Right back here, and then we’ll go over. Go ahead.
Lam Le/Rest of World (00:44:33):
My name is Lam and I’m from Rest of World. So in the data that was showing the traditional movements of workers, people usually tend to be from non-Western to western countries, but then with recent events, there’ve been anecdotal stories and stories, for example, of Chinese engineers coming back to China because from Vietnam, they’re anecdotal stories overseas, Vietnamese coming back because of these opportunities. And you also be saying the future is Asian. I mean empirically, are you seeing any kind of actually the trend of people coming
(00:45:14):
Back
(00:45:15):
From the west to Asia?
Parag Khanna/AlphaGeo (00:45:17):
Yeah, absolutely. So the repat story as it’s known, so repats repatriates, so not expatriates, but so of course that’s well established in China, tens of millions I think maybe collectively who have returned or maybe single digit millions sea turtles as they’re known in India of course as well, plenty of NRIs who have returned to India, non-resident Indians. And you see the same thing definitely in Indonesia. You see it in Vietnam, any place where you have basically it’s cyclical with the growth momentum. I’ve seen this with Turks from Europe who have moved back to Turkey when the economy is going great, they pack up their bags, load up their Mercedes and Audis, and they go back to Turkey and they start factories and make investments and they’re riding the Turkish economic growth rate. But then you have a situation like today where the Turkish currency has been shattered and it’s a horrible government and everyone wants to get out again.
(00:46:15):
So these things are economically cyclical. I obviously would be bullish on Vietnam, on Indonesia, on the Philippines, and therefore you do see a lot of repats. But remember, our populations are so large here in Asia that you’ll get both. There’s, as I said, literally more people leave India every single year, year on year on year on year on year than any country in the entire world, except for when there’s a war and a refugee flow of a million and a half people. But short of conflict, Indians voluntarily leave India. But sure, some Indians also move back. So our populations are huge and you just have both, and it’s a two-way street between Asia and the rest of the world.
(00:47:01):
But I often use the question you’re asking as a rule of thumb, when I travel to a country for the first time or the second time, or it’s just one of my soft indicators, if the diaspora of a country that often left the country because they’re disgruntled, because they’re upset, because they because they feel persecuted. If they having moved abroad and taken their savings abroad and their families abroad, if they then decide that they want to go back, something good must be happening. So I’m actually always looking to see if there are repats who want to take advantage of their language culture connections to be part of the growth story. To me, it’s a great lead indicator of a rebound of a country if the repatriation wave is strong.
Shreya Nandi/Business Standard (00:47:56):
Hi, I’m Shreya from Business Standard newspaper from India. So my question is a bit India specific. So in one of the slides, you’ve mentioned this with this log of copy ads, and there you mentioned Indian qualities of kati and production linked incentives. So if you could elaborate more on that and how the system of kaki that has been implemented as well as the PLI scheme, what has been the word perception of
Parag Khanna/AlphaGeo (00:48:23):
These schemes? So this is a shorthand for Indian industrial policy. It’s India doing what China has done for 40 years, right? It’s sort of in two ways, two bi-directional. One direction is simply trying to recruit more foreign investment into India because it’s modernizing investing in infrastructure in industry, and obviously branding itself as the safe alternative to China and so on and so on and so on. And the other part of it is the desperate need of the government to create jobs. I mean, no country needs to create more jobs for more young people every year than India, and it’s falling behind as year on year on year. And so that’s a cumulative deficit that needs to be overcome through job creation. And of course, the recognition that only capturing the lowest strung of the ladder is not going to create enough jobs, is not going to create enough GDP growth.
(00:49:14):
Instead, you have to ensure that there’s a spillover effects in the local ecosystem and so on and so on. So that’s the background obviously into the Macon India, whatever term it goes by PLIs as well. So you take all of that hodgepodge of incentives and policies. It’s obviously not going great as you know. It’s inadequate in terms of job creation. It’s inadequate in terms of total volume of FDI. FDI figures into India are way below what they should be. They’re OK, but they’re not great. And you also have a lot of outbound capital flow out of India, out of the capital account and at the retail household level, and again, embedded in the human capital as well. So India is, I would give it a score of three out of 10. And PLI is a lot of them as has been shut down or stillborn even because they have unequal regulatory or lack of transparency and clarity in the regulations and so forth.
