HUG Magazine 2016 EN – Issue №4 by PAIGEO - Pallas Athene Innovation and Geopolitical Foundation

HUNGARIA N G EOPOLITICS

2016 4

2016 / IV.

ISSN 2498-647X

GLOBAL CITIES REDEFINED SMART CITIES SHANGHAI ON THE BRINK OF BECOMING A GLOBAL CITY GEODEBATES THE ATHENA DOCTRINE THE GREAT DEGENERATION – NIALL FERGUSON BREXIT: A MILESTONE IN THE NEW 30 YEARS’ WAR CHINA’S HIGH-SPEED RAILWAY TRANSPORT

FOREWORD

Age of Fusions We draw maps for routes. We present how different points of the world are connected, accessible or, on the contrary, separated. When using a map, we select one possible route of the many: the best, the nicest, the fastest to reach our goal, to explore it. We live in the age of fusions and networks: for those who know the junctions of networks, the routes, and know its cohesive power, the unknown shrinks and the fact that with the help of technology space also narrows becomes obvious. Even the farthest points of the Internet are only six clicks away from each other, thereby we are not far away in network economy and in network geopolitics, either. People have always been driven by the exploration of the unknown. 100 years ago, the construction of the Trans-Siberian railway line was launched to reach the unknown, to overcome the greatest distance: the unknown. Sea trade has been replaced by rail transport, railway transport has been replaced by high-speed railways, since after having conquered the unknown, we want to make it accessible as soon as possible. It is a characteristic of networks that in addition to describing the world, they also affect it. The first maps of the New World ignited colonisation, the creation of the human gene map has reformed medicine. The links between known elements give birth to something more, something new, but surprising encounters, interfaces give way to really stunning, landmark scientific, technical, economic and cultural breakthroughs: they are fusional encounters. The 21th century will be the century of knowledge, talent, technology and innovation, exploring new, unknown areas, with infrastructural developments, knowledge networks, fusional meeting points. And the 21th century is also the epoch of the rise of cities. Cities and their surrounding urban regions are the places where talent and technology meet, they are the places where economy, the innovative layer, the creative class can really prevail. The added value of

several global cities expressed in GDP is higher than the GDP of a particular country. 50% of the US GDP are provided by 21 American cities. If we want to build the future, we should build smart cities, establish creative industries, support centres of innovation and cooperate with the world’s best universities and laboratories. Yes, let’s build smart cities, just like India does so with its 100 smart cities, China with its 20 smart cities, or South Korea with its 3 smart cities; let’s build start-up cities, just like 22 big cities do. Singapore has recently announced to have created the world’s first start-up state. Let’s make them available, let’s connect them so that they should be accessible as fast as possible, and let’s fill them with world-class content. In this new edition, we are navigating towards new, unknown areas, we build smart cities with the help of smart technologies, and we are looking for the answers to the question how the hubs and centres of world economy transform in the age of geo-economics. What kind of a global scene will evolve after Brexit, and will history repeat itself? What are the characteristics of declining and thriving areas, regions and cities, at the dawn of a new world order and a great new era? Come with us towards the unknown interrelations of the world we have known so far. Yours faithfully,

Norbert Csizmadia Pallas Athene Geopolitical Foundation Chairman of the Board of Trustees HUG Editor-in-Chief 2

TABLE OF CONTENTS 6

Global Cities Redefined

Smart Cities – Addressing Social Challenges?

Modi’s Vision: Developing 100 Smart Cities in India

Smart Cities Programme in China

Shanghai on the Brink of Becoming a Global City

108

The Crisis of Maritime Transport

118

100 Years of the Trans-Siberian Railway

128 138

PAGEO GeoDebates – Debate on the Future of Smart Cities

The Athena Doctrine. How Women Will Rule the World

Niall Ferguson: The Great Degeneration

Brexit – A Milestone in the New Thirty Years’ War

100

Geo-Moment: The Map of Exploring the 21 st Century

China’s High-Speed Railway Transport China Catching up with the Developed World

150

How Brexit Impacts Japan

158

Books, Music, Reviews

178

Female Artists Around the World

182

TOP 10: Hungarians in the global forefront

GlobAl cities

GLOBAL CITIES REDEFINED Author: Gere László

An analysis published in autumn 2016 differentiates between seven types of global cities. In addition to the innovative approach, the growing prominence of global roles played by Asian cities, which is the result of the urbanisation trends evolved in the last decades, is remarkable.

Thanks to urbanisation, cities mean the core of economic growth. Although an urbanised world means far more than global cities, the drives of modern economic growth – commerce, innovation, talent and infrastructural relations – are concentrated in a territorially unique way in these metropolises. During the course of mapping cities, it is revealed that significant differences manifest in different factors even on the level of metropolis regions, proving the presupposition that each city becomes a global city on the basis of its own competitive industries and fields. There is no single definition of global cities.

major scenes of manufacturing, especially innovative manufacturing, and finally, they are also the markets of manufacturing and innovation.

“Global cities play a key role in organising the governance of world economy.” AN OVERVIEW OF THE RANK OF GLOBAL CITIES

In world history, there have been numerous occasions when cities of global significance emerged – such as ancient Athens or Rome – but the notion was introduced widely and in a modern sense by urban sociologisteconomist Saskia Sassen for the first time in her work published in 1991, entitled The Global City: New York, London, Tokyo (and as its forerunners, Peter Halls’s The World City from 1966 and the article of John Friedmann entitled The World City Hypothesis, published in 1986, must be mentioned). In her now classic book, Sassen identifies global cities primarily on the basis of economic aspects: they are entities functioning as leading centres of the global economy. According to her definition, global cities play a key role in organising the governance of world economy, they are the primary focus areas of financial institutions and, among leading economic sectors, the specialized services replacing the traditional manufacturing output, they are the

Rankings of global cities, city typologies and top lists on world-level, and the scores achieved in them are rather important for cities, they may play a role in improving their ability to attract investment, and may provide transnational companies with viewpoints for establishing their centres and offices. Competitive city rankings as we know them today barely existed a decade ago, although the first ones date back to the 1970s (the Swiss Bank UBS released its first Prices and Earnings Survey in 1970 to compare 72 cities around the world, and they have been producing this ranking every year ever since). However, we can easily understand that as ranking can be performed according to numerous aspects, there is no single absolutely global city, and we cannot regard any ranking definitive, either. Consulting firms, think

tanks, governments, academics, chambers of commerce, business groups, tourism companies, and the media use a variety of approaches to evaluate and compare cities. The rankings range from comprehensive, in-depth analyses to compendiums of existing rankings (essentially rankings of rankings), to macroeconomic and future growth projections, rankings tracking the aspects of a selected social or business trend, etc. REDEFINED NOTION OF THE GLOBAL CITY In September 2016, Brookings Institution released a publication entitled “Redefining Global Cities – The Seven Types of Global Metro Economies”, as part of its Metropolitan Policy Program. US-based Brookings Institute is one of the world’s leading think tanks (in 2016, it was on the very top of the list compiled by the University of Pennsylvania ranking global research institutions), which has a considerable research background in analysing urban issues, in addition to socialeconomic-political matters. Their research findings are shared with the leaders of cities, and through these consultations they are able to work out practical solutions, which, eventually, can be applied at both the national and the international levels. Redefining Global Cities – The Seven Types of Global Metro Economies With more than half the world’s population now living in urban areas, cities are the critical drivers of the economy; the world’s 123 largest metro areas (studied in the analysis) contain a little more than one- eighth of global population, but nearly one-third of global economic output is focussed here.

As societies and economies have urbanized, they have upended the classic notion of a global city. No longer is the global economy driven by a few major financial centres like New York, London and Tokyo. Today, a vast and complex network of cities participate in international flows of goods, services, people, capital, and ideas, and thus make distinctive contributions to global growth. Therefore, in the current economic environment, what the IMF terms as the world suffering from “too slow growth for too long” (thus the world economy is basically stagnating), efforts to understand and enhance cities’ contributions to growth and prosperity become even more important, as a kind of preparation for the next period of global growth. In view of these trends and challenges, this report redefined global cities.

“With more than half the world’s population now living in urban areas, cities are the critical drivers of the economy; the world’s 123 largest metro areas (studied in the analysis) contain a little more than one-eighth of global population, but nearly one-third of global economic output is focussed here.”

Global cities redefined

THE SEVEN TYPES OF GLOBAL CITIES (1) Global giants

They serve as the command and control centres for the world’s largest advanced economies. They include the largest cities of the USA, Japan, France and the United Kingdom, New York and Los Angeles, Tokyo and Osaka, and London. These metro areas not only serve as the command centres of their extremely powerful nations, but as the world’s most significant concentrations of wealth, corporate decision making, and international exchange. The main feature of this group is their size: on average, they have 19.4 million residents and generate over $1 trillion in real output, three times more than the next largest set of economies, the Asian Anchors. If they were a single country, they would be the world’s third largest economy. These metro areas are also the world’s major nodes for flows of people, capital, and knowledge. Among the seven types of metro areas, Global Giants have the highest education levels, the second highest patenting rates, and the second highest number of scientific publications per capita. Los Angeles and Osaka may seem surprising at first sight; however, these metro areas are the fifth and sixth largest metro economies in the world, respectively. (2) Asian anchors

Asian Anchors include five East-Asian metro areas (Beijing, Hong Kong, Seoul-Incheon, Shanghai, and Singapore) as well as Moscow (which, while more aligned with Europe, falls in this group on the basis of its size, wealth, business and financial services). Asian Anchors have many of the same characteristics as their estab-

lished counterparts in Europe, Japan, and the United States, but are not yet as wealthy and globally connected. These cities serve as the gateways between the global investment community and their fast-growing nations. These cities attracted massive foreign investments, which have since been bolstered by investments in local infrastructure and skills. Asian Anchors are now among the cities with the largest concentrations of people and market activity. GDP per capita is the second highest in these regions, and since 2000 it has grown by an average of 4.2 percent per year. Several characteristics bind these cities, especially the five Asian metro areas: foreign direct investment (between 2009 and 2015) is the highest in this group, nearly double the average of the next highest grouping. These metro areas rank first in average internet download speed and relatively well-educated workforces. Yet, labour productivity in this sector is only about onethird as high as in Global Giants, they have a significant backlog in terms of patents and scientific publications, although on national level they can be considered the innovation hubs of their respective countries. 3) Emerging gateways

This type includes 28 large metropolitan areas from developing economies that serve as the largest business, transportation, and, in most cases, political centres of their countries and regions. Nearly one-third of the cities in this group are capitals ( (e.g., Ankara, Brasilia, Cape Town, Mexico City, Pretoria, Santiago, and Warsaw). Eight of them serve as the financial centres of their countries, and many of them also serve as gateways for entire regions (as is the case for São Paulo in financial and business services within South America; Istanbul connecting the Middle East and Europe; Johannesburg as the business hub of sub-Saharan Africa). In this group, cities house on average 10 million inhabitants and have an average GDP of $265 billion. Real GDP per capita has grown 5.5 percent annually since 2000 (second fastest after Factory China metros). They are not yet on par with the Global Giants in terms of international business or with Knowledge Capitals in terms of global innovation, although their prominence is growing quickly.

(4) Factory China

(5) Knowledge capitals

This category comprises Chinese manufacturing hubs, and these 22 cities are a good representation of the geographic diversity of China’s industrial revolution. It includes metros on China’s east coast (Hefei and Nantong), inland regions (Chengdu and Zibo), and the Pearl River Delta (Foshan and Dongguan). In this group of Factory China, there are second- and third-tier population centres that are growing quickly. The typical city in this group has an average population of 8 million and a nominal GDP of $205 billion. Output and employment have grown in these metros by an outstanding 12.6 and 4.7 percent annually between 2000 and 2015. Real GDP per capita has expanded fivefold since 2000, from $2,500 to $12,000. The most salient feature of this group is the extreme reliance on manufacturing, which accounts for nearly 40 percent of their total output; this ratio increased in a time-proportional manner, in 2000, it was merely 30 percent. Factory China metro areas plug into the global economy as nodes in international manufacturing supply chains, providing goods to wealthier consumer markets in advanced economies. Several multinational corporations (e.g. Unilever, Goodyear, Samsung, Intel, Pfizer, Dell) anchor manufacturing operations in Factory China. But in these cities, the industrial activity has come with significant environmental pollution: pollutant levels are 40 times above what the WHO recommends. The lack of economic diversification explains why cities in this cluster rank last in flows of FDI, venture capital attraction, and international passengers. Additionally, in this group there are only few research universities, resulting in a low share of patents, and less than 10 percent of the population 15 years or older has tertiary education.

Knowledge Capitals tend to be mid-sized population centres that are among the wealthiest and most productiv cities in the world. This group of 19 metro areas has an average population of 4.2 million, the second smallest group by population. Nevertheless, they have the third highest average economic output, and the highest nominal GDP per capita and GDP per worker. Knowledge Capitals are the world’s leading knowledge creation centres. Having excellent infrastructure connectivity, (among others, this is the reason why they have the greatest volume of aviation passengers in the world), they compete in the highest value-added segments of the economy, relying on their significant stock of human capital, innovative universities and entrepreneurs. 41 percent of their 15-and-over population has obtained a college degree (often from an elite university), this group boasts the largest share of highly cited scientific publications, and although with only about 1 percent of the world’s population, 16 percent of patents were generated here (between 2008 and 2012). Knowledge Capitals also have the highest venture capital investment rates per capita in the world (led by San Jose, San Francisco, and Boston): more than half of all global venture capital funding flowed to these 19 markets over the past decade. (6) American middleweight

Mid-sized production centres, scattered all over the United States; cities that have experienced significant population growth recently (Miami, Phoenix, Orlando, St. Louis, Tampa, Sacramento). While many of the cities in this group are still finding their global niche, they

Global cities redefined

all maintain at least one globally relevant export sector (for example, Charlotte, Detroit, and Phoenix are among the leading metro exporters of engine and power equipment, motor vehicles, and semiconductors, respectively). Their competitiveness isenhanced by the existence of highly skilled labour force (strengthened by an advanced tertiary education infrastructure) and tradable clusters, enabling them to succeed in global markets as well. (7) International middleweight

Methodology: The typology focusses on competitiveness; this is a complex variant made of 5 plus 1 indicators, determined in the course of the ranking, The 5 plus 1 indicators include: +(1) tradeable clusters (stock of greenfield foreign direct investment, and total stock of jobs created by FDI between 2009 and 2015); +(2) innovative capacity (share of total publications between 2010 and 2013, total patents in absolute number and per capita between 2008 and 2012, stock of venture capital investments in absolute value and per 1,000 inhabitants, 2006-2015); +(3) talent (human capital) (share of the popula-

This last group is very diverse, including wealthy cities in Canada, Europe, Asia and Australia. These 26 metros have an average population of nearly five million, their economies are very varied, including cities (e.g. Toronto, Sydney, Frankfurt, Madrid, and Copenhagen) that play a fundamental role in the provision of business and financial services in their national and regional economies, as well as industrial centres (Kitakyushu-Fukuoka, Nagoya, Stuttgart, Karlsruhe, Milan, and Barcelona). They tend to specialize in knowledge services, advanced manufacturing, or some combination of both. Nonetheless, there are several shared characteristics that bind International Middleweights. They are outstanding in terms of migration of workforces and capital flows, about one-fifth of their population is foreign born, the highest share among any cluster. These metros boast the second highest level of foreign direct investment per capita, with $2,000 of FDI stock per inhabitant. The number of people with tertiary education, the number of research universities and patents filed are also high in these metros. However, they share another characterization that is not so favourable: sluggish economic growth. Between 2000 and 2015, output, GDP per capita, and employment grew less than 2 percent annually, each the slowest of any group. The international financial crisis of 2008 dealt a crushing blow to these cities, breaking their trajectory of economic growth; more than one-third of the cities could not return to their pre-crisis GDP per capita levels until 2015, and five cities have yet to regain their pre-crisis employment base.

tion 15+ with tertiary education in 2014, or at the soonest point of time) +(4) infrastructural connectivity (number of avi-

Major global city rankings produced according to different criteria Comprehensive rankings – Cities of Opportunity (Pricewaterhouse Coopers) – H ot Spots 2025 (Economist Intelligence Unit) – G lobal Cities Index and Emerging Cities Outlook (A. T. Kearney) – G lobal Power Cities Index (Mori Memorial Foundation) Niche rankings (audience, perspective, city selection) – World’s Most Competitive Cities (IBM; (audience: business site selection) – S ustainable Cities Index (ARCADIS; (perspective: sustainability) – G lobal Financial Centres Index (Z/Yen Group; (city selection: financial centres)

– G lobal Cities of the Future (fDi Intelligence; perspective: foreign direct investment) – Resilient Cities (Grosvenor; audience: real estate clients) – Q uality of Living Survey (Mercer; audience: companies with an international workforce) – T he Wealth Report Global Cities Survey (Knight Frank (audience and perspective: real estate and attraction of high net worth individuals) – City Momentum Index (Jones Lang LaSalle; (audience: real estate clients) Analyses based on macroeconomic data – G lobal Metro Monitor (Brookings Institution) – U rban World: Mapping Economic Power of Cities (McKinsey Global Institute)

ation passengers in absolute value and per capita in 2014, average internet download speed in 2015); +(5) governance (the extent it helps to attract investments and implement growth strategies (data were not available for all metro areas) (+1) general industrial and economic characteristics (population, GDP, GDP per capita, output per worker, industry share of overall output, industrial output per worker, 2015). Identification and selection of metro areas: 123 metro areas with the largest economies measured at purchasing power parity rates were included in the survey (on the basis of data from 2015). With a few exceptions, these metro areas all tend to have economies larger than $100 billion in nominal terms. The sample’s average population is 7.6 million. Global growth is not solely powered by these large metro economies; in fact, small and midsized cities matter greatly, this study, however, intentionally focuses on a smaller sample because they uniquely concentrate the assets that

IMPLICATIONS Through examining global city economies, the authors of this study identified three broad territorial patterns.

2. The different ways cities engage globally are reflected in their economic outcomes. Unsurprisingly,

1. First, there is no one general “definition” of the global city. Every city may become one on the basis of various factors. But the pervasiveness of globalization has linked metro economies in an international network that is simultaneously collaborative and competitive.

lower-income metro areas, led by Factory China, demonstrate the the greatest growth (they have experienced the fastest GDP per capita growth since 2000), and although the pace is slowing, growth is expected to continue in the future). Global Giants and Knowledge Capitals not only have higher average incomes but have also experienced faster growth in GDP per capita, while the American Middleweights and the International Middleweights tend to have not only lower incomes but also lower growth.

Technological innovation features heavier than ever in becoming a global city, rendering a set of U.S. and European mid-sized regions of global significance (due to the results of their research universities and firms engaged in research). Their ability to attract global finance and investment, their role as global gateways to large, middle-income countries are decisive, rising most of the manufacturing and export-oriented Chinese metro economies onto global level. Maintaining a developed economy and specialisations are major global strengths of several advanced-economy metros (USA, United Kingdom, Europe, Japan).

3. Local and national leaders must approach economic strategies with a clear understanding of the role their city-regions play in a global context, the opportunities they have, and the risks they have to run. The study also produced a set of recommendations within each group for devising their development strategies.

undergird global growth.

RECOMMENDATIONS Global Giants What has made these global metro economies great also poses risks: an overreliance on financial transactions, and high levels of inequality that are creating significant pressures on low- and middle-income households (namely, housing is very expensive in these metros). Industrial diversification must be accompanied by investments in housing to ease affordability pressures. Asian Anchors These metros are considered to be some of the worldâ&#x20AC;&#x2122;s most impressive examples of urban economic growth. However, to drive this growth they must focus on boosting productivity, embracing entrepreneurship, investing in education and skills, and developing the infrastructure. These metros house the headquarters of numerous world-leadingcorporations (e.g., Beijing-based Lenovo or Seoul-based Samsung), still, it remains a question whether these regions can generate new rounds of successful, homegrown companies that can compete in global markets. Emerging Gateways Their function is similar to that of Asian Anchors, but they have yet to achieve as prominent a role, and they primarily serve as the entry point to emerging markets of secondary and tertiary cities. However, they have their shortcomings: investments into research and development and the development of infrastructure connectivity are their priorities of action. Addressing social inequalities is key to their further development. They need to take advantage of their privileged position as magnets of knowledge, and closer collaboration between the universities and the firms should be among the top priorities.

Factory China The last 15 years saw an accelerated growth in these cities, but it has not come without costs: life expectancy in some of these cities is on average five years lower than in the rest of the country due to air pollution; population growth, climate change, and industrial demand are creating water shortages in several cities. Pricing these negative externalities must be a critical goal of energy, environmental, and industrial policy going forward. High levels of debt pose another challenge that they must address to transition to a more sustainable growth model. Knowledge Capitals Knowledge Capitals must assert their knowledge in the global marketplace, attract more direct investment, and thereby enhance the competitiveness of metros. Furthermore, these cities also face affordability challenges; these concerns must be acknowledged and addressed. American Middleweights This group of cities is striving the most to retain their global position. Due to the presence of less-productive industries, their economic growth is slow, and their problems were further aggravated by the international economic crisis of 2008. Specialisation in their traditional industries and innovation may mean a break-out point for them, and they have significant potential available (intellectual capital, skilled workforce). International Middleweights Their greatest challenge is to create new business models, products, and to come up with new ideas. They should encourage entrepreneurial firms and embrace entrepreneurship by removing regulatory hurdles if necessary. Since they have sufficient potential, there is actually scope for growth led by innovation and R&D.

SMART CITIES

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES? Authors: Ráhel Czirják, László Gere

Since 2007-8, more than half of the population have been living in cities. Today, however, cities are not able to address global social, economic and environmental challenges, which, in addition, occur in a higher concentration and more intensively in these places. Since the rate of urban population is expected to increase in the future, it is a fundamental interest of mankind to establish and operate cities that are sustainable in all aspects. May the Smart City concept mean a solution for this? And beyond sustainability, can “the cities of the future” reduce social and financial inequalities? In our paper, we intend to find answers to these questions.

IBM offers a wide range of innovative solutions, from urban planning and city management to infrastructure and social developments. They implement a complex transformation of complete cities into smart cities, uch as the Smart City Malaga project, transportation project in Zhenjiang, or the weather forecasting and emergency monitoring system in Rio de Janiero. Microsoft’s City Next initiative provides solutions through Zenon automatization software to manage interconnected devices (Internet of Things), and thereby to apply different urban solutions. These services have been utilised in several big cities, from Houston to Los Angeles, and from Utrecht to Shanghai.

Telecommunications company Cisco has developed a monitoring system in Copenhagen to optimise numerous services, from outdoor lighting to managing parking places and waste. The company has developed similar digital monitoring networks in several other cities, from Hamburg to Adelaide and Barcelona.

LG also takes part in the urban developments, primarily in South Korean cities such as Challenges In the 21st century, the everyday life of urban people is almost unnoticeably featured by a growing number of various technical innovations, with the help of which we can manage our time more efficiently, orientate ourselves more easily, obtain information more simply, or pollute our environment to a lesser extent. With the innovations gaining ground, we have new devices that are able to communicate even with each other, allowing more and more activities to be optimised or automated, and we can do more and more by using less and less resources. The final state is the so-called Internet of Things, where objects and people are interconnected. We are at the very beginning of this process, but it is unstoppably taking place around us, and as a result, the boundaries between the “online” and the “offline” world are blurring. More and more technological companies are becoming interested in developing infrastructure with which

“Since 2008, more than half of the world’s population have been living in cities...” they evidently participate in, for instance, urban development as well. The competition launched in traffic optimisation and self-driving vehicles is just one of its branches, in which such – at first sight, unusual – participants have appeared as Google or Apple. Today almost all electronics or telecommunications companies (IBM, AT&T, Cisco, Samsung, Microsoft, Oracle, GE, LG, etc.) are engaged in solutions that are specifically designed to optimise urban services. A short, non-exhaustive, demonstrative list of technological companies involved in – as a diversion from their main profiles – city-solution technologies include:

High cost of living

Seoul, Busan, Suwon with building energetics, environmental and sustainability projects.

Obviously, General Electric primarily supports urban development initiatives with projects related to the energy sector, called “intelligent environments”, and their Predix platform, storing and analysing massive data volumes, also facilitate the optimisation of urban services. Siemens offers products of intelligent infrastructure: traffic optimisation, enhancement of energy efficiency (in Vienna’s Aspern district), and various other sustainability projects. Parallel to high-tech giants, a kind of competition has commenced between cities; several cities try to become more attractive and more competitive by promoting smart solutions and integrate them as much as possible in the planning phase (e.g. Amsterdam, Singapore, Stockholm, Seoul; on national level: Smart Cities India programme). Digital technology offers the opportunity to resolve increasingly pressing current urban issues while also respecting people’s private lives. The major challenges and opportunities are included in the table below:

Opportunities Modern affordable housing

occurs when housing demand outpaces developed land and infrastructure.

is enabled by performance-based code, advanced materials, and new ownership models.

Congested commutes

Digital mobility systems

result from decades of sprawl and lack of coordination in transportation demand and supply.

can manage limited road space to improve transportation equity and air quality.

Public health crises

Personalized social services

include rising rates of obesity in developed cities and pollution in developing ones.

can deliver measurable health outcomes while maintaining individual privacy.

Fossil fuel dependency risks urban resilience and air quality.

Distributed energy management uses new business models, renewable energy, and smarter storage to improve sustainability.

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES?

THE SMART CITY CONCEPT

Timing In the last 200 years, three industrial/technological revolutions took place which significantly transformed, and eventually determined the operations and the structure of today’s modern cities. Each industrial revolution implied huge progress, yet, there was a serious social cost to pay. Currently several authors agree that we stand on the brink of a new, so-called fourth industrial revolution. Its importance is marked by the fact that it was a special topic at the World Economic Forum 2016 in Davos. The first industrial revolution was the “revolution of steam”; it gave cities rapid transportation, steamships,

and large factories that

Songdo, a smart city in South Korea

But what is exactly meant by a smart city? Smart City means such a settlement that uses available technological opportunities (primarily information and communications technology, ICT) innovatively to promote the creation of a better, more diversified, more sustainable urban environment. A city is considered “smart” if its investments into human capital, traditional elements of infrastructure (e.g. traffic and transportation), and modern ICT infrastructure drive and encourage sustainable economic growth, and further raise living standards, while also managing natural resources reasonably. Smart cities use smart technology to render their infrastructural systems and services more interconnected, intelligent and efficient.

transformed commerce. But, due to the massive increase in the number of urban workers, it also gave cities the first industrialized slums and the worst air pollution that mankind had ever known. The second, the electricity revolution gave people lights, subways, and elevators. But electricity also allowed us to block sunlight, retreat to artificial environments, and warehouse people in high-rises. The third industrial revolution was marked by the spread of automobiles, with the help of which cities started to expand in every direction, providing access to more job opportunities and weekend retreats. But it also gave us sprawl, traffic jams, and smog and nearly killed the central city. Currently, digital technology is transforming our cities – this is the fourth industrial revolution. Smartphones already shape how people interact with cities. A new set of digital technologies—ubiquitous connectivity, real-time sensors, precise location services, distributed trust, autonomous systems, and digital actuation and fabrication—can collectively transform city life. However, it is a question towards what end they do so. Will they make the city more responsive, equitable, innovative, and human or will they challenge civil liberties and security?

What do smart city solutions include? Literature refers to the various areas of intervention by sub-systems. The paper entitled “Smart cities”, for example, identifies the following sub-systems as key areas for the operations of a city where the opportunities of using intelligent solutions open up:

smart economy (competitiveness) smart population (social and human capital) smart governance (participation)

• “ People” sub-system (including public safety, health and education); • Business sub-system (including political and regulatory environment) • Urban services sub-system • Transport sub-system • Communications sub-system • Water management sub-system • Energy management sub-system The Smart City Development Model – Planning Guidelines calls for planning in the following areas: society, human infrastructure, economy, landscape and natural characteristics, system of green areas, built environment, transport, public utilities, environmental protection, disaster prevention, urban climate, administration of self-government, system of instruments and institutions, possible expansion and extension of urban development into the agglomeration. A study ranking smart cities identifies the following sub-systems:

smart mobility (transport and ICT infrastructure) smart environment (natural resources) smart residential environment (quality of life). The same subdivision is used by a collection of international examples. Smart City interventions mean a complex approach to urban planning; in this case the approach, that is, the mindset is innovative, thus the question what methods should be used for urban development interventions is of great importance. It is a rather interdisciplinary area, requiring high-level cooperation of the classic urban development branch of science and information technology experts. SMART CITY IN PRACTICE After this overview of the theoretical framework, we will present to cities demonstrating the Smart City concept is practice. These two cities embody two different types of Smart Cities. One of them,

Songdo, was born on the drawing board. It is a newly built city, where different challenges, including environmental ones, were addressed as early as in the moment of planning, and architectural and technological solutions were applied accordingly. The other example presented here is the historic city of Amsterdam, where a city structure and an infrastructure developed over several hundreds of years are equipped with various technological achievements to address the challenges of the 21st century. Songdo and Amsterdam are the two cities through which we are attempting to answer the question in the focus of our study: are smart Cities able to reduce social inequalities? THE CITY OF THE FUTURE IN SOUTH-KOREA: SONGDO Songdo IBD (International Business District) is located in South-Korea, on the coast of the Yellow Sea. There are no separate statistical data available on the number of inhabitants of the district; even Gale International was unable to provide relevant figures. What is known is that currently 110,000 people live in Songdo. The number of inhabitants of the international business district does not reach the planned number (250,000), since investments are expected to be actually finished by 2018. The district of an area of six square km is a mere 15-minute drive from Incheon International Airport, and one-third of the world’s population is accessible within a 3 ½

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES?

power plants, and in partnership with Incheon Metropolitan City, the three partners started to develop the plans.

Songdo

Master planning a city has given developers enormous opportunity, since it is easier to plan and implement a flawless city than transforming an existing one. Learning from the mistakes made in architecture in the past, there was the opportunity in the planning phase to construct an energy-efficient, environmentally sustainable city, applying the most advanced technologies as well as relying on solutions in architecture. Songdo brings together green space, accessibility and advanced technology to create an improved way of life. A green and walking city 40 percent of Songdoâ&#x20AC;&#x2122;s area is dedicated to green space. In the heart of the city lies Central Park, covering 10 percent of the city, both inspired by and named after Central Park in New York City. Another large green area is an 18-hole championship golf course designed by American golfer Jack Nicklaus. In addition, several smaller parks, public spaces and lots of trees make Songdo greener. services provided by advanced technologies, Songdo was aimed to be the economic hub of South-East Asia. Regional markets, including China, Japan or Russia are within easy reach from here. This effort is also expressed by the symbol of the city, the Northeast Asia Trade Tower, the tallest building in South Korea. The purpose of the 305-meter tall building is to attract prime global and Korean companies into this international free trade zone.

Source: http://www.nicehousing.com/mn_songdo _apartments/about_songdo.asp hour flight. In Songdo, a city built from scratch, such an environmentally-friendly city was created by applying advanced technology infrastructure, which is able to adequately address todayâ&#x20AC;&#x2122;s global environmental challenges. In addition to environmental sustainability, however, city planners also paid attention to the economic one, and, due to its geographical position and the

Songdo is a walking city. As a result of conscious architecture, all urban functions are within walking distance from the heart of the city, Central Park. Schools, offices and shops are within a 15-minute walk from here. According to surveys, if people need to walk more than 10-15 minutes they will tend to get in their car. This contributes to significantly reducing the city's carbon footprint. For those who want to get round the city faster but still in an eco-friendly manner, there is a network of 25 kilometres of bicycle lanes, which is a safe way to get from one place to another. For greater distances, public transport can be used: there is an underground express train that links the development with Seoul, cutting travel time to the South Korean capital down to less than 30 minutes. In addition to the solutions of architecture, another important element of creating an environmentally sustainable city is applying cutting-edge technological solutions, which make Songdo a smart city. Advanced information and communications network technologies are applied to operate its infrastructure, to improve the city's quality of life and to provide efficient services. All buildings here form one shared Songdo, a green and walking city

Songdo was built as part of former South Korean President, Lee Myung-bakâ&#x20AC;&#x2122;s (2008-2013) drive to promote low carbon-dioxide emission and environmentally sustainable urban growth as basic principles in the development of South Korea. The investment of almost $40 billion has been implemented in a PPP construction as a cooperation between high-tech companies and the local authority to create an environmentally sustainable city, a vivid international economic hub. In 2001, the South Korean government commissioned Gale International, a family-owned and managed real estate development company, with building Songdo. In 2002 the company launched a joint venture with South Korean POSCO E&C, an engineering and construction company engaged in planning and constructing

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES?

information system: everything, from fire alarm systems to heating and the security system are interconnected. Consequently, operation is much more cost effective, and, on the other hand, residents can adjust their homes' temperature, lights, etc. – even remotely. Furthermore, the flexible system result sin efficient energy use, since it goes through and seeks areas of energy use and reduces it wherever possible. Songdo is taking energy efficiency even further. Homes and various institutions are connected by a telecommunications system – provided by Cisco –, making people available through video installed in TV screens. This further reduces the city's carbon footprint by curbing people's need to travel. These

Sensors and microchips collect data for almost all areas of the operations of the city; these are processed by a central system, aiming to make Songdo’s operation even more efficient, based on the information. Street lights, for example, adjust to the number of pedestrians15 – saving a considerable amount of energy. Traffic lights work in line with real-time needs. Cars are equipped with RFID (Radio Frequency IDentification) tags These sensors will send the geo-location data to the central monitoring unit that will signal black spots or congested areas, and traffic is diverted with the help of traffic lights.

innovations are helping reduce energy consumption in each building by 30 percent, compared with traditional operations.

There are several other solutions in the operations of the city which make this urban environment more sustainable. Solar and windforce energy are being currently used to manage the energy demands of the city; rainwater is trapped and used to water parks, wash streets and flush toilets. To conclude, Songdo aspires to be a model for future cities in which, by the deployment of state-of-the-art technologies, an eco-sustainable urban environment is working, addressing global environmental challenges.

In Songdo, there are no garbage trucks in the streets, since all apartment buildings, offices and streetcorner trash cans are connected by an underground system of pipes and trash is automatically sorted and recycled, buried, or burned for fuel. The operation of the waste management system currently requires just seven employees for the entire district.

AMSTERDAM SMART CITY

Source: http://songdoibd.com/about/ _apartments/about_songdo.asp

Apart from master-planned cities, there are initiatives to transform cities with a history of several hundreds of years along the smart city concept. One example is the capital of the Netherlands, with a population of roughly 800,000. The Amsterdam Smart City (ASC) initiative is actually the innovations platform of the Amsterdam Metropolitan Area. It launched its operations in 2009, inviting businesses, residents, the municipality and knowledge institutions to suggest and apply innovative ideas and implementations about urban themes. The program is a collaboration between local government officers, private businesses (e.g. KPN, a telecommunications company) and the Amsterdam University of Applied Sciences. The main aim of the initiative is (as they put it) to contribute to the liveability of the city, to curb the emissions of pollutants and energy consumption.

Since the beginnings, they have been cooperating with more than 100 partners, participating in nearly a hundred innovative projects. The entire initiative is encompassed by a website, including the descriptions of all projects and products, in addition blog posts are published, there is a separate section dedicated to communicate the needs/questions regarding intelligent solutions, information about events is shared, and it also functions as the space of knowledge sharing and a community interface. This is the main point of the Amsterdam Smart City concept as well: to involve as many people as possible into the projects, therefore smart projects have been launched in a wide variety of fields, with the involvement of the broadest possible circle of society. Naturally, the initiative in Amsterdam required an already existing creative/innovative “core”, a social layer that adopts the concept of spreading smart solutions easily. The Amsterdam Smart City programme primarily relies on these innovative initiatives, acting as small, “living labs”; some of them are likely to be only short-lived attempts, but some others may meet real and considerable social needs and act as a template for many other cities of the world.

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES?

Developments are grouped in six categories: 1. Infrastructure & technology: integrated resident alert system (accidents, fires, crimes, etc.); system of hook-ups for electric cars; innovative solutions for using green energy; smart street lights along cycle lanes (switched on by motion; energy is generated by windforce and solar energy); green roofs; community 3D printing R&D project (with international cooperation, also a tourist attraction); homepage collecting all open data (helping other services to increase efficiency). 2. Energy, water and waste management: cheap loans for sustainability projects; “passive quarter”– a district in Amsterdam in which the energy use of buildings is provided by 100 percent renewable source, resulting in zero carbon-dioxide emission – under construction (expected to be finished by 2021, with a total of 200 apartments); virtual power plant project (storing and small-scale “trading” renewable energy between users in order to optimize the use of capacities), energy atlas (to stimulate the use of renewable energy). 3. Mobility: smart traffic management systems (to prevent congestions); electric boats (instead of on board diesel generators); zero emission city logistics; tracking system to prevent bicycle theft; smart parking application. 4. Circular city: re-using building materials, use of bio-based plastic, offices for creative and social enterprises. 5. Governance and education: social media sites generating smart city-networks; measuring residents’ satisfaction with smart solutions; creating an environment promoting and attracting startups with the municipality’s support. 6. Citizens and living: smart lighting; supporting neighbourhood community initiatives; programmes aiming at assisting/activating senior citizens; online dashboard for participatory urban planning and transformation; programmes supporting a healthy lifestyle. All these development goals reveal that by implementing the smart city concept, Amsterdam aims at developing improved, more efficient solutions in almost all areas of life, with the active involvement of society. After this overview of the two cities, now we are examining the impact of the two smart cities on society and trying to find the answer to the question whether they are able to reduce social inequalities.

CAN SMART CITIES REDUCE SOCIAL INEQUALITIES? First of all, we need to clarify the motion of social inequality to examine this question. Social inequality is one of the most extensively researched phenomena, and it has many definitions – however, their systematic overview or comparison is not in the focus of this present paper. We wish to provide a pragmatic definition as a base for our thoughts on the social impact of smart cities. (For those interested in more in-depth theories of the notion, Reinhard Kreckel’s (1982) Class, Status and Power? is recommended.) By social inequalities, we basically mean the differences between individuals along various dimensions which determine the person’s opportunities for welfare. The dimensions include qualifications, income, labour market position, place of residence, education, etc. Although these factors cover different aspects of life, together they determine whether a particular person lives in poverty or wealth. Social inequalities are as ancient as mankind itself, since different resources have never been distributed evenly between people. The extent of inequalities varies in different countries, cultures, due to economic development, social-political regimes and other influencing factors. Generally speaking, as the gap between the poorer and the richer strata widens, social tension also increases, because “over a certain extent, the increase of social inequalities (differentiation of the members of society) prevents social integration, the cooperation between members of according to acknowledged norms and rules, that is, normal social life. An unstable social situation may evolve”. Consequently, it is the interest of the entire society to reduce inequalities. SMART CITIES AND SOCIAL INEQUALITY – THE CASE OF SONGDO Due to a lack of data, the opportunities to empirically support the statements on the social impacts of smart cities are rather limited. This topic has not yet attracted much research (which is quite explicable, regarding the fact that it is a relatively new phenomenon.) In this light, our standpoint is rather

an intuitive hypothesis and not a scientifically grounded fact, to be proven or disproven by future experience. Hence our aim is to generate debate and form some though-provoking ideas. When examining the case of Songdo, it is important to note that the city was not born as the result of organic, bottom-up development, but it was artificially created top-down by business enterprises. Consequently, its society does not reflect a “natural status”, since “its residents went through a selection process, the fundamental preferences of which focus on knowledge serving the city”. It means such residents have been moving to Songdo who fulfil the functions required to operate the city – developers, researchers, students, businessmen –, and can afford the real estate prices that are higher than those in the capital. Therefore, the population of Songdo, regarding qualifications, income and conditions of living, can be regraded homogeneous, that is, no considerable social inequality can be detected locally. On national level, however, we can establish that “this type of selection generates significant social exclusion. Citizens with lower level of education and of a lower social status are excluded from the welfare services of the city and the benefits of a ubiquitous information technology”. That is, the technological achievements in Songdo are available to those who have enough money and adequate qualifications to live here. This brings them further advantages, increasing social inequalities within society. The gap is widened between the residents of Songdo and others living in other Korean settlements by several factors: the city was built with significant state subsidy, (also) financed from the payments of citizens living outside Songdo, while its benefits are enjoyed only by a thoroughly selected stratum of society. On the other hand, real estate prices in Songdo prevent a wider circle of the Korean society from benefiting from the developed infrastructure and the technological solutions, that is, they suffer a competitive disadvantage compared with the residents of Songdo.

Source: https://amsterdamsmartcity.com/

aspiration to become the hub of international companies with its “unmatched quality of life” provided by its infrastructure and its services. “The concept of the first wave of smart cities – including Songdo – does not converge towards social justice but pursue the wellbeing of selected residents”, while keeping environmental aspects in view. Master-planned smart cities, such as Songdo in south Korea, are able to satisfy two of the three dimensions of settlements (economy, natural and built environment, society) to a high standard, but offer no solutions to social issues.