(00:50:13):
So this is India being India, it’s like good idea, bad execution. I’m allowed to say this of course. So yeah, I would like to see them get it right because the playbook is actually pretty obvious. But then the thing is, in a democratic society, in a very federalized system, you have 30 states in India, you have a lot of special interests, corporate capture, there’s just so many frictions along the way that make it hard to just have one standard, one law, one transparent thing. So I mean, I would just say that India will eventually get there. It’ll just be so many missed opportunities along the way, and it won’t really live up to the expectations that society needs.
Yujie Xue/South China Morning Post (00:51:05):
Thank you. Yujie Xue from South China Morning Post. I like to hear your views on the implications of Trump’s immigration policy, of the global talent flow, where they’re going to and which countries are going to benefit from this. And also this implication is going to be long-term or temporary?
Parag Khanna/AlphaGeo (00:51:23):
Right. So I’m glad you added that coda, because there is a long-term process that’s already been underway for say 20, 25 years, which is that there has emerged a global war for talent. And we wouldn’t have identified it per se were it not for the consequences of the 9-11 terrorist attacks a quarter century ago, after which there was the similar phenomena to today, difficulty in getting visas and anti-immigrant sentiment, American university campuses to decided to set up abroad because they had trouble bringing students in the us. Other countries capitalized like Canada and said, if you’ve got talent come here, then the same thing happened after Trump won. So 2016 you had countries being a lot more shrewd, like the UK sprung into action even though they had just had Brexit. And that was an own goal. And yet still by 2017, you had a record number of new student applications and inflow into the UK because of Trump.
(00:52:28):
So you had Brexit and Trump at the same time. That should have brought those numbers down. Instead, they went up in the UK because you had all this talent that said, OK, well I’m done with the US because of Trump. And then Canada, they went up and Canada really started to take off at that point. Canada’s invested a lot in expanding higher education opportunities. I’ve seen a lot of European countries since that time last decade, exactly, switching the medium of instruction to English. And that’s been a big coup for them. Dutch universities, German universities, Swedish universities and so on and so on. More and more every year there’s more European institutions teaching in English. Of course, Australia and others have capitalized also. So you’ve had this expanding war for talent. So the world was prepared for what happened last November when Trump got elected because they’d already been training for it and already exploiting it.
(00:53:21):
So now what you see happening is for students, it’s come over to Europe, Canada. Well, Canada has had a difficult time because they should have exploited this moment better, but as you know, they didn’t build enough accommodation. So they’ve had to now artificially cap this year’s migration numbers, including for students. Had they built enough housing, they wouldn’t have had to do that, which is really dumb on their part because you just lost an opportunity to, of course, import more capital or export more services is the way it’s actually categorized. But Australia’s capitalizing and so on and so forth. And then at the higher level of faculty and so on, there is a binge going on. I was just over in London meeting with some university presidents and they said that they’ve got a five-year plan to spend a couple of hundred million pounds a year to recruit top American talent, but they’re not going to buy them all in the first year slowly, slowly, because Trump’s cuts will eat in over time. So each year there’ll be more and more Americans who run out of money from the grants that they had in the last few years. So there’s going to be that. So at all levels, this will play out in the coming years, it’ll be good for the rest of the world and not so good for the US basically.
(00:54:44):
So therefore, it’s a short term spike, which is part of a cyclical series of spikes that constitute a longer term process, which I call the global war for young talent. Students are a huge part of it. I would like to see Europe emerge as a kind of aggregate winner in a way. It is in many ways for Europe, for Asians. I mean, think about all the Chinese who now won’t go to the US, they’ll just go to Europe. Europe welcomes them, or Canada or whatever the case may be. So I think, and remember, this is all part of the fact of the broader demographic story that I told you guys about in a totally separate slide, which is the youth bulge, right? You’ve got Gen Z is the largest cohort of human beings alive on the planet earth. They all need a place to go and study.
(00:55:38):
Literally, there’s never been a worse time to turn off students. You’ve never had more students alive at any time in history as right now. You should be begging, you should be building universities on every block to absorb them. They’re bringing their parents’ money to your country. You’d be stupid to say no. In this country I talked on this issue and other issues, but in particular since November, I’ve made very clear to my interlocutors, I would give a blank check or a $200 million check to each of the five major universities in this country and let them go shopping and buy talent, no strings attached and bring them here for the long haul. And that’s what every country should do.