From the city’s viewpoint, however, it is not necessarily viewed as a failure, because it is not Songdo’s aim to reduce social inequalities. It declared its

SMART CITIES ADDRESSING GLOBAL SOCIAL CHALLENGES?

Google’s shift from online applications to the “offline” world is remarkable. They have been one of the first companies to develop self-driving cars (and had palpable results around 2012), which have become one of the most dominant trend in the automotive industry, followed by almost all the big manufacturers. In addition, such subsidiaries have appeared (as holdings, which are, together with Google, encompassed by Alphabet, their parent company) such as Calico, a biotech company researching anti-aging drugs, Life Sciences, a healthcare company, Fiber, a high-speed Internet provider, Nest, a home automation producer, and X (earlier Google X), specialized in drone delivery and other programs. Unsurprisingly, the conglomerate is finding “space” for testing, then applying their newest innovations, and for this, cities are the most obvious units.

SMART CITIES AND SOCIAL INEQUALITY IN THE CASE OF AMSTERDAM As opposed to Songdo, Amsterdam has evolved through organic development and it is a city with a history of several hundreds of years – it was inhabited as early as in the Neolithic era. Consequently, its society is heterogeneous, regarding demographical, income and other dimensions, that is, such social inequality exists in Amsterdam that is not present in Songdo, due to various filtering effects, thus the social impact of the smart city concept can be examined locally, within the city. We can detect several similarities in the smart nature of the two cities. On the one hand, investments have been realized as the result of a cooperation in both cities. In the case of Songdo, local authority and multinational companies, while in the case of the capital of the Netherlands, the municipality, private businesses and the university form partnerships to realize the smart city. On the other hand, eco-sustainability is one of the goals of both cities.

In our opinion, the impact of the smart city concept on social inequality depends on the context of implementation. In a socially integrated environment where political willingness to involve local people – both in defining problems and devising possible solutions – exists, developing technological innovations may contribute to reducing social inequalities, since, in this case, the needs and problems of groups of a lower social status also appear in the planning phase, and these developments ensuring a competitive advantage are not accessible by those already living under better conditions. Smart cities like Songdo – focussing on the development of the economy in addition to the environmental dimension –, are regarded as a kind of technological ivory towers, enhancing inequalities on regional and global level, since their services are available for people with higher levels of education and a (very) good financial status.

Apart from these, however, the two concepts are fundamentally different. While Songdo intends to be an international economic hub, Amsterdam wants to become a more liveable city for local citizens, that is, the Dutch capital focuses (also) on society. Another important difference is social integration. Songdon is a master-planned city, without any rooted local population, where such developments work that have been designed and implemented from above; while in Amsterdam, the smart city concept wants to address the needs expressed by local people, with the inclusion of local citizens. In our view, this is the guarantee that the application of various technologies will not enhance inequalities between different social groups, but will ultimately result in the reduction of inequalities. Although the initiatives and ideas are generated by groups more receptive to novelties, the innovations themselves intend to reach a wider circle of society. Examples include programmes focusing on activating senior citizens: the applied solutions come from younger generations but their aim is to reach retired people.

The Sidewalk Labs project Google’s Sidewalk Labs initiative is a new type of company, specifically established to work with cities to build products addressing big urban problems. The company creates a platform and a set of urban applications to accelerate innovation in cities around the world before implementing them at scale. Unlike all other smart city concept (and their realization), the activity of Sidewalk Labs is unique due to the concentration of two basic factors at Google: first, they have loads of data available practically on anything – and they can collect further volumes of data potentially more easily than any other company –, and the so-called big data, that is high volumes of data “provided” by various sensors and devices (this is the Internet of Things, IoT), are essential to apply smart devices optimally, because most smart solutions can make processes more efficient, less difficult and less resource-intensive on the basis of these data. Another great advantage Google has

is that they have more extensive knowledge and know-how than any other company and are able to implement its ideas in an ever more integrated way, and have vast capacities to improve and develop these. Often technological solutions applied to cities have failed to solve real-world problems, and policy solutions have failed to capitalize on the full potential of technology. To address this, Sidewalk Labs is building an integrated platform for urban innovation spanning technology, data, policy best practices, relationships, and capital. The project sees the future of urban planning in the spread of technological innovations. However, there is a gulf to be bridged: while technologists fundamentally are not competent in urban planning, urbanists do not necessarily understand technology. Sidewalk Labs would mean the “marriage” of these two sides, in order to develop the most efficient solutions possible with two different kinds of approach and expertise.

DEVELOPING 100 SMART CITIES IN INDIA

DEVELOPING 100 SMART CITIES IN INDIA Author: Zita Vajda

Narendra Modi, Prime Minister of India, announced the ‘100 Smart Cities Mission’ programme in June, 2015, envisioning the creation of 100 smart cities in the next five years. The government has committed to develop satellite towns of larger cities and modernize existing midsized cities. Within the framework of the programme, the aim is to pursue such information and communications technology (ICT) that improves liveability, investment and service opportunities, and facilitates the achievement of sustainable economic growth in an environmentally conscious way.

The core infrastructure elements in a smart city would include:

Adequate water supply

Assured electricity supply

Sanitation, including solid waste management

Efficient urban mobility and public transport

Affordable housing

Broadband internet, digitalization

e-Governance

Sustainable environment

Safety and security

Health and education

100 Smart Cities initiative of the Indian government While India's urban population is currently around 31% of the total population, it contributes over 60% of India's GDP (it is projected to grow up to 75% by 2030). As India's population continues to grow, more citizens will move to cities. About 25-30 persons from rural areas will migrate every minute to major cities in hopes of a better livelihood. It is estimated that by 2050, the number of people living in Indian cities will touch 843 million. This large-scale urbanization poses several challenges, which will accelerate in the near future. Thus, developing smart cities has become essential. What is a smart city like? According to the Smart Cities Council, a smart city is one that uses information and communications technology (ICT) to create a more liveable and sustainable urban environment. A smart city uses three simple processes: 1. It collects information about itself through sensors, other devices and existing systems. 2. It communicates these data using wired or wireless networks. 3. It analyses that data to understand what's happening now and what's likely to happen next. 4. S mart cities vary from city to city and from country to country. In developed countries, a smart city is one where existing infrastructure is augmented through application of IT. Investments in ICT infrastructure encourage a sustainable economic growth. In case of India, however, the smart city concept is different: since many cities lack basic infrastruc-

ture, institutional framework and proper governance, smart city initiatives will have to focus on providing basic needs through IT enabled solutions.

„The aim of 100 Smart Cities Mission is to create 100 smart cities in the next 5 years.” THE SELECTION PROCESS OF SMART CITIES The Indian government is committed to developing 100 smart cities, which will be selected through a 'City Challenge Competition'. A Special Purpose Vehicle (SPV) will execute the implementation of the Smart City Action Plan. For smart cities, the government will appoint CEOs (therefore local governments cannot make decisions alone), who will drive the concept and execution. In the selection process, the following criteria are included: • Developing at least two smart cities in each of 29 states; • Cities with a population of over 1 million may become potential smart cities; • State capitals, cultural heritage cities and the agglomerates of cities are all potential smart cities; • T here will be an opportunity to develop several smart cities in states with a larger urban population (Maharashtra, Uttar Pradesh, Karnataka, Tamil Nadu, West-Bengal, Gujarat);

Four pillars Physical

Social

•M ultimodal Public transport •2 4x7 power supply •Z ero emission: solid and liquid waste •A ssured and metered water supply • High-speed broadband connectivity

Economic

• I nclusive development: affordable housing, night shelters, etc. •Q uality education •T ele-medicine •E ntertainment and recreational facilities •C ultural, sports and fitness centres

Institutional

•S kill development centres • I ncubation centres •T rade facilitation and logistics centres •S ME clusters • I nstitutional finance/banking •W orking women hostels

• Minimum government, maximum governance • E-governance – 24X7 online public service delivery • Ease of doing business • Citizen engagement • Safety, security, enforcement • Transparency and accountability • Disaster management and resilience

The success of Indian smart cities will depend on how efficiently these four pillars are introduced.

Selection timeline

20 2015

40 2016

40 2017

100 Cities Source: JLL

DEVELOPING 100 SMART CITIES IN INDIA

• I n the selection process, such parameters as existing urban reforms, sanitary conditions, efficiency of tax collection and capacity of municipal bodies are considered. THE FIRST 20 SMART CITIES On 28 January 2016, Minister of Urban Development, M. Venkaian Naidu announced the 20 urban areas that will be developed as smart cities. Decisions were made according to the following parameters: feasibility, focus on project results, citizen participation, timeliness of proposals. In the next five years, $7,636 million will be invested in the development of cities. Five of the selected cities are capitals of federal states, including New Delhi, Chennai (Tamil Nadu), Jaipur (Rajasthan), Ahmedabad (Gujarat) and Bhubaneshwar (Odisha). These cities will be equipped with adequate infrastructure (water and electricity supply, solid waste management), sanitation system, urban mobility and public transport, broadband internet access and e-governance mechanisms. THE SMART CITY PROGRAMME IS SUPPORTED BY VARIOUS OTHER GOVERNMENT INITIATIVES FOR FASTER RESULTS India’s smart city programme and economic activity are supported by building industrial corriFirst 20 selected smart cities

dors, being currently underway. At the moment, six industrial corridors are being developed: Delhi-Mumbai, Amritsar-Delhi-Calcutta, BengaluruMumbai, Visakhapatnam-Chennai (East Coast Industrial Corridor), Chennai-Bengaluru and Bhopal-Indore economic corridor. These corridors will promote industrial development, the transformation of new industrial cities into smart cities, the establishment of industrial zones, the connections between industrial hubs, and production activity. The second significant projects concern India’s public transport, including a $20 billion metro construction project (an investment of a value of $20 million) and the construction of the MumbaiAhmedabadhigh-speed railway (an investment of $10.5 billion). India-based Power Grid Corporation’s investment of $5 billion into introducing smart energy network technologies until 2020 also contributes to the development of smart cities. Within the framework of the Startup India initiative, 16 technological incubators, 7 research and 13 start-up centres will be established in future smart cities. The Digital India programme will ensure broadband internet connection for 500 million users by 2020. WHAT DOES URBAN INDIA WANT IN SMART CITIES? The results of a public opinion poll involving 51 cities reveal the factors that resident of cities in Indian regard the most important in connection with the development of smart cities. The graph below shows that for them the main priority is adequate transport, sanitation and sustainable waste management are top priorities. No wonder: baffling traffic situations are frequent scenes in the big cities of India, making transport a hopeless case and the everyday life of residents difficult. Sanitation is another important issue, since a lot of people still live lacking basic hygienic conditions, and waste presents a nation-wide problem. The third most important factor is e-governance, which is, again, no wonder, since bureaucracy is extremely slow and difficult in India.

Three models of smart city development strategies Retrofitting development

Distribution map of 100 potential smart cities

Where? • Existing developed area • Minimum 500 acres in size What? • Zero emissions: Solid and liquid discharge • Quality electricity and water supply: Smart metering • High-speed, high-bandwidth connectivity • CCTV surveillance of all public areas • LED lighting, intelligent traffic and parking management • Pavements, cycle tracks and roads How? • Implementation in three years • SPV • Selection through competition – “City Challenge”

www.livemint.com

Redevelopment

Greenfield townships

Where? • Existing urban sprawl • Minimum 50 acres in size

Where? • Vacant land • Minimum 250 acres for each township

What? • In addition to all retrofitting components • Higher floor area ratio (FAR) and lower ground coverage • Green and energy-efficient buildings • Wide roads, recreational facilities and open spaces

What? • In addition to all redevelopment components • Quality infrastructure for education, health and recreation • Multimodal transport • Trade facilitation, incubation, skill development centres

Conditionalities • Mixed land use and higher FAR • Maximum 50% ground coverage • Maximum 40% commercial, minimum 10% institutional and minimum 10% for parking • MoU with states, ULB, developers How? • Implementation in five years • SPV (public or private developer) • Equity participation by the central and state government and ULBs • Selection through competition – “City Challenge”

Conditionalities • In addition to all redevelopment conditions • High speed rail and road connectivity • MoU: States, ULBs and developers How? • Implementation in five years • SPV (public or private developer) • Equity participation by the central and state government and ULBs • Selection through competition – “City Challenge”

DEVELOPING 100 SMART CITIES IN INDIA

SMART CITY PROJECTS AT THE IMPLEMENTATION STAGE What urban India wants in smart cities*

Source: Snigdho Majumdar

GIFT city Gujarat International Finance Tec-City (GIFT City) is being executed as the first financial tech city of Gujarat. This project was initialised in 2011 and is expected to be concluded by 2021. The aim is to develop a global financial hub that provides stateof-the-art financial, banking, insurance and information technology services. Key components of planning include establishing high-quality physical infrastructure (water, electricity, gas, roads, telecoms, district cooling, and broadband), special economic zones (SEZ), an international education centre, techno parks, shopping malls, hotels. What urban India wants in smart cities

Source: http://nayaraipur.in/

Delhi Smart City The New Delhi government has planned to develop Delhi as a smart city with the vision of integrating the geospatial data of all city departments to enable them for better coordinated analysis, planning, governance and management of resources. The new geographical information system will contribute to better information-sharing and analysis. The following key objectives are envisaged under the current transformation: cloud-based provision of services, data and application integration, introduction of 3D visualisation techniques, and development of applications in the areas of disaster management, land management system, property

Major foreign investment projects

tax facilitation. Naya Raipur The state of Chhattisgarh was created in the year 2000 and Raipur was declared its capital city, with a growing importance as the major node in trade network and a host of industries. However, the city is constrained by lack of capacities, and a new city – Naya Raipur (located about 17 km from Raipur) – is being developed as a greenfield smart city. The new city is envisaged to be developed by 2031, for an estimated population of 560,000. The project is divided into the following sections: smart utilities, transport, smart governance, centralised command and control centre and computing infrastructure. Affordable and high-quality health

Source: Zinnov Management Consulting

services are top priorities in planning the city. A cardiac hospital, unique in being heart shaped, has been built. In the future, the city will be a knowledge centre as a hub for the information technology and bio-technology sectors. COUNTRIES INVESTING IN SMART CITIES IN INDIA Multiple foreign countries have shown interest in India’s smart city project and are looking forward to participate in the development of future smart cities. Major funding partners include Spain, the United States of America, France, japan, Germany, Singapore, Israel and Sweden. Next is a short overview on the cities in the development of which these countries take part. Spain – New Delhi A joint smart city project of the Delhi Development Authority and Barcelona to develop a smart sub city in east Delhi – Karkardooma. Spanish agencies will provide technical support. The key components of the project include ensuring access to vehicles of public transport (nearby Metro station), energy conservation, water harvesting, housing to 3,000-4,000 families, green cover, IT-enabled services.

Unites States of America – Ajmer, Allahabad, Visakhapatnam The United States Trade and Development Agency has signed memorandums with the Indian state to develop three Indian cities as smart cities. The following three cities have been selected: 1. Allahabad – Uttar Pradesh 2. Ajmer – Rajasthan 3. Vishakhapatnam – Andhra Pradesh The main guidelines of the project are clean water and solid waste management, as well as the enlargement of smart cities in an efficient manner. Japan – Varanasi Kyoto has signed an agreement with the Varanasi city government to develop Varanasi as a smart heritage city. Kyoto’s Uji and Otsu districts are world heritage sites, and developments will be based on the Kyoto model. An exchange programmes between Kyoto University and Banaras Hindu University will be established. The Japanese team will lend their expertise to improve five core areas to help rejuvenate the holy city. These include transport management, solid-liquid waste management, industry-university interface, developing the Buddhist tourist circuit in and around Varanasi, and setting up of a convention centre to boost cultural activities.

France – Nagpur, Puducherry és Chandigarh France is keen to invest in creation of smart cities to enable all-round development and to preserve the cultural heritage of each city. France focusses on the energy and the transport sectors. Chandigarh was designed by French architect Le Corbusier half a century ago. The city, owing to its infrastructure and green belt, will have an important role among the planned cities in India. On 26 January 2016, a French delegation visited Chandigarh, where Francois Hollande announced the cooperation with India in the fields of recyclable energy, information technology, defence and space research. The French president plans to invest one billion euros annually to consolidate the Indo French economic partnership. Israel – Mumbai Tel Aviv is committed to developing smart cities in collaboration with India by using digital resources and systems. Plans include online municipal services, traffic and parking management through IT. The work of the Delivering Change Foundation, a Mumbai-based NGO, will be facilitated and supervised by Israeli representatives and Israeli experts will be sent to Pune, Nagpur and Nashik. These cities will be set up to use Tel Aviv’s DigiTel pass, through which citizens can pay water and municipal tax bills, order parking permits, and send photos of potholes or broken park benches to the municipal complaint line; in addition, a citywide WiFi coverage will be provided and GPS-based smartphone apps (digital city services) can be used. Sweden – Karnataka, Maharashtra, Telangana and Uttar Pradesh Sweden will bring excellent experts and high technology to India to support the building of smart cities through public private partnership (PPP). Currently, there are 150 Swedish enterprises in India, and their number is continuously growing. The majority of Swedish companies are engaged in rural development and smart city solutions.

Germany – three smart cities In addition to the countries investing in India listed above, Germany has entered into an agreement with India to develop three smart cities, which are yet to be identified. PRIVATE CITIES Wave City Wave City was created based on the IBM smart city concept, and has become one of the most efficient and largest hi-tech cities in India. It is located in the suburbs of Ghaziabad (30 minutes from New Delhi, in Uttar Pradesh state), with an area of 4,500 acres. The city features the elements of smart cities: command and control centre, smart metering, water management (equipped with sensors measuring the pH value and the quality of water), smart traffic control system (to ensure seamless traffic flow), green parks and open spaces, automated garbage control systems. Lavasa City Lavasa City, planned by Lavasa Corporation Limited in collaboration with Cisco Systems and Wipro Limited, is being developed near Pune. Dasve, the first town, is nearly complete and has 476 villas and 376 apartments. Lavasa is expected to accommodate a population of approximately 240,000 with an employment base for nearly 80,000, as well as facilities to host around two million tourists every year. Core components of Lavasa city include the following: e-governance, e-learning, e-healthcare, e-commerce, e-homes, e-utilities. Palava City Palava city, developed by the Lodha Group, is less than an hour from South Mumbai. The goal is to develop it as Mumbai’s sister city. Palava isn’t just a new place to live, it’s a new way to live. The city will leverage intelligent technologies in urban planning. Today, this green city is home to thousands: with over 25,000 residential units sold. By 2025, the city will house over 80,000 families. In the city of opportunities, an Olympic sports stadium, green parks, ponds, cultural centres will be built.

POSITIVE IMPACTS OF THE SMART CITY PROJECT Narendra Modi’s smart city project will deliver several long-term benefits. Technological innovations will promote cost-savings in the fields of public transport, energy consumption, water and safety. For instance, Schneider Electric’s smart solutions will save energy usage up to 40% with the introduction of LED lighting, and 15% less water will be wasted. Developing smart cities will attract enormous volumes of FDI, and the dynamic growth of tourism and the expansion of industries will significantly contribute to the increase of GDP. The 12 smart cities in the Sagarmala project has the potential to boost India's GDP by 2%. Smart environmental, health, transport and waste management solutions contribute t sustainable growth and create a higher quality of life. The outcome of the smart city project may generate a 10-15% rise in employment. An increasing number of IT, data analyst, advisor and system integration jobs will be created. Education will be available to a wider circle, through distance learning. 41

SMART CITIES IN CHINA 42

SMART CITIES PROGRAMME IN CHINA

Cities with Smart City projects (on the basis of city levels)

Author: Viktor Eszterhai

The first projects related to the developments of smart cities in China (zhi hui cheng shi) appeared in the 2010s, and have made extraordinary progress in the past years. In January 2013, the Ministry of Housing and Urban-Rural Development (Zhufang he Chengxiang Jianshebu) formally announced the first list of national pilot Smart Cities. More than 300 cities have joined the pilot programmes ever since, and the implementation of 41 special pilot projects has also started. Tasks are assigned and their implementation is coordinated by various ministries (National Development and Reform Commission – Guójia Fazhan he Gaige Weiyuanhui, Ministry of Industry and Information Technology – Gongye he Xinxihuabu, Ministry of Housing and Urban-Rural Development), and regional/citylevel governments.

Currently, there is no statutory definition in China of what constitutes a Smart City. In past years, the government introduced a number of guidance notices – first and foremost the urbanization plan for the 2014-2020 period –, creating a basis for development. According to plans, by 2020 the distinctive features of Smart Cities will have been determined based on the experience from the pilot programme. Hopefully, the developments after 2020 will be implemented in line with a concept formulated on the basis of considerable experience. It has been most commonly recognized by scholars, government officials and enterprises that Smart Cities operate under the basis of a ‘digital earth’, connecting the virtual, digital world with the real, physical world. The key driver of the Smart City programme in China is mainly an extremely dynamic urbanization process. The Chinese governments views urbanization as a universally accepted road to social modernization. In 2013, the number of urban residents exceeded that of the rural population, and by 2020, the ratio of permanent urban residents to total population should reach about 60 percent, according to the plan. This accelerated urbanization has entailed a series of problems: developments have not been energetically, environmentally, and, in certain cases, financially sustainable. Therefore, the government of China is seeking solutions that rationalize dynamic urbanization, and would create cities

“In 2013, the number of urban residents exceeded that of the rural population, and by 2020, the ratio of permanent urban residents to total population should reach about 60 percent, according to the plan” that manage energy and resources more efficiently, are less crowded and provide high-quality services. China’s Smart Cities programme can fill a real market niche (some estimates anticipate a $28 billion smart city market by 2020). Key areas include: smart and more efficient energy usage; smart water management and quality control; smart traffic control, which, in addition to maintaining a smooth traffic flow, focuses on improving the air quality; smart healthcare, to remedy the weaknesses of the social net in China. A further aim of the programme is to strengthen the technological companies that may facil-

itate the transformation of Chinese industry into hightech production. The government’s pilot programmes greatly facilitate these companies – ZTE, Huawei, Tencent, Ruijie, Digital China, Chinasoft, China Mobile, China Telecom, China Unicom, International Sugon, Fiber Home, Tsignhua Tongfang, Inspur, Longmaster, etc. – to become key market players globally. The Smart Cities programme in China is characterized by the fact that significant regional differences must be considered within the country. Given the different economic and social situation of the specific regions, there is no template of a prototype city. Thus, pilot cities play an important role: on the basis of their experiences, it will be possible to develop a strategy that takes the differences between cities into proper consideration. The Smart Cities programme, however, has also been criticized. Critics of smart cities are now concerned that the programme does not necessarily keep the real interests of the residents in view, and does not five real answers to the education-, health-, employment- and housing-related problems. It has also been highlighted that the programme is mainly about connecting smart devices and urban environments, which is in line with the interest of technological companies, but adds little real value to residents. There are voices, however, that consider the market principles are not observed properly, because they are too subordinated to political aspects (e.g. access to data). Others are concerned that due to

the top-down nature of developments, residents do not have a say in decisions, and there are many others who question the competences of local governments. There are voices that consider governance too decentralized because the management of the programme is divided between the concerned ministries; in addition, the ministries are not necessarily aware of local demands. Furthermore, local governments still tend to evaluate investments on the basis of return only, and do not use a complex index. Despite existing question marks, there may be a boom in the spread of smart cities in the next decade, owing to the above-described restraints and the intention of the Chinese government. Hopefully, the programme will significantly contribute to guiding urbanisation in China in a more reasonable and sustainable manner.

“More than 300 cities have joined the pilot programmes ever since, and the implementation of 41 special pilot projects has also started.”

SHANGHAI ON THE BRINK OF BECOMING A GLOBAL CITY

Author: András Szűts, Tamás Dani

Imagine a city in which you can get from the airport to the city within a couple of minutes after landing by a high-speed electric train running at 430 km/h; in which a metro network of almost 600 km renders cars needless, and a phone application renders cash dispensable because you can manage everything, from shopping to paying bills, with using a QR code; in which you can make appointments with your hairdresser or at your sports centre by your phone, and you do not need to spend time with shopping because you can buy everything for delivery straight to your home, saving time to spend with your family, leisure, or – as it is most expected in the modern world – work.

FROM THE WORLD OF JENŐ REJTŐ TO THE SMART CITY OF THE 21ST CENTURY There have been many visions describing the “city of the future” with similar ideas. But the description above is not a utopia, but parts of the everyday life of completely average person living in Shanghai – and emphasis is placed on average, that is widely spread, here. In history, Shanghai has always been regarded special. More than one and a half centuries had to pass for the city to transform from the eastern bridgehead of the West and then the neglected big city of Mao’s China into the new showpiece of the country, which wants to meet the challenge of becoming into one of the major economic, financial and cultural centres of the 21th century in all aspects, no matter how much money and energy it takes. Until the end of the 27th century, Shanghai was not more than an insignificant fishermen’s village. After the appearance of the British, however, it became one of the centre of opium trade by the early 19th century. The Huangpu River crossing the city, and the nearby Yangtze made Shanghai a primary commercial centre, because the goods arriving on see – opium, most of

the time – could easily be forwarded on the rivers and canals into inland China. The 1842 Treaty of Nanking, closing the First Opium War, stipulated the protection of British individuals and goods, and opened up the opportunity to establish trade posts, i.e. consulates. Stimulated by the example of Great Britain, soon the United States and France opened their own consulates in the city, because China presented such vast trade potential that everybody tried to exploit. Shanghai lived its first golden age between the two world wars, when it was a major commercial of business centre of not only China bit the Far East. Several countriesheld so-called concession (extraterritoriality) rights in the city. In addition to the three most influential states – the British, the American and the French – Japan, Spain, Portugal, Belgium, Holland, Norway, Denmark, Sweden, as well as Switzerland and Brazil had considerable operations. The new business centre of the Far East attracted tradesmen and investors, as well as adventurers, from all over the world. Black trade flourished and opulent western entrepreneurs soon created an environment very similar to the milieu of European and American big cities. Early development presented endless business opportunities, and launched incredible careers. One of them

was that of Hungarian László Hugyecz (Hudec), who became one of the most influential and renowned architects of Shanghai in the 1920s and 1930s. He escaped from a PoW camp in Siberia, and made his way to China on a railway hand car, and then he left after the second world war as a wealthy and world famous architect. This excellent Shanghai architect of art deco designed more than a hundred of the city’s buildings, sixty-five of which survive. He is still considered one of the most considerable architects of Shanghai. The economic and cultural vibe of the inter-war years, the fairy tale world of the city, wrapped in opium vapour and the lights of eastern lanterns, inspired several works of literature and films. According to some sources, Hungarian pulp fiction writer and playwright Jenő Rejtő also was inspired by mystic Shanghai, and the city served as a model for several of his exotic venues set in the Far East. After the war, Shanghai secluded itself and was stagnating for decades. Owing to the economic reforms announced by Teng-Hsziao Ping, a rapid growth started in 1978, and the city has seen inexorable progress in the past four decades.

According to the census in 2010, the number of expatriates living in Shanghai reached 208,300. Excluding expats from Taiwan (44,900), Hong Kong Special Administrative Region, and Macau Special Administrative Region, foreigners total 143,200 people, and their number is continuously growing. The dynamics of the local economy are well reflected by one of the facts in the Shanghai Fact Book 2014: the city created 600,500 new jobs in 2013 and the unemployment rate has been roughly between 4 and 5 percent in recent years.

“Transport is one of the foundations of the operations of a city.” While in the 90s and early 2000s the world was fascinated by the modern high-rises springing up in the city, the main issue in Shanghai in the 2010s is how the sudden enrichment can be spent on sustainability, liveability and the raising the standard of living. TRANSPORT IN A BIG CITY

RIGHT AND WRONG WAYS OF URBAN DEVELOPMENT IN SHANGHAI Nowadays, more and more articles and papers are about smart cities. Although there is no concensus around the term, and no standard definition exists, the notion of smart cities might be summarised as cities that innovatively utilize state-of-the-art technological solutions to foster the development of a better, more sustainable urban environment. It requires a developed infrastructure (human, educational as well as innovational, transport and cultural) the systems of which are interconnected, and, on the whole, they increase the standard of living and competitiveness. Shanghai province covers an area of 6,340 km2 (approximately the size of Pest county in Hungary), in contrast with the figure from 1949, when the city had an official area of only 636 km2. In that year, the permanent resident number was merely 5.2 million; today it is 24.3 million. According to the data of the censuses, between 2000 and 2010 population grew by 6.5 million, that is, over 10 million people migrated from rural areas to Shanghai in past decades – presenting incredible challenges to the city, both infrastructurally and socially.

Transport is one of the foundations of the operations of a city. “Time is money” – if the majority of people have to crawl in traffic jams for hours, it costs some of their valuable working, leisure and free time, but, on the whole, it is detrimental to production. An even more important viewpoint is that stress generated by traffic has significant impact on the everyday mood, the mental health of people and their relationships with their environments, thus, creating well-operating public transport is a key task. Shanghai’s transport was not able to keep the pace of the population growth; since the 70s, people had to literally fistfight to get onto buses. After the 90s, the city has allocated almost all its resources to develop the metro network. While the first line entered operation in 1994, there are currently 14 lines in operation, and a maglev line of 29 km, connecting the airport and the city and running at a speed of 430 km/h. The network, including the maglev line, extends 588 km, but the extension of several lines and the construction of 8 completely new lines are planned to be finished by 2020. Public transport is extremely cheap, which boosts competitiveness. According to the latest city development strategy, the length of the metro lines will exceed

1,000 km by 2040. Speed is served by using a contactless card that can be used to access many forms of public transport, including metro and the maglev lines, taxis and buses, saving a lot of time and simplifying travelling. A bicycle revolution has just been unfolding, but infrastructure is already available. There is a separate motorbike and bicycle lane in almost every street, several bicycle-renting companies, similar to Hungarian Bubi, flooded the streets of the city with bicycles. The system in Shanghai has no docking stations, an application helps to find the nearest bicycle, which can be reserved and then left anywhere. Legal parking, however, if is rewarded with extra points, which can be used later. Registration via phone takes only 1-2 minutes, and a 30-minute use costs an amount equalling to HUF 20-40 – depending on the service provider –, in a city that is considerably more expensive than Budapest. Until the late 90s, millions of people used bicycles in Shanghai, but they were replaced by motorbikes and later cars. The city, however, cannot cope with congestions, despite the rapid construction of motorways, overpasses, tunnels and multi-storey roads. There are several attempts to restrict traffic, from unrealistically high registration fees to improving public transport, but currently it is hard to curb the motorization boom that started 10-15 years ago. Shanghai pays special attention to tackling noise pollution. Electric cars are popular and widespread, and the average age of cars, compared to even to Budapest, is young, thus the city is surprisingly quiet. It has many reasons: in addition to quiet cars, noise is reduced by the high quality of roads, the relative distance of buildings from roads, and the ever-present lines of trees absorbing sounds, but noise is considerably reduced by the fact that only electric scooters are allowed in the city. The traffic of Shanghai’s two airports has to bypass urban areas, which is, for example, a significant source of noise in Budapest; similarly, helicopter traffic is also restricted. CULTURE AS A TOOL OF URBAN DEVELOPMENT In recent years, cultural investments have played a significant role in urban development. Cultural complexes, similar or even larger in size than the Palace of Arts in Budapest, such as The Oriental Art Center concert hall, the Shanghai Symphony Hall, the Shanghai Grand Theatre and the Culture Square have been constructed in the las 10-15 years. In addition, several other new museums have been built, and the city organised a world expo in 2010. These institu-

tions always upscale their neighbourhoods, therefore cultural investments are considered a major tool of urban development. It is a good practice in building new city quarters to have a library, convention centre, university campus or museum of exclusive design in the centre of the new quarter – and, as opposed to the American and Australian model, not a shopping mall. Not only is the cultural offer of the new sub-centre enhanced but an institution is immediately created to attract people from the city centre, promoting local properties.

“In recent years, cultural investments have played a significant role in urban development.” Since cultural investments have to compete with the “sensations on offer” of the city coming up with something new every day, producing newer and newer skyscrapers, Shanghai “cannot think small”. A disadvantage is that size is one of the primary expectations, in addition to an extravagant look, but it is a frequent problem that the existing area is not exploited and filled with real content. Nowadays examples of natural development can be seen if a quarter is attempted to flourish by preserving existing values and reviving original functions; but the attitude of demolishing and re-building is still more typical, to which a lot of valuable buildings fall victim even nowadays. Unfortunately, heritage protection has a long way to go in Shanghai: lately, the city’s largest, traditional Chinese shikumen quarter has been demolished, and strong protests saved a late 19th century, Spanish Neo-Baroque church. Demolishment was scheduled because of the construction of a new cultural quarter, which could have been housed by the old buildings, but unfortunately these lack prestige in China. IMPROVING LIVEABILITY TO BOOST COMPETITIVENESS: GREENERY AND DIGITALISATION It might be surprising for a big city of almost 25 million people to be astonishingly quiet. One more reason for that is that the leadership of the city and the

districts spend immense energy on making the city green. Currently the rate of green space per capita is 7 square metre, but a regulation stipulates to increase it to 13 square metre. One of the foundations of the increasingly popular Oriental mindset is creating inner peace and contemplation. The Chinese garden has very rich traditions, because even today, Chinese people have the need to tend to the health of their body and soul every day. In order to fulfil this need, a lot of new parks, ponds, canals and urban forests have been created to provide the opportunity for this essential recreation. Digitalization is a way to make the urban lifestyle more comfortable and the time spent on commuting useful. Some years ago, Shanghai and the developers of the WeChat application – often dubbed as the Chinese Facebook – concluded an agreement enabling users to keep contact with the public utility providers of the city. As a result, water, gas and electricity bills can be paid via WeChat. You don not need cash for days, because you can pay everywhere, from the largest shops to the grocery store on the corner, via phone, using such applications as WeChat or Alipay. All you need is a smartphone. Eliminating cash payments saves lots of time in everyday life. Similarly, personal shopping is also disappearing as online shopping has become general. Food ordered in the morning is delivered to your home during the day, but online shopping for clothes and other goods is becoming more frequent. However, the spread of digitalisation also has its downside. The old shopping streets of the city centre

have to face losing their customers rapidly. In a fightback against the rise of e-commerce, all the historic department stores, built in classic European style, have recently announced togo through major renovations until 2018 in order to improve the shopping experience and attract costumers. Nevertheless, digitalisation is addictive, posing serious social risks. It is a frequent sight in cafés and restaurants the all the guestsaround the same table are staring at their mobiles, instead of talking to each other. They meet but they are not together. In Japan, alienation caused by the internet world already has extensive literature, and obviously, the problem is aggrevating also in China. WHAT DOES A “CITY GETTING SMARTER” THINK ABOUT THE FUTURE? Between 22 August and 21 September, the public could give their opinion on the plan the final version of which was compiled by October, and is called “Shanghai 2040” in short. As similar visions of most cities, Shanghai’s development plan is also extremely ambitious; but there are two reasons why this plan is unique: first, having seen the pace of development in the city in the past three decades, there is a good chance for its contents to be realized, second, as opposed to earlier development plans, economic indicators are not exclusive, but liveability, itself, and ultimately, people are in the focus of planning. To emphasise this, the city made several gestures towards its residents: the plan, unusually, was not just open to public opinion, but

SHANGHAI ON THE BRINK OF BECOMING A GLOBAL CITY

BACK TO COMMUNITIES

special attention was paid to the wording of the document to be easy to read for the public. As it was told at the press conference presenting “Shanghai 2040”, the primary aim of the city is to become the fifth global city of excellence until the givendeadline, that is, to be mentioned together with New York, London, Paris and Tokyo, as a global city that can influence the processes of the world economy and world politics, and global cultural and technological trends. By 2040, Shanghai aims to become an international economic, finance, trade, shipping (already number one in the world) and scientific innovation centre, as well as a cultural metropolis. In addition, it also aims to become one of the most

In a city where population almost doubled by increasing by 10 million people within a couple of decades, creating urban communities has extreme significance. Those ten million people migrating from the countryside have lost their former lifestyles and often their cultural traditions as well, because they do not fit the city or cause problems in the new environment. Their children grow up seeing the parents unsettled in the world, and they take this psychological burden with themselves. To counterbalance this, the creation of urban communities related to the subcentres of the city quarters would be promoted. In addition to the

liveable metropolises of the world, by strengthening five “happiness concepts” in the next decades: culture, tourism, sports, health and seniors’ care. As opposed to the past, the city does not regard economic growth the only important factor; cultural and technological developments are equally weighted in its vision. Experience has shown that in the competitiveness of the four global cities a creative environment, maintained by the diverse cultural life of these cities, plays a major role. Competitiveness is also defined by liveability: these cities could not become attractive to those creating a creative environment if they were not pleasant places to live in. Shanghai’s leadership have recognised that “liveability” is also an economic factor.

social aspect, it is important because decentralization is essential for the operation of a city of 25 million people. In order to resolve these issues, the plan includes the principle of “15 minutes’ walks”. It means that by 2040 such city structure will have been created in which all necessary public facilities are within a 15 minutes’ walk, providing basic public services for everyday life (grocery store, shopping mall, bank, park, sports facilities, etc.), and also providing family members with the opportunity to choose workplaces (office buildings) schools and eldercare facilities that are within a 15 minutes’ walk, preventing millions of people from commuting 20-40-60km distances to work or school daily.

“The primary aim of the city is to to be mentioned together with New York, London, Paris and Tokyo as a global city that can influence the processes of world economy and world politics, and global cultural and technological trends.” TRANSPORTATION ABOVE ALL It is obvious that a city of 25 million residents (if this commitment of the plan is fulfilled) must give priority to motor vehicle traffic. Years ago, an extremely high duty was introduced for issuing number plates, but it does not discourage people’s needs for individual transport, thus the goal is to create as efficient public transport as possible. Maybe learning from Tokyo’s problem, where millions commute up to 3 to 4 hours, Shanghai has targeted to reduce average commute below 40 minutes. For this purpose, the principle of “three more than 1,000 km” is applied in track-based transport. Metro lines, 588 km at present, as well as the railway lines connecting the suburbs and Shanghai will reach a total of more than 1,000 km. At least 60 percent of Shanghai's residents will be within 600 meters of a subway station, and all suburbs with a population of 100,000 or above will have a metro line. Interchanges will be quicker because changing lines from the same platform is considered as early as at the planning phase. An even more ambitious plan is about the revival of the city’s historic tram network: until 2040, more than 1,000 km of tram lines will have been constructed in Shanghai, because it would serve middleterm urban transport the best. This was already a plan in 2014, although at that time the target was to construct 800 km of new tram tracks. At a press conference held in 2014, the argument for trams was that tram’s capacity was ideally suited to suburban residential areas with populations of between 500,000

and 1 million, while no more underground space could be spared for the metro. The average distance between two metro stations in Shanghai is twice or three times more that in Budapest, thus it is not practical for travelling short distances, and the two modes of transport would perfectly complementary. Tram development seems especially ambitious if we consider the fact that currently Melbourne has the most extensive tram network of 250 km. Nevertheless, only 10 km of these ambitious 1,000 km have been finished in one of the suburbs in Shanghai, and two other lines are expected to enter operation in Shanghai’s Western suburb, Songjiang in December. It demonstrates the fact that the area of the city is very disproportionally divided between individual and community transport. The greenest means of transport is not forgotten, though; by the end of the plan’s timeline, greenways of over 2,000km will be set up so that residents can enjoy walking, jogging and cycling. Leadership intends to radically expand bus lanes and set up Bus Rapid Transit routes; in the case of taxis, however, self-driving cars are not considered, although the development of that technology is going to boom, and the system is used in Masdar city, near Abu-Dhabi. THERE IS NO COMPETITIVE CITY WITHOUT A COMPETITIVE REGION It is important for the leadership of the city that the master plan for 2040 should be in line with the development plan of the Yangtze River Delta region. Therefore, they consider the “Shanghai 1+6” region, that is, they intend to create an economic and cultural region by involving surrounding cities and their agglomerations. The six cities are Suzhou, Wuxi, Nantong, Ningbo, Jiaxing and the centre of the Zhoushan islands. Together with the cities involved in the cooperation, a region would evolve serving as a place of residence of 50-50 million people and being suitable to settle the masses of people who would still flow into Shanghai. In its development plan to 2020, the city limited its population to 25 million and the same target is set in the master plan to 2040. If the city, currently having a population of 24.3million wants to fulfil this commitment, there is not much room for manoeuvre; establishing a suburb ring seems an obvious solution. Each city of the ring should be within 90 minutes from Shanghai’s major stations, which has already been realized Suzhou, Wuxi and Jiaxing, after the high-speed

SHANGHAI ON THE BRINK OF BECOMING A GLOBAL CITY

railways with a speed of 300 km/h were built. In order to enhance the regional role, Pudong International Airport is planned to be connected by intercity lines, which is again a large-scale commitment. Designers of the new region are aware of the fact that creating unity on the long term can be maintained with strengthening the shared cultural identity, thus they place great emphasis to the protection of cultural heritage. A number of medieval “water towns” have survived in the area; their preservation and renovation are given priority now, and their recognition as world heritage sites would strengthen the shared identity. Finally, such a new regional public administration model is intended to be set up that would efficiently implement developments across administrative boundaries and adequately coordinate the cooperation of the 7 cities. The evolving region would serve as the place of living of about 60 million people by 2040, and would provide adequate background for enhancing Shanghai’s global role. A GREEN MEGACITY Apparently, tremendous energy is devoted to turn Shanghai into a green city. The Chinese garden culture, with a history of several hundreds of years, seems to flourish again, and the central government has to make all efforts to counterbalance the increasing dissatisfaction caused by the intolerable smog with mood-boosting measures. Therefore, in Shanghai, where the dimensions of the city allow the creation of large green spaces, there is hardly any street that is not flanked by lines of sycamores or gingkoes. Remarkably, before the construction of new residential quarters, the adjacent, beautifully tended, vast parks are ready, and before entering operation, the wider roads are flanked by 4 to 6 lines of sycamore saplings, and it is compulsory to build parks of considerable sizes in the enclosed inner parts of residential developments. The current urban regulation in Shanghai stipulates 13 square meters of greenspace per capita. At the moment, each of the 25 million residents has 7 square meters, but Shanghai 2040 sets this rate at 15 square meters by 2040. According to the chapter on green spaces, ecological land will cover 60 percent of the total land area in the province, and forest coverage will reach 25 percent. 16 green rings will be established in the city. It will not cause any problems in the Pudong area, built across

the river after 1990, because it was originally designed to have an extremely high ratio of green spaces, but the perceived lack of green space on the west side of the Huangpu river, in Puxi, has to be addressed in a similar way. By 2040, each district is required to build an urban park with an area of some 100 hectares, and Shanghai province will boast more than 30 natural protection areas. Due to its climate, the city is extremely wet, and its area includes several smaller rivers, cabals and undrained marshland, and these untouched green spaces have extremely rich fauna and flora. The city’s green concept wants to promote their con-

“Chinese garden culture, with a history of several hundreds of years, seems to be flourishing again.” servation and re-introduction. In addition, probably the most important commitment is establishing an open green space larger than 3,000 square meters in every 500 meters. Parks play an important role in the life of Chinese people. It is their daily routine to spend time in the nearest park twice or three times a day: in the morning, in the evening, and even at lunchtime. Since community life is also very strong, millions flood the nearest green space every day to do some exercise or thai chi or dance in the morning or in the evening. In addition to the health aspect, establishing parks is badly needed for social needs as well – therefore the commitment to build a park in every 500 m is not an exaggeration. As the first step, the city, relatively green already, plans to construct a 22-km long green riverside corridor along the Hunagpu river by the end of 2017. Parallel to the regulations on ecological land, the local government regulates the upper limit of built-up areas (3226 square km of 6340 square km), and several practical steps are related: in the future, surface public transport hubs and planned shopping malls must be built together, sparing area for green spaces, and sport fields and stadiums.

renewable energy, China alone spends more on renewable energy on an annual basis than the Unites States and the European Union together. Still, citywide carbon emission is expected to reach its peak in 2025. A reduction of 15 percent off the peak rate by 2040 is set as a goal in the master plan. Shanghai 2040, however, also has its shortcomings: it does not emphasise the importance of selective collection, which does not seem to be spread in the city even in traces in 2016, and the use of plastic is not controlled, either, although it would be extremely important in a city where all products are wrapped in two or three single-use plastic bags in all kind of shops, from the grocery store on the corner to biggest shops, and in age when – according to the report of the European Committee – garbage patches of the size of the United Kingdom and France together are floating in the world's oceans. A CULTURAL METROPOLIS, COMPETING WITH NEW YORK AND TOKYO The local government of Xuhui district announced in spring this year to open 16 new theatres as part of the renewed riverside promenade by 2019. Within the Dream Centre, six large venues, including a 2,500-seat theatre and an 1,800-seat interactive concert hall will be built along with 10 small venues for chamber plays. As in previous years, the city is investing incredible amounts of money to strengthen the “cultural industry”. Its aim is to be referred to as a cultural capital on a par with New York, London, Paris or Tokyo within 20 years. Chances are excellent: in addition to being one of the centres of the Far East, it has rich European traditions from colonial times and buildings constructed in French, English, Spanish and American style still constitute a major part of city’s architectural heritage, not to mention the wonderful art deco buildings of Hungarian László Hugyecz. Diversity is part of the city’s history and identity. According to Shanghai’s extremelyambitious plan, 10 percent of its employees will work in the cultural industry by 2040. This is based on the plan to have 10 art galleries, two museums and five libraries for every 100,000 residents. Cultural institutions have had a major role in urbanization, because they have always been meant to make the subcentres of new quarters more attractive, and the same path will be

followed also in the future. However, it is inconceivable without a more intensive internationalization, therefore Shanghai wants to open up towards expats and attract as many outstanding talents as possible, and fill their new theatres and concert halls with high-quality, diverse programmes. The plan aims at placing more emphasis on heritage protection, “preserving the originality of Shanghai”. In this field so far, however, a hotchpotch of results has been produced. The city cannot genuinely identify with the European era, hence the historic buildings are not always taken care of, and easily fall into decay or are demolished; but the traditional Chinese residential quarters, the characteristic Shanghai shikumens are not preserved, either. One of the worst, and more and more frequent example is that original quarters are demolished, and then the houses and streets are built to seem old, but often with significantly different proportions. Sometimes the original side of the street front is kept, thus the difference is even more apparent. Not only does it lack any sensible heritage protection aspect, but tourists find them nothing but repulsive, since every corner of the new quarters reveals they are replicas, very far from reality, reminding passers-by of destruction instead of preservation. Hopefully, the city will soon value its past and its own architectural heritage, and recognize the value the villas remaining here and the old Chinese quarters, rare sights nowadays, represent, because only cities that can preserve and come into terms with their past have the chance to become global cultural metropolises. SUMMARY Shanghai’s rapid growth in the past decades has astonished the world. The city’s latest, development strategy, spanning to 2040, will not only focus on economic growth but innovation, health preservation and liveability will have the same importance. By 2040, Shanghai intends to join the club of cities called “global cities”, and aims to become an international economic, finance, trade and scientific innovation centre, as well as a cultural metropolis. The recently issued urban development strategy contains a series of measures the adoption of which is considered important by the city to achieve the above goals.

The development concept also includes provisions on improving the quality of air and water. Although the country has taken monumental strides to migrate to

GeoDebates smart cities

GeoDebates II. – OPPORTUNITIES OFFERED BY SMART CITIES Author: Eszter Polyák

PAGEO held its GeoDebates conference again, focussing on smart cities this time. The main topic of the Debates was whether smart cities are necessary, and what approach should be taken to implement the modern initiative of urban development. What dynamics work between decision makers and residents? How can they provide solutions for urban problems?

SMART SOLUTIONS OF MODERN PROBLEMS In his keynote speech, László Gere, a researcher at PAGEO, summarised the main information about smart cities in an international context. Beyond doubt, cities have an important role in the modern era, thus the question arises whether the new methods of urban planning are able to cure the problems occurring in settlements with high population densities, such as the crisis of public healthcare, expensive housing, difficulties in transport. New participants have appeared in urban development. These technological companies offer “smart” solutions in the fields of economy, environment, energy management, governance, etc. Two examples were presented: the city of Songdo in South Korea, and Amsterdam Smart City. Although the development of each city is peculiar, they are linked by using the achievements of technology efficiently. If we suppose that smart cities are useful tools, is their implementation more efficient as a grassroots initiative or through top-down planning? In the debate, János Balázs Kocsis, an assistant professor at the Budapest University of Technology and Economics and Corvinus University, and Klára SzerdahelyiNémeth, founder of Budapest Dialóg, represented the grassroots initiative, while Dávid Vitézy, director

of the Museum of Engineering and Transport, and Samu Szemerey, an architect of Lechner Knowledge Centre, were advocating top-down planning. Anton Bendarjevsky, director of the foundation contributed as a moderator. PLANNING The party representing grassroots initiatives claimed that smart cities of the future cannot exist without considering the needs of local inhabitants, and a thriving city can be built relying on the local civil society. Local inhabitants must be inspired so that a competitive city should be created, thus smart city development must be based on the needs of the cities’ residents and not on technological progress. An example for that is Budapest Dialóg, which collects the ideas of locals and forward them to the local government or other authorities, organisations concerned. In addition to ideas to be implemented, local governments are also given the opportunity to receive feedback on projects published at the planning phase. The question whether our cities are smart in their current forms arose. There have been many creative cities in history: Budapest, for example, was remarkably developed, just like a smart city, between the two world wars. Smart cities may offer a good solu-

tion for today’s ills, but first the problems to be resolved must be assessed. Applying smart methods is a question of management, and no matter that a plan is fascinating and convincing if its significant costs raise further questions. Being aware of poor and segregated cites, it is a difficult question why it is not the quarters in need that receive the amounts spent on smart cities, since there is a very wide digital gulf between the lower and upper strata of society. Technological giants invest tremendous amounts in cities, and the decision makers’ convictions about their raison d'etre reveal serious interests. Challenges must be accurately identified, because while the prices of flats are influenced by prestige, a smart method cannot change this. It can hardly alleviate the problems of public healthcare, either, since high costs are inevitable. In a smart city, personalisation could be something of a novelty, but today this area suffers a setback, compared to the previous period. The aim is to have technology as a tool, and experts of sociology could tell the best way of application, highlighting the interests of firms. The topdown planning side fundamentally regards smart cities technocrats, systems of notions governed by the concepts of a few large companies. All over the world, legislation is best method of urban regulations, which is absolutely natural viewed with a topdown approach. Through this, the most diverse prob-

„Smart cities should be created to enable us to protect historic urban areas with grassroots initiatives.” lems are solved and this is what makes a city “smart”. Furthermore, the concept of smart cites must be natural. By the 21st century, information technology has become ubiquitous, thus it is as necessary to operate a city as laws and electricity are. This is why raising questions must basically be approached along identifying goals. Technology, however, is a mixed blessing. Mobile parking facilitates parking in the city centre, but conflicts with urban policy, which wants to see as few cars as possible in these areas. Likewise, we can produce smart solutions without technological devices, thus the opportunities of technology must be put in their right place, and the goals of our urban policy must not be subordinated to them. Top-down and bottom-up initiatives are both needed; one is useless without the other. Particular systems, such as public utilities, do not work bottom-up but local solutions may have a considerable role in the development of

GeoDebates II. – OPPORTUNITIES oFFERED BY SMART CITIES

systems. In Budapest, it currently works the other way round: it is easier to make a major change from the bottom, from investors than fulfilling, even with a top-down approach, the needs of the inhabitants of an urban area. Smart cities should be created to enable us to protect historic urban areas with grassroots initiatives. Technology, however, will pose newer and newer challenges, such as the spread of self-driving cars, which may impact public transport and cause public health problems – and this is definitely the responsibility of legislation from above. High level of global urbanisation is a popular argument in the development of smart cities; however, the fact that European and North American cities do not grow but age, opposed to dynamically developing East Asian cities, is a more important one. Therefore, it is not sensible to talk about smart cities in themselves, without regional characteristics. The potentials of city types must be considered to identify problems and opportunities. It is an essential interest of a city’s leadership to understand digital transformation, and the task it entails for them. Most cities in Hungary are not aware of the data they possess and they cannot use them. It is also necessary to assess liabilities and potential sources of incomes. Local governments must transform in order to be competent in this field, and they must understand the role that data have.

The other question is economic sustainability. For a sustainable operation, the involvement of market participants is required, because innovations and competitiveness lie with them. In order to be able to interpret development in the cases of smaller settlements and lagging regions, marketable units must be covered. It requires alliances of local governments, and the network of settlements can be operated in a compatible system coordinated from above. Local governments may aim, as market participants, to sell their well-operating developments, and it requires top-down management. . CITIES IN RANKINGS AND BUDAPEST The first question of the moderator raised modern city rankings, such as Juniper’s, according to which top ranking smart cities for 2016 are Singapore, Barcelona, London, San Francisco and Oslo. What are the differences between the cities from continent to continent, from culture to culture, and where can Budapest be located in this ranking? Singapore is a template of top-down planning, but it is intelligent legislation, and not technology, that makes it a smart city. Decisions of public policy are programmed and executed, for example, the number of cars is limited according to the issue of number plates, and congestion charge works according

to programs, traffic influences the routes that are chosen by people. The most difficult part is policy: it requires long-term strategical thinking. In this respect, many European cities do fairly well, because we have a strong cultural base, regarding the traditions of transport in Budapest, for example. It depends on the current policies of historically smart cities whether they remain smart. Historically, the United States have started from a mush worse status. They are trying to transform their cities, for example Seattle and Los Angeles through public transport development projects, which have been adopted by referendums with great majorities. They may correct earlier, inadequate urban policies, for example, that of Los Angeles, created by the automobile lobby. Advocates of grassroots initiatives think that living in cities has become fashionable, that is why we also speak about smart cities. City rankings merely reflect trends, and it would be surprising to have another city on top instead of Singapore. But this does not mean that these are functioning cities. Budapest does not perform badly at all, is characterised by a strong civilian background and vibe. Residents read a lot about urbanisation, and the interesting thing is how we can channel grassroots initiatives. When talking about smart cities, it is important to talk about existing development and organizing tools – regulation, tendering, institutions – as well. Looking at these

„A city is as smart as its residents are.” through different eyes, and applying them with a different approach – these in themselves make the city smarter. A good example is Budapest and the Térköz tender, an urban rehabilitation programme in 2013: it supports only applications that are based on grassroots initiatives. It is worth examining the political cultures in which smart cities develop rapidly. In India, for example, a government’s policy can be built on developing 100 smart cities in 5 years, and in Singapore top-down developments play a great role. In these countries, top-down initiatives have a much stronger impact, and there is much less room for mediation, in which the opinions of citizens are considered. In this respect, Europe is in a more difficult situation, because such concept cannot be implemented against voters. Copenhagen is on top of liveability rankings: it has taken years to make residents stakeholders, actively participate in urban development. And this is not the result of a new application or a network of sensors, but of a long learning process and confidence-building. Thus, the key is not technology but the development of society’s strength.

THE ATHENA DOCTRINE

THE ATHENA DOCTRINE BY JOHN GERZEMA JOHN GERZEMA

Author: Simigh Fruzsina

THE ATHENA DOCTRINE How women (and men who think like them) will rule the world (Jossey-Bass, 2013) – co-author: Michael d’Antonio

„

John Gerzema is an American CEO and columnist who focuses on social sciences and the impact of leadership ethics and corporate culture on consumer behaviour and financial performance. He has a particular focus on female leadership traits and competencies in modern-day leadership.

növekedés innováció stratégia

„

JOHN GERZEMA az egyik legsikeresebb író és társadalmi teoretikus Amerikában.

SPEND SHIFT

A Young & Rubicam reklámügynökség vezető munkatársaként rálátása van óriási

How the post-crisis values revolution is changing the way

Gerzema is a pioneer in the use of available data to adatbázisokra, amelyekből adatelemzési módszerekkel azonosít társadalmi identify future or current social changes and help átalakulásokat, szociális változásokat és fogyasztási szokásokat. Elemzéseiben companies anticipate and adapt to new trends and demands. An author, strategist, speaker and consultkimutatott gazdasági és társadalmi hatásokat számos nagyvállalat építette be ant, his various books have appeared on the bestüzleti stratégiájába. seller lists of The New York Times, The Wall Street Journal, USA Today, Fast Company, The Washington A Columbia egyetemen és az MIT Sloan üzleti iskolájában tart órákat, de Post, Bloomberg Business Week, The WEEK Magazine and many others. A frequent analyst on television and radio, Gerzema’s TED talks have been viewed by hunLeadership” vezetőképzőjének munkatársa, a University of The People, a Rainforest dreds of thousands of people. He has written for pubCAREER lications like Harvard Business Review, Inc. Magazine, Alliance és a United Nations Foundation „Girl Up” kampány tanácsadója. A BAV WIRED, Forbes and McKinsey Voices on Society. GerGerzema received a bachelor's degree in Marketing Consulting tanácsadó cég vezérigazgatója. zema’s writing was included among “The Fifty Classic from The Ohio State University in 1983 and a masManagement Articles of The Decade” by Strategy & ter's degree in Integrated Marketing from the Medill Publikál többek School közöttofa Journalism Harvard Business Review-ban, az Economist-ban, a Wall Business, and his research has been presented at The at Northwestern University in World Economic Forum and cited in Street publications like 1987. He began career at Campbell-Mithun, proJournal-ban, a New Yorkhis Times-ban, és a Forbes magazinban. A „Válság utáni The Journal of Consumer Psychology and Marketing viding account services and brand management from fogyasztó” című 1987 TED előadását több mint 250 millióan látták. 2014-ben a Forbes Management textbook. to 1992. Then he joined Fallon Worldwide, an In addition, Gerzema is a board advisor to the Univer- „ainternational company. While there, beválasztotta világ első marketing 100 szellemi vezetője közé he a megbízható vállalatok sity of The People, an online, tuition-free university co-founded account planning at Fallon Minneapolis. körében”. operated by a NGO, and The United Nations Founda(“Account planning” spread in the USA in the 1990s, tion’s Girl Up Campaign, empowering the hardest to and means devising such marketing strategies by reach girls to become world leaders. (Proceeds of his identifying consumer needs that create a lasting book, The Athena Doctrine, support this program.) He experience and guarantee market performance but is an advisor to the National Kidney Foundation too, also meet consumer needs.) He worked as a planning and a fellow with the Athena Center for Leadership director and managing partner of Fallon New York Studies at Barnard College. (1997-2000).

we buy, sell and live (Jossey-Bass, 2013) – co-author: Michael d’Antonio

THE BRAND BUBBLE The looming crisis in brand value and how to avoid it (John Wiley & sons, 2008) – co-author: Ed Lebar

THE ATHENA DOCTRINE BY JOHN GERZEMA

In 2004, Gerzema joined Young & Rubicam as chief insights officer, overseeing account planning, research, and analytics. In early 2011, Gerzema became executive chairman of BAV Consulting, a division of Burson Marsteller and the company that is responsible for BrandAsset® Valuator, the world's largest global brand database and management tool. books

published in 2013. Today, a kind of disappointment is observed about former leadership strategies and characters. There is a growing rejection to such traits as aggressive, selfish and control-driven, since people make them responsible for reckless risk-taking, wars and ongoing scandals. The values listed, if required to be classified genderwise, would be associated with men. They are replaced by new, emerging traits, which are embodied by the Greek Goddess Pallas Athena: wisdom, courage, humanity and co-operation. Traits that are more and more expected from a good leader to embody.

The Brand Bubble Gerzema is the author of The Brand Bubble: The Looming Crisis in Brand Value and How to Avoid It (2008), written with Ed Lebar, which documented the $4 trillion overvaluation of brands in companies in contrast to their declining perceptions in the consumer data. Spend Shift Spend Shift: How the Post-Crisis Values Revolution Is Changing the Way We Buy, Sell and Live. In his book, written with Michael D’Antonio in 2010, Gerzema studied the strategies of companies to adapt to a consumer marketplace focused on ethics, integrity and values in post-recession America. Spend Shift appeared on the "best of" lists of The Washington Post, The Wall Street Journal and other magazines. The book became a TED talk (The Post-Crisis Consumer), in which Gerzema emphasized the fact that new consumer behaviour actually offers tremendous opportunities. It is an opportunity for the consumer who, with their mindless, “binged” consumption, drove the economy into this recession, to show a way right back out. There is an uptake in the savings rate, and mindful consumption becomes predominant, in which various values and consumer needs, such as empathy and value-driven spending, play an increasingly important role. In his research, Gerzema found that 71% of people admitted trying to buy such brands that share the values that they share. In addition, he also highlights that companies cannot influence, manage or stop this process; instead, they have to accommodate to new consumer behaviour. These shifts will force capitalism, buried by many, to be better. The trend that appeared in his previous books, the predominance of consumer needs and values is further reflected on in his next book, the Athena Doctrine: How Women (And Men Who Think Like Them) Will Rule The World, also written with D’Antonio and

People who agreed that “the world would be a better place if men thought more like women.” (%) 80%

60%

40%

20%

0 U.S.

Global Average

U.K.

Of adults agree 66%

India

China

Of men agree 63%

Canada

Indonesia

Japan

South Korea

France

Germany

Brazil

Chile

Mexico

Of millennials agree 65%

Gerzema and his co-author surveyed 64,000 people in 13 countries across a wide swath of cultural, political and economic diversity. In the first study, they asked half their sample (thirty-two thousand people around the world) to classify 125 different human behavioural traits as either masculine, feminine or neutral; then, they asked the other half of their sample to rate the importance of the traits on leadership, success, morality and happiness. Overall, they found strong consensus on that feminine traits such as loyalty, reasonableness, empathy, selflessness, are more vital to making the world a better place. The study also revealed what expectations are formed about modern leaders: people seek a more expressive style of leader, who shares feelings more openly and honestly as well as patience and reason to break gridlock. Winning should not be attributed to their ego, but credit should be shared with the group.

Being loyal is more valued than being proud, which points to being devoted to the cause rather than one’s self. Leaders are wanted to be more intuitive, to have the capacity to relate to ordinary people and their points of view. In addition to emphasizing feminine traits in leadership, Gerzema also highlights that this is not the end of men. It simply means that successful leaders need both masculine and feminine traits. It will not just make employees feel better, but is shows obvious correlation with the economic development of states (countries that think in a more feminine way have a higher per capita GDP). It is not about women alone ruling the future. The book emphasizes that women with certain leadership capabilities and traits, and men who also have these, will more probably succeed in today’s increasingly interconnected world economy.

In their research of more than 60,000 people in 13 countries, Gerzema and D’Antonio found that “traditionally feminine leadership and values are now more popular than aggression, control, black-and-white thinking and risk. They have been replaced by the need for empathy, co-operation and kindness. The research found that “two-thirds of people feel the world would be a better place if men thought more like women – including 79 per cent of Japanese men; 76 per cent of French and Brazilians and 70 per cent of Germans.”

JOHN GERZEMA’S PRESENTATION IN BUDAPEST

In my presentation, I will talk to you a little bit about my research, and make an argument in the next half an hour that we are on the cusp of a feminine age. I am going to do that by explaining a little bit about my book, The Athena Doctrine.

Let’s start with the research. I gather research around the world. What I am trying to do is to understand changes in leadership, changes in society. We commenced a study to look at 13 countries and about 64,000 people, so we gathered data from a range of different countries around the world to represent market development, culture and various aspects. We also travelled around the world. My co-author, Michael D’Antonio and I spent two years travelling to 26 different cities. I think I had hair when I started this project. What we wanted to do was to take an understanding of what is happening in the 21st century. How are our leaders adapting to a world that is fundamentally different than most people think of the 20th century. We gathered a lot of interesting thinkers; we also talked to chefs, but we talked to leaders in science, technology, education in math, we talked to politicians, start-up CEOs, just a whole range of different people to try to understand how they were thinking about leading in the 21st century. One of the guys we talked was the President of Israel, Shimon Peres, and he said something to me I will never forget. He said, “we are in a new world with many old mines”. We are in a new world with many old mines. I thought this was curious from a guy who just turned 90 years old but he talked about his leadership and the desire to want to be a servant leader who is adapting to a social, open economy. What happened was he had just come back from spending time with Sheryl Sandberg and Mark Zuckerberg, and he went on to talk to us about what are the qualities of a leader then when you need to deal with an open, social economy, like Facebook economy. So, those are the types of things we saw around the

world and I realized in understanding a little bit about your strategies focusing on particularly the Far East for market development, but I thought I might share a little bit of data and put a few of the Asian countries. One of the things we saw around the world was a lot of pessimism, questioning whether life would be better for their children. That was not the case in China or India or even Indonesia, but you can see the difference between developed economies and these fast-growing markets. We also saw around the world a challenge in the belief that there is too much power in institutions and in corporations, and how we become more connected, as well as empathy. Today empathy is becoming a really important question of our political leaders. And there is this question of fairness. Again, while China, Indonesia or India do not feel this way, other countries around the world feel that the world is not really set up to be fair. So, we thought that with that sort of pessimism in place, of a couple of the things that we found were quite interesting was one of the questions that asked “would the world be a better place if men thought more like women”. It was interesting to us that two-thirds of people around the world felt that.

“We are in a new world with many old mines” Now, when you get into the data and you do the interviews, it really was not about gender, it was not about men versus women. It was about the masculine struc-

tures that we have from the 20th century, like the political gridlock, the over-conservative ways in which sometimes business thinks about women in the workplace, the way we think about inclusivity and innovation. And these more feminine qualities that I am going to talk about really align nicely with what is happening in the world today. What we did is we designed a study. We asked half our sample to take 125 different words and tell us whether they felt they were masculine, feminine or neither. In the other half of the sample (this time without any gender whatsoever), we asked that group to take these very same words and to tell us which of these are the qualities that are most important in the ideal modern leader; which will make us happier and more successful in society, in our relationships in our families. One of the things that we saw – and was really interesting to us anyway – was that the essence of a modern leader, 64,000 people around the world think, is more feminine. The things that least correlated to the ideal modern leader were things like aggression, pride independence; that almost sounds like a stereotypical, right? A stereotypical CEO. Yet, in its place where things like empathy, selfless-

ness, flexibility, expressiveness – whether a leader can express her or his position to their team to understand where they are taking their company, where they are taking a political movement make that relatable to people. These are the qualities we got really interested in and as we travelled into our research we also learnt and understood that this was not about women versus men. In fact, obviously, all of us have these qualities in our lives but are we bringing them into our leadership? People around the world believe that you need both masculine and feminine qualities in order to navigate today’s world.

„Yet, in its place where things like empathy, selflessness, flexibility, expressiveness make that relatable to people.” 69

TRANSCRIPT OF JOHN GERZEMA’S PRESENTATION

Looking at the research in our travels, we kind of got to 10 different important traits that need to be built into leaders, that need to be adopted by people based on their personal qualities and their own personalities. But importantly, we also need to value these in each other. We need to build these into our teams and we need to cherish them inside organizations. Now, before you go on and say to me, “well, these do not sound like words that are about strength”, now, clearly, leadership is also about decisiveness, it is about resilience, it is about fortitude; but we started to see that these qualities –even things as strange as vulnerability – are actually very powerful examples of ways to lead in the 21st century. I’ll give you a quick example of a vulnerable leader. This is a guy I met in Berlin, his name is Dr. Ijad Madisch. He told me he was at Harvard working on his experiments, and he kept getting stuck and he went to ask his colleagues for help. They said, “you look a little foolish, asking for all this help: you have a PhD, you should have all the answers”. He realized that science was all about me, it was not about we. He thought that there could be a very interesting way to bring scientists together if they were open and honest about what they did not know. So, he created researchgate.org. Now, today researcghgate.org, which is a Facebook for scientists, now has nearly three million scientists collaborating on 800, 000 different research projects. I asked him, “Dr. Madisch, what do you want to do with this business, this idea and he said, “I want to crowdsource a Nobel prize”. And I want to have the credits flow like at the end of a movie screen. Now, my pint about Dr. Madisch is he took his vulnerability, his openness, his humility and he said to others, “I do not have all the answers”, and a whole bunch of other people joined in to help. I think that’s really an apt metaphor for the 21st century. This is the type of businesses that are being scaled very quickly when people are vulnerable, when they are open and they are honest, and they work well together. Another example of an interesting leader we met was Major General Orna Barbivai. Now she is the highest-ranking woman anywhere in the world in a military uniform. I asked her how she approached military strategy and she said, “as a mother”. I was curious by that and she said, “first, do not try to cross a mother”. But she went on to talk about the need to bring in feminine qualities into management, and she talked specifically about the challenges she had at checkpoints at the Syria and Gaza strip specifically, and the fact that there was too much conflict, too much hostility because there was a lack of esteem treated toward Arabs

coming into work each day in Israel. So, she created a medal and a system of commendations to soldiers that actually de-escalated conflict. To make her point very clear, she takes stations two of her daughters at the checkpoints along with women soldiers for the first time from the IDF. So again, sort of an open, sort of a vulnerable approach of thinking about leadership. One of the things we saw around the world was a lot of crisis. And we saw a feminine response to crisis. If you think about when things are really terrible, it is usually when we are at our best. We are focused on compassion, on our empathy and our understanding. That was the case in Iceland. This is Mr. Örn Bárður Jónsson, and he is a constitutional committee member for the Icelandic Parliament. You know that bankers basically took the country into systematic bankruptcy, and the trust in government was at zero. We went to Reykjavík and he was named a constitutional committee member because he had been someone who had criticized the government for many years and earned some favorability. What they decided to do was rather than simply develop a new constitution on their own, they would take it to the public, and using Facebook, Instagram, Twitter, all these different social media, they basically got input from people, and they crowdsourced the draft of a new constitution, in order to repair that trust and to bring people back into the political process in a very open and inclusive way. These collaborative business models are really interesting. We are seeing them in politics all over the world. This is Leo Riski. He is the cultural attaché from Helsinki, and he is standing in front of the Felleshus. Does anyone know about the Felleshus in Berlin? This is the first shared embassy in the world. It is home to the five Nordic nations of Denmark, Norway, Iceland, Sweden and Finland. And, as opposed to most embassies that are closed off and are like walled gardens, this is much more like a college campus. Basically, diplomats move freely together and they collaborate. What Leo talked about was that the humility of the countries putting aside their individual ideals to work together in ways that they could expand their economic growth and their political cloud. One of things that I noticed when I left, he said, “look across the street”. I have done a Google map for you and you can see that directly across the street from the Felleshus is the Syrian embassy that at the time was shuttered and covered in graffiti. Sort of a stark contrast between this sense of openness and a government that is not yet at the moment.

We saw really interesting business models being played out in terms of public-private collaboration. This is Emily Bolton, she works at Social Finance, and they create social impact bonds. A really interesting program here where they get the private sector involve. One of the programs they designed was a bond that would reduce the rate of reoffending prisoners in the British prison system. What became really interesting is that they figured out that if they could get the rate below 7.5 percent per year, private investors would profit. Guess what happened. These investors got involved in drug counselling, job counselling, basically rehabilitating these prisoners with enlightened self-interest in mind. The net result was that the government saved on future costs, there were fewer people in prisons, and private investors profited. It is this type of creativity that we were seeing in these models as people started to use the internet and expand in new ways to think about multiple forms of winning. If you think of winning and losing, we always think of it as a zero-sum game, which is a very masculine, 20th-century construct. This is about how you create multiple positive outcomes for more people and you can actually really make some profound change. An amazing country we spent time in was Kenya. This is Bob Collymore, who runs Safaricom, a CEO of a telco. There they have text-based messaging platform called M-Pesa. M-Pesa now runs two-thirds of the Kenyan economy, because businesses now have a safe way to move money to pay workers without fears of extortion

or fears of corruption. What is really amazing about what Bob is doing is that he has taken that information and turned it around to educate people by giving free maternal information through text, all kinds of education platforms, and he envisions an online university where kids in rural villages can use their phone through a Safaricom platform with an educator to basically get an education. So, you are seeing also activists and private enterprises getting involved. One example of a great program that they do at Safaricom is working with Rose Goslinga. These little weather vanes right behind her (in the picture projected) measure precipitation on farms. They basically work in a way that helps farmers afford crop insurance, because it is too expensive to go out and to see a claim of a farmer if they have drought, but here, they can use this information, send it to Safaricom, and text the farmers new payments. What has happened already is that 12,000 farmers have signed up for this program. So a public and private company in the works. We were seeing interesting business models being built off the post-financial crisis. This is Giles Andrews of ZOPA; he is the co-founder. ZOPA stands for Zone of Possible Agreement. This is peer-to-peer lending, and ZOPA just passed the £500 million-threshold of a business after being only in business for two years. What’s fascinating to me about their business model is that borrowers and lenders get better rates based on personal connections and their own character. They are not

TRANSCRIPT OF JOHN GERZEMA’S PRESENTATION

Sometimes the people that we met were really interesting in that they had problems that on the surface could seem kind of amusing. This is Maria Ziv, she is the head of the Swedish Tourism Bureau. She does her own research just like me, and she found out that around the world the top to things people think about Sweden are blonde people and ABBA. It was kind of a challenge for her because she wants people know the real Sweden. If you have a Twitter account, you must follow this account called @Sweden. It is the government’s Twitter account. Maria and her colleagues went to the government and asked for a Twitter account, which they then turned over to one Swedish citizen to tweet for a week on behalf of the country. So, your job was, if you were a truck driver, to represent your country. An enormous responsibility. But in the process, they started to learn and value each other’s citizenship role in really putting the best foot forward for their country through this interesting social experiment.

going to an institution, they are connecting together to determine each other’s creditability, and that in turn determines their market value. We are also seeing a lot of Millennial-driven businesses that are being created. And one of the things we saw as we travelled around the world is that Millenials wanted to build values and accountability into their businesses. Their start-ups always seem to have this values component. This is Tim Kunde; he is an entrepreneur in East Berlin. He realized that most people don not value or have a relationship with insurance companies. Do you care about insurance companies, anybody in the room? It is kind of a low-interest concept, right? He wanted to put emotion into insurance. So, he created Friendsurance. The way it works is this: let’s say, the first row, you guys all want to get car insurance. You would go in together and if everyone drove safely, your claims, your rates would actually go down. But if one of you got an accident, all of you would pay that claim, and your rates would go up. Just think about your friends and who you would do this with, right? The point is that he created insurance that became emotional. This is behavioral economics. He found through his data that people were driving more safely, that they were actually taking care

of themselves better because they wanted to be accountable to their friends, rather than some nameless, faceless institution. An interesting way to think about emotion and accountability. We were in Stockholm on a freezing March morning to interview Jonas Vig and Måns Adler. These guys created a start-up called Bambuser. What happens with Bambuser is if you turn on your cell phone to start to take a video, you would instantly broadcast that video to the internet. I thought they were creating an interesting entertainment platform only to find out that they got shut down by the Egyptian government. They are actually the first company shut down (even before Twitter) during the Arab Spring because kids were using this technology to broadcast what was happening. What I think is fascinating about this model is that these two guys, with very poor to moderate hygiene – I spent time with them –, had more power at that moment than the Egyptian government. And that is what we’re seeing in the 21st century. That is why governments need to be accountable, why businesses need to be open and porous, and why leaders need to understand that there is always someone with a video camera. I think, this is a really interesting way of thinking about how power is being dispersed in today’s world.

We met all kinds of amazing people around the world. I would have to say that my time in Japan was most humbling and probably most emotional. We were there right after the earthquake and tsunami, about maybe nine months later. The country had yet to recover. I knew that feeling growing up and being in Lower Manhattan during our 9/11. When I talked to people they felt helpless, they felt patriotic, they loved their country and they did not know what to do. But one of the things that also happened in Japan is that young people got frustrated with the government because they did not think the government moved fast enough to help people. This kid, Fukuzakisan, decided to do something about it. I am showing you a picture of him in his dorm room in Tokyo University, and he told me one afternoon that as he was watching the news and realizing the government was not helping displaced people, he got an idea. He told me, ‘I decided to hack an Airbnb. What he means in code language, hacker language is he decided to rip off their business and make his own website. And he did. He created roomdonor.jp. It was a very simple website: on one side, you could sign up if you had a room to loan to someone; on the other side, you would sign up if you needed a room or housing if you had lost your house. He moved 12,000 people in three weeks out of his dorm room in Tokyo University. He was moving faster and more effectively than the government. My point about his story is I really think is pertinent to this whole discussion we are having this evening, which is the nature of leadership does not flow top-down as in the old 20th century

model. This is leadership, this is leadership on a small scale, it is leadership that comes up, it is absolutely the type of leadership that Millenials around the world, in our data and in our interviews, associate with the way that they believe is going to change the world.

“This is leadership they believe is going to change the world.” These Millennial values and this sort of accountable personal leader – we saw them all over the world. We met Sylvia Loli, at the Woman’s House in Lima, Peru. Sylvia had a terrible problem: domestic abuse toward women. The police took a blind eye to the problem. The reason they did is that the police force at the time was all male. She told me, ‘I got really upset about it, so I decided to create my own all-women’s police force. It became very effective. So effective that when the government decided to integrate the man and woman police officers together, corruption dropped by 30 percent. My point about her and I think the point of our leadership lessons that we understand now is that she, like many of these other Athena thinkers, they put their whole selves into their challenge. They did not just go to a job. They thought through and made creative solutions because they put their whole selves into what they were doing. We talked a little bit earlier about empathy. This a really interesting guy. He is from the MIT Age Lab in Boston. His name is Dr. Joseph Coughlin, and he is studying ageing. With many ageing societies in Western Europe and in America, this has very big interests in companies and to governments as we think about our ageing people in our population. What he did, though, is he had designers and engineers create a suit called AGNES. AGNES stands for Age Gain Now Empathy System. I do not have a photo of this but I will try to explain it to you. He basically created this suit that looks like a goalie uniform for hockey. The designers and the engineers have to walk around and it dulls your joints and puts pressure on your back, it dulls your eye-sight and your hearing, and then they asked the designers and engineers to go drive cars, to go get onto a bus at a public bus stop, to go into a grocery store and reach for a product on a store shelf. Basically, they are saying to these designers, ‘do not just think about your customer, live that customer’s life. I

TRANSCRIPT OF JOHN GERZEMA’S PRESENTATION

think this idea of the fourth wall of empathy, of breaking through to really connect has, I think, really interesting impacts on the way we think about innovation and understanding. Again, we found some very phenomenal Athena thinkers; a couple of them were men, by the way. One of them is Mauricio Facio Lince, and he is the number two highest-rated government official in Medellín. Medellín is a fascinating marketplace today. Long gone are the stereotypes of drugs and violence as this city is remaking itself into a very interesting cosmopolitan and cultural center. One of the things that Mr. Lince and his cabinet was to make a bet on young people. They devoted twothirds, 63 percent, of the Medellín city municipal budget for the next five years to children, basically to kids under 20. In the belief that if they had after-school programs, education, maternal programs, they can break this systemic cycle. I think that what is fascinating about that is that many of these leaders did not try to solve the same problem in the traditional way. They were trying to attack them in new ways, and I think he is definitely an example. Another example of empathy and innovation comes from Medellín as well. This is Margarita Angel Bernal, and she is one of the few civil engineers in Columbia. One of the big successes that she is credited for is the Medellín Metrocable. Perhaps you have heard of it: a genius cable car system that moves 30,000 Columbians a day from the poor areas, from the favelas, into the city for work. She did it not by sitting behind her desk but going out and listening and working with people to really understand the needs of society. We travelled everywhere. We were actually even in Bhutan, and we interviewed the secretary of the Gross National Happiness Commission. I think what is great about that is that you get your own parking spot that says it. But what is fascinating to me about this tiny mountain kingdom is that Davos has journalists go and visit them because they talk about gross national happiness, opening up our aperture on GDP, thinking about our total society, not just thinking about money. I think what they have struck a chord in is something that is really missing in many countries, which is why they have become so popular. I’ll share with you two last stories, but one of the really amazing stories we met were two guys caught in the middle of a war, but they are also best friends. This is Ya-

din Kaufmann and Sahed Nashef, one Arab and one Israeli, both of them are venture capitalists. They cannot solve the problems in the Middle East. But they thought they could do what they do best, which is create startups. Now, Veritas Ventures is an incredible, successful Israeli start-up VC-fund. Sadarah Ventures is a fledgling, starting Arab start-up, and it is in the West Bank. So Yadin and Sahed got together and decided to create a program that for taking money of any Israeli start-up into the VC-fund, they had to give up 2 percent of their stock. The belief was if any of these companies would go public and make a lot of money, that stock could be invested into the Arab start-ups. They just sold Waze, the traffic navigation system to Google for three billion dollars. What Sahed and Yadin believe is that they can work together, they can create start-ups in the West Bank, and they can start to educate collaboration between the next generation of people, Arabs and Israelis. Lastly, one of my favorite interviews I believe was with Eriko Yamaguchi. She has a pretty amazing story. She lives in Tokyo now but she grew up in Japan and she was bullied terribly as a child, and because she was bullied, her parents decided to send her home for home-schooling. While she was there she started to get an interest in fashion. But she also told me she did not want anyone to go through what she went through. She got onto the internet one day and she typed into Yahoo, ‘what’s the poorest country in Asia?’ and discovered it was Bangladesh. She got a Kickstarter fund, and she got some investment money from her friends and family, and she went to Dhaka and she leased a factory. Her goal was she was going to teach illiterate factory workers that were making bags, basically sacks of grain and potatoes, to make high-quality handbags. That had never been done before, and in truth it took her three years to get anything of good quality. But in the end, today, now she has seven stores in Japan, she has a thriving, successful business and she pays her workers double the average wage in Bangladesh, which is I think a true testament to her fortitude.

and women have access to this incredible power if they choose to use it, which is why we believe in this open, social, interdependent economy, driven by globalization, driven by understanding your customers, absolutely an imperative to work closely and to collaborate together, that feminine values are the operating system of the

21th century. I’ll leave you with this, and my book has already been introduced; all proceeds of our book support the Girl-up campaign (www.girlup.org) of the United Nations. It is an amazing campaign; it basically helps young girls find their voice as leaders by advocating for at-risk girls around the world.