Katia Dmitrieva/Bloomberg (00:56:32):
I have so many questions for you, I’m going to limit myself. So you mentioned, for example, Vietnam as a place or Thailand or Southeast
(00:56:43):
Asian countries in general. They do have a higher birth and fertility rate, but we’re seeing that like everywhere else in the world it’s starting to go down as well. We saw a couple of weeks ago, Vietnam taking down the two child policy, for example. So I’m just, I wonder maybe relatively speaking, they are better, but how do you see these economies, especially economies that really to get to where they are now, a large part of it was the workforce, the people, the productivity. How do you see these economies adjusting to the new low birth reality? And the other question that kind of comes from that, is there, and maybe AI could help in the productivity space, I don’t know, but there’s also this need then to increase. Everyone has the same need of increase in the tug of war. You spoke of increasing their skilled workforce, and it’s happening at a time of rising xenophobia, rising nationalism kind of everywhere. So I wonder if there are any countries that are succeeding in that right now, doing a better job. You spoke a bit about Europe potentially being a good place for students to
(00:58:00):
Go.
(00:58:02):
And yeah, finally, if no one else asks a question, I wanted to ask something about China.
Parag Khanna/AlphaGeo (00:58:07):
All right, well, let me take the second question first, which is easier to answer. There is I like to shorthand it as populist nationalists and globalist technocrats, right? And populist nationalists would be Trump. But you’re not seeing the impact of Trump being that the world is a set of following dominoes and everyone’s becoming populist nationalists. Canada elected a globalist technocrat Britain is run by a globalist technocrat. Germany elected a globalist technocrat, Australia, globalist technocrat, Japan, China, India. Really most of the world’s pragmatic, important economies are run by globalist technocrats. So I don’t see this global populist nationalist right wing, xenophobic wave that people sort of extrapolate from just because of Trump. I actually see the opposite because the reaction to someone jumping off a cliff is not to jump off the cliff. It’s the runaway from the cliff. And that’s the problem. That’s why sort of these linear kinds of theories don’t actually work.
(00:59:10):
So I am quite optimistic about globalization in general for that reason. And about migration, openness to migration in particular, because most countries are saying, look, we need people, we need humans. We need labor, we need taxpayers. So that’s going, supply and demand is going to dictate more than politics will dictate. And you can see that in country after country even where you do have populists elected in the long run or medium term even immigration keeps going up because of the demand factor. But let’s talk about Asia for a second. So yes, fertility is coming down everywhere, and even if they relax any sort of China’s one child policy and so on, it’s usually too late. So let’s take for granted that fertility will go down everywhere and you’ll have this peak humanity and so forth. You’ll have elderly populations. But because remember that that doesn’t mean that everyone becomes old overnight.
(01:00:02):
One of the things I often tell people about China is that we talk about aging China and so forth. I’m like, hold on, stop. You’re often talking to Americans or Europeans. So put things in perspective. If half of the Chinese population is below the median age, that means that you have more young people in China than the entire population of the entire European Union. So you still have a lot of young people. It’s not just one big elderly care home. So it’s wrong to think that way. These things play out kind of in increments. So for ASEAN countries, you will not have the same volume of job creation and manufacturing as during the kind of first wave of outsourcing and so forth. Because of automation. Europeans, Americans, Japanese, Chinese, are all bringing their automation technologies into their facilities in ASEAN. That’s what’s known as premature de-industrialization, right?
(01:00:57):
The risk that you will have industry, but it will be automated very rapidly. And so the human factor is going to be sort of excluded from that. I actually think that’s OK because the higher end of the wage curve is services not manufacturing. So what you want is more people working in the peer-to-peer services, financial, education, construction, hospitality, retail, elderly care, whatever sectors that pays better anyway. So we have to focus on investing in developing those sectors that requires education, productivity, skills, investments, and so on. And I think that’s where Asian countries will start to invest more the soft infrastructure side to absorb those populations, those segments that are not going to go work in factories, but they’ll be better off in the long run. The economies will be better off as well.
Kevin Johnson/NPF (01:01:50):
Well, this hour went faster than we could keep up, and I hate to shut down the conversation, but please join me in thanking Parag. Thank you Parag for a wonderful presentation.
###