I guess, as we think about the master and the servant and we think about how power is changing, we should step back lastly and look at the data. Because the definition of power is no longer about control. Maybe for a few people, they believe that, but really, people around the world believe that power is about influence, and influence can come in a whole host of very interesting ways, many of whom I would argue are feminine. That is why we really believe that in today’s world both men

THE GREAT DEGENERATION BY NIALL FERGUSON

Niall Ferguson Scottish historian Niall Ferguson has been widely known as the author of numerous, debate-provoking books and gained extreme popularity in the United States as well as in Great-Britain. His scientific recognition is reflected by the fact that he is member of several famous educational institutions: Jesus College, University of Oxford – Senior Research Fellow; Hoover Institution, Stanford University - Senior Fellow; New College of the Humanities - Visiting Professor. In 2004, he was named as one of the 100 most influential people in the world by Time magazine for his book Colossus: The Rise and Fall of the American Empire.

FAMILY BACKGROUND, SCHOOLS

ACADEMIC WORK

Niall Campbell Douglas Ferguson was born in Glasgow, on 18 April 1964. His father was a physician and his mother a physics teacher. He attended The Glasgow Academy and then received a demyship (scholarship) at Magdalen College, Oxford. He graduated with a first-class honours degree in history in 1985. He received his Doctor of Philosophy degree from Magdalen College in 1989.

Ferguson’s first book, Paper and Iron: Hamburg Business and German Politics in the Era of Inflation, 1897–1927 is mostly based on his PhD dissertation and grounded his academic reputation. He was the editor of Virtual History: Alternatives and Counterfactuals, a best-seller in the United Kingdom, although his hypothetical of approach to history was also criticized by fellow historians. Ferguson champions counterfactual history, also known as "speculative" or "hypothetical" history, in which he likes to imagine alternative outcomes, attaching great significance to individuals and he asks the question ‘what, if’ also in his later books. His book about the 1st World War, The Pity of War generated much controversy. This is an analytic account of what Ferguson considered to be the ten great myths of the Great War. Ferguson suggests that it might have proved more beneficial if Britain had stayed out of the First World War in 1914 and allowed Germany to win, because, consequently, the history of the 20th century would have been far more peaceful. As the result of original archival research, Ferguson published The House of Rothschild, two volumes about the prominent Rothschild family in the USA, which won the Wadsworth Prize for Business History. In his 2001 book, Cash Nexus: Money and Power in the Modern World, 1700–2000, which he wrote following a year as Houblon-Norman Fellow at the Bank of England, Ferguson presented a case for human actions in history motivated by far more than just economic concerns. In Empire? How Britain Made the Modern World he gives a favourable picture of the British Empire, and was also accused of rehabilitating it. It was also the case with Colossus: The Rise and Fall of the American Empire, in which he explores the United States’ current hegemony. The War of the World: History’s Age of Hatred is the chronicle of the

MILESTONES IN HIS ACADEMIC CAREER: 1987–88 Hanseatic Scholar, Hamburg and Berlin 1989–90 Research Fellow, Christ’s College, University of Cambridge 1990–92 Official Fellow and Lecturer, Peterhouse, University of Cambridge 1992–2000 Fellow and Tutor in Modern History, Jesus College, University of Oxford 2000–02 Professor of Political and Financial History, University of Oxford 2002–04 John Herzog Professor in Financial History, Stern School of Business, New York University 2010–11 Philippe Roman Visiting Professor, London School of Economics From 2004, Laurence A. Tisch Professor of History, Harvard University and William Ziegler Professor of Business Administration, Harvard Business School. Currently, Ferguson is a Senior Research Fellow at Jesus College (University of Oxford), and a Senior Fellow at Hoover Institution (Stanford University). Furthermore, he is a Resident Faculty Member of the Minda de Gunzburg Center for European Studies and an Advisory Fellow of the Barsanti Military History Center.

bloody history of the 20th century, in which he claims the most important change in the world was the great shift from the West to the East. The Ascent of Money: A Financial History of the World basically examines the financial history of the world and predicted the 2012 economic crisis in the USA. High Financier: The Lives and Times of Siegmund Warburg is the biography of a man who was one of the architects of European financial integration and a prominent figure of London’s post-war economy. Civilization: The West and the Rest examines the factors that made the Western world dominate the East, and Ferguson’s answer includes competition, science, the rule of law, medicine, consumerism and the work ethic. His latest published book The Great Degeneration: How Institutions Decay and Economies Die analyses the decay of the institutions of our society, which exerts a negative impact on economic growth. Since Henry Kissinger made all his former governmental documents available in 2003, Ferguson has been working on the biography of the former U.S. Secretary of State; the first volume was published in 2015. POLITICS Ferguson has never been too far from politics, he was a supporter of Margaret Thatcher as early as in his university years. In 2010, he was asked by Michael Gove, Secretary of State for Education of the British Conservative Party to advise on the development of a new history syllabus. In the USA, he has been an advisor of the Republican Party and a vocal critic of Barack Obama. The historian regards the spread of Islam a major threat to Europe, and basically explains the process with the decline of Christianity, which drifted Europe in a postChristian state. In 2005, he summarized his ideas on economic policies in The New New Deal, calling for changes to the American government's fiscal and income security policies. In 2012 Ferguson stated that the U.S. has enough energy resources to move towards energy independence and could possibly enter a new economic golden age due to the related socio-economic growth. PROFESSIONAL ACCOLADES 2014 Nominee of Distinguished Visiting Professor title at Tsinghua University, Beijing 2013 Ludwig Erhard Prize for Economic Journalism 2012 Hayek Prize for Lifetime Achievement 2010 Benjamin Franklin Prize for Public Service 1998-99 Houblon-Norman Fellowship, Bank of England

BOOKS • Henry Kissinger: A Life. 2015. • The Great Degeneration: How Institutions Decay and Economies Die. Penguin Press, London, 2013. • Civilization: The West and the Rest. The Penguin Press, London, 2011. • High Financier: The Lives and Times of Siegmund Warburg. Penguin Press, New York 2010. • The Ascent of Money: A Financial History of the World. Allen Lane, London, 2008. • The War of the World: History’s Age of Hatred. Allen Lane, London, 2006. • 1914. Pocket Penguins 70s S. Penguin Press, London, 2005. • Colossus: The Rise and Fall of the American Empire. Penguin Press, London, 2004. • Empire? How Britain Made the Modern World. Penguin Press, London, 2003. • The Cash Nexus: Money and Power in the Modern World, 1700–2000. Allen Lane, London, 2001. • The House of Rothschild: The World’s Banker, 1849– 1999. Vol. 2, Viking Press, New York, 1999. • The Pity of War. Basic Books, New York, 1998. • The World’s Banker: The History of the House of Rothschild. Weidenfeld & Nicolson, London, 1998. • The House of Rothschild. Vol 1. Viking Press, New York, 1998. • (ed): Virtual History: Alternatives and Counterfactuals. Basic Books, New York,1997. • Paper and Iron: Hamburg Business and German Politics in the Era of Inflation, 1897–1927. Cambridge University Press, Cambridge, 1995.

PUBLISHED IN HUNGARIAN • Civilizáció. A Nyugat és a többiek. (Civilization: The West and the Rest). Scolar, Budapest, 2011. • A pénz felemelkedése. A világ pénzügyi történelme (The Ascent of Money: A Financial History of the World). Scolar, Budapest, 2010. • A világ háborúja. A gyűlölet évszázadának története (The War of the World: History’s Age of Hatred). Scolar, Budapest, 2008.

THE GREAT DEGENERATION IN BRIEF: EUROPEAN AND HUNGARIAN PERSPECTIVES Author: Niall Ferguson

Since the turn of the new millennium, the world has grown fond of oppositions: humanity versus technology, corporations versus disruptors, planners versus the people, governments versus innovators. Hungary is the perfect place to think about such oppositions because this kind of dualistic thinking seems to be in Budapest’s DNA.

As every tourist soon learns, Budapest consists of two cities, Buda and Pest, joined by bridge. It is a city that has lived between two religions at least; it lived through more than one hundred and forty years of Ottoman occupation after 1541. It is also a city that experienced a kind of semi-independence as part of the Austro-Hungarian dual monarchy until 1918. It is a city that lived in the middle of the twentieth century between fascism and communism. It is a city that was up to a quarter Jewish until the catastrophe of the Holocaust struck in 1944. It was a communist city from 1949 until 1989. But it was also the scene of the biggest of all the revolts in Eastern Europe against communism in 1956. “If you come from Paris to Budapest, you think you are in Moscow. But if you go from Moscow to Budapest, you think you are in Paris.” Those were the words of the avant-garde composer György Sándor Ligeti. Today, Budapest is still a city with a split personality, somehow undecided, or doubly committed, between West and East. It is part of the European Union now, but not, it seems, a wholly comfortable part of it. In the summer of 2015 there were scenes of mayhem in Hungary, as asylum seekers from Kosovo, Afghanistan, Syria,

Pakistan and Iraq poured into the country. For many, Budapest’s railway stations were gateways from East to West. When the trains would not carry them, thousands opted to walk to the Austrian border.

“The European integration in 2015 is an incomplete process.” For all these reasons, Budapest is the perfect place to ask the question: what is Europe in the 21st century? What are its problems? Where is it going? How does it need to change? In my eyes, the European integration in 2015 is an incomplete and maybe an incompletable process. There is a confederation called the European Union, which has a Monetary Union at its core, but not all the members of the European Union are members of the monetary core. The country I come from, the United Kingdom, is a member of the European Union, but it is not a country that has adopted the euro as its currency. Partly because of this half-in, half-out status, Britain is a country that conceivably as soon as next year will

be holding a referendum on whether or not to leave the EU. Certainly, this is an incomplete project when a key member, one of the biggest economies in the European Union, is at least contemplating the possibility of leaving it altogether. The near death of the euro and the near collapse of the Monetary Union in the crisis years 2011 to 2013 has revealed something very important: namely, that the critics of the original design of Europe’s Economic and Monetary Union (and I was one of them) were right about the fundamental mismatch between monetary unity and fiscal decentralisation. Let me take you back in time, all the way back to 2000. In that year, my good friend Laurence Kotlikoff and I published an article in the American journal Foreign Affairs.2 In that article we argued that Europe’s monetary union would degenerate – that was the term that we used. And this degeneration would happen, we claimed, because there was a fundamental incompatibility between creating a monetary union but leaving the member states to do their own thing in terms of fiscal policy. We got this right, because we claimed that it would work for about ten years, and then fiscal imbalances would cause the whole thing to come apart. That very

nearly happened. The enormous disparities in public debt, with Greece at one extreme with the largest of all public debts, very nearly blew the monetary union up. Indeed, if you go back to 2012, the vast majority of economists who wrote on this subject predicted that Greece would leave, there would be “Grexit” and the monetary union would quite possibly fall apart. It did not happen, but at this moment, the possibility of Grexit is still being discussed and it remains unclear whether or not a solution will be found to the fundamental crisis in Greek public finances that will allow Greece to remain inside the monetary union. Now we have, as a crazy solution to this problem, a fiscal compact. And this fiscal compact essentially requires all members of the euro area to become more and more like Germany in economic terms, if not in any other respect. What does that mean exactly? Well, it means first of all that they all have to run more or less balanced budgets. No more of those enormous deficits that we saw particularly in the period of economic crisis after 2008. If you look at the International Monetary Fund’s projections running to 2020, by that year only one country in the European Monetary Union—Slovenia—will have a bigger deficit than 1.5 percent of GDP. Seven member states will actually be running budget

THE GREAT DEGENERATION IN BRIEF: EUROPEAN AND HUNGARIAN PERSPECTIVES

surpluses. So this is the first step in the direction of what Angela Merkel has called the “Bundesrepublik Europa”, the Federal Republic of Europe: a European Union that looks more and more like the Federal Republic of Germany, at least in the way that it handles its public finances. No big deficits, a more or less permanently balanced budget. But that is not the only way that Europe is becoming more like Germany. In the past, member states sometimes ran quite large current account deficits. But those days are gone. Partly as a consequence of doing what is often described disparagingly as austerity, fewer and fewer euro zone member states now have current account deficits. In fact, looking once again the IMF’s projections, by 2020 only three members of the euro zone will have current account deficits, and they will be really small ones. If these are the economic consequences of solving the problem of fiscal imbalance, then the big question is whether or not this solution is going to be conducive to economic growth and the creation of jobs. The answer to that question seems to be, only if this policy is mitigated by the European Central Bank’s doing quantitative easing (QE). This strange phrase has come into usage by economists, sometimes I think, mainly in order to baffle the public. What exactly does it mean? Well, some naïve critics say that it just means printing money, but that is not quite true, or at least it involves the creation of a special kind of money: not the money you or I are able to carry around in our pockets or keep in bank accounts, but the money that banks can keep in their accounts at the central bank. These reserves, a special kind of money, are the thing that is created when the European Central Bank does quantitative easing. And what it does when it creates this new money is to buy assets, to buy bonds to be precise, although other assets could conceivably also be purchased. What is the effect of quantitative easing then? Well, it seems to be to drive down already low interest rates, lowering already quite low borrowing costs. A side effect is to expand the balance sheet of the central bank. That was probably a good idea if only because the balance sheet of the ECB had been shrinking, while the Bank of England’s or the Federal Reserve’s had been growing in the aftermath of the financial crisis. When the ECB adopted QE it was essentially playing catch up, adopting an unconventional monetary policy that had

already been taken on by the other major central banks of the developed world. Now, one thing is clear: quantitative easing is not about to cause runaway inflation. The question really is whether it can suffice to avoid runaway deflation and on that question, I think, the jury is still out, although the outlook--at least as far as the projections I have already referred to--is reasonably good. The problem is that it is not yet clear that quantitative easing at the time of fiscal austerity is going to produce growth. And it is growth that matters for ordinary Europeans, because without economic growth it is highly unlikely that Europe is going to be able to solve its chronic problem of unemployment, and particularly youth unemployment, much less to absorb hundreds of thousands, if not millions, of refugees from the Middle East, North Africa and South Asia.

“For the foreseeable future, Europe is in low growth mode.” Now let us shed more light on growth. At the moment, there is no question that Europe is underperforming. The IMF is currently predicting that the European Union as a whole will grow by just 1.8 percent this year. What is more worrying is that it does not expect that rate to go above 2 percent all the way down to 2020. So, for the foreseeable future, Europe is in low growth mode. Moreover, that means that unemployment rates, which are extremely high on the periphery of the European Union, are likely to stay high. Right now unemployment rates range from 4.9 percent in Germany, which is the lowest, to 23 percent in Spain, an amazingly high figure that implies that quarter of the workforce are in fact unemployed. The unemployment data require close scrutiny. There is a problem of youth unemployment, which is well known to everybody, particularly if one looks at Southern European countries. The extent to which young people are struggling to find work is really quite extraordinary. But there is something that is also important, and I want to underline it because it gets much less attention in public discussion. That is the differential in unemployment rates between native-born Europeans and those born abroad. Foreign born workers are not significantly more likely to be unemployed in the United States than native born workers. That is also true of my own country, the United Kingdom. But when you come to the Euro-

pean continent, you notice something very remarkable. That is that foreign born workers are much more likely-more than twice as likely in some countries--to be unemployed than people born in the country in question. That is a problem. Why? Because if a society cannot offer employment prospects to immigrants, and this also applies to the children of immigrants and even their children, then it is highly likely to fail at one of the most important things a modern society has to be able to do. That is to assimilate, to integrate new comers into the host society. Let us add all this together, and try to work out what it means in the great historical scheme of things. Europe is not quite stagnating, but it is certainly not growing dynamically. Europe is failing to create jobs, and it is failing especially to create jobs for young people and for immigrants. If one sets this in a broad historical perspective, it tells me at least that the great shift from the West to the Rest is continuing apace. Now, this is the biggest economic change the world has seen in five hundred years. Let me explain what I mean by that. Five hundred years ago, if you had gone on a world tour, you would not have been especially struck by Western Europe compared with some of the other great civilizations you could have visited. Five hundred years ago, it would not have been obvious to a traveller that for the next five centuries there would be a huge divergence in living standards

between the West and the Rest. Five hundred years ago, Ming China was in many ways the most sophisticated civilization in the world. It certainly had some of the biggest cities. If you take Nanjing or Beijing, those cities were far larger than Paris or London, for example. But beginning in around 1500 to 1600, a great divergence occurred that saw living standards, measured in almost every conceivable way, dramatically improve in Western Europe and in places where West Europeans settled in large numbers, notably North America, relative to living standards in China but also in the rest of the world. This great divergence is the most striking feature of modern history. To give you an example, in around 1600 there was no huge difference in living standards between Eastern China and Western Europe. Indeed, Eastern China was probably richer in terms of per capita GDP than North America on the eve of largescale European settlement. In statistical terms, the ratio of per capita GDP in North America to that in China was around about unity, one. As a result of the great divergence, by the 1970s, the ratio of North American per capita GDP to Chinese was twenty-two to one. The average American, when I was a teenager, was more than twenty times richer than the average Chinese. That was the great divergence. It was a divergence that manifested itself not only in economics. Life expectancy by the middle of the twentieth century was double in the West what it was in

THE GREAT DEGENERATION IN BRIEF: EUROPEAN AND HUNGARIAN PERSPECTIVES

Niall Ferguson’s 3D holographic keynote speech

most of the rest of the world. In other terms too, the West dominated the world of the early 20th century. The great empires that emerged from Europe together dominated the world’s geopolitical landscape. They may have accounted for a relative minority of the world’s population, but those European empires controlled a huge proportion of the rest of the world’s people. In our time all of this has changed. In our lifetime the great divergence stopped and it went into reverse. Let me give you an example. In the late 1970s, the average American was twenty-two times richer than the average Chinese. Today that ratio is down to four to one. From twenty-two to one, to four to one in just the space of my adult life. And we see this convergence manifesting itself in all kinds of different ways. Let me give you just one example. China’s GDP back in the late 1970s, when the People’s Republic first embarked on economic reform, was a really small percentage of the world’s total and the European Union’s was a really big percentage. But next year, unless the projections turn out to be wildly wrong (which seems unlikely as it is only a year away) China’s GDP will exceed that of the European Union. It will become a bigger share of the world economy than the EU is right now.

them is a good news story, and one of them is a not so good news story. The good news story is, as I have argued in the book called Civilization, that the Rest have essentially downloaded the West’s killer applications. These were the things that after 1500 made the West so successful. You may wonder what those were. One was the idea of competition in economic as well as in political life, a very Western idea that you would not really have even encountered in Ming China. Another was the notion of science in the sense of the Scientific Revolution of the 17th and 18th centuries. That was an essentially Western project. There were no Newtons in the Ottoman Empire.

olution if people do not a great many clothes because the main achievement of the industrial revolution was radically to reduce the unit costs of things like the shirt and the suit that I am wearing. In addition, if my demand for shirts and suits was not really price-elastic, if I did not buy more the cheaper they got, then the industrial revolution would not have succeeded.)

Number three: the notion of the rule of law based on private property rights. That was a Western innovation, especially deeply rooted in the English-speaking parts of the West. And then, number four, modern medicine: that branch of the scientific revolution that doubled and then more than doubled life expectancy. Killer app five was the consumer society, the notion that we should all have a great many clothes in our wardrobes. (There is no point, by the way, in having an industrial rev-

Those killer applications for around five hundred years were monopolized by people in the West. They really did not exist in the rest of the world. But in our time that has changed. A hundred years ago there was really only one non-Western society that understood the importance of my killer apps, and that was Japan. It was the first non-Western society to download everything that I have just listed, from the notion of competition in economic life through to the work ethic. But Japan

Finally, we have the sixth killer app: the work ethic, the thing that got me out of bed at 6 o’clock this morning to write the final version of this essay. If I did not have the work ethic, I really would not have bothered, and this essay would be significantly worse than it actually is.

Let me focus a little bit on what I mean by “the West.” In a wonderful book called The Clash of Civilizations, Samuel Huntington, the late great Harvard political scientist, defined the West essentially as being Western Europe and those places where West Europeans settled in large numbers: North America, for example, or Australia. Back in 1950, when Sam Huntington was just beginning his academic career, Westerners, according to his definition, were around a fifth of the world’s population. By 2050, according to the United Nations’ projections, that share will be down to ten percent, or a tenth. That is a halving of the Western share of the world’s population in the space of a century. These are huge shifts. What they mean is that people like me, white men from Northern Europe, are much less important and much less powerful than they used to be. We are still richer than most people, and in relative terms we are still quite powerful, but we are declining. We are a bit like the Elves in Tolkien’s The Lord of the Rings. Our time is passing. Our time has, in many ways, passed and the future belongs not to the West but to the Rest. The question that we need to ask ourselves is what are the real drivers of this shift? Why is this happening? I think there are two answers to that question. One of

THE GREAT DEGENERATION IN BRIEF: EUROPEAN AND HUNGARIAN PERSPECTIVES

was an outlier. Most non-Western societies did not do that. Indeed, they spent much of the 20th century trying other models. Think for example of what Chairman Mao tried to do to China. He had killer applications all right, but they actually killed people, and killed them in their millions. Only in the late 1970s, after Mao’s death, when Deng Xiaoping was in charge, in China did that change. Only then did China begin to download the killer apps that had made Western civilization so prosperous. And, lo and behold, as soon as he did that, China’s growth rate dramatically increased. Prosperity came and hundreds of millions of people were pulled out of poverty. So part of what we have seen in the world today, is a belated adoption by the rest of the world of the institutions and ideas that really worked well for the West. That is great news. That is a cause for celebration. It can only be good news that more and more Asians and now Africans too are leaving poverty behind and discovering the benefits of competition, of science, of the rule of law, of modern medicine, of the consumer society, of the work ethic. Get the champagne out: history turned a corner, in our lifetimes. That is the good news. The bad news? Well, the bad news is that, even as the rest of the world is getting better institutionally, that is to say getting better in its thinking, we in the West appear to be getting worse. You can download the killer applications if you are a non-Western society, but you can also delete them, or at least fail to update them, if you are a Western society. That is the problem that concerns me the most today. We in the West, in Europe, also in the United States, are suffering from a strange institutional degeneration. Let me give you some insights into the four aspects of degeneration that I see today. The first is generational, in the sense that our policies in nearly all Western states are calculated to create enormous imbalances between the generations. The way our welfare states and pension systems work, in the context of an aging population, is bound to create burdens for the next generation that they will have to shoulder to finance our retirements. The Baby Boomers are exiting the workplace. They are putting their feet up and looking forward to a long and cushy retirement. But who is going to pay? Their children, their grandchildren, their great grandchildren. Let me focus on Hungary. Well, right now just around ten percent of the Hungarian population is aged between fifteen and twenty-four. Those are the crucial

years educationally, in many ways they are the formative years, the years that produce great creative minds. It is all downhill from your late twenties in my experience. So just one in ten Hungarians are in that magical age group we call “youth.” Meanwhile, we have the percentage, aged sixty-five or over, rising from 17 percent to, perhaps, as high as 27 percent by 2060. And that is by no means the worst example. Germany, Italy, Portugal, Spain are all ageing more rapidly. By the middle of this century, in those countries, the population aged 65 or over will be one third of the total; one in three of retirement age and older. In Hungary, by the end of this century, one in ten people are projected by the UN to be 80 or older. This huge demographic shift, which has its roots in changing patterns of fertility and mortality, is making Europe an old and ageing society. But we are still set up with welfare states that were designed in the post-war period for youthful societies, with relatively large proportions of the population in employment. Either we fix these systems radically, or young people are going to be shouldering a rising burden of taxation to support the entitlements of the elderly.

“I do not think it is too much to write that we are witnessing a slow, creeping crisis of the Western civilization.” The second way in which we are degenerating as a society is that excessive regulation is tying our economy up in knots. It is a distinctive feature not just of the United States, but also of the European Union, that it is staffed by bureaucrats who like nothing better than to draw up enormously complicated regulations and impose them on the rest of us. That is what bureaucrats live to do. This excessive regulation is going through a boom right now in the wake of the financial crisis. Why? Because the idea has taken root--an idea that I think is quite wrong--that the financial crisis of 2008 happened because of deregulation. Because deregulation caused the crisis, reason the bureaucrats, we now need regulation and plenty of it to prevent another crisis from occurring. The great Viennese satirist, Karl Kraus, famously claimed that psychoanalysis was the disease of which it pretended to be the cure. Well, the same is true of regulation. It is the disease of which it

pretends to be the cure. The more we regulate our financial system, the more unstable it becomes, in just the way that complex systems tend to be more unstable the more complex they become. Third, the rule of law, which I am strongly in favour of, is something less good when it becomes the rule of lawyers. And regulation, in all its complexity, is a gravy train to lawyers. The one part of every business that is rapidly expanding at the moment on both sides of the Atlantic is the compliance department, staffed by people with law degrees. Fourthly, and finally, I think we see a degeneration of the institutions of civil society. By civil society I mean the voluntary non-governmental agencies that used to do so much in Western civilization, and which today have largely been marginalized by the ever expanding public sector, the all-powerful state. I do not think it is too much to write that we are witnessing a slow, creeping crisis of the Western civilization. And there is also, in addition to the threats from within that I have just described, a threat from outside. Radical Islam is the ideological epidemic of our time, just as Bolshevism was an ideological epidemic a century ago. It is an astonishing fact that up to four and a half thousand Europeans have left the European Union to join the Islamic State in Iraq and in Syria. Think of it: four and a half thousand people opting to join the Caliphate in a misguided and murderous attempt to turn the clock back to the times of the prophet Mohamed. Or consider the fact that by 2030 Muslims may account for as much as 10% of the populations of Belgium, France and Sweden, 9% of the population of Austria, 8% of the Dutch, Swiss and British populations, and 7% of all Germans and Greeks.

I have a number of remedies for the institutional degeneration of the West that I have described to you. You can improve public financial accounting to end the phenomenon of vast off-balance-sheet liabilities. You can introduce “sunset” clauses for laws and regulations so that they are expiring rather than accumulating. You can reform legal systems, simplify the laws as well as the regulations. And, to upgrade our civil society, you can do a lot worse than to found new and better independent schools. All of these things can do much to halt our institutional degeneration. But I do not believe that reforms like these alone will suffice to solve the fundamental imbalance or imbalances that I see today. The imbalance between an aged and an ageing Europe and a youthful Muslim world. The imbalance between a wealthy Europe and a poor Muslim world. The imbalance between a post-Christian Europe – a secularized, unbelieving Europe – and an increasingly devout Muslim world. The imbalance between a disarmed Europe and an increasingly militarized Muslim world. In its long history, Budapest has experienced first-hand what these tendencies can lead to. Our best solutions to the challenges that we face, from the challenges of public financial overstretch to the challenges of mass migration across the Mediterranean, may well come from technology. But if we do not address the issues of institutional degeneration that I have mentioned in this essay, then technology alone will not save us. The early 20th century saw staggering technological advances, much greater than the ones in our time (compare Twitter with the atomic bomb). But what the great technological innovations of the 20th century did not do was to inoculate us against fascism and communism. That seems to me to be a very, very important lesson to learn in Budapest.

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BREXIT – A MILESTONE IN THE NEW THIRTY YEARS’ WAR Author: Dr. György Matolcsy – Governor of the Central Bank

It is not a momentarily symptom of crisis: the significance of Brexit is much greater than what we would think. The interests of the USA prevail, and Europe is on the verge of complete realignment. Hungary, smartly balancing in the battle of major and middle powers, must renew its own national strategy. What Brexit has made visible and perceptible to anyone now, started around 2000. In the year of the turn of the millennium, the think tanks of the USA raised a question, ‘are the European Union and an integrating Europe still our friends?’ The answer was no, they are not anymore. The European Union, introducing the euro in 1999 and recommending it as a common global currency to replace the dollar, is not a friend of the USA. And if it is not a friend anymore, then (according to the mindset prevailing in the USA, which distinguishes between two different type of relationships, namely friend or foe), it can be only one thing. Thus, Brexit was decided in 2000. As a matter of fact, we could say it was rather decided in 1620, when the passengers of Mayflower, which transported the first group of English Puritans, disembarked in Cape Cod, under present-day Boston, but that is not the case. The process that the British themselves identify as the immediate cause of Brexit started centuries later, around 2000. And this is the fact that between 2000 and the spring of 2016 a great many of people, 8,000 of them, settled in the United Kingdom. The causes of Brexit also include that Calais, France – on the other bank of the Channel – had become one of the most significant cities in the months before the British referendum. The fact that either Brussels or Berlin or Paris did not yield could also play a role in Brexit. The United Kingdom was not granted any concessions. There was no transition. They could leave out of things, but they could not stay in the Union. It is rather odd.

But let’s get back to the real, more profound reasons, the strategy of the United States, which we know very well, since George Friedman described it completely clearly. The former strategy was renewed around 2000: instead of a European integration, it focussed on the disintegration of Europe. The first goal is to get rid of the euro, the second – if the first one failed – is to dissolve the European Union. Why? Because the euro is in the way of the dollar, the world’s dominant currency. But it is an even greater threat that the euro and the renminbi, that is, the European and the Chinese global currencies merge and these two together exceed the dollar reserves in the currency baskets of all central banks and financial institutions. It was the America strategy, changed at the turn of the millennium, that sealed the European Union membership of the United Kingdom. THE CENTURY OF A DUEL The question automatically arises: is Brexit final? Nothing is final in politics. Furthermore, this referendum was not a decisive one, the rates of leave and remain votes were just 52 and 48 percent, respectively. But in Britain, with no written constitution, such a referendum is regarded as a decision of constitutional significance. if we look at age categories, the majority of voters aged 35 years voted to remain, and youngsters under 25 absolutely stood by the EU membership, and the great majority of voters over 60-65 voted for leaving. We could conclude that Brexit is still wavering. But it cannot be wavering because from the viewpoint of politics,

BREXIT – A MILESTONE IN THE NEW THIRTY YEARS’ WAR

the decision cannot be altered: only in 25 percent of parliamentary constituencies was a majority decision made to remain, but in 75% of them Brexit won. Thus, we must reckon that Brexit will take place. The modified great American strategy will reap its first spectacular victory in the 21st century, since the first significant step to dissolve the European Union has been successful. Brexit is the least about the United Kingdom; it is basically about the United States, and the duel between America and China. In the 21st century, the duel between America and China may determine the face of the century, and it has entered a new phase with Brexit. Financial impacts are widely considered to be the most remarkable. 44 percent of British export is directed to other Member States, but it will not cause them difficulties. They will enter various global agreements, maybe sooner than anybody else. The British will get along even in the medium term, and in the long term, they will benefit a lot from Brexit. And Scotland may choose the Union, since it would be difficult for it to be a member simultaneously in two integrations. This is a significant implication for the American Empire, because after 2003, Afghanistan and Iraq were

not spectacular, great victories – to say the least. In addition, the steps taken to eliminate the euro have failed. They did not succeed in making Greece exit from the Eurozone, despite great pressure. In the meantime, they did not succeed in preventing the number of Eurozone members from increasing from 17 to 18. The European Central Bank defended the common currency from the attacks. Thanks to Brexit, however, the United States have reaped its first spectacular great victory in the major duel of the 21st century – and maybe also in the second Thirty Years’ War taking place between 2003 and 2033. After the first spectacular victory, it is worth considering what else may come next. If you won a major battle, you might have found the key to winning the next battles. From Hungary’s viewpoint, it is particularly interesting how the great overseas strategy, which is the essence of the duel between the American Empire and China, has been modified. How does Brexit affect the process which makes the world’s economic, financial and power focus shift from West to East? In this context, what can be the shared future of the United States and the European Union?

Share of global GDP, 1820-2030

Source: Central Bank of Hungary

A THOUSAND-YEAR-OLD AMERICAN EMPIRE? Share of global GDP, 1820-2060

We are familiar with the great American strategy. It was created by the Masonic American political elite, including Masonic presidents, in the 18th century. Their aim was to seize and maintain global power in order to – and here comes their mission – build, spread and maintain a liberal order in the world. It is an enlightened idea: the target system of liberty and light. Naturally, an empire is subject to change, and does not necessarily retain its original goals, but these are the initial goals of the United States. In addition to the mission, the USA also has a vision of the future, namely, to build an empire working for a long time, like the Roman Empire was, which existed from 510 B.C.to 476 A.D, that is, almost for a thousand

years; or Byzantium, which, again, existed for a thousand years. But there is Egypt, with a history of several thousands of years; or China, the giant of the Far East. What strategy was needed to build the American Empire, and what should be modified? Three plus one elements constitute the American strategy, according to the political think tanks concerned. The first goal is to take and maintain supremacy over seas and oceans. The step preceding it was the Monroe Doctrine in 1823: America for the Americans; an attack against the north from the south should be prevented, as well as an attack from the seas and oceans against the new empire, the centre of liberal order, the United States should be prevented.

Source: Central Bank of Hungary

BREXIT – A MILESTONE IN THE NEW THIRTY YEARS’ WAR

Source: Central Bank of Hungary

The second strategic goal was the hegemonic possession of the ocean of money. For this purpose, the Federal Reserve, established from the alliance of private banks in 1913, developed the dollar into the global currency, and has managed to maintain this role up to this day. The third strategic goal was the hegemonic possession of the oceans of global information. Anglo-Saxon countries receive loads of information from the satellites orbiting above us; this information is processed and stored in vast data banks And there is one, additional goal: to maintain the relative advantage on the global economic scene. It does not mean a hegemonic role, but primarily, the task is to maintain the 23.3 percent rate in the world’s GDP. And this requires continuously rebuking countries threatening the leading role of the United States of America in economy. And this relative global power is threatened at times. This was the role of the two great oil price shocks between 1973 and 1977, and the financial crisis in South-East Asia between 1977 and 1979, and in Russia in 1998. But even the European Union is not a friend anymore, because it threatens the relative economic power of the United States. STRATEGIES BASED ON FEARS

Source: Central Bank of Hungary

“Three plus one elements constitute the American strategy. China also has its own great strategy.”

China also has its own great strategy, with which, although not as clearly as with the American one, we are also familiar. The goal is to recreate the middle empire under heaven. Until 1820, China and India were the two most powerful states of the world then. Now both aspire to this role again. China has chosen the way of peaceful rise, based on the principles of Confucius, Sun Ce and Laozi. It primarily means avoiding war at all means. Germany was stopped with war by the Anglo-Saxon powers between 1914 and 1928; otherwise, Germany would have been the British Empire in a couple of decades. The next element of the great Chinese strategy is the Silk Road. Its concept was devised and eventually disclosed in 2013. It must be an accident but Chinese leadership was developing the concept when the new thirty years’ war of the 21th century began first with the Afghan and then with the new Iraqi crisis. The Silk Road is a smart concept. It encompasses 64 countries. It has three different branches: a northern one, which did not exist in the Middle Ages, a middle one and a southern one. There is a continental, a railway and a maritime Silk Road.

Source: Central Bank of Hungary

The new Silk Road affects two-thirds of the population of the Globe, and 40 percent of the world’s GDP production. Countries not lying on the Silk Road have more power and wealth now. But this may change in the future, because the Silk Road is the concept of a peaceful rise. And finally, the method of follow and overtake is also included in the strategy of China. Beijing thinks the West must be followed because it defeated the East: decomposed China, colonised India, brought Japan to its knees. It must be followed, learned from and overtaken. The strategies of both global powers are based on fear. The American Empire is afraid of the future, of the emergence of Eurasia, a contiguous Eurasian continent, a unified continental power. There have been several such attempts in the last 500 years of European history. The role of Napoleon can be mentioned in this context. But the European Union can be considered as such an attempt, about which we should talk about in past tense, because Brexit has prevented the establishment of a potential European Empire, and without a unified Europe the Eurasian Empire is not possible, either. China is also afraid, but their fear is not nurtured by the future but the past. The people of the Far East are afraid of being isolated, of being held back, and the Empire being falling victim to conquest, which has happened several times in history, despite the Great Wall, which is visible from space but does not provide sufficient defence.

EUROPE DIVIDED INTO ZONES By considering American fears, we can conclude that today the euro, the Eurozone and the European Union are considered the rivals of the United States. If the dissolution of the euro failed, the European Union itself should be terminated. But the European Union disintegrates if – after Brexit – another major state leaves the community by means of a referendum. In the same manner, the euro will be abandoned if a major state opts out of the common currency. Which political power is trying to facilitate this? The extreme right. According to their views and ambitions, the endpoint of migration, changing the societies of Europe, is the referendum.

Source: Central Bank of Hungary

BREXIT – A MILESTONE IN THE NEW THIRTY YEARS’ WAR

CHAOSLAND This area is the biggest focus of conflicts, terrorism and disintegrating states.

SEA BORDER The clash separating the NATO from Russia and the Baltic Sea from the Arctic Ocean

CLASH AT THE MEDITERRANEAN SEA The conflict zone between the World of Order and Chaosland.

RUSSIAN FEDERATION CHAOSLAND

UNITED STATES

NORTH KOREA SAHEL ZONE

WAR ZONES IN THE WORLD

CHINA

Conflict between Russia and the NATO

CHAOSLAND

Syrian - Iraqi Civil War

2. Levantine conflict

Boko Haram uprising (Nigeria, Nigel, Chad, Cameroon)

Afghanistan War Kurd-Turkish War (Turkey, Syria, Iraq)

Lybian Civil War

SLAN

CHAO

Drug War

SLA AO

Islam uprising in Pakistan

Somalian Civil War

3. China Sea Conflict

Yemen War Uprising on the Sinai Peninsula South Sudanese War Ukrainian Civil War Kashmir War Balochistan War (at the border of Pakistan and Iran) Mianmar War The conflict between the Colombian Government and the gorillas Israeli - Palestinian tension Northern Mali Civil War Instability in the Sahel Zone

Ogaden conflict (Ethiopia) Central African Civil War War in the Democratic Republic of the Congo Burundian War Islamist rebel in the North Caucasus

MAIN ACTORS: UNITED STATES OF AMERICA 2. RUSSIAN FEDERATION 3. CHINA

Jinjiang Rebel (China) War in Darfur Indian local conflict (in Andhra Pradesh and Chhattisgarh states)

(with the participation of Islamist groups and desert mafias)

Islamist uprising / separatist movement in the Philippines and Malaysia

The Libyan cell of the Islamic State

Drug War (between the logistics bases of Mexican drug bands)

SUPPORTING ACTORS: GERMANY TURKEY

The referendum about remaining in the current Union. In England, in the United Kingdom, this recipe has worked. in these days, disintegration instead of integration is an integral part of the American strategy. Instead of a unified European Union, Washington would welcome a Europe divided into various groups, or zones, whose operation, in line with American interests, would be easier to build on the basis of the principle of divide et impera – divide and rule. If it happens, if the different parts of the European Union can be handled separately, it can be re-integrated into the West, and the West can consistently act against the East. And the strategy based on the duality of Western Europe and Eastern Europe is not unprecedented in history. If we look at Brexit from this angle, we can see that a reverse Anglo-Saxon integration has evolved. It was the War of independence that ended the integration of Great Britain and its American colonies. Now the United Kingdom could be the 51st state. This is unlikely to happen now, but an Anglo-Saxon alliance is probable to be formed. Regarding population and economic power, it would be roughly the same as the European Union will be without the United Kingdom. Basically, two integrations with similar significance may be achieved after Brexit. In its altered strategy, the U.S. have also acknowledged that, outside the two most important global focus areas, setting up social-political structures built on internal balances is a good solution. It has special importance to the United States. This the reason why Washington has peacefully settled the ignition points in Cuba and South America, and has created a peculiar balance between four countries, Iran, Turkey, Saudi Arabia and Israel, in the Middle East. The American Empire uses this method in other parts of the world, too. But there are two areas they cannot let go: one of them is Europe, and the other is Northeast Asia, that is, China, Japan and South Korea. FEDERATION OF EAST CENTRAL EUROPEAN STATES What are the consequences of all this for Hungary? I think it is worth examining thoroughly the Hungarian national strategy, which evolved in the 1980s and is still alive and successful. The national strategy should be summarised in eight bullet points; let’s see them one by one.

Source: Central Bank of Hungary

The Atlantic integration, our NATO membership as well as our EU membership have been achieved. We have done whatever we could, and are still doing it every day, to unite the nation across borders. The integration with neighbouring V4 countries, the opening to the east and the south are continually developing. Our economic catching-up process is successful because since 2014, Hungary has been on an upward-directed trajectory. Demographic turning point: it has commenced, but is yet to happen. The situation is similar in Hungary’s healthcare system, too. But several of the eight elements of the national strategy above are not valid anymore. I think – without being exhaustive – we need to look at the new elements that would be needed. Our starting point should be that the new American strategy wants to build four groups of countries replacing the European Union in the next 10 to 15 years. One of these is a group evolving with its centre in Britain and with the participation of perhaps Portugal, Spain or probably Denmark. The second one is a Scandinavian group, which is quite apparent also from a geographical point of view. A so-called middle group can form, including Germany, France, Italy and Austria, which – perhaps together with the Benelux countries – will remain the core of the Eurozone. And,

BREXIT – A MILESTONE IN THE NEW THIRTY YEARS’ WAR

as a fourth group, the federation of East Central European states may be established, with the participation of Poland, Slovakia, perhaps the Czech Republic, Hungary, Romania, Serbia and the Balkan. Many of the steps ensued by the dissolution of the European Union indicate such federation of states. Therefore, the Hungarian government should enhance and even more intensively continue the policy, launched by the current Prime Minister, focussing on neighbouring and V4 countries. The future for us may be a federation of East Central European states. Profound social, cultural, educational and human integration is required, for which Poland is a role model. On 16 February 2016, Poland disclosed a new concept

of the second hundred million euros. It may give us weight in the federation of East Central European states. I think, for this purpose we basically need to change everything that we think of development policies, investments or strategic development completely.

For a better understanding, I would recall an old, edifying story. Once a peasant, with the first chessboard of the world under his arm, pilgrimed to see the Emperor of India. ‘Emperor, I have invented something’, he exclaimed when he was allowed to see the ruler. ‘Show

of economic development of €250 billion for the next 25 years, operating an investment rate of over 25 percent. The concept has five focus areas. The first one is re-industrialisation – they have learnt a lot from Hungary. Strengthening and developing Poland is a very important interest from our viewpoint as well. Furthermore, growth based on balance between the two distant major powers – the American Empire and China – as well as the two nearby medium powers – Germany and Russia – is also our priority interest. One of them alone would be capable of crushing us. If we analyse the fall of Transylvania after the first, 17thcentury thirty years’ war, we can see that it was the matter of one single bad decision: György Rákóczi II attacked Poland without authorization from the Ottoman Empire in 1657. Today, such a grave national mistake cannot be made. The two major powers and the two regional medium powers, and in addition, many others do not allow us to do so. Further growth of the Hungarian economy is required, that is, doubling the gross national product, the GDP

me’, responded the emperor. The peasant opened the board consisting of 64 squares, told the rules and the emperor grew fond of the game. ‘You can ask for something about your chessboard, as you call it.’ There was only one thing the peasant asked for. ‘My family is starving. Although I have invented the chessboard, I do not ask for anything else, Emperor, but to put one grain of rice onto the first square, two grains onto the second, four on the third, as so on.’ The Emperor was amazed, ‘Ask for something greater. This is nothing.’ But the peasant insisted on his request. They got as far as the 32nd square, where the Emperor of India had to hand over so many grains that are grown on a medium-sized rice paddy. From this point on, the story has several different endings. There is a version in which the peasant is immediately beheaded, because it has been calculated that there would be great trouble around the 33rd or 34th square, and the pile on the 64th square would dwarf Mount Everest, and it is more rice than has been produced in the history of the world.

WE ARE ON THE THIRTY-THIRD SQUARE

We are standing on the thirty-third square

I wonder if it is a mere co-incidence that there are exactly 64 states, including China, along the Silk Road. I do not know; but we certainly live in a similar, exponentially growing and changing age. Those engaged in the brain revolution say that the second machine age has arrived. The first one multiplied the physical strength of man. The strength of hands and feet were multiplied by the steam engine, for example, and that is how the industrial revolution began. There had been steam engines earlier, too, but they had utilized only one percent of the resource of power. Then a new invention came, which was capable of a performance of 3 percent. And this revolution of 300 percent started the development of the last 250-300 years. Source: Central Bank of Hungary

More than fifty years ago, in 1965, the calculation and observation called Moore’s law was written down. According to Moore’s law, information processing capacity exponentially develops and doubles every 18 month. This process has been going on ever since. At the moment, we are standing on the 33rd or 34th square of the chessboard and we do not know what will happen. Therefore, we have to prepare by re-considering everything: the complete Hungarian national strategy, the operation of the Hungarian society, politics. We need to renew everything to become a strong country in the federation of East Central European states.

The article is the edited version of the presentation delivered in Kötcse, on 11th September, 2016.

GEO-MOMENT

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Norbert Csizmadia’s presentation at the book launch of Geo-Moment on 3 November 2016

Seeking the answer to the question who the winning nations, communities, leaders and powers of the current era will be, the book Geo-moment guides readers in the global world of the 21st century by means of maps. The task of the explorers and geo-strategists of the 21st century is to give guidance on the world full of global economic and social challenges. New maps are required, which incorporate the wisdom and the tools of the old ones, but are complemented by today’s knowledge. It answers the question how we can anticipate global processes on the basis of the latest geographic and economic interrelations.

GEOGRAPHY IS A TOOL TO EXPLORE THE WORLD

MAPS ARE IMPORTANT

My book enquires into the main drives of the major geopolitical and geo-strategical challenges of the 21st century, and turns to geography for an answer. For me, geography is a tool to explore the world, since ge-

In order to understand the processes of this new age, we need maps. Maps are important! Maps are continually changing, developing, but their meaning and their significance remain unchanged. Maps used to

Parameters are important at each birth. The book Geo-moment was born with 1,500 grams, it is the size of an iPad, although it is thicker: it has 408 pages, 6 parts, 24 chapters and a summary with a “geo-manifesto”. The book, which includes 100 exciting and spectacular figures, maps and infographics, seeks the answer to the question what our world in the 21st century is like. This book is an essential collection and selection of the professional work carried out in the last 5 years.

Countries possessing knowledge, i.e. knowledge-intensive economies located in the old peripheries may be the new landmarks. It requires new perspectives, extensive knowledge and creativity, since we live in the age of fusions, networks and geo-economics. In the Tacitus Lectures event held in February 2016, Paul Tucker, former Deputy Governor of the Bank of England said that such nations and countries would be competitive which aligned their monetary and economic policies with their geopolitics.

If the genre of the book was to be presented with two words, I would say it is a special guidebook; if with ten words, I would say it is a special guidebook to explore our world in the 21st century. It is a guidebook because it builds upon the thoughts of the latest and most important books, mems of thinkers, different places, and guides towards the unknown future. When the manuscript was finished, the cover was ready, and we had the title – Geopillanat in Hungarian -, we realized if we shuffled the letters of the title we got Lonely Planet, the world’s leading guidebook… thus the definition of the genre was obvious.

WHAT MAKES THIS GEO-MOMENT SPECIAL?

The book places a map and a compass into the hands of the readers, and, just like in the case of a guidebook, you can open it at any page, still, everything converges by the end. It is about the moment – the geo-moment in which we live, which is nourished by the past, which creates in the present and builds upon the future. The main question of the book is who the winners – nations, leaders, communities – of this special geo-moment will be. Will they be the small ones or the large ones; the strong or the fast; centres of peripheries?

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The 2008 economic crisis created a new world order, a new value system, with new participants, new co-operations, new places; former centres got to the periphery, and former peripheries became centres. Earlier recipes and dogmas have failed; we need a new mindset and new methods. The 21st century is the era of knowledge, talent, technology and innovation, the currency of which is ideas and innovations. After the age of globalization, the age of technology has set in, and the main question of the book is what role places will play in this technology-driven age. If we merge technology, knowledge and geography into one word, the main question of the book is: how to navigate in the age of tech-knowled(ge)ography?

ography does not just mean memorizing places on our maps, but the knowledge of geography implies a complex exploration of the world. Not everybody thinks the same, though. At the end of the 1990s, Richard O’Brian wrote his book Global Financial Integration: The End of Geography, which is about the role of geographical space in our globalized world. He thinks, thanks to modern information technology, millions of dollars can be transferred from one corner of the Globe to the other in a matter of seconds. Thus, the future in which “location no longer matters in finance” is not far away. Well, today we can assert that O’Brian was not right. A decade later, the geopolitical guru of Stratford, Robert D. Kaplan focused on the definitive role of territoriality in global processes, with his book The Revenge of Geography, which can be read as a response to O’Brian. In his book, Kaplan argues that we may forget about the power of geographical factors but they do not cease to exist. Even technological development is incapable of it, although many thought so; technological development has not brought about the death of geography, but attributed a higher value to the significance of geography. Although his approach is slightly different, Thomas L. Friedman, author of the great book The World is Flat has a similar opinion. In 2013, he claimed that in our world we should not talk about developed and developing countries, but countries which are inspiring. These are the countries that will matter in the future.

be important in the past, and will be important in the future. In the 8th century A.D., the Polynesians drew a map with the help of which they got to more than 1,000 islands within the triangle anchored by New Zealand, Hawaii, and the Easter Island. They knew the stars, the ocean currents, the sea routes. They made their maps by hand. They placed seashells on the junctions, representing islands, and this is how they navigated for centuries. But portolan charts made by European sailors were just as important maps; they described major places and ports in as many details as possible, and these maps meant the cartographical basics of the European explorations one 1-2 hundred years later. Or the mosaic map found in the city of Madaba, Jordan, made of two million mosaics in the 5th or 6th century A.D., and containing the complete geographical description of the globalized world. But what are our maps today like? If we look at the topography or the political-economic map of the Earth, the continents and the boundaries of countries are marked. This new way of thinking is supported by maps because if we look at the world from a different angle, we can adopt a new kind of viewpoint: what does our world map look like viewed from the perspective of Asia or the Pacific? What would it look like if we created our map on the basis of the routes of the world’s 182 airlines, outlining major economic hubs; and the same can be read from the network charts of the world’s cities. If we look at Joel Kotkin’s map, we can find an exciting theory. In his article entitled The New World Order, the American geographer divides the world into 19 regional tribal alliances, each expressed by a shared history and culture.

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We live in the age of fusions and networks

WHAT WOULD OUR WORLD LOOK LIKE IF IT WERE A VILLAGE OF 100 PEOPLE? When the world’s population reached 7 billion in 2011, 100people.org repeated the study carried out in 1990 by a pioneering American environmental scientist, Donella Meadows (1941–2001). She likened the world to a village of 100 people, representing the distribution of the world’s population by gender, age, culture and ethnicity. Business Insider, however, examined the question from an interesting approach: what would happen if the world’s population decreased to 100 people? In this case, 50 women and 50 men would live, 26 would be children and 74 of them would be adults, only 8 of whom would be 65 and older. 60 of the 100 people would live in Asia, 15 in Africa, 14 in America and 11 in Europe. 51 people would be urban dwellers, 13 would speak Chinese and 5 would speak English as their first language. As for religion, there would be 33 Christians, 22 Muslims, 14 Hindus, 7 Buddhists, 12 people who practice other religions. 48 of the 100 people would earn less than $2 USD per day, 77 people would have a place to shelter them from the wind and the rain, but 23 would not. Only 7 would have a college degree, 22 would possess or share a computer, 77 would use a cell phone and 30 would be active internet users.

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This outlines the map of cities and population density – with an Asian hegemony, and interestingly, if we examine the scene of 21st-century technology, innovation, patents and inventions, again, this region is the most predominant: Singapore, South Korea, Japan and China. Another predominant scene appears on maps: the Central European countries, called the new Europe. We can also see on 21st -century maps that invisible borders appear. In Europe, we are looking for the border of the Eurozone, of the European Union, or of Europe and of Central Europe. Yanko Tsetkov has created 20 maps on which Europe is divided by invisible boundaries. AGE OF GEO-ECONOMICS It is a major geo-political element of the 21stcentury that a new, multi-polar world order is emerging from the former, mono-polar one. It has three main protagonists: the United States, China and Russia; and two supporting characters: Germany and Turkey. Geo-economics, as a fusional meeting point of economics, social sciences and geography, determines the processes of world economy. Today, we are witnessing the rise of geo-economics; a competition taking place in the language of commerce but according to the logic of wars. Geopolitical competition transforms global economy, the

The map of exploring the 21st century

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at Hungary. The Silk Road used to be important in history because it transported the most important technological innovations and knowledge of the age, and quality products were exchanged. WE LIVE IN THE AGE OF FUSIONS. We live in the age of knowledge, in the age of geoeconomics, in a world of fusions. We can find fusions in gastronomy, music, science, architecture; fusions are important because something completely new can be born from encounters at the most unexpected places. In terms of gastro-fusions, we can talk about a fusion if the East meets the West. And in this fusional age, in this geo-fusional age big data will be the raw material of the 21 st century; knowl-

global balance of power and governance. Before the financial-economic crisis, geopolitics had a local role; in these days, however, conflicts between major powers have flared up again. The conflicts between the West and Russia, China and its neighbours, as well as the crisis of the Middle East, are becoming increasingly manifold and multi-faceted, are the most prominent ones. Although several wars are being fought in the world, from Damascus to Ukraine, nowadays economy is considered the most important battlefield. Military strikes are replaced by economic sanctions, military alliances by competing commercial systems. Currency wars are much more probable now than territorial conquest, and manipulating the price of certain raw materials (such as oil) proves to be more effective than a conventional arms race. Geo-economics may at once mean the antithesis of globalization and its greatest victory. Countries are so inter-dependent and interconnected that the opportunity of exclusion amount to the gravity of an armed conflict. Geo-economic challenges highlight the powerful trends that are reshaping the world and change the circumstances of the competition between countries. All these outline a world in which the possession of power will be as important as the pursuit of profit, accompanied by an intensifying participation of the state; economic

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warfare will undermine economic integration; multilateral systems, instead of becoming global, will regress onto a regional level; the price of oil will be low and volatile, therefor competition will take place for markets and not for resources. LINKING LINES – THE NEW SILK ROAD There is one more cartographic element on the map exploring the 21 st century which is even more important than borders, and this is the lines extending beyond and linking locations and continents. These are infrastructural lines. In a TED talk, Parag Khanna claimed we have less than 500,000 kilometres of borders, one million kilometres of Internet cables, two million kilometres of pipelines, four million kilometres of railways and 64 million kilometres of roads. These networks will be the most important lines on our maps. It is not a co-incidence that China’s long-term geo-strategy is to shift the axis of world economy from oceans to the mainland again. It intends to regain its former historical, cultural, economic and commercial significance by rebuilding the New Silk Road. It is not a co-incidence that up to date 64 countries have joined the One Belt, One Road initiative, and it is not a co-incidence that with building the New Silk Road, China provides Hungary with a considerable role: three Silk Road networks meet

edge, creativity, experience will be the services; with new participants and from new co-operations the small ones become giants, as start-up companies, start-up cities and start-up nations have demonstrated. In a new Cambrian moment, we are witnessing a new technological-entrepreneurial revolution. If we have to highlight one map from the 21 st century, this would be the map of Internet, with its networks and hubs. GEO-MANIFESTO – EXPLORERS OF THE 21ST CENTURY “Geopolitics is what makes you hit the bottom, and geopolitics is what gets you out.” The famous saying by George Friedman has become a motto to be followed by each leader in this century. Decisionmakers of the 21st century are the ones who will be able to view the world from a geopolitical perspective, and dare to re-draw the maps. Philip Zimbardo, the father of the Stanford Prison Experiment said, ‘if one person withstands the world, he is mad; if three or four people do the same, it is a standpoint’. If one of our maps is incorrect, it is useless, might probably mislead us, but it is not a typical construction error, though; but three or four of them are the first sign of a paradigm shift. Leaders of the most dynamically growing multinational companies, professors of most successful universities and politicians with extensive international networks of relationships have already tossed their incorrect maps aside, and they are drawing their own system of targets and in-

terpretation onto a blank sheet. Leaders of the world are building a close network with Eastern Europe, India and Southeast Asia to refresh their portfolios with the creativity of small start-ups. In the meantime, China is building the modern Silk Road crossing the Asian continent from the east. The directors of technological giants pay more and more attention to global social issues, putting pressure on such international political decisions such as space race, global warming or migration. Science has also turned towards geopolitics: urbanism, territoriality, sustainability and social geography are also included in the economic and leadership studies of the University College London. In 2015, Stanford launched its global executive programme of $700 million USD, seeking answers to economicsocial questions, globalization and technological challenges. At the Faculty of Social Sciences of the National University of Singapore, Asia’s best university, economics is complemented by geography, communications theory, psychology and politology. Similar processes have commenced at Hungary’s Corvinus University. The world’s leading economic, political and knowledge centres intend to redraw the maps of the world, adding their own interpretation kit and legend to them. These metropolitan areas and regions (Boston, San Francisco, Bangalore, Singapore…) intend to become such hubs that are inalienable from the data, knowledge and innovation networks influencing the decisions of the world. Ultimately, it is always people and the decisions of people that are behind geopolitical turning points. And those will be the decision-makers, economic, political, scientific and technological leaders of the 21st century who are able to comprehend global connections and create hubs of creativity and information flow around them. Those who are brave, curious and creative enough to draw strength from crises and to reconsider the role of spatiality in global decisionmaking. Those who are seeking fusions and new border areas, may they be physical, natural or scientific. Those who build personal networks with other hubs and draw strength from the exchange of experiences with other cultures. They will be real explorers, global leaders, pilgrims of dynamic maps who, adopting a geopolitical viewpoint, reshape the world.

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MARITIME TRANSPORT IS IN CRISIS

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MARITIME TRANSPORT IS IN CRISIS Author: László Gere, Fruzsina Simmigh

Figure 1 Baltic Dry Index, own graph based on the data series of lloydlist.com

With the spread of online shopping, the process of ordering a product, filling in our data and clicking ‘send’ is becoming more and more ordinary. Now, as Christmas is coming – Christmas shopping and special offers can never start too early – companies coordinating shipping have already been calculating which products will arrive from which locations and on which cargo ships. In reality, however, it can be seen since summer that shipping companies, and even shipping as such, are in crisis. As a result of various asymmetries in trade, a lot of containers remain empty, but the freight rate still must be paid. Prices plunge and the weakest collapse.

THE WEAK FAIL The difficulties of the shipping industry, which most recently has culminated in the crisis of South Korean Hanjin Shipping, demonstrate the mismatch of ambitions and in the industry. This was supposed to be the age of the ultra-large container ship, piled with thousands of steel boxes holding clothing, toys and Apple iPhone 7s; but the world turns out to need smaller and fewer ships. On 31st August, 2016, 66 ships and their cargo of a value of $14.5 billion were left stranded at sea, due to the collapse of Hanjin Shipping, the world’s seventh-largest shipping company. Several ports refuse to let them dock because they are afraid that they will not pay for unloading; and distributors, and through them, customers, are worried about not receiving the products ordered in the run up to the Christmas season. Negotiations between the company, the government of South Korea and the ports are ongoing to collect necessary financial resources to ensure at least unloading. However, it may serve as something of a warning for the whole industry that President Park Geun-hye said, ‘ it is lazy thinking that the government will have no choice but to help shipping lines if they run into prob-

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lems.’ The situation is causing a serious dilemma, since the government cannot let shipping line giants such as Hanjin and alike and shipbuilders unable to compete with Chinese competitors go bankrupt and their workers become unemployed. However, the companies’ practice to manage their receivables in such a negligent and often irresponsible manner and to expect the state to get them out of trouble must be ended. Hanjin is not the only company having difficulties. Several Japanese companies, including Mitsui OSK Lines, NYK Line and Kawasaki Kisen Kasiha are encouraged by investors to merge. The container-shipping business is set to lose as much as $10 billion this year, according to global shipping consultancy Drewry. UP AND DOWN What has contributed to the emergence of the crisis? • it was the first time in 2015 that global GDP had grown more rapidly than containerized trade (which amounts to 2/3 of seaborne trade), with the exception of the 2009 crisis; • ships orders and their loading capacities are unable to flexibly fit changing demands; • with the restructuring of Chinese economy, its raw material take-up capacity has decreased, which re-

duces the number of orders for new ships as well as the demand for products to be shipped; • significant overcapacities have been created in past years; • high levels of indebtedness – banks tend to wait and see whether shipping companies can survive until the shipping market recovers; • in addition, there are a lot of so-called “zombie ships”, which can just about repay interest on their debts, but have no hope of repaying the capital; • companies are reluctant to remove surplus capacities, ships, containers from the market; • in the meantime, the values of ships are also plummeting; • the commitment to the liberalization of seaborne trade is decreasing; • and multinational companies try to locate their production and their factories as close as possible to local markets. Since the establishment of modern container shipping in 1956, the industry has mostly grown, apart from some downturns that lasted only for a year or two. Companies in cyclical industries, the Financial Times claims, invest heavily near the peak of the cycle, trying to achieve as high profits as possible and beat competitors. Then a downturn arrives at the same time as their new capacity. And in the long term it does severe harm to even larger companies as well as smaller and weaker ones. Now we have reached such a downturn of a cycle. By early 2016, Baltic Dry Index, the index of the global shipping industry, hit its lowest level since records began in 1985, and considerable increase is not expected for quite a while (Figure 1). One of the reasons for the situation that has evolved and now is aggravating into crisis is the deceleration of growth in global trade, and the slowing of the

extent of globalization, to which the restructuring of the Chinese economy and the political climate around multilateral trade deals have contributed. In addition, shipping companies grew faster than even buoyant globalisation justified. The average size of container ships has increased by 90 per cent in the past two decades, and total fleet capacity in 2015 was four times larger than that of 2000. Shipbuilding has accelerated since 2007, becoming “completely disconnected” from levels of demand, according to an OECD study. More and larger ships, combined with weak demand, have created overcapacity of up to 30 per cent. (Figure 2 and Figure 3).

„Modern container shipping has mostly grown, apart from some downturns that lasted only for a year or two.” Overcapacities have sent prices plunging, which has doubled with a drop in the values of vessels, thus even their demolition cannot generate such income that would ensure the repayment of debts. For example, a five-year old Capesize vessel – so-called because they are too large for the Panama Canal and have to sail round Cape Horn – was sold for $19 million USD in early 2016, 40 percent below the normal listing price for a vessel that age of around $33 million USD. (Figure 4). Nevertheless, preventive servicing might increase the life span of vessels, decrease their maintenance costs and make shipping more reliable. Due to oversupply, the effects of the crisis reach beyond seaborne trade: port terminal operators, railroads, trucking companies will also lose on revenues if, as Hanjin did, other companies go bankrupt and cannot get their cargo into ports. WTO’s statistical outlook, published in April, warned of the situation. According to the report, a growth in the volume of world trade was expected to remain subdued in 2016 as uncertainties weigh on global demand. Growth in 2016 was expected to be at 2.8%, unchanged from the 2.8% increase registered in 2015. Global trade growth should rise to 3.6% in 2017. Reasons include a sharper than expected slowing of the

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(in fact, world trade has not managed to recover since the 2008 crisis). While the volume of global trade is growing, its value has fallen because of shifting exchange rates and falls in commodity prices.

Figure 2 Ship orders in the past 10 years. Financial Times

Figure 3 China’s race to become the world’s biggest shipbuilder. telegraph.co.uk

Maritime transport handles over 80 per cent of the volume of global trade; obviously, seaborne trade is still key to the exchange of goods and globalization. Demand for seaborne trade, however, is fundamentally affected by global economic growth, and its permanently low level has certainly an adverse effect on the industry. OECD’s Interim Economic Outlook, published in September 2016, claims that these belowtrend figures indicate a breakdown in trade-driven

Maersk was the first to increase the size of vessels, which has resulted in the failure of smaller companies with less capital and less opportunities to diversify resources, but it has also put Maersk itself into a more difficult position. The whole industry is forced to cut capacity by reducing the number of shipping companies through their mergers, and cutting the number of vessels as well. Ships should not be kept at anchor,

global processes.

but should be broken up, “even big, expensive ones”.

According to OECD’s another economic policy paper, issued around the same time, the global trade slowdown has cyclical and structural components. Precrisis growth in the volume of trade was induced by the global liberalization of trade policies, on the one hand, multilateral deals (e.g. NAFTA and the unification of the EU as a single market in the 1990s). Another driving force was the growing importance of global value chains, where production was divided between various countries, increasing global trade, especially the trade of intermediate goods. Liberalisation has slowed down after 2000, but the expansion of global value chains still accelerated world trade. Since the financial crisis the contribution to world trade from GVCs and trade liberalisation has plateaued and with creeping protectionism from a myriad of small measures has gone into reverse (Figure 5.). The document concludes that substantial policy action is required to return to former growth rates.

Chinese companies, joining the competition with high ambitions earlier, as well as others, have chosen a fourth tactic. China Shipping Container and China Cosco lost more than $857 million USD in their total market value from 2015. A re-organisation of the groups owning these companies have been attempted, extending efforts to create smaller and globally more competitive businesses. The plan comes as other shipping companies pursue adverse strategies, and explore mergers and acquisitions to obtain greater control and capital for survival.

WHERE TO GO?

Figure 4 Ship prices have been mostly falling since the financial crisis. Financial Times Chinese economy, worsening financial market volatility, and exposure of countries with large foreign debts to sharp exchange rate movements. Although the volume of trade is still registering positive growth, this is the fifth consecutive year of trade growth below 3%

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nancially hazardous routes. Although it means pushing shipping rates up in the long term, consumers do not benefit from it; and the industry should not go back to a situation of cartels and price fixing. A balance between the two should be sought.

Zvi Schreiber, CEO of online logistics market platform Freightos, outlined three scenarios which may help the industry to overcome the crisis: 1. the world economy should get back into growth to make more orders and catch up with capacity; 2. more companies should collapse; 3. prices should be consolidated by mergers in the shipping line industry. This latter option has been confirmed by Philip Damas, head of Drewry Supply Chain Advisors, highlighting that due to weaker competition companies will not depress prices to the extreme, and will also avoid fi-

MODERNISATION IS ALWAYS A GOOD OPTION Another possible option would be to equip remaining ships with more developed technologies. Currently used interfaces are often outdated, there is no adequate data about the location of the ship, or the product being shipped, or whether the valves are closed. It makes adequate cost assessment extremely difficult. And calculations tagged as “just an estimate” are not very encouraging for investors. But there are solutions for such problems, processes can be greatly optimized with the help of smart technologies. Danish Maersk is a flagship in this respect. With the help of their unique system, introduced in 2016, each of their containers can be monitored and logistics can be managed remotely (this is the socalled Remote Container Management - RCM). Earlier Maersk spent about USD 200 million every year on physical inspections and continuous monitoring of its containers (and their contents), but with the RCM system, instead of people sensors monitor the journey of goods (by sending real-time data), rendering the process much more reliable and also considerably more

Figure 5 The increase of the world trade volume is still low. OECD

Figure 6 Structure of international seaborne trade in 2014. UNCTAD

cost-effective. The system further optimizes empty container flows, develops more accurate container supply and demand forecasts – therefore processes will be more predictable. However, several other companies are engaged in monitoring containers. The TRAXENS system, developed and applied by French-based CMA CGM group, collects real-time data throughout the container’s transport: location, temperature, humidity level, vibrations, impacts, attempted burglary, customs clearance status and more. In addition to monitoring, they can remotely control and adjust, for example, the temperature of refrigerate containers. ShipX, a company specialising in LTL freight, attempts to make as accurate calculations as possible, Hong Kong-based Cargo Smart’s software promises to improve logistics planning and reduce costs, T-Systems improves the synchronization of dynamic logistics processes; thus, on the basis of developments, there is great demand for services of this kind.

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Top 10 International Container Shipping Companies (based on data from Alphaliner, 2016).19 1. A.P.Moller–Maersk Group

Founded: 1904. HQ: Copenhagen, Denmark Capacity (twenty-foot equivalent units, TEU): 3,178,475 Ships: 615. Employees: 89,000 Revenue: $40.3 Billion (USD)

2. Mediterranean Shipping Company S.A. (MSC) Founded: 1970. HQ: Geneva, Switzerland Capacity (TEU): 2,799,863 Ships:490. Employees: 24,000 Revenue: $28.2 Billion (USD)

3. CMA CGM Group

Founded: 1978. HQ: Marseille, France Capacity (TEU): 2,168,914. Ships: 457. Employees: 22,000 Revenue: $15.7 Billion (USD)

4. China Ocean Shipping (Group) Company (COSCO) Founded: 1961. HQ: Beijing, China Capacity (TEU): 1,555,520 Ships: 279. Employees: 130,000 Revenue: $10.2 billion USD

5. Evergreen Marine

Founded: 1968. HQ: Taoyuan City, Taiwan Capacity (TEU): 973,685 Ships: 187. Employees: 3,389 Revenue: $4.6 billion USD

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6. Hapag-Lloyd

Founded: 1847. HQ: Hamburg, Germany Capacity (TEU): 932,239 Ships: 165. Employees: 9,500 Revenue: $12 billion USD

7. Hamburg Süd Group

Founded: 1871. HQ: Hamburg, Germany Capacity (TEU): 597 886 Ships: 115. . Employees: 5,360 Revenue: $6.9 billion USD

8. Hanjin Shipping

Founded: 1977. HQ: Seoul, South Korea Capacity (TEU): 621,243 Ships: 48. Employees: 5,800. Revenue: $8.3 billion (USD)

9. Orient Overseas Container Line (OOCL) Founded: 1969. HQ: Hong Kong Capacity (TEU): 576,270 Ships: 98. Employees: unknown Revenue: unknown

10. United Arab Shipping Company (UAS C) Founded: 1976. HQ: Dubai, U.A.E. Capacity (TEU): 544,680 Ships: 57 Employees: unknown Revenue: unknown

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MARITIME TRANSPORT IS IN CRISIS

xChange Furthermore, xChange, having recognized the problem of losing considerable amounts of revenue due to empty containers, provides carriers with interchange opportunities. To help industry players collaborate, the Boston Consulting Group (serving as a neutral, global clearinghouse for information about container demand and availability) developed a global interchange marketplace for empty containers in 2014, which was officially launched in November, 2015. BCG calculates average savings amount to approximately $200 to $400 per interchanged container, corresponding to potential annual savings of $350 million to $700 million, and scaling up this impact to the top 100 carriers would promote annual savings of up to $4.5 billion. The data collected by the company indicate that there are significant needs as well as opportunities to interchange containers in all regions. To fully capture the benefits of xChange, cross-carrier collaboration is required. Carriers must be willing to adopt advanced repositioning strategies, and to pursue interchanges with other marketplace participants, without prejudice or subjective preferences and roles, responsibilities and competences need to be clear. Each carrier’s organization must be committed to a proactive attitude, even prevailing over the interests of the sales department, and to adopting a common set of shipping standards. In addition, avoiding all movements of empty containers for carrier-specific

reasons would improve the environmental footprint: it would reduce carbon dioxide emissions by more than 6 million tons annually. The emissions reductions would also be significant for other greenhouse gases. THE NORTHERN SEA ROUTE As a result of global warming, new shipping lanes may open in the Arctic. In 2012, Russian LNG Carrier “Ob River”, demonstrated that the Northern Sea Route is a commercially viable alternative to transiting the Suez Canal. This new route from Northern Europe to North East Asia cuts the maritime distance by 40%, drastically reducing the environmental footprint of the vessels as well as providing economic benefits in terms of fuel consumption. According to some analysts, the race for access to the route (and now accessible energy resources) may even turn the Arctic into a battlefield, but it also opens a plethora of new possibilities for maritime transport. For example, more Korean companies, including Pan Ocean and Heung-A Shipping, would be transporting plant facilities to Russia and Kazakhstan via the Northern Sea Route from 2016, using ice- resistance vessels instead of ice-breakers. However, this route is not likely to become the saviour of the shipping industry: statistics from the Northern Sea Route Information Office showed that in 2015

”Maritime transport handles over 80 per cent of the volume of global trade.” 18 ships crossed the route, significantly down from 53 in 2014 and 71 in 2013. (Nevertheless, it should be also noted that total cargo volume expressed in tons increased and reached 5.45 million tons in 2015, a significant increase in comparison with 4.0 million tons in 2014 and 3.9 tons in 2013). The decline in the number of such voyages has been attributed to a general setback in seaborne trade and a plummeting of oil and gas prices. In addition, the majority of the ships that transited the Northern Sea Route are owned by Russian and European shipping companies. Apart from CJ Korea Express, the only other Asian company to make a voyage through the route in 2015 was Cosco Shipping. The vessels crossing this route are mainly owned by Russia or European countries; as for Asian ones, only CJ Korea Express and Cosco Shipping used the Northern Sea Route in 2015. To adjust

this imbalance, a better knowledge of the area and solutions to the above-mentioned overcapacity and technological problems are required. According to Jonathan Roach, container market analyst at Braemar ACM Shipbroking, the shipping industry has taken a double hit: in addition to the painfully slow growth of global trade, a chronic overcapacity is becoming permanent. And this does not seem to change soon, “especially because a lot of new ships will be delivered in the near term”. The expansion and opening of the Panama Canal will also put further pressure on shipping companies to deploy as many and even as old and as large vessels as possible, to exploit the new opportunities of the canal. However, it is a question what new competition the opening of the Northern Sea Route, or One Belt, One Road, and its speed railway network initiated and continuously developed by China, will create, and whether it generates adequate motivation for carriers to actually start to remove overcapacities.

Figure 7 Global maritime shipping routes

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100 YEARS OF THE TRANS-SIBERIAN RAILWAY Author: Anton Bendarzsevszkij

The Trans-Siberian Railway – historically called the Great Siberian Route -, crossing entire Europe and Asia, celebrates its 100th anniversary this year. Its construction started under Russian Tsar Alexander III in 1891, and the entire section was completed after 25 years’ of construction, in the twilight of Tsar Nicholas II’s reign, in October, 1916. Constructing the 9,288 km-long railway was not essential for Russia only, linking areas rich in raw materials with the circulation of the empire, and, in addition, serving important geopolitical and strategic goals, but the railway brought East Asia, conceived unreachable before, closer to Europe, merely a few weeks’ journey away. GEOPOLITICAL SIGNIFICANCE In addition to obvious logistic and economic advantages, the Trans-Siberian Railway primarily served geopolitical purposes: due to the intensifying activities and influence of Western European powers in East Asia, the Russians were getting anxious about the safety of their Siberian territories. Until the construction of the Trans-Siberian railway, it had been extremely hard to access this vast part of Russia, rich in raw materials – and multiple times bigger than the European portion of the country. The Russian railways built until the end of the 19th century had not reached further than the Ural Mountains. On road, the journey from Moscow to the eastern part of the country could take up to 14th months – Siberia had been substantially defenseless against any military attack. The fastest way to reach the Pacific coast had been by ship, but it had meant a voyage of two to two and a half months, and again, had not provided a reassuring solution to military deployments. Basically, Siberia had been separated from the rest of the country, and despite the fact that it had had rich raw material deposits, they had not been easily accessible; in addition, it had been a very sparsely populated area and had hardly had any inhabitants. Thus, as a direct consequence of the railway construction, more than three million people moved from the West-

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ern regions of Russia into the Eastern ones between 1906 and 1914. The Trans-Siberian railway had a key role in connecting raw material deposits in Russia. The construction of the railway boosted several industries, such as gold and coal mining, logging, trapping, the petroleum industry, fishing, etc. 20 percent of Russia’s current crude oil extraction, 25 percent of its logging, and some 65 percent of its coal mining are pursued in areas adjoining the railway. Furthermore, from a strategic viewpoint, logistic access to the Pacific and the continental linkage of the Russian ports was important. On top of all these, the Trans-Siberian Railway also served serious military purposes: a section of more than 2,000 kilometres was running across Manchuria, Northeast China. Russian political leadership had had ambitious plans concerning the strategically important, resource-rich areas: the military had planned the gradual pacification and the Russian repopulation of Manchuria, which had been allowed by the weakened Chinese central leadership of the time. During the Russian-Japanese War of 1904–05, the railways had a significant logistic role, but the line, in that condition, could not meet demands: only one carriage could run in most of the sections, and the railway bridges had not been built, either, thus compart-

ments had been transported by ferries. By World War II, however, the line had gained invaluable strategic importance: it enabled a continuous supply of European Russia with raw materials, ammunition and soldiers. On the journey back to Siberia, machines, food and workforce were transported; passenger transport was reduced to the minimum in those days. The unexpected attack by Nazi Germany on 22 June 1941 took Stalin by surprise, and since the German army occupied or destroyed most of the military production capacities of the Russians in Europe, the safest solution was to re-build the defence industry as far from the theatre of war as possible. Between July and November, 1941, 1,532 Russian companies of the defence industry were relocated in the Eastern regions. Implementation would have been significantly more difficult without the Trans-Siberian railway. It was again the Trans-Siberian railway with the help of which millions of military personnel and vehicles were deployed to the Eastern front after the fighting in the European battlefields had ended in May, 1945. THE STORY OF A GRANDIOSE CONSTRUCTION PROJECT The plan of the “Great Siberian Route” was first devised in the middle of the 19th century – the idea of constructing a railway line was first mentioned in writing by the governor of East Siberia, Graf Nikolay Muravyov-Amursky, in his letter to the Tsar. However, several decades elapsed until the plan was imple-

Main data The Trans-Siberian railway is by far the longest direct railway line of the world: the currently operated longest section between Moscow and Vladivostok is 9,288 km long.

The kilometre plate of the railway station in Vladivostok The trains on this line pass through eight time zones, 87 cities and cross 16 rivers. The highest point of the railway is 1,040 metres. Annually, more than a hundred million tons of cargo are transported on the line on an annual basis. The European section of the railway amounts to 19.1% of the entire length; some 80.9% of the line run through Asia. The railway has a special track gauge: it is 1,524 millimetres wide. Finland and Mongolia are the only countries that use the same gauge.

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mented. The project had several opponents, and the extremely harsh environmental conditions as well as the extremely high costs of the project impeded the construction. The opponents of the construction of the great railway claimed that, as a direct consequence, westerns traders would appear and exploit the population. In addition, opponents anticipated that a logistic connection of such scale would corrupt the order in the east and it would be much easier for Siberian convict labourers or political exiles to escape. The importance and scale of the construction of the railway is well reflected by the fact that of the 14 Russian ministers of the time 8 were included in the special committee set up to discuss the issues around the railway construction. In 1885, a decision was made to construct the railway line between Samara and Ufa, due to their key artillery factories. The plan of the Trans-Siberian railway was finally approved in 1891. The missive dated 17 March 1891 from the Russian Tsar, Alexander III to his son, later Tsar Nicholas II, read: ‘'With this I lay upon you the establishing in Vladivostok the Ussuri section of the Great Siberian Railroad”. The project was completely financed by the state. Construction was simultaneously started at both ends – in the European areas (using the Russian lines already built by then) and in Vladivostok –, and im-

plementation was divided into seven sections. The Tsarevich Nicholas travelled to East Asia in 1891, and personally loaded soil in a wheelbarrow, and laid it down, formally commencing construction. The great railroad was going to be built in ten years (eventually, it took 25 years), with a calculated cost of 350 million roubles – in the end, the estimated total cost was several times larger (according to Soviet sources, the total cost might have amounted to one and a half billion Russian roubles). Tens of thousands of workers were working on the construction of the Trans-Siberian railway, at least 6,000 of them were members of the engineers’ team. In the busiest period, 89,000 workers were employed on the construction simultaneously. That was the only way to achieve a then remarkable result of building 500 to 600 kilometres of railway on an annual basis. The construction of the railway line required tremendous engineering and logistic feat. Workers had to work under extremely harsh climatic conditions. Most of the work was done by hand, with ordinary axes, spades and handsaws. Since there was no other route to transport building materials and tools, most of them were transported to the site on sea. The region around Lake Baikal was the most difficult and the most expensive as well, where explosions and tunnels were required. Although the length of this section is merely 260km, construction took several years, and was substan-

Russian map of Trans-Siberian Railway in the early 20th century. The Manchurian section is marked by a dashed line. Source: Brockhaus and Enfron Encyclopedia tially more expensive per kilometre than the rest of the Trans-Siberian Railway, owing to the difficulties. The circum-Baikal railway was finished in 1904, and was brought into permanent operation in 1905. Most of the railway built then, however, did not survive: about half a century later, in 1956, a large section of the railway was disassembled and flooded during the construction on the Irkutsk Hydroelectric Power Station, and a new section was built from Irkutsk to Lake Baikal. THE CHINESE EASTERN RAILWAY, THE CHINESE PART OF THE TRANS-SIBERIAN RAILWAY Eventually, a section of the Trans-Siberian Railway of the time passed through Chinese Manchuria, due to financial and logistic reasons on the one hand (the Manchurian construction site was considerably less difficult), but the geopolitical reasons, referred to at the beginning of this article, were much more important. Strategically, the pacification of Manchuria had been long envisaged by Russian statesmen. The Tsar

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was eventually convinced by his minister of finance, who supported the plan of the “Chinese Eastern Railway”. The Russio-Chinese part of the Trans-Siberian railway – as opposed to the rest of the line – was privately funded. In 1895, the Russio-Chinese Bank was established to finance the project, but more than 60 percent of the money was provided by French banks. The right to build the railway was granted by a treaty signed with China in 1896, which included a secret clause against Japan. The Chinese Eastern Railway Company, established thereby, gained the rights over the railway line for 80 years. The construction of the 1,529km-long railway was launched then. In 1897, the Russian fleet deployed at China’s coast, took Port Arthur (now the city of Dalian), which was the terminus of the Chinese Eastern Railway. The Russian argued that they were protecting China from the Germans, and the weakened Chinese leadership could not step up against it. In 1898, an agreement was signed in Beijing, which granted the Russian Empire a 25-year lease on Dalian. The construction of fortifications to Port Arthur was promptly launched, transforming the Chinese town into the Russians’ second major

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naval port in the Pacific. The Boxer Rebellion, which took place in China between 1899 and 1901, provided Russia with further opportunities against China. The central government and the rebels – uprising against western influence in China – attacked the railway and the Russian workers working there. In response, Russia invaded Manchuria “to protect its workers”. The Russians planned to completely colonise the region, and intensively re-populate it with Russian civilians. Then Japan also presented its claim for Manchuria. Surprisingly, Russia was not prepared for the RussoJapanese war, erupting in 1904. On 27 January 1904, the Japanese Imperial Navy attacked Port Arthur without a declaration of war. Most of the Russian Far East Fleet sank, and the surviving ships were under Japanese siege in the bay. Only some 20 percent of the port’s fortification had been finished by that time; the fact that the city resisted the siege of the Japanese for 11 months before capitulating was something of a miracle. The Russian army was defeated, and was forced to make a humiliating peace with Japan, resulting in losing Port Arthur and their influence in Manchuria. In the 1920s, China gradually extended its influence over the Eastern Chinese Railway, then, in 1931, it was transferred again to Japanese control. An agreement was made with Japan in 1934 about the concession railway line, under which the Russians sold their rights for 140 million yens. Subsequently, the railway track gauge was modified to meet the European standard. After World War II, in 1945, the railway again came under the joint control of the USSR for a short period, but the Soviet Union transferred (free of charge) all of its rights to the to the People's Republic of China in 1952.

Thus, the 100th anniversary of the Trans-Siberian Railway would as well have been celebrated 12 years ago, but control over the Chinese railway section was lost in 1905 as a consequence of the defeat by the Japanese. There was no other option than finishing the entire line of the railway on Russian land. Subsequently, the decision to construct the 2,115.8km-long Amur section of the Trans-Siberian Railway was approved, and the section was built in 1907-1916. With this line being completed, there was the currently known form of the transcontinental line encompassing Europe and Asia. For the construction of the railway, a track was marked in a distance of 15km to 130 km from the Amur River. For the first time in Russia, trucks were used in railroad construction. Over the years, in different periods, 20,-54,000 people were simultaneously working on the construction. With the outbreak of World War I, building slowed down: many of the workers were drafted and replaced by forced labourers – prisoners and criminals. Nonetheless, the Amur sec-

City of Dalian, China, formerly known as Port Arthur.

The carriages of the tsar’s train, where the abdication was signed by Nicholas II on 2 nd March, 1917.

COMPLETING THE RAILWAY The “Great Siberian Railroad” was officially opened on 1st July, 1903; however, there were two problems: first, on the Circum-Baikal Railway trains were carried on ferries; and second, it passed through Chinese territory before reaching the Pacific Ocean. The Circum-Baikal Railway was completed on 18 September 1904; after that, rail transport was ferry-free from Saint Petersburg to Moscow and Port Arthur on the Pacific coast. In those days, the distance between Moscow and Port Arthur was covered by a normal train in 16 days and 14 hours, and 13 days and 4 hours by an express train.

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Port Arthur with the Russian fleet in the early 20th century.

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Family of the star in St. Petersburg in 1904. Source: Wikimedia tion was basically completed in 1914, but lacked the railway bridge crossing the Amur River. Until it was built, compartments were transported by ferryboats on the river in summer, and by horses on the ice of the river in winter. The construction of the Amur railway bridge began in 1913. Around the clock, five thousand people were working on the construction. The steal spans of the bridge were made in Warsaw. The bridge was supposed to be finished in 1915, but in autumn 1914, the Russian merchant ship carrying the last two spans to East Asia was sunk in the Indian Ocean by a German cruiser. Russia had no other choice but urgently order the missing parts from Canada, and construction was delayed by more than a year and a half. The bridge was finally completed on 5 October 1915, and railway transport became continuous along the entire length of the Trans-Siberian Railway. The bridge, having a length of 2,568 metres at completion, was called “Amur miracle” and was the longest bridge in Eurasia. Interestingly, the tsar's train was the permanent seat of the last Russian monarch, Nicholas II between 1915 and 1917. The tsar signed his abduction in one of the compartments on 2 March 1917. It is the irony of history that the tsar and his family were transported by Bolsheviks on the Trans-Siberian Railway, one of the most important legacies of the reign of Nicholas II, to Tiumen, the first city of Siberia next to Europe, then to Tobolsk in 1917, and to their final destination, Ekaterinburg in 1918, where the tsar’s entire family, including his five children, as well as their servants, were shot during the night of 16 July.

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The original railway bridge crossing the Amur was short-lived: in April, 1920, during the Russian Civil War, the bridge was detonated by Red partisans to hinder the logistic lines of White forces. After the Civil War, the bridge was reconstructed in 1925, and served until 1999. Today, it is replaced by a new bridge, carrying automobile and rail traffic on two levels.

Russian engineers Being a grandiose structure, the Trans-Siberian Railway was not designed and supervised by only one person, but different engineers were responsible for different sections. The bridges along the railway also required a tremendous engineering feat, again, accomplished by several different engineers. The following lead engineers were engaged in the construction of the Trans-Siberian line: Orest Vyazemsky designed the Ussuri section of the railway, Nikolai Garin-Mikhailovsky designed the West Siberian section, Nikolai Mejeninov designed the Mid-Siberian line, while Alexander Liverovsky was responsible for the Circum-Baikal Railway.

Electric locomotive driven freight train is running at Lake Baikal, along the trans-Siberian Railway. Source: Anton Romanov, Shutterstock. ploit the natural resources in Siberia, and construction took nearly 50 years. The total cost of building the 4,287km-long railway amounted to 17,7 billion roubles, which, most probably, made it the most expensive project in the history of the Soviet Union. The railway runs on severe terrain, passing through seven mountain ranges and crossing 11 major rivers, and a total of 2,230 bridges of various sizes had to be added. Ten tunnels – including Russia’s longest one, 15,343m-long Severomuysky Tunnel, completed only in 2003 -, were built during the construction. The cargo capacity of BAM is 12 million tons per year, planned to be expanded to 50 million tons per year by Russia’s leadership.

BAM

TODAY

In 1984, a new, practically independent branch was added to the railway – this is the so-called BaikalAmur Mainline (“BAM”), which departs from the Trans-Siberian railway in the section before Lake Baikal, at Tayshet, runs north of and parallel to the Trans-Siberian railway, and reaches the Pacific Ocean at the Russian town of “Soviet Port” (Sovetskaya Gavan), populated by 25,000 people. Building the line came under consideration in the 1932, in order to ex-

The Trans-Siberian Railway is currently subject to various transformations. In the 1990s, traffic volume was successfully increased, and the bridge over the River Amur was reconstructed. The electrification of the entire line was completed in 2002. Until 1917, the line did not start at Moscow but Saint Petersburg. Currently, the main route of the Trans-Siberian Railway is used by train Nos. 1 and 2 from Moscow to Vladivostok. The entire journey currently takes six days

and one hour, at an average speed of 64 km/h. Earlier, a line from Kiev to Vladivostok (10,259km), as well as a line from Kharkiv to Vladivostok (9,714km) existed; in the 1970s even the idea of an 11,967km-long line from Moscow to Hanoi, Vietnam was conceived, but this latter line was in service for a few times only, and the former two ones were closed in 2011. On 11 January 2008, China, Mongolia, Russia, Belarus, Poland and Germany agreed to create a continuous line between Hamburg and Beijing, comprising the Trans-Siberian Railway. According to Russian records, some 15 million tons of cargo transited along the Trans-Siberian line after 2011. Chinese goods can reach Germany by rail in 11 to 15 days, while it would take 30 to 35 days by sea. In addition, the Trans-Siberian Railway forms an important part of One Belt, One Road, a new Chinese project announced in 2011, which would create all-encompassing continental links between Europe and Asia. Whatever the future may bring, the Trans-Siberian Railway seems to have become a determining factor in the political and economic lives of the two continents, Europe and Asia, and, due to the increasing intensity of social and interstate relations, it will continue to be one in the next decades as well.

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China’s economy and society are undergoing a drastic transformation, in which Chinese high-speed rail, being the longest HSR network in the world despite its history of less than ten years, has an increasingly important role. This article looks at the history of developing Chinese high-speed railway traffic, and by considering the advantages and disadvantages of the development, it examines the reasons why the Chinese government pays special attention to the programme.

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Author: Viktor Eszterhai

According to the official Chinese definition, high-speed railway (HSR) lines (gaosu tielu) generally refer to passenger dedicated lines with a speed of 250 km/h and above. A China Rail – High-Speed train (CRH) service was first introduced on 18 April 2007, between Beijing and Tianjin. In 2015, it was used by more than 1.1. billion passengers. China’s high-speed rail tracks had exceeded 20,000km by the summer of 2016; more than half of the world’s high-speed rails are in China, and 28 of the country’s 33 provinces are now linked by a standard network. The Mid-to-Long Term Railway Network Plan, adopted in 2004 and updated in 2008, laid out a railway development plan through 2020, including the connection of all provincial capitals and cities above 500,000 people to a national rapid rail network, the entire length of which will be doubled by 2025 (in comparison with the 18,000km at the end of 2015), and extended to 45,000km by 2030. By 2020, the government hopes, the high-speed railways will be used by 5 billion passengers. The high-speed railway of the East Asian country holds several records. China has the world’s longest high-speed line, spanning 2,298km between the cities of Beijing and Guangzhou. The world’s longest high-speed rail service is available between the cities of Harbin and Wuhan, taking a total of 2,446km, and 14 and a half hours. The world’s fastest regular passenger train can also be found in China, the magnetic levitation train running at a top speed of 430 km/h while completing the 30km-long distance connecting Shanghai Pudong International Airport and the Shanghai city centre. The world’s longest viaduct bridge of 164.8 km between Danyang and Kunshan is part of the Chinese high speed rail system. The sec-

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Overview of high speed rail in service or under construction by country (TOP 10)

Peculiarly, the network is basically made up of four components: 1) newly built, mostly passenger dedicated lines; 2) newly built conventional rail lines that can carry high-speed passenger and freight trains; 3) upgraded pre-existing rail lines that can accommodate high-speed trains; 4) regional, “intercity” lines. According to the Mid-to-Long Term Railway Net-

“a railway development plan through 2020, including the connection of all cities above 500,000 people to a national rapid rail network” work Plan, the axis of the network is constituted by eight mainlines: 4 vertical and horizontal ones, with a total length of some 12,000 kilometres, designed for a minimum speed of 300 to 350 km/h, and dedicated exclusively to passenger trains. The mainlines are crossed by several high-speed secondary railway lines, which can also carry freight trains. The main lines are going to be completed by 2020, making all provincial capitals – except Lhasa – accessible within 12 hours from the capital.

High-speed railways as of 15th May, 2016.

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HISTORICAL BACKGROUND State planning for China's current high-speed railway network began between Beijing and Shanghai in 1990, under the supervision of the Ministry of Railways (Tiedaobu). Although China was a very poor country then, the key rail line from Beijing to Shanghai was facing overcapacity issues and running inefficiently. However, the leadership of the Chinese Communist Party was not unanimous on the necessity of a high-speed railway. Opponents noted that high-speed rail was expensive and there was no real demand for it, due to the weak purchasing power of the population. In addition, some supporters proposed the implementation of a magnetic levitation (maglev) train, considered to be the future of railway transport, instead of conventional technologies, but, owing to the high costs and the difficulty of connecting it with existing lines – and the fact that at the time Germany was the only country which had the technology and

was rather unwilling to give it to China – this option was not realized. Eventually, a more traditional steel-on-steel rail technology was chosen for the railway, and the construction of the first line of a speed of 200 km/h was launched in 1999. The greatest challenge that the Chinese industry had to face was to produce the necessary locomotive. Although there were serious attempts to develop a domestically made locomotive, eventually, in 2002, the State Council (Guowuyuan) decided to purchase foreign technology. At the beginning, the Ministry of Railways preferred Japanese Shinkansen technology, but due to the population’s resistance, it solicited new bids in 2004. There were four applicants: Japanese Kawasaki, Canadian Bombardier (but with premises in Germany), French Alstom and German Siemens, which withdrew its bid first, then submitted it again. The applicants had to meet several criteria: they had to adapt trainsets to China's own common standard; co-operate with two state-owned companies, appointed by

the State Council (China North Rail (CNR; Zhogguo bei che gufen youxian gongsi) and China South Rail (CSR; Zhogguo nan che gufen youxian gongsi); manufacture in China and then transfer the technology to the Chinese party. All applicants won the bid, and were commissioned with the delivery of some 400 carriages. Technology was not just simply transferred to Chinese state-owned companies, but was simultaneously developed further. In 2010, the Ministry of Railways announced the beginning of the development of "super-speed" railway technology, which would increase the maximum speed of trains to over 500 km/h.

Connectivity of provincial cities and Beijing by 2020 as projected by the Mid-to-Long Term Railway Network Plan

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On 1 August 2008, the first high-speed railway line, the Beijing–Tianjin Intercity Railway (with a topspeed of 350 km/h) opened in time for the Olympics. Thanks to the large-scale development in the period between 2007 and 2010, almost a hundred cities were linked by high-speed railways, becoming the longest network in the world. However, developments were accompanied by severe mistakes: vehicles often malfunctioned, concerns about

safety and corruption were also raised. The greatest disruption of railway development was caused by the Wenzhou accident on 23 July 2011, resulting in the death of 40 people. As a consequence of the accident, three senior officials of the Ministry of Railways (Long Jia, Li Jia, He Shengli) were dismissed and the speed of trains was reduced for two months. In early 2011, the head of the Ministry of Railways, Liu Zhijun was dismissed on corruption charges and was also expelled from the Chinese Communist Party. Following the crash, new safety checks were launched, and the speed of Chinese high-speed trains were further reduced. Due to the difficult financial situation of the Ministry of Railways, the government halted the construction of several lines. At the beginning of 2012, the Chinese government resuscitated the development of high-speed rail transport, primarily to drive flagging economic growth. During the 12th Five-Year Plan (2011-2015) more than 3,580 billion yuan was spent on the development of the Chinese railway. In March, 2013 the

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Ministry of Railways was dissolved: duties were taken up by the Ministry of Transport (Jiaotong Yunshubu) and leadership was decentralized (in regional centres). The network and the carriages are provided by state-owned China Railway Corporation (Zhongguo Tielu Zonggongsi). As a result of reforms, private investors have also appeared in rail constructions (first Xinjiang in 2013 with $4 million USD). Although the system as a whole continued to make loss, certain lines started to earn profit: first the Shanghai–Nanjing line, then the Beijing–Tianjin, the Beijing–Shanghai and the Shanghai–Hangzhou lines as well. The success of developing transferred foreign technology is reflected by the first domestically developed train, CRH380A, launched in 2010. As a result, China has become competitive abroad as well. For a more efficient competition with foreign manufacturers, the government merged CSR and CNR, the two major manufacturers of high speed trains, into a company called China Railway Rolling Stock Group (Zhongguo zhong che gufen youxian gongsi), which has become the largest rolling stock manufacturer in the world. High-speed rail transport has a prominent role also in the 13th five-Year Plan, ensuring the implementation of an extremely ambitious plan aiming at having a network of at least 30,000km, and connecting 80 percent of China’s cities by 2020. CRITICS OF HIGH-SPEED RAILWAY TRANSPORT AND THE PRICE OF DEVELOPMENTS According to the critics of high-speed railway transport, there are two reasons why China should have refrained from launching the programme. First, highspeed rail is too expensive in comparison with China’s level of development; second, the population is not well-off enough to use the service.

Element

350 km/h

Land acquisition and resettlement Civil works Embankment Bridges/Viaducts Tunnels Track Signaling and communications Electrification Rolling stock Buildings including stations

4 48 6 41* 0* 9 4 5 15 2

Unit Cost of PDL Several factors influence the cost of a HSR project construction. The major factors include the line design speed, type of tracks, topography, climate and weather conditions, land acquisition costs, use of viaducts/bridges/tunnels instead of embankments, the size of stations, etc. A study made by the World Bank in 2014 shows that the construction of high-speed rails in China is considerably less expensive than in Western countries. The unit cost of the high-speed rail of a speed of 350 km/h is $17to 21 million USD (RMB100-125 million) per km. However, the cost of HSR construction in Europe, having design speed of 300 km/h or above is estimated to be of $25-39 million USD per km, while as high as $52 million USD per km in California. As in other countries of the world, unit cost varies substantially depending on the line design speed. The unit cost of 350 km/h projects is between RMB94-183m per km. The unit cost of 250 km/h PDLs is, with a couple of exceptions, between RMB70-169m per km.

250 km/h 4-8 50-54 7-12 13-25 16-29 9-11 3 4-5 3-4 2-4

Percentage of Total Project Costs of High-Speed Railways Constructions per km

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Aside from the lower cost of manpower, the relatively low cost of land acquisition and resettlement is also likely to have led to lower HSR unit cost in China. The fact that public land ownership greatly contributes to the fast pace of developments, should not be overestimated. Rail construction costs are also kept low through the standardization of steps in the manufacturing process. Finally, the scale and pace of the rail development programme have also affected construction costs positively: using capacities continuously has reduced unit amortization for companies and storage costs have also been lower. In addition, because of previous constructions, the background infrastructure required for constructions is available in several Chinese provinces, therefore machines do not need to be moved in long distances for constructions. Overall, it can be concluded that HSR construction in China is considerably cheaper than in Western countries, and it has imposed less burden on China’s economy than preliminary estimates indicated. While conventional rail traffic has grown at 1.5 percent annually, CRH traffic has grown at 39 percent per annum since 2008. Chinese passengers overwhelmingly think (85.7%) it will be the main transportation of the future, and like it primarily for its comfort. There are many positives to the use of high-speed rails, as opposed to airlines: airports are located further away from cities, security

checks are minimal, reducing the time needed to be spent at stations. The ticket prices of high-speed rail are usually three or four times higher than that of regular-speed rail, but are still cheaper than airline or intercity bus tickets. These fares, however, are about one quarter or one fifth of the fares applied in other HSR countries. The average length of travel for CRH passengers is about 330 km, but it is lengthening, thanks to the opening of long railway sections. The average seat occupancy was 70

“Overall, it can be concluded that HSR construction in China is considerably cheaper than in Western countries” percent in 2014. In 2013, twice as many domestic trips were taken on CRH services than by air; however, only short air routes (below 800 km) tend to be cancelled when faced with HSR competition. Generally speaking, for trips under 150 kilometres, car and bus often remain competitive, especially if the HSR station is located far from the city centre, while for trips of over 1,000 km air is still an attractive option. HSR passengers stayed approxi-

200 km/h 6-9 44-51 13-15 25-27 2-13 6-7 4 4-5 5-7 3-5 Foreign countries interested in China’s high-speed rail technology.

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mately one day less away from home than those on conventional trains, trading off higher fares against accommodation expenses. This might in part explain why there were a number of HSR passengers with relatively modest incomes. The fears of lack of demand for HSR have proved groundless; in recent years, more and more lines have become profitable. Critics being afraid that HSR would take away passengers from conventional services have not been right, either; rather, it has just proven that conventional services were constrained by their limited capacities, and a new type of service was needed. REASONS FOR DEVELOPING CHINA’S HIGH-SPEED RAILS There are several reasons supporting China’s highspeed rail transport, and the central government continues to actively promote its development. China has a vast continental area and a large population, High-speed rails significantly increase transport capacities, because they are usually built next to existing lines. While new rails ensure rapid passenger transport, the existing (and continuously upgraded)

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lines are suitable for cargo transport on an increasingly higher standard and of an increasingly greater capacity.

“The development of high-speed rails reflects the ambitions of China’s government: to make Chinese industry catch up with the level of more developed industrial countries.” • High-speed rails increase the mobility of workforce and transform the internal migration of the country. The relations between centre and periphery change: distances can be covered in shorter time (for the flow of workforce, technology and knowledge), accessibility improves, the economic integration of the country is enhanced. Towns and peripheries are positively affected by the fact that they can attract investors more easily and are less subject to the mi-

gration of workforce (releasing some of the pressure on the huokou system). They expand the market for local businesses and may bring new customers as they become more easily accessible by other companies as well. The Chinese government expects railway developments to mitigate existing regional differences. The programme promotes the growth of China’s interior regions and creates new urban centres, which generates further developments, connecting them with China’s major centres of development. Greater accessibility enhances the capability of interior and western regions to attract capital. • While in 2013 53 percent of the population was urbanized, an expected 70 percent of the population will live in cities by 2030. Railway development ensures the connectivity of cities, reduces time spent in inter-city travel, which entails the improvement of economic productivity. All these promote the clustering of regions. • High-speed railway facilitates the government’s effort to boost Chinese economy. Furthermore, railways can be a tool to tackle with overcapacities in the construction industry and to create jobs. • New Chinese railway stations usually form a part of an infrastructural urban development of a greater

scale (they are typically related to the construction of new industrial and logistics parks or city quarters), which, in addition, have a multiplier effect: existing investments present added value to the environment, which is particularly important to local authorities earning great incomes for selling land. • High-speed railway is a relatively environmentallyfriendly way of transport: it can move a high volume of people, and has a smaller environmental footprint than ways of road transport do. Theoretically, electricity may be drawn from renewable sources of energy, which is an extremely important viewpoint for the Asian country suffering from severe environmental damage. • It promotes the development of China’s technological and engineering skills. China imports turnkey rolling stock very rarely; and usually only 20% of spare parts are made abroad. The development of high-speed rails reflects the ambitions of China’s government: to make Chinese industry catch up with the level of more developed industrial countries. In addition, high-speed rails are good export products as well, which are mainly competitive thanks to their price, arousing considerable foreign interest in recent years.

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CHINAâ&#x20AC;&#x2122;S CATCH-UP PROCESS

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CHINA CATCHING UP WITH THE EVELOPED WORLD

Author: Ferenc Bánhidi

It is a well-known and widely acknowledged fact that China has continuously been catching up with the developed world for almost forty years. In the last one hundred and fifty years, China’s leading politicians have always wanted more; namely, they wanted “China to take its rightful place in the world”, that is, to rise among the most developed countries. However, the country is several decades away from this goal now. In 2015, China’s gross national product was still 20 to 30 percent less than that of Argentina, Mexico, Brazil or Russia.

THE MIDDLE INCOME TRAP “The middle income trap” is a well-known notion of modern-day economic history. In the last one hundred and fifty years, there have been several countries that have relatively easily reached a certain degree of economic development, but got stuck there and been unable to approximate the standard of developed countries. According to international statistics, in the 20th century only nine of one-hundred and ten middle-income countries were able to break out of this trap. The above-mentioned LatinAmerican countries are examples for spectacular failure, and only Japan and the four East Asian Tigers can be mentioned as success stories. China achieved a per capita GDP of $6,000, representing middle income, after 2010; since then, the pace of economic growth has started to slow down spectacularly. How long can the successful catch-up process of the last forty years continue and will be China able to escape the middle income trap, as a small number of countries managed to, and actually reach the standard of developed countries in twenty to thirty years? These are among the most debated questions of Chinese and international experts. In order to answer these questions, three topics will be explored in more detail: • Do China’s historic traditions and culture enable China to become one of the most developed countries?

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• Have the reforms of the past forty years created a sustainable economy that can drive further growth? • Can break-out points allowing to avoid the growth trap be identified from the experience of other developing countries? No ultimate and obvious answers can be promised; hopefully, the analysis of the historical and the recent past will provide some insights that have been ignored by short-term analyses. THE EFFECTS OF HISTORICAL TRADITIONS ON CHINESE ECONOMY As for the volume of the historical development of China’s economy, there is more or less a consensus about it now. Economic historian Angus Maddison’s GDP time series encompassing the Middle Ages and the Modern Period are basically accepted by the entire international scene of economic historians. The data obviously reveal that China’s catch-up process of the last forty years can be regarded as a kind if restoration period, since the country boasted the world’s largest population as well as the largest economy in the early 19th century. As yet, however, the economic and historical sciences have difficulties to provide a meaningful explanation for China’s rise. Either Acemoglu’s1 widely accepted catch-up theory, or, among others, János Kornai’s theory describing the post-Socialist transition are

Share of global GDP in % 35

China India

Japan West Europe USA Soviet Union

5 0 1820

1952

1978

2003

Source: Agnus Maddison Chinese Economic Performance in the Long Run. OECD 2007

hardly compatible with China’s experiences of the last forty years. Most probably, finding genuine answers takes more time, since the explanation of the rise of East Asian countries, the description of the socalled East Asian development model was provided in 19932, after the process had finished. Obviously, answers can primarily be expected from Chinese scientists’ researches based on extensive data collection. Fortunately, this field has seen significant development in the last four to five years. From the extensive literature, I have selected the works of economic historian Wu Xiaobo; one of his publications was rated as one of Best Chinese Business Books of the Year. According to the prevailing understanding by Western history, the rejection of a free market economy by the traditional Chinese culture and the dominant state ideology blocked economic modernization, resulting in a widening gap between China and the developed world. Analyzing the different eras of three thousand years of Chinese history, Wu Xiaobo demonstrates that the Chinese state was far not as antimarket as that would have followed from the official state ideology. He thinks that certain market economy elements played an important, although not a key, role in traditional Chinese economy: • Basically, the private ownership of land became predominant before the unification of the country in 221

B.C. Although the institutional system and guarantees of land and money markets were not as developed as in western countries, but existed and were widely used for centuries. • The most important commodities (salt, iron, silk) practically had a national market and a supporting physical infrastructure (road and canal network) since the unification of the country. In Chinese history, the trade of salt and iron was regulated by state concessions in most periods. They, on the one hand, ensured considerable state income, and, on the other hand, also created the conditions of marketconform trade. • Education had a history of several hundreds of years and had great importance in the system of social values. Although the content of the curriculum did not meet the requirements of modern economy by the end of the Imperial Period, but was subject to significant development in the early 20th century. • Certain Chinese products (porcelain, tea, silk) were considered market leaders of international trade even in the 18th and 19th centuries. Prohibitive and restrictive state measures apparently existed but, in part, were applied only in certain periods or just temporarily, or were partly evaded – with the tacit approval of officials. Acemoglu, as well as other western historians describe the Chinese state as an authoritarian participant, which encroached on the economy, restricted trade, exploited resources, and was a constant source

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CHINA CATCHING UP WITH THE DEVELOPED WORLD

of all-encompassing corruption. Wu Xiaobo absolutely denies this description. The starting point of his analysis is the well-known fact that although Confucianism was the official state ideology, in reality, three different schools blended, representing cultural traditions in a kind of synchronicity. The ideology of Confucianism underestimated economy, and did not believe in a powerful state; Taoism advocated individualism, a kind of pessimism, and therefore believed in non-intervention and deregulation in economy; finally, tradition includes the ideology of an all-prevailing central state, called the school of legislators, but it was highly influential in short periods only. In the Chinese Middle Ages, under the reign of the Tang and Song Dynasties, between the 7th and 13th centuries, Taoist non-intervention and the self-limiting state concept of Confucianism prevailed. External trade, city markets and the consumption of luxuries thrived. Rich merchant families built their relationships freely with the bureaucracy, marketfriendly state regulation gained considerable ground. The period of the Song Dynasty is called the economic revolution of the Middle Ages by Japanese

economic historians. In this period, such an economic structure evolved on market principles that was operated partly under the control of the government, but, to a large extent, with its consent. Going back to the long-term economic time series of Maddison, his analyses also confirmed that in these centuries China had been the world’s largest as well as most developed economy. During the Ming and Qing periods after the Middle Ages, between the 14th and 19th centuries, the concept of state changed; the dictatorial nature of the political system intensified, and the former international openness was replaced by isolation. The emperors of these dynasties tried to keep merchants away from power, and, in addition, prohibited, later restricted foreign commerce for decades. This change of mindset did considerable damage to the economy and the gap between China and the developed countries started to widen gradually. Wu Xiaobo, however, showed that the market-based economy survived under the Qing Dynasty, and, although the state attempted to restrict its scope every now and then, this intention was basically futile.

Although the ideology of Confucianism underestimated the social role of economy, it did not actually seek to exploit or crush the economy. According to the ideal of human, but frugal governance, the size of the Chinese bureaucracy, in terms of the size of the population, was unprecedentedly small, and very little was spent on the military, in compliance with the civil-oriented official ideology; consequently, taxes could be kept low. Apart from Wu Xiaobo, an increasing number of western historians, including members of the California School of economic history, do not describe the operation of the Chinese state in the 19th century as a dictatorship, an exploiter, but quite the reverse: a power with low levels of income and limited resources that was unable to provide public services by the standard of western countries or organize the defence of the country. To sum up the analysis of the impact of the Chinese historical tradition in the economy, it can be stated that this legacy included such a massive marketoriented behavioural tradition and experience without which the rapid development of the Chinese economy in the last forty years would not have been

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possible. The economic successes and entrepreneurship of the Southeast Asian communities anticipated decades ago that under adequate political circumstances, the Chinese state would also be able to catch up with developed countries. EXPERIENCES AND LEARNINGS FROM THE ECONOMIC REFORM PROCESS These missing political circumstances were created by the reform process launched in 1978. However, economists could not provide a scientific explanation of the fast successes of these reforms, either. Interestingly, this statement applies to both Western and Chinese scientists. The doyen of Chinese economists, Wu Jinglian, the author of the most known work on the history of Chinese economic reforms translated into English, has been prevented from it primarily due to the fact that as a distinguished advisor of Chinese governments of the 1980s and 1990’s, he was “too close to the fire” (i.e. power), and could not evaluate events without bias. Professor Wu refrains from overemphasizing

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CHINA CATCHING UP WITH THE DEVELOPED WORLD

banks in the middle of the 1990s to the economic stimulus package introduced in 2008, included in the current five-year plan.

Chinese “national characteristics”; he interprets the history of Chinese economic reforms as the history of gradually enforcing the mechanisms of market economy, in which the reformer state and politics have a crucial role. This mindset is very close to the Eastern European market reforms and the recommendations of the World Bank of the time, but is very difficult to be reconciled with historical facts. In the late 1980s, the Chinese government adopted a comprehensive price and tax reform, in line with foreign recommendations, but instead of substantially promoting economic growth, it triggered inflation, acquisition panic, rampant corruption, greatly contributing to the political crisis arising at the end of the 1980s. Professor Wu wrote his renowned book at the beginning of the 2000s, and then he could not know that the new political leadership taking office in 2002 would abandon reforms and strengthen the economic role of the state. This change of direction, however, did not slow down economic growth at all; even the fastest, twodigit GDP increase of the whole reform period was achieved in the period lasting until the outbreak of the world economic crisis.

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The other pole of the authors engaged in history of Chinese reforms is represented by Justin Yifu, a Taiwan-born professor at the University of Beijing. He believes in the school of economics supporting an active, developing state, as opposed to market orientation. He thinks, the rationale behind the “Chinese miracle” is the fact that the Chinese government made necessary decisions with adequate content and in a timely manner, and therefore was able to maximally pursue the economy’s comparative advantages of the country. No wonder that this explanation has not been widely accepted, either, since it is hard to believe that all the decisions made in the course of forty years by the state, continuously intervening in economic processes, were rational. Professor Lin’s beliefs may effectively be contradicted by simply examining the implementation of the fiveyear plans produced continuously until today. The actual figures of the last seven five-year plans have been randomly well above, like in the 2000s, or well below targets. The reform period after 1978 saw no significant economic policy packages, from the austerity measures of 1989 and the consolidations of

As opposed to opinions emphasizing the role of the reformer state and the political leadership, the most authentic analysis of the success of Chinese economic reforms was carried out by Nobel-prize winner economist Ronald Coase, who finished his book on the history of reforms just before he died. This work, despite the provocative title (How China Became Capitalist), is widely recognized and respected in the People’s Republic of China as well, and the Chinese translation won the 2013 China's Best Books Award. Coase’s book includes two extremely important statements that confront the majority of analyses of Chinese reforms. One of the statement is that the outcome of Chinese reforms was not mostly generated by state intervention, but just the opposite, as an effect of the state’s withdrawal from the management of economy, called deregulation. The fact that economic reforms were not adopted according to a programme devised on political level and then implemented top-down is also acknowledged by Chinese politics. Political decision-makers – especially in the 20 years before the turn of the century –, always emphasized that their reform process was characterized by “the method of crossing the river by feeling the stones”, continuous learning and experimenting. Coase and his co-authors argue that what actually happened in the 1980s and 1990s was that central political leadership always gave way to local initiatives that proved to be visibly successful and popular, and approved of their legalization and national-level introduction within a short period of time. In the 1980s, successful economic reforms were adopted in rural areas. In that period, 70 percent of China’s population lived in villages and towns. The land reform, first started as a spontaneous local initiative and then extended as a pilot, became so popular that it was introduced on national level within three years despite the opposition of conservative political circles. The transformation of land ownership, with a kind of snowball effect, drastically changed also the operation of the industry and services in the countryside. By the end of the 1980s, 30 percent of industrial output was produced by nonstate provincial industry and it employed tens of millions of people. Formally, factories were owned by local governments, but their actual operations were

dominated by the will of their executives and market orientation. It is not a coincidence that when central leadership started to incentivise export in line with the strategy of opening in foreign policy, it was not urban companies not owned by the state but township and village enterprises that were able to react. These companies were the first to undertake work for hire for Taiwanese and Hong Kong-based partners, thus they had achieved a considerable share also in export by the end of the 1980s. Urban reforms took place in a similar way in the 1990s. In 1992, upon the invitation of Deng Xiaoping, paramount leader of the time, tens of thousands of state and party officials established privately owned enterprises. Since the growth of GDP in a particular region was the sole criterion of appointing and promoting regional party and state leaders, they did not hinder but support by all means the investments of various private investors. Since the legal status of privately owned enterprises was rather unclear, the majority of newly established companies were operated as joint ventures, involving mainly Taiwanese and Hong Kong-based investors. In the early 1990s, China suddenly took the lead of various rankings regarding the inclusion of international working capital, irrespective of the fact that the embargo measures introduced after the events of 1989 were still in effect and the legal regulation of market operations was in an initial phase. Ronald Coase’s other statement, drawn from the analysis of reform process, was that the private sector played a key role in economic growth and the expansion of employment in most of the reform period. Western analysts prefer to call the current Chinese economic regime state capitalism, referring to the fact that the state plays a decisive role both in the governance of economy and ownership. Another frequently voiced statement is that state-owned companies enjoy such privileges in the distribution of resources, including access to loans, or regarding market entry that prevents private enterprises from competing with them. As for ownership, the fact that Chinese political leaders consciously avoided using the expression “privatization” for ideological reasons was misleading for external observers for a long time. In fact, a rapid and comprehensive campaign was organised in the late 1990s, concerning thousands of mainly

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CHINA CATCHING UP WITH THE DEVELOPED WORLD

Contribution to average annual GDP growth, broken down into factors, 1978-2000 Contribution to average annual real GDP growth, in %, 1978-2000 Capital Labour Labour reallocation Factor productivity

Four Asian Tigers (Korea, Taiwan, Singapore, Hong Kong) 3,5 1,2 0,8 1,5

China 5,0 0,6 1,2 1,5

Source: Jonathan Anderson How to think on China 2006 UBS Investment Research

small and medium-sized enterprises owned by the state or local governments; but it was not called privatisation but restructuring. The scale of the restructuring is reflected by the fact that some 40 million employees of state-owned companies lost their jobs in this period of three or four years, according to various sources. The main beneficiaries of this campaign were domestic investors, primarily the managers of the existing companies. As it has already been mentioned, the majority of the companies owned by local governments were practically operated as privately owned companies from the middle of the 1980s; they were finally legalized by this campaign, and companies that were owned by cities and whose former management became owners joined them. The significance of this reform campaign is indicated by the fact that today’s internationally market-leader Chinese companies, such as Haier, the market leader of the household appliances market, and Lenovo, the leader of the PC market, became privately owned in this period. A populous stratum of entrepreneurs also evolved at that time, and they could influence the economic decisions of the government as well in the past 15 years.

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As for the second statement, namely that private enterprises are in continuous market disadvantage in comparison with state-owned ones, it was most effectively denied by the famous American Sinologist, Nicholas Lardy. On the basis of official Chinese statistics, he showed that the market share of stateowned companies in industrial output had decreased from 80 percent in 1978 to below 25 percent by 2013. Companies owned by the state and local governments had 100 percent share on urban employment in 1978, but this figure dropped to 18% by 2013. Rural employment was also completely transferred into the private sector. Although the number of people engaged in direct agricultural activities decreased by 60 million, almost all of them were snatched up by the private industry of villages and townships and the non-agricultural activities of households. These statistics apparently prove that, on the whole, the vigour and dynamism of the private sector was a decisive drive of the development of Chinese economy, even though some hurdles hindered the operations of private enterprises in some industries. From the analysis of the Chinese reform process, we can draw the conclusion that such an economic

system has evolved by today that is predominated by market mechanisms and private ownership. This system has evolved gradually, step by step; in this process, the state did not adopt a pre-planned programme, but, under control, gave room to entrepre-

to escape. The experiences of these countries greatly converge: the main tool to escape the trap is to develop domestic innovation, which is much more than increasing the state subsidy of R&D. A new growth model must be adopted, in which innovation is placed in the focus of

neurship and commercial traditions, which are deeply rooted in Chinese culture.

companies’ operations and the main goal is to increase innovation productivity.

ESCAPING THE MIDDLE INCOME TRAP

It is not an easy task to measure innovation productivity. The index most frequently used in the analyses of international economic organisations, including OECD and the World Bank, is the so-called factor productivity. Factor productivity accounts for effects in total GDP growth relative to the growth in traditionally measured inputs of production factors (labour and capital); the theory of macroeconomics regards this element the effect of innovation. The definition based on the residual principle simplifies the calculation of the index, because all growth effect not attributable to the growth of these two basic factors of production, i.e. capital and labour, are regarded as the effect of innovation. It is known that in the initial phase of economic reforms, China adopted the model of the Four Asian Tigers in its growth strategy. In most of this period, even the tigers were far from the forefront of technological growth, therefore they adopted the traditional, investment-oriented model.

The economic background of the middle income trap can be easily described. A catching up country can develop relatively rapidly for a long time by applying technologies that are not international cutting edges but still marketable and used in developed countries for years. By doing so, the country saves R&D costs, while technologies that are on their way out can be obtained from cutting-edge countries relatively cheaply and easily. It can, however, focus the use of marketable technologies on such labour-intensive activities such as assembling products, in which it can use its main competitive advantage for wages that are significantly lower than those of developed countries. The farther a developing country is from the level of developed countries, the more easily and cheaply available these opportunities are. As they approximate the technological level of developed countries, the cost of acquiring new technologies increase; as the differences between the consumption levels of a developed and a developing country is decreasing, the competitive advantage in employment is also gradually diminishing. As it has been mentioned in the introduction, China reached such an income level two or three years ago that made it face the above phenomenon, the loss of advantage due to high wages, and the difficulties of acquiring state-of-the-art technologies. The middle income trap is not the result of a mistake of the economic policy or of an institutional defect, but a phenomenon occurring as a rule, with which each catching-up country has to tackle. Successful countries, such as Japan or the Four Asian Tigers can also serve as role models to find ways

The above table demonstrates the main characteristics of this growth trajectory: the major driver of economic growth is not innovation but the contribution of the capital factor, i.e. investments. Thanks to the high and continuously increasing share of savings and the rate of accumulated savings these countries could achieve an above-average growth of 7-8 percent despite their relatively low factor productivity. This period, however, ended when the “middle income” was reached by the tigers in the 1990s and by China after 2010. If a country reaches the middle income level, the efficiency of investments deteriorates as they approximate the forefront of technology. The rate of

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Total factor productivity growth in China, 1995-2012 7,0 Factor efficiency percentage 6,0 5,0 4,0 3,0 2,0 1,0

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0,0

Source. OECD Economic Surveys China 2015

accumulated savings cannot be further increased because it would limit the growth of consumption and the expansion of internal market. On top of that, in China the reserves of workforce are running out, owing to a population policy that encouraged a fall in birth rates and was in effect for a long time. In the last three or four years, Chinese political decision-makers have faced the fact that increasing factor productivity, that is, developing innovation, may be considered the only driver of economic growth in the next period, because without this the pace of Chinaâ&#x20AC;&#x2122;s growth would practically drop to the level of developed countries, resulting in losing the hope to catch up as planned. In western literature, we can often read statements that China is doomed to fall behind in the international R&D competition primarily due to its political regime, its regulations restricting freedom of speech and expression, and will not be capable of innovation, imperative to achieve permanent economic growth,

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in the long term. International statistics and analyses, however, show that the productivity of Chinese processes of innovation has not fallen or is falling short of the results achieved on similar level of development by other countries. From this point of view, the data included in the country report issued by OECD in 2015 are especially convincing. In the period between 1995 and 2012, total factor productivity contributed to the GDP growth annually by 5 percent on average. The previous decade was particularly successful: between 1999 and 2007, the contribution of total factor productivity to GDP growth tripled, from 2 percent to 6 percent. To sum it up, it has a key role in assessing Chinaâ&#x20AC;&#x2122;s long-term growth perspective how the future development opportunities of innovation are evaluated. Past experiences suggest that the development of innovation is not hindered by any institutional or structural hurdles in China.

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BREXITâ&#x20AC;&#x2122;S IMPACT ON JAPAN

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Brexit, Japan, china Author: Anton Bendarzsevszkij, Eszter Polyák

At the G20 summit in September, Japan handed over a strongly worded message to the representatives of the United Kingdom. If the UK’s withdrawal does not move forward smoothly, it will cause major disturbance to the world economy. The European integration has great importance outside the continent as well: the integration, deepening for decades, appears as a model for different regions. What future will Brexit cast on Asia? How will Japan and China choose their strategies to maintain European relationships?

The world was badly shaken by the referendum of the United Kingdom on withdrawing from the European Union. It is especially true for East Asia, where the outcome of the vote caused quite a stir. This analysis intends to highlight why the Japanese government reacted so sharply, what the Japanese expect from Brexit, and whether their concerns have proven to be true since then. It is important to have a look at the Chinese opinion, too, since Japan evaluates the implication in the light of its regional rival. The appearance of the great Asian competitor is an important factor in Japan’s European policy, since China has already surpassed the European presence of the country regarding economic partnerships. Therefore, it is important for Japan’s foreign policy to find common ground to raise the importance of its partnership with the Union. After the analysis of the document issued at the G20 summit the current Japan-EU, and more specifically, Japan-UK relationships are scrutinized, and then these relationships are also examined from China’s perspective. The comparison of the East Asian and the European integration forms an important part of the context of relationships. Then the short- and long-term consequences of the referendum and the future prospects for Asia are discussed. MESSAGE OF THE G20 SUMMIT The Japanese delegation prepared a specific message to the British and the Member Countries of the EU for the G20 meeting. The Ministry of Foreign Affairs penned a rather dire letter, reflecting how alarmed Japan was by the possibility of Britain’s

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withdrawal from the EU. Japan was not the only country to voice this opinion. At a press conference with Theresa May, Barack Obama also expressed open criticism. It is in the interest of the entire world that Japan, the EU and the United Kingdom will share the responsibility to be the leaders of the free trade system. It is enhanced by a particular step: they announced to reach agreement in principle on the Japan-EU Economic Partnership Agreement (EPA) during 2016. They call upon the UK to actively participate in the process; it is a kind moral obligation, keeping their given word. .They regard uncertainty extremely harmful to the economy, therefore they wish to see the transition as a transparent process. A considerable number of Japanese businesses operating in Europe are concentrated in the UK, and they informed the Japanese government of a variety of requests. Uncertainty concerns the smooth flow of duty-free trade, investments, services and financial transactions and harmonised regulations and standards. There is a considerable number of Japanese businesses operating in the United Kingdom, and nearly half of Japanese direct investment intended for the EU in 2015 flowed to the UK. The fact that other countries in Asia as well as of Japan are major trading partners also constitutes a reference. They refer to the fact that a number of Japanese businesses were invited by the British government and these companies, exploiting their opportunities, have established value-chains across Europe, and upsetting the entire system would not be regarded ethical

at all. The Ministry of Foreign Affairs warned Britain that its banks, pharmaceutical companies and car manufacturers may leave the UK if Brexit happens and leads to the loss of tariff-free trade. The Japanese government attached to the document a list of their detailed requests ranging from the most general issues focusing on transparency to the measures targeting the free flow of factors of production and characterizing the basic values of the Union. If it would completely be adopted by Britain and the European Union, it would suppose almost completely unchanged economic circumstances before the withdrawal from the EU, and evaluate Brexit as such a provision that is only applicable to political institutions. RELATIONSHIPS BETWEEN JAPAN AND THE EU Shared values, such as democracy, respecting human rights, the rule of law and market economy have a prominent role in the relationship between Japan and the European Union. These values serve as a reference base for the Asian country when speaking about he importance of maintaining cordial relationships. The rhetoric built along values,

however, does not imply a closer political cooperation on behalf of either parties. Although Japan has been a partner of the European Union since the beginnings of the organization, European countries do not usually place to much emphasis on a better understanding of the country and incorporating this knowledge into political decision-making. Political partnership often does not match the level of economic partnership, despite the fact that the “old Japanese paradox” of Japan being economic giant and a political dwarf is outdated. There are remarkable similarities in the way Japan is perceived across

“Since Japan loses his role of being the number one Asian strategic partner, they hope they will be back on the agenda in the Union after Britain’s withdrawal.”

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Brexit, Japan, china

Europe: as a trustworthy partner, a defender of international order. The reform of Japan’s military is received relatively positively across Europe and seen as a rational adaptation to a changing balance of power in Asia. China is concerned about the initiative of the Abe administration, regarded excessively right-wing and entailing an amendment to the constitution. The military dimension may provide a new context to intensify Europe-Japan relations. For Japan, the expansion of the relations is also important because new ways would open to become independent from American military defence. For the future of the relations, enhancing cooperation within international organizations would be favourable. The close Europe-Japan cooperation at the UN on the situation of human rights in North Korea has set a precedent. ECONOMIC RELATIONS In 1987, the EU-Japan Centre for Industrial Cooperation was set up as a cooperation between the European Committee and the Japanese government. It still has an important role in conducting technological transfers as well as scientific and technological collaborations. Within this context, special attention should be paid to the relations between Japan and the United Kingdom. Britain regards Japan as an important economic partner, especially as the importer of high-tech and high-quality goods. The first reaction after the referendum was disappointment, which especially seemed to jeopardize their hopes expressed at the G7 summit organized by Japan in May this year. In 2016, they seek to fulfil their aim expressed towards Britain, Germany and the EU to become an economic partner in 2016, and by now, initial insecurity has been replaced by the self-confidence demonstrated also in the message penned in September. CHINA HAS ITS SAY China has been a major partner to the European Union for years. The EU replaced the United States as China's biggest trading partner in 2006: Sino-European trade exceeded the Sino-U.S. trade volume by some 5.7 billion dollars. European companies such as Airbus, Siemens, Nokia and Volkswagen, made the EU the fourth largest investor in China, it was revealed at the second Hamburg Summit – "China meets Europe” in 2006.

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Regarding today’s economic relations, China and the EU are each other’s biggest source of imports, and China, with its dynamically growing purchase power, is becoming an increasingly important market for Europe. The EU records a significant trade deficit with China, due to, in part, global and Asian value chains, and in part to remaining market access barriers in China. China’s role as a partner also continues after a successful economic restructuring and the accommodation to the new normal of growth pace. It is especially true in the case of the United Kingdom. During Xi Jinping’s visit in 2015, considerable results were achieved regarding deals on nuclear power, and the atmosphere of the meeting was much more cordial than the former visit to the USA. During the visit, the parties signed deals worth 40 billion pounds, for example, China will hold a one-third stake in Britain's new nuclear plant. The two countries declared to form global comprehensive strategic partnership for the 21st century, and, regarding the result achieved, they talked about the new “golden era” of Britain-China relations. However, the Chinese partners pointed out their expectations from the British several times: in September, 2015, Xi Jinping told David Cameron he wanted to see a united European Union, and Foreign Minister Wang made a similar statement in May this year, when a China-EU free trade deal was negotiated. Since the crisis and the indebted countries of the Eurozone put a heavy burden on the British, it was especially important to settle relations with China positively. The deals, however, were not favourable only for the country but promising for the entire European economy. EAST ASIA AND THE EUROPEAN INTEGRATION Japan’s interests promote the integration of Europe, but the question arises: what do other countries in the region think about integration? Is there any sign that the European integration model is a shared value? We will now examine what East Asia thinks of the European integration and the integration in their own region, and we will look at the potential implications of Brexit in this context. The Asian financial crisis in 1997 drew attention to the economic interdependency of East Asian countries. The difficult situation made the countries

realise that they needed more profound regional integration in order to avoid similar problems. And a successful example, the case of the European Union, was an obvious model for integration. The integration, however, was pursued completely differently, because of the characteristics of internal policies; a so-called “open” or “soft” integration started, centred around the Japanese economy. Integration primarily meant aligning financial sectors, which also created the base for tightening political relations in the future. The EU, however, cannot be a complete model for integration, given the different historical backgrounds of the two regions, and their past lacks an effect to promote. In addition, the principle of non-interference in internal affairs on which ASEAN countries and other countries in the region in general focus will remain an obstacle to influence each other’s policymaking, and will further promote bilateral relations. The integration of the European Union adopted an institutionalized model, which will not take place in the Asia any time soon, considering the

current circumstances in the region. Today, Asian integration can be best described as market-driven integration, which does not regard institutionalised political integration necessary. While in the 1980s, these aspirations centred around the Japanese economy, today China has taken this role. China is more open to free trade deals, especially if they involve a reduction in the duties of agricultural products. It would be especially advantageous for significant exporters, such as Vietnam and Thailand, to promote their economic integration. The question what arguments, apart from economic considerations, exist in favour of further Asian integration arises. These include tackling such problems in the region as poverty, environmental pollution, and securing a sustainable supply of energy, since East Asia is anticipated to be the largest net importer of crude oil by 2020. The prevention of crises could have a greater role: with controlling short-term capital flows, the incidents similar to the 1997/1998 Asian financial crisis could be eliminated. As opposed to official institutions, integration can possibly be pursued through networks, making

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Brexit, Japán, Kína

use of interpersonal relations; however, former crises very clearly showed the limits of the Asian “network-style” integration strategies. THE AFTERMATH OF BREXIT Without achieving integration, East Asia is much more dependent on other regions, such as the USA and the European Union. The situation is aggravated by the wavering of the European integration. China would like to see its most important commercial partner’s integration process further develop, and, as Lu Kang, director- general of the information department of the Chinese Ministry of Foreign Affairs said, his country still welcomes the advancement of European integration. For China, one of the possible consequences of the British withdrawal is a setback of its commercial relations, which have been thriving in recent years. In the period between 2009 and 2012, China’s export volume to the United Kingdom increased by 47.9 percent, and the view in Beijing is that the UK will only be a potential commercial partner outside the EU single market. Increasing Chinese investment in the UK would be reversed too, since the UK’s independent monetary system and stable regulatory market mechanisms make it an appealing destination within the larger European market, which would quickly vanish if customs have to be paid, especially, because the UK’s role is being a gateway to the

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European market. An advantage of the country is that its ideals about free trade deals have remained unchanged and they hope the cooperative British will not abandon their initiatives. However, regarding the fact that Britain has not independently implemented any trade policy for 43 years, bilateral trade agreements will require extra efforts. POST-BREXIT PROSPECTS China may become the centre of East Asian integration if Japan is not willing to play a leadership role. Since Chinese economy became the world’s second largest economy in 2010, exceeding Japan, Chinese economic growth has been serving Japanese interests too. Economic integration is definitely important for the region, and in the future, Japan should pay special attention to the further integration of China, representing a huge market, into the international community of which Japan has been a member for quite a while. In fact, this leads to Japan’s greatest concern and, at the same time, greatest opportunity too. Since Japan loses his role of being the number one Asian strategic partner, they hope they will be back on the agenda in the Union after Britain’s withdrawal. Regarding the recent implications of the UK-China relations outlined above, we can conclude that Japan, despite its economic interests, is no match for the offers of the Chinese partnership. Today,

China’s role in Asia is more important than that of Japan, as an important partner in foreign policy, since it pursues protectionism, and has serious economic problems. In addition, as an ally of the USA, its future has become even more insecure, and there are doubts whether the next presidency will continue to provide defence to maintain the status quo in East Asia. Speaking about the Asian status quo, another viewpoint arises: apart from the economy, what other changes will Brexit bring about to this status quo? Yuichi Hosoya, a professor at Keio University, who has participated in the amendment of the Japanese constitution to reform the military, expects changes in Asia’s security due to Brexit. The researcher thinks the new situation may affect the South China Sea disputes, since the British, now becoming independent from the Union, have joined the Asia Infrastructure Investment Bank, which, though voluntarily, Japan and the USA have refused to join to date. Their interests, including already existing ones in energy supply, indicate that the UK will opt for China in the future, which may mean a weaker alliance between G7 countries. China is still a firm supporter of European integration, and for this, it is ready to seek new partners within the Union. One example is the summit held in Riga in November, with the participation of Central and Eastern European countries and China, as part of the so-called “16+1” concept. Premier Li Keqiang

highlighted that China particularly counts on this region to manage its European relations, especially the Belt and Road initiative.xxii No one can tell whether Japan will have a similar strategy focusing on a smaller unit in the future, or it will regard the whole of the EU and its central organs as a primary partner. SUMMARY One of the expectations about Brexit is that Japan can establish a better relationship with the rest of the European Union. The policy based on shared values has particular importance: the British, leaving the EU, will withdraw from the integration determining the European economy, and causing turmoil may be regarded as upsetting the system of values. China, however, will continue to handle Great Britain as a distinguished partner, due to the economic relations, and Japan can enter this empty scene. They should continue to pursue an international policy based on shared values, and as many interfaces must be sought as possible. The role of regional integrations remains decisive in the 21th century, since historical examples demonstrated that this is one of the most effective ways of preserving political and economic stability. Japan still hopes the British will not refuse the integration and further support the peaceful operation of the Union.

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BOOKS, MUSIC, REVIEWS

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BOOK RECOMMENDATION

Ruchir Sharma (2016): The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World

P. Whitney Lackenbauer – Jessica M. Shadian (2016): The Arctic in Global Affairs: A Region in Transformation

After the crisis of 2008, the future prospects of certain countries seemed even more unpredictable than before, given the political unrest and sluggish economic growth. Is there a method with which we could discern which countries will succeed and which will fail in the future? In his book, Ruchir Sharma narrows numerous factors that can shape a country’s fortunes to ten clear rules, which, if projected upon the nations' political, economic, and social conditions, can identify both the next winners and losers. The author was travelling for twenty-five years, interviewing dozens of influential politicians and businessmen, and currently is a leading global strategist of Morgan Stanley. This is a book of original research, which was written by fully considering data, global trends and patterns in economy.

The book examines the forces that are transforming the Arctic region, and related political, economic, commercial and environmental issues. Globalization and climate change are transforming the region, and using new trade routes and exploiting sources of raw materials have created a competition the between countries concerned. Since the Arctic has been considered as terra nullius, much of the debates centre on who owns the Arctic and who should decide. It is not yet clear whether the region will become a source of increased conflict or the role model of successful international cooperation. The book will appeal to anyone researching Arctic politics and the theories of international relations.

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Gideon Rachman (2016): Easternisation: War and Peace in the Asian Century

Andrew Solomon (2016): Far and Away: How Travel Can Change the World

The central theme of the book is that the West’s domination of world politics is coming to a close, the flow of wealth and power is turning from West to East, and a new era of global instability has begun. The notion of Easternisation is the trend resulting in the rise of Asian nations, which is transforming the international balance of power. America’s supremacy is not challenged by rising China only, but also by a potential conflict between Japan, India, Pakistan and North Korea. Russia longs to reclaim its status as a great power, while the Arab world is in turmoil, but the West, struggling with economic malaise and political populism, is unable to react. Gideon Rachman offers a road map to the new the international politics of the twenty-first century, highlighting the main aspects of the initial period of “Easternisation”.

In the last 25 years Andrew Solomon have travelled around the world, and participated in several major events. In his book, he tells these stories to the public, sharing his observations, researches and experiences with us. Following a chronological order, his adventures begin in the last days of the Soviet Union and come to an end in Australia. In the period in between, he conducted a research among the Inuit in Greenland, was in Afghanistan for the fall of the Taliban, made interviews in Qaddafi’s Libya in 2006, and met the representatives of the democratic opposition in Myanmar in 2014, at the dawn of the change of the regime. In his narrative, he demonstrates how history is altered by individuals, and how personal identities shift when governments change. In his book, the author also tracks the cultural, political and spiritual aspects of seismic shifts.

Robert D. Blackwill – Jennifer M. Harris (2016): War by Other Means: Geoeconomics and Statecraft Today, nations increasingly carry out geopolitical combat through economic means and policies governing trade, investment and exchange rates are tools to achieve results both with diplomatic allies and adversaries. Not so in the United States, however: America still too often chooses military solutions, which has no benefits for the country. The authors believe the only alternative to reverse the decline is adopting the principle of geoeconomics. Geo-economics basically means the use of economic instruments to achieve geopolitical goals, but America’s foreign policy has been unable to successfully use its advantages, while other major powers, such as China have been increasingly profiting from it. The book concludes that the USA has to pay a heavy price if its policies are left uncorrected.

Bernard D. Cole (2016): China's Quest for Great Power: Ships, Oil, and Foreign Policy In his book, Bernard D. Cole examines the three major elements – naval power, economy and energy security, foreign policy – through which China’s transformation into a major power is mainly manifested. Compared to the 1980s, the People’s Liberation Army-Navy has seen enormous development, and become a world-class and effective fleet. Since China’s economic growth is based on its reliable access to raw materials, the goals of the fleet include, apart from safeguarding the country, to gain control over strategic transport routes and to guarantee energy security. In achieving geostrategic goals, Chinese foreign policy plays a major role, supported by both security and economic tools. The book also describes the rivalry between the United States and China, and its impact on Asia.

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SUMMARY REVIEW William A. Callahan – China Dreams: 20 Visions of the Future

Liu Mingfe openly argues that China has to build mili-

races, in which the weak (e.g. China’s minorities) lag

tary power after becoming an economic major power,

behind and merge, while the “yellow race” triumphs.

otherwise the country remains vulnerable to Western

According to Kang Youwei, who lived in the early 20th

countries. He thinks that China’s attempt of the great

century, not the victory of the “yellow race” but the

leap in the 1950s to surpass the United States is not

merger of the best races – white and yellow – will mark

over yet, just needs more time than Mao Zedong had

the end of history and will provide the fundamentals

thought. These concepts lead to several conclusions:

for a kind of global cosmopolitanism. In Jiang Rong (Lü

The China Dream (Zhongguo meng) is a

as well as its rejuvenation, the National

although within the country there is more or less a con-

Jiamin)’s novel, China becomes successful by changing

term popularized both in China and in-

Day Military Parade in 2009 (reflecting

sensus that China will lead the world and build a new

its peaceful and authoritarian, “sheep-like” social char-

ternationally in recent years, when Xi Jin-

China’s military power) and the 2010

world order, but there is no agreement on how it will do

acter by merging the “wolf-like” traits of nomadic peo-

ping, having taken the office of general

Shanghai Expo (demonstrating a mod-

it. The most frequently voiced argument is that China

ple. On the contrary, Taiwanese Lung Ying’s dream is a

secretary, announced that the imple-

ernizing China and the technological

will be a super power of a different kind. Mainly the

cosmopolitan, democratic and enlightened Chinese so-

mentation of the China Dream would be-

advancement of the country). Under

main source will be China’s traditional culture, but, as

ciety, adopting a universal model. Chapter five explores

come the hallmark of his administration.

the leadership of the CCP, China has

the book highlights, its Socialist past should not be dis-

Shanghai’s alternative futures. The 2010 expo was re-

President Xi’s China Dream is described

become a moderately well-off society

regarded, either.

jected by locals as a symbolic gesture demonstrating

as the great rejuvenation of China and its rise in the inter-

again and the second largest power of the world. The next

The topic of the third chapter is the relationship be-

the different visions of the central government and

national scene. The author of the book, William A. Calla-

phase seems obvious: to continue the revitalization of

tween the China model and the economy. Justin Yifu,

Shanghai. Jia Zhangke’s film “Shanghai Legend” depicts

han, a professor of International Relations at the London

the nation, as a result of which China can become a world

a leading economist of the World Bank believes that

the difference between the central government and

School of Economics and Political Science, gives voice to

power again. The fact that the leadership of the CCP is

China’s success is a hybrid of state planning and ener-

Shanghai, featuring the residents of the city. In Cai Guo-

China's many different futures in addition to the official

not as united as it seems from abroad is proven by Calla-

gising market power. China must aim at a transition into

qiang’s exhibition “Peasant Da Vincis” the aspirations of

programme.

han’s presenting the difference between the view of the

a consumption-driven market economy but it does not

rural people to escape everyday reality are presented

In the West, people tend to think that the official view-

fraction composed of the children of leading party offi-

necessarily entail a political transformation. Accord-

through their inventions (aeroplanes, an aircraft car-

point of the Chinese Communist Party (CCP) is a decisive

cials, the so-called “princes” (the central figure of which is

ing to Hu Angang, an economist at Tsinghua University,

rier, a submarine). Last, through blogger Han Han, the

opinion in China – and those who are unwilling to support

Xi Jinping), and the socially more sensitive “new left” (with

China’s road is to become such a major power that is the

author introduces the generation of the 1980s, which

it, cannot but defect abroad. In reality, there is an ongoing

Bo Xilai as a leading figure) drawing on China’s Commu-

world’s number 1 in terms of both quantity and quality.

requires the emergence of a civilian society capable of

lively intellectual debate about the path that the Asian

nist heritage and state capitalism.

China will be a responsible and attractive major pow-

exercising control over the state.

country should take. In order to present a diversity of

As opposed to CCP, the dream represented by dissidents

er, having a leading role in technology, the elimination

In the last chapter, Callahan examines the relationship

opinions, the author eavesdrops on fascinating dreams of

(e.g. Liu Xiaobo, Ai Weiwei) is a democratic political re-

of social injustices, environmental protection and pro-

between the prevailing American Dream and Chinese

experts of foreign policy, economists, soldiers, dissidents,

form following economic reforms, in spite of the fact that

duction of cultural goods. The key to realise this goal

exceptionalism. Despite the differences between the

bloggers, and artists in addition to the state programmes

it can be expressed in very different ways. The leaders

is the middle class, whose consumption is high. In this

two, the author demonstrates through a film character

and guidelines, in a total of twenty visions. Callahan was

of the intellectual elite include Zhang Weiwei, a profes-

process, the state plays a wise, coordinating role. Ac-

called Du Lala that these two may even merge into a

not interested only in the opinions of elite intellectuals,

sor of Fudan University, who argues that China has to find

cording to Pan Wei, a professor at Beijing University and

“Chimerican” Dream.

but also in the opinions of intellectuals of other social

its own way, which is different from the model offered by

Cui Zhiyuan, promoter of the economic aspects of the

The greatest merit of the book is that it presents the

classes, not communicating from the traditional academ-

the West. They think that the Chinese model springs from

Chongqing model, China needs a “Chinese” road that is

Chinese intellectual vibe very creatively, which might

ic and political sphere, who can convey their message to a

China’s unique history and culture of several thousands of

neither capitalist nor socialist. Pan regards meritocrat-

surprise readers knowing little of China or through

broader audience, thanks to the latest platforms of mass

years, which is opposite to Western norms and world or-

ic governance and a social structure built on families

Western media only. It is an important book because

media (Weibo, WeChat, etc.) The opinions of citizen intel-

der. Left-wing intellectuals organized around an internet

as China’s success. Cui argues that China’s own road is

such an approach has been rarely adopted (the most

lectuals are noteworthy because they are neither CCP

page called Utopia, with Wang Yang as a leader, also em-

to find a socially sensitive economic model. At the end

known is Thinking China; and Mark Leonard’s works,

officials, and they do not have to adapt to the central

phasize finding China’s own way of development (Chong-

of the chapter, Callahan introduces Chan Koonchung’s

What does China think? (published in Hungarian by

guidelines, nor dissidents, who are enemies of the existing

qing model) but with roots in the Socialist past.

science fiction book set in era in which the age of a well-

Gondolat in 2008) and China 3.0). One of the few de-

regime and we receive their message usually magnified

In the second chapter, Callahan presents the Chinese per-

off, conflict-free but not completely liberal society

fects of the book is allowing little room for unfolding

or sometimes politically distorted. Although the opinion

ceptions of a possible post-American world order. First

comes.

different visions, although the reader would happily

of citizen intellectuals, owing to censorship, is limited be-

comes the “harmonious world” concept of Hu Jintao, for-

In the fourth chapter the books seeks the answer to

emerge in each idea. Although the nature of the book

tween – not specifically defined - boundaries, there is also

mer President of CCP, in which China is idealistically de-

the question who is considered Chinese. Callahan ex-

prompts the author to remain unbiased, in certain cases

room for people to think creatively about China’s future.

picted as tolerant, democratic, harmonious and – first

amines the attitude of the Chinese society to the ques-

he cannot (e.g. Liu Mingfe). The book is an excellent op-

The author explores the most important topics in six chap-

of all – peaceful major power. Second, Zhao Tingyang’s

tion through the story of the half-Chinese, half Afro-

portunity for the reader to dismantle a unilateral, mon-

ters. In the first chapter, he depicts the vision of China out-

“Tianxia” model anticipates the new, Chinese phase of

American talent show contestant, Lou Jing. According

olithic view of China. Exploring the intellectual debates

lined by officials, dissidents and intellectuals. The official

globalization, in which China’s historical role as the moral

to an approach popular under Sun Yatsen, being Chi-

going on in China now is important because it brings the

version of the CCP on China’s future is best characterized

leader of the world and a global government is restored.

nese primarily means a bloodline, going back as far as

major power of the future, which will most probably af-

by the 2008 Olympics (the aim of which was to present

Although Zhao just hints that China will be a new, great

the mythical yellow Emperor, or even the “Peking Man”.

fect our lives as well, closer to us.

China’s soft power, cultural and civilizational magnitude

empire, in his book entitled “The China Dream”, Colonel

In China, another view is that there is a competition of

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Viktor Eszterhai

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Bill Hayton: The South China Sea – The Struggle for Power in Asia

II, the French ruling China, Japan and Vietnam made several attempts to gain control over some islands, but, regarding the balance of power between major powers, it had no considerable significance then. After the Japan occupation during the world war, Communist China, Taiwan and the independent states of Southeast Asia, Vietnam and the Philippines all attempted to expand their influence in the region of the Spratley and the Paracel Islands. After China declared its nine-dash line in 1949, the Philippine attempts lead by Tomas Cloma in the 1950s can be mentioned, then in the 1970s, supposedly thanks to the oil fields discovered in the meantime, South

Author: Péter Klemensits

Based on the latest references, Bill Hayton’s book is an accessible yet scientifically accurate account of the historical, political, strategic and economic aspects of the South China Sea disputes. It is one of the best recent summaries of the problem posing the greatest challenge to the safety of the South Asian region.

Bill Hayton, an associate fellow a Chatham House and a journalist of BBC World News has spent several years as a reporter and consultant in South Asia and his writings have been published, among others, in The Economist, the South China Morning Post, The Diplomat and the National Interest. His first book Vietnam: Rising Dragon was published in 2010. In 2014, Yale University Press published his new book, The South China Sea – The Struggle for Power in Asia, which was extremely positively received. The Economist chose it the book of the year. The author has endeavoured no lesser task than presenting and comprehensively analysing the South China Sea dispute, which today poses a major challenge to security policy. One of the main characteristics of Hayton’s book is its accessible, understandable style, which appeals to the general reader. Basically, this work is not dedicated to a narrow, professional audience, although they can also find new information therein; especially, because extensive research was conducted before the publication of the book. Through face-to-face interviews, the author wanted to gain information firsthand from the people concerned, later incorporating it into the narrative. These personal stories make the account lively while they provide useful additions to the presentation of the facts. In his book, Hayton

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does a fantastic job of covering the historical, legal, economic, political and strategic dimensions of the disputes. In addition, it also gives a detailed account of today’s key issues, such as the relationship of China and the United States, the concept of rebalancing or the role of nationalism in the region. A brief summary of the South China Sea disputes is as follows: referring to historical rights, China claims 90 percent of the area (the nine-dash line area), which is also claimed by other states. The Paracel Islands are contested by the People’s Republic of China, Taiwan and Vietnam, but the situation is even more difficult in the case of the Spratley Islands, since China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei are all concerned. Confrontation is inevitable, since the unclarity of maritime boundaries and land territories are important factors in acquiring the rights to fishing areas and energy carriers as well as the strategic control of important trade routes, which is a priority for China, the USA and their allies. Therefore, all countries from South Asia to East Asia are concerned by the disputes to some extent. The first chapters of the book give an overview of the history of the South China Sea region from the early days until the end of the 20th century. Although

conflicts did not flare up until the late 20th century, the author’s viewpoint is – quite rightly – that understanding the past is essential to interpret current events, since today’s disputes fundamentally root in the past. One of the major problems is that certain countries try to interpret historical facts and conclusions for their own interests to underpin their territorial claims, thus several conflicting theories on the history of the region have been formulated. Overall, it can be concluded that until the arrival of colonisers, international relations, dominated by the relationships of Southeast mandalas and the Chinese vassal system, in which ethnicity, nation, sovereignty hardly had any significance, were strikingly different from the current ones. The arrival of the Portuguese, the Spanish and the Dutch marked the beginning of a process in which the colonizing powers drew the borders of the countries in Southeast Asia in accordance with their spheres of interest. Maps became increasingly significant, while maritime law also received much attention, thanks to Hugo Grotius. By the end of the 19th century, Europeans had demarcated their interests also on the South China Sea – drawing the borderlines in a region in which these had had no significance for centuries –, creating present-day problems. Before World War

then North Vietnam also joined the list of rivals (in the meantime, Taiwan managed to consolidate its control over the largest island, Itu Aba). China did not refrain from military engagements between Saigon, and invaded the Paracel Islands in 1974. Later, when the Socialist Republic of Vietnam was established and the new state did not give up its territorial claims, another maritime battle took place in 1988, resulting in the Chinese occupation of several reefs on the Spratly Islands. Eventually, in 1995, Beijing occupied the Mischief Reef against the Philippines. In chapter 4, seemingly less significant historical events are presented by reference to international law, up to the 20th century, when the practice, still effective today, of demarcating seas and other geographical features was defined by the United Nations Convention on the Law of the Sea in 1982. Being familiar with the criteria of the convention, in certain cases we can draw adequate conclusions about the possible demarcation of geographical features, but there are several factors complicating our judgement. Hayton, after having examined the rightfulness of the territorial claims of different countries, draws the conclusion that, with regard to legal hurdles, almost no valid claims exist from a historical perspective, thus no just decision can be expected from any court. In the rest of the chapter, detailed information is provided about the infrastructure, living conditions and military significance of the islands occupied by particular countries. The next chapter is about the economic significance of the South China Sea, primarily focusing on the circumstances of exploring and exploiting oil and gas fields. Since the 1980s, the countries concerned, China, Vietnam and the Philippines, offered conces-

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Bill Hayton: The South China Sea – The Struggle for Power in Asia

sions to various foreign oil companies (Crestone, BP, Exxon) to exploit energy resources in the disputed parts of the sea, but these projects, owing to the lure of Chinese investments and Beijing’s violent conduct, did not live up to expectations. Parallel to economic development, there is an increasing demand for fossil fuels – especially on behalf of China –, therefore the exploitation of new deposits enjoys priorities. According to the estimates of the U.S. Energy Information Administration, the South China Sea has about 11 billion barrels of oil and 190 trillion cubic feet of natural gas but only a fraction of it could be tradable. Chinese estimates are more optimistic, but since no concrete, comprehensive assessment was made of the region, and experts doubt these opinions, while others regard any drill stem testing in the region senseless, being convinced of the futility of such efforts. Hayton claims the nationalisms of the different countries play an important role in the disputes but not in the way that governments present them. Economic development, the appearance of the internet media and the desire of self-expression are all important drivers of nationalism, which is primarily directed towards neighbouring countries. In Vietnam, we can talk about demonstrations or waves of protests on internet, supported and controlled by the government, instead of spontaneous outbursts of Sinophobia. It also functions as a kind of safety valve, distracting attention from other problems and preventing the expression of criticism against the Communist party. In the Philippines, due to the lack of solutions of social problems, the rage of theorists is directed towards both China and the United States, although the latter one is regarded the source of the greatest problem. Left-wings movements blame the USA and the US-friendly political elite for the weakness and the poverty of the nation and unsettled social conflicts. In China’s case, the situation is similar to that in Vietnam: nationalist manifestations are supported by the state and serve as the distraction of attention, and, in the other hand, also function as sophisticated tools of diplomacy in the hands of the leadership, with the help of which they can demonstrate strength or weakness to foreign countries. On the whole, Hayton claims the nationalists do not exert considerable influence on political decision making in either country; on the contrary, it is the politicians who use nationalistic slogans for their own purposes.

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Chapter 7 tries to explore the diplomatic background of the disputes, in the light of the rivalry between the United States and China. Cambodia is an excellent example of the diplomatic strategy of the small countries in the region: it aims at maintaining a good relationship with both major powers, thwarting them against each other, while profiting as much as possible from their contest. Although the countries of Southeast Asia regard the military dominance of the USA in the region advantageous, economically they perceive China’s rise more intensely, and they do not want to take sides with either of the giants, but take advantage of the opportunities arising. Afterwards, the author describes in full detail the initial period of the American rebalancing concept and the plans drawn in 2008 and 2009, which later constituted the fundamentals of president Obama’s policy on Asia. Regarding the value of the book as a resource, one of the most important part is the detailed description of the critical negotiations of the 21st ASEAN summit taking place in 2012, during which the adoption of a code of conduct facilitating the resolution of the South China Sea disputes failed in the last moment. As we can remember, the chairman of the organization at that time, Cambodia, openly committed itself to China, confronting the initiative of the Philippines and Vietnam, and displaying the disunity of ASEAN countries regarding their relationships with China to the external world.

“According to the estimates of the U.S. Energy Information Administration, the South China Sea has about 11 billion barrels of oil and 190 trillion cubic feet of natural gas.” In the rest of the chapter, the author puts his emphasis on discussing military issues. He draws attention to the difference in China’s and the US’s approach to the American operations aimed to maintain the freedom of navigation, then he presents the development of Chinese military potential, along with American reactions. China’s main goal is to keep the American fleet away its coasts, and state-of-the-art anti-ship bal-

listic missiles can play a great role in that, since they pose a danger to American aircraft carriers too. As a response, the Americans developed the AirSea Battle doctrine, the essence of which is launching kinetic and non-kinetic attacks in a potential conflict with China, primarily to destroy the enemy’s command centres, satellites and radar systems, in line with the principles of information warfare. The USA do not need permanent bases in the region any more, but accessibility to certain areas and infrastructure should be ensured by allies. Despite the evolving arms race, countries of the South East are unable to compete with China, therefore the American-Chinese military rivalry will be predominant also in the future.

tion through bilateral negotiations, during which China’s supremacy over its rivals would prevail. The joint exploitation of raw material resources does not seem to be simple, either, since the Chinese rules of the game are not acceptable for smaller countries. Events in the past have demonstrated that informal meetings often have more outcome than formal negotiations, but on the whole, multilateral agreements between the countries concerned would represent real results. Resolving the disputes in a short term is impossible, because, despite the fact that escalation is not in the interest of either party, they are not willing to remit their claims for economic, political and strategical reasons.

In the last chapter, the author examines the possible alternatives to resolve disputes. The Philippines fundamentally seeks to resolve conflicting interests by reference to international law, but China is distrustful and unwilling to make any compromise about the nine-dash line. Beijing, however, is keen on a resolu-

In the Epilogue, Hayton abandons his pessimism, and believes that there is little chance of the outbreak of a war, although the intensification of tensions is expected from time to time, while the USA remains the dominant power – at least militarily – in Southeast Asia and the Pacific despite China’s efforts.

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Connectography: MAPPING THE REVOLUTION OF NETWORKS Author: Fruzsina Simigh

Globalisation is unstoppably charging ahead and, as a consequence, tightening networks of relationships, infrastructural, commercial, internet-based, interpersonal and supply-demand-based networks and influencing them are much more important elements of power than armies used to be up to the previous century. Conflicts, borders and the determining factors of the ways of asserting interests are transforming. In his book, Connectography, Parag Khanna presents a world where everything is interconnected and currently known borders have lost their significance.

THE LAST DAYS OF BORDERS In his latest book composed of five parts and sixteen chapters, Parag Khanna intends to convince readers that the days of political borders, which we know from geographical atlases and maps, are definitely over, and the newly evolved, forming and continuously changing reality transforms the nature of conflicts. For example, Russia has not annexed Crimea to restore the former territorial borders of the old Soviet Union, and China does not hold on to the nine-dot line on the South China Sea for only territorial expansion purposes, either, but to gain control over the infrastructure and energy resources lying there. It stems from the nature of human civilization that it concentrates in cities and other nodes of networks connecting different units; this partly explains why the borders from colonial times drawn along the political principles of the Westphalian system and often completely ignoring economic, cultural and ethnical reality have been fading. Borders have become increasingly porous, earning a living is not ensured within state borders but by cross-border trade; and power grids, and networks of gas and oil

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pipelines â&#x20AC;&#x201C; which also have little consideration for man-made borders, especially if their source can be found several thousand kilometres farther on the other side of the border â&#x20AC;&#x201C;, have not been even mentioned yet. If we truly want to understand todayâ&#x20AC;&#x2122;s geopolitical events, we must look at processes, which are much more genuinely depicted by these networks and supply-demand-based relationships than any artistically coloured, state-based map. COMPETITIVE CONNECTIVITY AS THE NEW ARMS RACE A world depending on supply chains In line with market rules, Khanna imagines a transactions-based system, where free trade, the elimination of customs duties and the standardization of taxes play a balancing role, and operates by itself through its own system of rules. This system is large and practically independent from super powers. The permanence of demand and supply does not ensure total equality, but enables the standardisation and levelling-off of the global standard of living and regulation by guaranteeing the freedom of competition. It is much more important to create the free flow of resources, capital, workforce and trade, to expand the connection network as widely as possible, since we can influence only what we are connected with.

Hyper-globalisation instead of globalization Technology and innovations inevitably drive the world not just towards globalization but hyperglobalisation, which, at best, might be just slowed down by warfare. Although after 9/11, the collapse of the WTO Doha round of negotiations in 2006, and, most recently, the financial crisis of 2008, the death of globalization was heralded by many, Khanna argues that we live in the golden age of globalization, underpinning this by the significance of export, the re-evaluation of old trade routes, the thickening network of internet and flights, the multiplication of inter-regional trade, and by the fact that foreign investment accounts for one-third of the world GDP, and the regions participating in global markets complete and balance each other. To all these, connectivity and the infrastructural systems enabling it are the key. And it leads to the conclusion that it is not the possession of an area but the use of the resources or road and gas pipeline networks that can be found there that counts. The continuous flow of resources through them is the thing that would enable, for example, the United States to access new workforce, or China to ensure the energy and raw material import required for economic growth, which indirectly guarantee the stability of power of the ruling Communist party. In addition, connectivity is favourable to competition as well: producers and workforce can flow

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more freely, which, in the long term, results in, according to the rules of the market, levelling wages, production costs, regulation and standards, which can be absolutely favourable to developing regions. Importantly, this connection-based new globalization is not based on dependency from major powers on top, but all regions, having adequate infrastructures, may take part in this interdependent system.

be climbed as high up to the added value curve as possible. For a country, the goal will be to cover the broadest possible spectrum of the production value chain. Naturally, it also includes cutting supply chains to be of as an ideal length as possible – although sooner or later the realities of the market will manage this – in order to reduce, for example, the carbon footprint of supply chains.

World War III or a slow tug of war? The number of conflicts among states is declining, while conflicts are still present – their nature and their participants, however, is changing. Instead of armies, cities, companies and huge federations are standing in the nodes of a vast network of ropes, and pull each other depending on who has control over supply chains. These wars are won slowly and carefully, and for the most part, opposing teams dig in their heels to hold ground and wait for the other party to tire out. The new tool of war is reciprocity guaranteed along networking and connectivity. Interconnectivity is a blessing and a curse, and the prerequisite of victory is that the players should

China is building the future – the new Silk Road Connectivity is as much of a public good as security is, and after the cold war the USA volunteered to provide it; however, China is better at the former one. In addition, an advantage is being free of ideologies – since infrastructure is equally demanded everywhere, and economic interest have considerable force. as an example, Khanna gives Russia, which fears no country more than China, yet, together they feign an anti-Western front while China buys up growing volumes of Russian resource supplies. Even if the size of Chinese economy surpassed the American one, this latter one would still be considered a greater power, since this country commands the most extensive financial network of the world, in which the role of USD is indisputable. The USA, however, has not acknowledged yet that influencing, if not ruling, commercial networks and posts is much more important than global military presence. It is a mistake to measure power through military potential and military spending, because it is much more important who builds ports, road networks, schools and hospitals than who build military bases. And regarding investments – both domestic and cross-border ones – of the former kind, China is far ahead of the United States. Although connecting people, enterprises, cities, etc. may mean ending poverty, underdevelopment and the exploitation of the weaker ones, it is also true that momentarily there is far greater demand for than supply of infrastructure in the world. By recognizing this and, naturally, its own interests, China wants to step up against it by reviving and further expanding old trade routes. China commenced to build its empire not in the way the Russian tsars did, because territorial expansion would never end; but, with the mindset of the Dutch colonisers of the 17th century, it aims at influencing commercial hubs, building roads and winning the former “big game”

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of Great Britain and Russia along the Silk Road. For example, by increasing the number of containers transported from Asia to Europe from 2,500 in 2012 to 7.5 billion by 2020. In addition, the New Silk Road may offer an alternative to the dilemma of the Strait of Malacca, the control of which implies lots of potential confrontation. CITIES AND EMPIRES INSTEAD OF COUNTRIES

diplomacy transforming into “diplomacity” (as an example, the first trade agreement concluded between cities, signed by Massachusetts and Guangdong in 1983, and the free trade deal negotiated independently and arbitrarily by Shanghai). In the developing world, they attract talent and workforce, thus they raise the spillover effect of development outcomes, if they are adequately connected with each other and other regions of the country.

The era of nation-states is over. On the first hand, there are less than ten countries which can declare themselves purely nation-states; on the other hand, the future lies in cities and federations. For example, Yugoslavia has become a Balkan Free Trade Zone, in line with economic realities. Urban life has entailed a new identity. Urban residents often feel they have much more in common with each other – irrespectively of their nationalities – than with their own compatriots, living, for example, in rural areas. It is a considerable community-shaping force, reflecting reality far more accurately than state borders. Governments are coming to terms with becoming unable to adequately fulfil a significant part of their tasks and they will be delegated onto urban levels as it is done in practice. By 2025, there will be more than 40 megacities in the world that, thanks to their economic and demographic weight, will manoeuvre for increasing autonomy – a process described by Khanna as

Urban development – the USA could take an example from China For implementation, however, a conscious urban development plan is required, like the one seen in China, the differences of which are presented by Khanna through the example of Detroit és Dongguan. It is a grave problem in the USA that cities have no autonomy from the centre, and since they are relatively small, they are not able to generate investment on their own, through which they could build infrastructure and innovate. In China, however, the central government places great emphasis on the development of cities, but also expects them to have their share in it. The city’s leadership is backed by the subsidy of the Chinese national bank, which has contributed to the construction of the enormous buildings and the road network, and although it seemed a ghost city then, by now demand has also caught up with vacant supply. Beijing promotes experimenting, and, at the same time, provides a

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other, and this dynamic creates stability. Khanna depicts this as a kind of ideal: a network of strong cities, where government remains powerful enough to push development into the less developed Western regions of the country without hindering the development of cities. On the contrary, the USA, as one of the less urbanized countries of the developed world, lags far behind, and struggles to retain its own workforce. The inertia of cities and their dependency on Washington also build up a backlog in the field of “soft” infrastructure as well as road and railway networks, which further intensifies the opposition within cities and the country.

safety net in case of a potential failure, and developments thrive in this ambience. China is becoming a network of megacities, which attract investments, workforce and innovation by competing with each

Federations – new empires At the same time, we can also observe the emergence of large federations, in which different resources are added and shared, enhancing efficiency and the opportunities to exert interests globally. Examples include the closer cooperation between the North-American states in the field of sharing energy and water (here, again, building from the bottom up, through inter-city relations), the EU or ASEAN. In addition, stability within these “federations” (for example, granting autonomy for member states) would mean the most reliable defence

against potential imperialist expansions, or the attempts of particular member states to seize power. The migration challenge It coincides with the necessity to address the migration challenge. Urbanisation is inevitable, which may lead to the emergence of an extremely heterogeneous and unequal society in a relatively limited area. Without adequate infrastructure, which is, for instance, required for commuting from agglomerations; or without supply chains that create new workplaces, there is a risk that tensions break loose after a while. Active integration of special economic zones into the economy instead of separating them with a strict border, as if they were merely a laboratory experiment, may be helpful. CONNECTIONS RESOLVE EVERYTHING If the number of employees cannot solve the problems of the economy, it is time to invest in the improvement of interpersonal relationships. Investments are needed to be focused on both physical

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and “soft” infrastructure, even if it entails the increase of debts. Neither higher nor lower taxes work; relationships must be built, because they create new demand-supply chains, and are able to steer them onto more favourable and balanced terms. In addition, Khanna argues, countries spending more than 25 percent on such developments, can boast stable, long-term growth. The world is progressing towards devolution and not democratization, and we must accept that. State borders are obsolete, and the greatest challenge is posed to sovereignty by internal and not external factors, the market realities presented by cities and demand-supply. Simultaneously, infrastructure must be developed in line with preparing for environmental changes, the rise of sea level due to the melting of polar ice, and potential new arable lands releasing in Russia and Canada. First of all, sustainable supply chains must be created – and they should be displayed in progress and in a much bolder manner, even in 3D, on maps, because they constitute geopolitical reality.

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John Tackara – HOW TO THRIVE IN THE NEXT ECONOMY

a standard system, monitoring resources coming in and being generated there, recycling the outflow of processed materials, products, services and waste in the form of resources. TURNING POINTS Thackara’s change-oriented approach is reflected by how chapters are edited, and novelties are interpreted as new stories starting from changing human needs. In these 10 chapters, he describes the new ways how people can live in and take possession of the world. He starts with drawing attention to an undesired phenomenon of current development, the more frequently occurring fast and out-of-touch design of Indian technological cities, demonstrated by the example of “Trans-Ganga hi-tech city”. The majority of these cities grown along fast, inorganic development pathways represent a built environment consisting of separate residential, commercial and industrial zones, whose purposes do not include organizing local communities, creating public services close to people both in a physical and mental sense and using space creatively and diversely but they only serve growth measured in terms of economic profit.

Author: Sára Farkas

ABOUT THE AUTHOR Author and producer John Thackara has spent a lifetime examining forms of life serving a sustainable future. He shares his conclusions and stories with his audience at his blog, and by inviting the leaders of best practice projects, he has organized several festivals and national biennials to convey messages, including “Designs of the Time” in England and “City Eco Lab” in France, of which he has been the programme director. Thackara has created a new form of workshops called xskools, that helps diverse groups of society develop the design agenda for their bioregion. He has gained wide experience of leading institutions as the Director of the Netherlands Design Institute (1993-1999), and a Senior Fellow at the Royal College of Art, in London (1998-2002). Currently, he is Founder and Director of “Doors of Perception”, an event production company specialized in sustainability and social innovations. In his literary career, Thackara has published 10 books. His most popular works include Design After Modernism: Beyond the Objects and In the Bubble: Designing in a Complex World. His most recent title is How To Thrive In the Next Economy, published by Thames & Hudson, in London. THE FUTURE HAS ALREADY BEGUN The starting point of the book is the axiom that economic processes take place at an accelerated rate, but without considering long-term natural and social effects, lacking a system approach and aligned governance and in a currently unsustainable manner. The present system of economic development has reached the limit to its creativity, and quality growth and development is possible only in an economic sys-

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tem based on new fundamentals. The shift towards this has already started within the framework of local community initiatives. Community gardening for social purposes in cities, “smart management” of rainwater, building new types of urban infrastructure, or upcycling, a more and more popular, value-adding activity among designers, and the emergence and spread of local currencies, the popularity of more personal and direct so-called peer-to-peer (P2P) networks are all identified by the author as a shift towards eco-social systems, the forerunners of revitalization in economic processes. in his book, Thackara describes the most important building blocks of the operation and the system-level context of this new economy, and the uniqueness of his work lies in the following characteristics:

– It is change-oriented, he identifies the first steps required to trigger changes starting from the current situation, in addition to describing their theoretical background along a system approach. – It highlights that economy should operate in harmony with and as a part of nature, as an ecological system (biotope), subordinating its growth targets to the reasonable fulfilment of people’s realistic needs. – “Living Labs” – searching for living laboratories: The author apparently links his proposals with innovative local projects that create the best practices of shifting towards them and of conscious interventions. – It makes new notions widely known, creating a jargon for thinking about economy, a new sign language, in which economy is interpreted as a part of life, a sub-system of the eco-system constituting an organic and closed system. The author primarily emphasizes this closed nature when examining the processes of the metabolism of the world around us, in which the active coordinating effects of feedback mechanisms are also exerted. In the book, the proposal of this cycle approach appears for example in managing the processes of urban metabolism in

The first turning point is, the author emphasizes, the remedial effects in process management instead of exploiting and consuming raw materials. Establishing and creating re-connecting points, first and foremost, reconnecting with geographical space, are in the centre of implementation. It simultaneously means the reorganization and creation of local processes of urban-rural value chains, and the introduction of the monitoring practice of the above-mentioned urban metabolic mechanisms. As for resource chains, Thackara regards the organization of food chains, production and distribution on a regional basis the most important, so that access to food should be part of the public good, as a fundamental right, in the new economy. Reconnecting with arable land, its protection, cultivation and general management should be better known and recognized, emphasizing education to achieve a common understanding of the role of soil in a healthy society. As a key change, he mentions the shift from a monocultural, intensive production method of growing a single crop across a vast area of arable land towards the (re)introduction of a production culture working in a more mixed and diverse structure.

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JOHN THACKARA – HOW TO THRIVE IN THE NEXT ECONOMY

In the row of reconnecting processes, Thackara highlights the cooperation of artists and systems thinkers, demonstrating it with two positive social examples. The author primarily interprets the (re)connection of artists and systems thinkers as the allocation of obvious and high-level goals as well as long-term aspirations to technological development and creative processes (design activity). His significance lies in leading and coordinating the activities of the “new creative” movement evolved as new, technology-based solutions spread. The author highlights that encouraging these new connections is important so that the application of technology should not be a goal in itself, a curiosity, but it should serve the active shift from former unsustainable economic development processes. Through P2P relationships, fruitful collaborations between artists and systems thinkers and within their respective groups will evolve more easily. The global spread of the unMonestary movement, identifying themselves as a “social clinic serving the future”, is a role model of the social motivation and new forms of social cooperation of these new connections. Their mission is, by reinterpreting the lifestyle of the (life) communities of old monasteries, to build online and offline spaces for active communities serving social and self-development purposes and to contribute as much as possible to broaden and improve the community’s knowledge through their members’ knowledge and skills. In short, their goal is “work that make sense”, replacing the goals of earning a living and making money from work, which does not lead to a welfare development. Their first “prototype community” opened its doors in February 2014 in Matera, Italy, thanks to the city’s inclusive community and initiative. The social initiative of establishing a new work and lifestyle model received great attention. Their activities include building spaces and recruiting volunteers for local communities to establish interaction-based, cooperative and strong social relationships, working on the implementation of their work or leisure projects. The Bristol New Economy Summit (BNE2015) was held in October, 2015 as the forum of innovative economists, with a total of 600,000 visitors(!) to create healthier models, concepts and platforms shifting away from the money-based economy (new economization). In this context, the author highlights that new economy is characterized by the following seven features:

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– Community forms of ownership, spread of community ownership. – Continuous transformations, changes, transition periods, often created by groups working on technological solutions. – P2P models: connections, conversations of highly qualified people, resulting in new models, practices and forms of sharing. – Local money: at the summit in Bristol, nine (!) groups of local money designers gathered. The spread of complementary currencies is emphasized by the author through the example of Bristol’s mayor, who paid with the Bristol pound (£B) at the summit. (The Bristol pound was launched in 2012, and is backed 1-1 by pound sterling. The Bristol Pounds can be used in both paper and electronic format, payments can be made in paper Bristol Pounds, online or with a mobile phone.) – Buen Vivir: the concept of “good living”, originating in Latin America and referred to as a civilizational base, is a society based on mutual acceptance, equality and strong communities, and its sustainable and reasonable operations, different from the current system of nature and the economy. – Bioregionalism: local economic development model based on knowing and carefully using local natural resources, where natural values are also protected by tools of economic regulation (taxes, congestion charges). – Hackers, intuitive people and artists fitting in “Do-ItYourself” movements. In urban areas, new types of infrastructures are needed to ensure sustainability, which primarily means the introduction of a more careful form of water management, and, in particular, the system of draining, using and retaining rain water. The author warns of another critical point of setting up urban infrastructural systems, namely the difficulty in making decisions about aligning infrastructures and determining their endpoints. Thackara expects an active participation in creating a socially sensitive, inclusive social environment and from urban residents as self-organising communities too. One progressive example is the global spread of community-based urban gardens, where fruit and vegetables are grown with the purpose of producing food, in many cases providing mini plots of land for deprived people. The question of mobility and the realistic assessment of its necessity is also critical to the system. This point is often interpreted as a starting point

from human needs and the pre-requisite of development, but the car-dependent life that evolved in developed countries and the economy of oil-based countries, in most of the cases, do not result in real development in fulfilling their societies’ reasonable needs on a higher level. The author argues that in Cuba, for instance, there was a scarcity of oil, cars and imported food due to effects of the embargo for 60 years, and the health of its citizens is almost the same, in spite of the fact that Cuba’s spending on health amounts to only 5 percent in comparison with the USA. The author also mentions Bangladesh, one of the poorest countries of the world, where, despite stagnating low income levels, significant results have been achieved in reducing child mortality, as well as in several other indicators characterising the health status of the population. Basic needs, job opportunities, and the proximity of regularly used services, a compact settlement pattern designed accordingly, and the organisation of regional and economic processes on local levels are featured as distinguished factors in the book. Thackara’s another significant statement is that mobility is not a pre-requisite for development, it is not a basic human need, since the basic needs of the population can be fulfilled by the regional organisation of economic processes and an optimal, compact design of settlement patterns. In the new economy, living in a community, a social lifestyle is regarded a basic need by Thackara, therefore assessing poverty and wealth will have new points of reference and social capital will have added value. This type of capital is a more significant condition of providing the necessities of life than wealth in several less developed East Asian countries. In these regions, the public services provided as social benefits in developed countries are present as favours within families and neighbourhoods. Despite

their lack of data and infocommunications infrastructure, society and enterprises display a high level of creativity.

“Social capital will have added value.” The last chapter of the book presents the path leading from the approach to the different ways of action, real interventions. As Thackara puts it, we are living in a 'desert of the real', despite the large supplies of data and information, our natural resources are running out, and only a low level of increase in the efficiency of energy management has been achieved. Ultimately, the development of information technology did not result in a global increase of available resources, the quality improvement of our environment and society’s progress in wellbeing. Therefore, the author advocates the repositioning of mankind in the ecological system of the Earth, in which it is necessary to acknowledge that nature and the landscape around us determine our resources, opportunities and limits. If we accept these conditions, a more sustainable system can evolve even on a global scale, where growth means broadening our knowledge in a more balanced structure. CONCLUSION – “THINK LIKE A FOREST” In order to realise growth in the new economy and to govern this continuously changing system, Thackara recommends the introduction of an approach and a system of creating a dynamic balance based on diversity. In his closing message, in the forest metaphor, the author calls the readers’ attention to the stewardship of natural resources.

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FEMALE ARTISTS AROUND THE WORLD – NEW RELEASES Every year, British world music magazine Songlines recognises the best music artists and albums. In 2016, the Best Artist award was granted to Portuguese fado singer Mariza, the Best Album was Damon Albarn’s Africa Express, the best performer in the Africa & Middle East region was Mali-based kora (a 22-string instrument) player Seckou Keita, the best artist of the Americas was Mexican Lila Downs, the best Asian artist was Indian slide guitarist Debashish Bhattacharya, and the best European artist was English Sam Lee. In

the Fusion category, the album Musique de Nuit by French cellist Vincent Segal and Malian kora maestro Ballake Sissoko was the best. A review of the English edition of the book entitled The Story of Hungarian Folk, sponsored by PAGEO Foundation, was published in Songlines magazine, and received the highest score. In this edition, we present a selection of the winners’ albums, and we invite you for a musical journey around the world with the new releases of the world’s most special female performers.

MARIZA – Mundo (Warner Music Portugal 2016) Mariza Nunes was born in Mozambique in 1973. At age three, her family moved to Portugal. She was raised in Lisbon's historic quarter of Mouraria, the cradle of fado. Fado is not simply a music genre but the Portuguese feel of life, featuring sea, solitude and love. In the 19th century, it was the music of the cafés. Fado singers performed in the café of Mariza’s parents, and they inspired her to start singing at the age of 5. Apart from fado, the attention of teenage Mariza was also raised by other styles, such as jazz and bossa nova. She became an instant success in a broadcast tribute to the most famous fado singer (Amalia Rodrigues) in 1999. in 2002, Mariza’s debut album, Fado em Mim was released, making her known around the world. She became immersed in

Lila Downs – Balas y Chocolate (Sony Music – 2016)

Half Mexican Indian singer Lila Downs is capable of uniting cultures with her special songs and extraordinary voice. Lila Downs was born in Oaxaca, Mexico in 1968, as the daughter of a Mixtec Indian mother and ScottishAmerican father. Her parents met in Mexico City, where her mother sang in bars. Downs was eight when she started to sing Mariachi songs to her family but there was a long way to go up to her singing career. The excellent singer sings in English and Spanish as well as Indian languages. In 2002, Downs played the part of a tango singer in the biopic drama film Frida depicting the life of renowned Mexican painter Frida Kahlo, featuring Salma Hayek. Her album La Cantina, released in 2006, was an even greater international success than her previous albums, and she has become a permanent performer of

Anoushka Shanka – Land of Gold (Deutche Gramophon Gmbh, Berlin – 2016) the fado tradition, and created her own style. in 2003 she won the Best European Artist of World Music award, and was nominated to the Grammy Award. 13 years later, Mariza was best singer again, her new album Mundo was released, and she still presents Portuguese fado from a completely new angle.

AZIZA BRAHIM– Abbar El Hamada (Glitterbeat Records – 2016)

Aziza Brahim was born in 1976 in a refugee camp in Algeria, where her family, and many other Sahrawis, had settled, fleeing from the outbreak of an armed conflict in Western Africa. Aziza discovered music at an early age as a way to express herself. In Algeria, she joined the Na-

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the greatest festivals all over the world. The songs of her later record Shake Away are a tribute to the shamans and healers who play an extremely important part in indigenous cultures. The basics of Lila Downs’s music include Mexican styles, cumbia and ranchera, as well as blues, jazz, pop and rock. Her album Balas y Chocolate, released last year, won the Best Album of World Music in the Americas award.

tional Saharawi Music Group, and in 2000 she moved to Spain, and founded her own group Gulili Mankoo. Moving places also meant being exposed to new impressions: Iberian-Moor, Malinese and Cuban motifs are incorporated into a desert blues base. Her album Soutak (Your Voice) topped the World Music Charts Europe in 2014, and in the same year she debuted before the Hungarian audience in a successful concert held at the capital’s major cultural hub, Müpa, and she was a performer of WOMEX in Budapest again in 2015, where she presented her new album, which reached high positions on world music charts in Europe right after its release.

Her father, Ravi Shankar became world-famous sitar maestro. Anoushka, who was eight years old at that time, stepped onto a path, along which she was helped by the greatest and best master possible: her father. Her first solo album was simply called a miracle, which has been reinforced by the fact that she has received the British House of Commons Shield – she has been the youngest lady ever granted this award. Anoushka has been successful in the film industry, too. At the International Film Festival of India, she received the Best

Supporting Actress award for her role in the film Dance Like A Man. It is no wonder that she was chosen as one of 20 Asian Heroes by the Asia edition of Time magazine. Two years ago, her music style took a new turn with her album Rise, on which she is not performing her own music alone on the sitar but with a handpicked ensemble of brilliant musicians. Rise gave Anoushka another Grammy nomination in the Best Contemporary World Music category, and she also became the first Indian to play at the Grammy Awards. His new albums, Traveller, released in 2011, Home, released in 2015, and Land of Gold released in 2016, represent this direction. As she admits, further is the only direction Anoushka knows. “On the one hand it means so much to me explore the Indian Classical music my father taught me, and on the other hand I am so deeply excited to be discovering my own creative voice. I really hope to create that balance, because that is who I am. And at the end of the day, you've got to be making music because you love it, and because it's honest.”

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FEMALE ARTISTS AROUND THE WORLD – NEW RELEASES

Sainkho Namtchylak – Like a bird or spirit, not a face (Ponderosa Music & Art Srl 2015)

Sainkho Namtchylak is the best-known female artist of Tuvan throat singing, a genre dominated by men. She blends this traditional Tuvan way of singing with jazz, classical and electronic music. Her grandparents were nomads, and her parents were schoolteachers, who were very fond of music. Music forms a very important part of the lives of Tuvan people; they sing all the time. Sainkho studied music at a local college (IppolotovaIvanova), then in Moscow. She was engaged in Tuvan and Mongolian throat singing as well as Lamaism and Siberian shamanic traditions outside school. On her album, Naked Spirit, released in 1998, she was accom-

panied by Armenian dudu-player Djivan Gasparyan. On Stepmother City, recorded in 2000, texts of Buddhist monks from 5th century BC are included. Her album Who Stole The Sky?, featuring, among others, pianist Stefano Bollani and kora-player Lao Kouyate, was chosen the best album of world music by the BBC in 2003. In 2015, Sainkho’s interest turned towards the Sahara and she recordeed her album Like a Bird or Spirit, Not a Face, including 10 songs, with the members of the world-famous Tuareg band Tinariwen. This great album is an extraordinary mix of desert blues and Mongolian throat-singing.

Rokie Traore – NéSo (Noneusch Records 2016) Originating from a family of diplomats, Rokia Traoré has lived in several countries of the world with her parents, from North Africa to the middle East and Western Europe. She started singing and playing the guitar as a child. For the singer of Malian origins, music is not merely a tool to entertain but also to raise awareness about current social problems. Apart from the difficulties of the lives of African women, the miserable life of starving children or the problem of statelessness, she also sings about the most beautiful human sentiments, including love and affection. The support and guidance of famous Malian musician, Ali Farka Touré means a lot to her. In Rokia Traoré’s music, some traditional instruments, such as the balafon, a xylophone-like instrument made of pumpkin and with

Natacha Atlas was born in Belgium in 1964-ben, to an English mother and an Egyptian father. The family lived in the Moroccan quarter of the Belgian capital, Brussels, thus she was exposed to and greatly impressed

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“being at home”. Rokie Traore also performed at TED global conference.

Leyla McCalla – A day for the hunter, a day for the prey (Jazz Village – Harmonia Mundi 2016)

Natacha Atlas – Myriad Road (Mi’ister Productions 2015) by several cultures as a child. She can speak English, French, Spanish and Arabic. Later she moved to Northampton, England. As a teenager, she was the singer of a local rock band, then she returned to her motherland for a while, where she performed in Arabic and Turkish bars and salsa clubs. Since 1990, she has been a member of a formation called Transglobal Underground, the style of which is based on the members’ diverse tastes for music and cultural backgrounds. In her later albums she returned to great Egyptian artists and her album Ana Hina is considered the best albums of the Middle East in music history. In her independent works, Arabic traditions feature heavily, only accompanied by Western fusion. She made music with Peter Gabriel, Sinead O’Connor, Jean-Michel Jarre, Nigel Kennedy, Indian Nitin Sawhney and Talvin Singh. She met Lebanese trumpet player and jazz musician Ibrahim Maalouf in Istanbul, and this encounter gave birth to an album, Myriad Road with 10 wonderful songs in 2016, on the border of a jazz, Arabic chansons and Eastern maqams. Natacha Atlas’s first jazz album, is also regraded as a curiosity, especially the enchanting song entitled Oasis.

resonators, and ngoni, a traditional stringed, lute-like musical instrument from West Africa, are very important. His seventh album Ne So was released in spring, 2016 by one of the largest record companies of world music, Noneusch. In Bambara language Ne So means

Haiti-born Leyla McCalla plays the cello, and her second solo album has been released recently. She was born in New York, spent her childhood in Ghana, Africa.

She then moved to New Orleans, where she still lives and works. She sings in French, Haitian Creole and English, plays the cello, violoncello, banjo and guitar. She is inspired by the Haitian Creole musical tradition, American jazz and folk, and she also plays Cajun music. She became world-famous as member of the Chocolate Drops, then she made her first solo album Vari-Colored Songs: A Tribute to Langston Hughes in 2013, which was awarded as the Best Album of the year by Songlines. Her new album, including 12 songs, is light, diverse, colourful and definitely unique.

+ ENCORE – 3 LITTLE GIRLS FÉLIX LAJKÓ – Most jöttem (I’ve just arrived; Fonó Records – 2016) Félix Lajkó’s music draws richly from the music traditions that influenced his everyday life from childhood. This means the folk music of his native Voivodina region which includes also Hungarian, Gypsy, and even Romanian folk music. On this record entitled Most jöttem we hear virtuoso variations on folk themes for violin and zither with extraordinary singers such as Bea Palya, Gabriella Tintér and Anna Csizmadia, and musicians such as László Porteleki, Antal Brasnyó and Gergő Szabó Csobán. “In the Folk project, with folk musician friends and singers, we have been able to put together a show

that rolls and is danceable from beginning to end. It’s either virtuosity, the violins, or the zither solos, or the singers’ uniqueness that reigns from moment to moment. Of course the finale is the best moment here too, when the ladies together sing melodies that will keep us humming for days.” The overall impact is frenetic. It cannot and needn’t be taught how the band is “tampering with” folk music hits. Just enjoy listening to it!

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top 10

Hungarians in the global forefront In order to preserve and to convey national values, the Central Bank of Hungary and Pallas Athéné Geopolitical Foundation intend to draw global attention to young Hungarian talents and creative communities. “TOP 10 - Hungarians in the global forefront” is a joint publication introducing Hungarian talents we can be proud of, who, as role models, encourage and inspire today’s youngsters. Because “we, Hungarians can make it into the top league in Europe and globally”. Our selection is an overview of success stories from the past three years, encompassing the fields of gastronomy, sport, culture, tourism, technology and science, highlighting such segments which usually remain hidden from the general public. Let’s take a look at those sensational Hungarians who recently added colours to the world-wide web and the map of understanding the 21st century.

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uploads/606968147_EPC%20Issue%20Paper%2023%20 EU%20Asian%20Integration.pdf Breitbart London: China wants more European integration ahead Brexit vote. In: Breitbart. 26th May 2016, http://www. breitbart.com/london/2016/05/26/china-wants-europeanunion-integration-ahead-brexit-vote/ DUCHATEL, Mathieu: The new Japan paradox. In: European Council on Foreign Relations. 07/12/2015, http://www.ecfr. eu/article/commentary_the_new_japan_paradox5044 Embassy of the People’s Republic of China in the United States of America: EU replaces U.S. as biggest trading partner of China. http://www.china-embassy.org/eng/xw/t272113. htm European Commission: China - Countries and regions. http:// ec.europa.eu/trade/policy/countries-and-regions/countries/china/ HOSOYA, Yuichi: Asia and the liberal international order, post-Brexit. In: The Strait Times. 26/18/2016, http://www. straitstimes.com/opinion/asia-and-the-liberal-international-order-post-brexit HU, Yongqi: Premier Li: China is a Firm Supporter of European integration. In: China Daily. 06/11/2016, http://www.chinadaily.com.cn/world/2016liattendsSCOCCEEC/2016-11/06/ content_27288347.htm MIE, Ayako – Thomas, Beatrice – Osumi, Magdalena: Brexit Could Hamper Japan’s Efforts On Eu Deal: Analysts. In: The Japan Times. 24/06/2016, http://www.japantimes.co.jp/ news/2016/06/24/national/brexit-hamper-japans-effortseu-deal-analysts/#.WD87BbLhDIV Mofa.go.jp: Japan’s Message to the United Kingdom and the European Union. http://www.mofa.go.jp/files/000185466. pdf MÖLLER, Almut – OLIVER, Tim (ed.): The United Kingdom and the European Union: What would a “Brexit” mean for the EU and other States around the World? DGAP analyse. No. 16., September, 2014 SWINFORD, Steven – McCann, Kate: G20 Summit: Japan warns it will take banks and car makers out of UK - unless it gets Brexit trade deal. In: The Telegraph. 4th September, 2016. http://www.telegraph.co.uk/news/2016/09/04/g20-summit-us-president-barack-obama-says-britain-was-wrongto-v/ TANIGUCHI, Tomohiko: Brexit: Consequences for Japan. In: The Diplomat. 08/07/2016, http://thediplomat. com/2016/07/brexit-the-consequences-for-japan/ TIAN, Shaohui: Big power diplomacy: China, Britain enhance trust and trade. In: Xinhuanet. 26/10/2015, http://news.xinhuanet.com/english/2015-10/26/c_134751864.htm UK-JAPAN JOINT STATEMENT: A DYNAMIC STRATEGIC PARTNERSHIP FOR THE 21 ST CENTURY. http://www.mofa. go.jp/files/000037456.pdf Maritime Transport is in Crisis Bloomberg News: China Shipping Reform Erases More Than $850 Million in Value. In: Bloomberg News, 14/12/2015, http://www.bloomberg.com/news/articles/2015-12-14/ cosco-singapore-plunges-to-lowest-in-11-years-on-profitwarning Cargosmart.com: Improve Shipment Visibility with Cargo Tracking. http://cargosmart.com/en/solutions/CargoSmart_ Tracking.pdf CHURCHILL, John: Smart containers listen and talk. 10/02/2016, http://www.maersk.com/en/the-maersk-group/about-us/publications/group-annual-magazine/2015/smart-containers-listen-and-talk CMA CGM: Worldwide innovation: The CMA CMG BOUGAINVILLE is the first container ship ever to have in-built

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connected container technology thanks to the Group’s partnership with TRAXENS. In: CMA CMG, 01/10/2015., https:// www.cma-cgm.com/news/962/worldwide-innovation-thecmacgm-bougainville-is-the-first-container-ship-ever-tohavein-built-connected-container-technology-thanks-tothegroup-s-partnership-with-traxens FICENEC, John: Zombie ships send maritim freight into worst crisis in living memory. In: telegraph.co.uk, 22/01/2016, http://www.telegraph.co.uk/finance/12108453/Zombieshipssend-maritime-freight-into-worst-crisis-in-living-memory.html GAPPER, John: Shrink the big ship to fit the world. In: Financial Times,08/09/ 2016, https://www.ft.com/content/823371fc743e-11e6-b60a-de4532d5ea35 Gazprom: Northern Sea Route, In: Gazprom, http://www. gazprom-mt.com/WhatWeDo/Pages/Northern-Sea-Route. aspx GUNNARSSON, Bjørn: Future Development of the Northern Sea Route. In: The Maritime Executive. 18/12/2016, http:// www.maritime-executive.com/editorials/future-development-of-the-northern-sea-route HALS, Tom: Hanjin says U.S.-bound ship is being held ’hostage’. In: reuters.com, 15/09/2016, http://www.reuters.com/ article/us-hanjin-shipping-debt-usa-bankruptcy-idUSKCN11L2NL International Transport Forum: The Impact of Mega-Ships. In: International Transport Forum, OECD/ITF, 01/05/2015, http://www.itf-oecd.org/sites/default/files/docs/15cspa_ mega-ships.pdf JAYNE, Tilly: Startups scramble to reform shipping industry. In: ventureburn.com, 16/02/2016, http://ventureburn. com/2016/02/startups-scramble-to-reform-shipping-industry/ MoverDB.com: Top 10 International Container Shipping Companies. In: MoverDb.com, http://moverdb.com/shipping-companies/ OECD: Cardiac arrest or dizzy spell: Why is world trade so weak and what can policy do about is? September, 2016, http:// www.oecd-ilibrary.org/docserver/download/5jlr2h45q532. pdf?expires=1475580890&id=id&accname=guest&checksu m=F8225AF6E398402D3FB5E5935C38540D OECD: Interim Economic Outlook – Global growth warning: Weak trade, financial distortions. 21/09/2016, http://www. oecd.org/eco/outlook/OECD-Interim-Economic-OutlookSeptember-2016-handout.pdf Quandl: https://www.quandl.com/data/LLOYDS/BDI-BalticDry-Index SANDERS, Ulrik – RIEDL, Jens – KLOPPSTECK, Lars – ROELOFFS,Christian – SCHLINGMEIER, Johannes: Think Outside Your Boxes: Solving the Global Container-Repositioning Puzzle. In: bcg.perspectives, 17/11/2015, https://www.bcgperspectives.com/content/articles/transportation-travellogistics-think-outside-your-boxes-solving-global-containerrepositioning-puzzle/ SONG, Jung-a: South Korean shipbuilders engulfed in crisis. In: Financial Times, 23/06/2016, https://www.ft.com/content/ d74127ac-3140-11e6-8825-ef265530038e T-Systems: https://www.t-systems.com/de/en/industries/ automotive/scm-solutions/smart-logistics/digital-transport-management-252148 UNCTAD: Review of Maritime Transport 2015, http://unctad. org/en/PublicationsLibrary/rmt2015_en.pdf Wikimedia commons https://en.wikipedia.org/wiki/Ship_ transport#/media/File:Shipping_routes_red_black.png wikimedia: https://en.wikipedia.org/wiki/Baltic_Dry_Index#/ media/File:BDI.png

ZENG, Xiaolin: Hanjin vows to resolve ongoing crisis. In: joc. com, 14/09/2016, http://www.joc.com/maritime-news/ container-lines/hanjin-shipping/hanjin-vows-resolve-ongoingcrisis_20160914.html ZENG, Xiaolin: More South Korean shipping lines eye Northern Sea Route. In: Fairplay.ihs.com, 19/07/2016, http://fairplay. ihs.com/commerce/article/4271961/more-south-koreanshipping-lines-eye-northern-sea-route 100 Years of the Trans-Siberian Railway “Yellow Russia, which we lost. Part 3. Port Arthur.”( Желтороссия, которую мы потеряли. Часть 3. Порт-Артур). In: http://humus.livejournal.com/2653297.html 13/07/2012 “The Great Siberian Route is 100 Years old” (Великому Сибирскому Пути — 100 лет). In: Se7en, 05/10/2016, https:// se7en.ws/velikomu-sibirskomu-puti-100-let/ “The Trans-Siberian Railway turns 100 years old” (Транссибирской магистрали исполнилось 100 лет). In: Primorszkij Reporter, 05/10/2016, http://primrep.ru/2016/10/ transsibirskoj-magistrali-ispolnilos-100-let/ “Trans-Siberian Railway - a Dossier”. (Транссибирская железнодорожная магистраль. Досье). In: TASS News Agency 18/10/2016, http://tass.ru/info/3711511 “Trans-Siberian Railway” (Транссибирская магистраль). In: http://lifeglobe.net/blogs/details?id=471 APTYEKAR, Pavel: “Century of the Trans-Siberian” (Век Транссиба). In: Vedemosztyi, 17/10/2016; online version: https://www.vedomosti.ru/opinion/ articles/2016/10/17/661276-vek-transsiba

KPMG: High-speed rail network connecting China. China 360, March, 2013, https://home.kpmg.com/cn/en/home/insights. html LYU, Chang: Private capital gains wider access to railway sector. In: China Daily, 31/07/2015, http://en.people. cn/n/2015/0731/c90000-8929349.html OLLIVIER, Gerald – BULLOCK, Richard – JIN, Ying – ZHOU, Nanyan: High-Speed Railways in China: A Look at Traffic. In: China Transport Topics No. 11, December, 2014, World Bank Office, Beijing OLLIVIER, Gerald – SONDHI, Jitendra – ZHOU, Nanyan: HighSpeed Railways in China: A Look at Construction Costs. World Bank, Documents & Reports, China Transport Topics No. 9, 07/07/2014, http://documents.worldbank.org/curated/ en/695111468024545450/pdf/892000BRI0Box3000chin a0transport09.pdf People’s Daily Online: 8 key figures in China’s 13th Five-Year Plan. In: People’s Daily Online, 22/03/2016, http://en.people. cn/n3/2016/0322/c98649-9033753.html People’s Daily Online: Rail track beats Maglev in BeijingShanghai High Speed Railway, 18/01/2004, http://en.people. cn/200401/16/eng20040116_132743.shtml Decree No. 34 of the Ministry of Railway, 2013. XIN Ding Ding: China’s ‚Super-Speed’ Train Hits 500km/h. In: China Daily, 20610/2010, http://www.chinadaily.com.cn/ china/2010-10/20/content_11431683.htm Xinhua: China Exclusive: China’s high speed rail track exceeds 20,000 km. In: Xinhua, 10/09/2016, http://news.xinhuanet. com/english/2016-09/10/c_135678132.htm

BALAJEVA, Jekatyerina: “How the Trans-Siberian Railway was Built” (Как строили Транссибирскую магистраль). In: Smart News, 14/03/2016, Source: http://smartnews.ru/articles/17027.html

YU, Chien Wen et al.: An Analysis of the Chinese High-speed Rail from the American Perspective. Bridgewater State University, 1-16. 2-4. http://ageconsearch.umn.edu/bitstream/ 207119/2/2012_146_Analysis_Chinese_Rail.pdf

SZTARIKOV, Ivan: “Trans-Sib. 100 Years of Solitude” (Транссиб. Сто лет одиночества). In: Novaja Gazeta, 05/10/2016; online version: https://www.novayagazeta.ru/ articles/2016/10/05/70071-transsib-sto-let-odinochestva

从京沪高速铁路看中国铁路走出去, ll.sxgov.cn http://ll.sxgov. cn/content/2014-12/17/content_5333140.htm 铁道部 (), subordinated to the Ministry of Transport since 2013 交通运输部Ministry of Transport

High Speed Transport In China

Book Recommendation

ARTER, Kleran –BUCHANAN, Paul: Economic Impact of Highspeed 1 – Final Report. London & Continental Railways, January, 2009, http://www.lcrhq.co.uk/media/cms_page_media/32/HS1.final.report.pdf

SHARMA, Ruchir: The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World. Allen Lane, 2016., 480.

Attus: China II – High-Speed Railway (Kína II. - A nagy sebességű vasút). http://attus.hu/content/kina-ii-nagysebessegu-vasut China Daily: Decision to slow trains met with mixed response. In: China Daily, 12/04/2011, http://www.chinadaily.com.cn/ cndy/2011-08/12/content_13097239.htm China Daily: Decision to Slow Trains Met With Mixed Response’. In: China Daily http://www.chinadaily.com.cn/ cndy/2011-08/12/content_13097239.htm CRI: China spends 800 billion yuans to construct railways (Kína 800 milliárd jüant fordít a vasút építésére). 28/01/2016, http://www.chinacham.hu/hirek/kina-800-milliard-juantfordit-a-vasut-epitesere

LACKENBAUER, P. Whitney – SHADIAN, Jessica M.: The Arctic in Global Affairs: A Region in Transformation. Bloomberg Academic, 240. RACHMAN, Gideon: Easternisation: War and Peace in the Asian Century. Bodley Head, 2016, 288. SOLOMON, Andrew: Far and Away: How Travel Can Change the World. Vintage Digital, 2016, 594. BLACKWILL, Robert D.– HARRIS, Jennifer M.: War by Other Means: Geoeconomics and Statecraft. Belknap Press, 2016, 384. COLE, Bernard D.: China’s Quest for Great Power: Ships, Oil, and Foreign Policy. Naval Institute Press, 2016, 320. CALLAHAN, William A.: China Dreams: 20 Visions of the Future, Oxford University Press, 2015, 232.

JIN, Ying – BULLOCK, Richard – FANG, Wanli: Regional Impacts of High Speed Rail in China. Working Paper 1, Baseline report for a case study of Yunfu in Guangdong Province, 30/07/2013 World Bank Office, Beijing

HAYTON, Bill: The South China Sea – The Struggle for Power in Asia. London, Yale University Press, 2014, 298.

KIYOHARU Takagi: Development of High-Speed Railways in China – Expansion of High-Speed Rail Services. In: Japan Railway & Transport Review 57., March, 2011.03., pp.40-41. http://www.ejrcf.or.jp/jrtr/jrtr57/pdf/36-41web.pdf

John Thackara: How to thrive in the next economy. Thames&Hudson, 2015, 192.

KHANNA, Parag: Connectography – Mapping the Future of Global Civilization. Random House, 2016, 496.

WTO: Trade Statistics and Outlook – Press Release. 07/04/2016, https://www.wto.org/english/news_e/ pres16_e/pr768_e.pdf

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LIST OF PICTURES AND PICTURES Smart Cities – Addressing Social Challenges? Picture 1: songdoibd.com, http://songdoibd.com/about/ Picture 2: nicerent.com, http://www.nicehousing.com/mn_songdo_apartments/about_songdo.asp Picture 3: PKphotograph, Shutterstock Picture 4: Vichy Deal, Shutterstock Picture 5: songdoibd.com, http://songdoibd.com/about/ Picture 6: bbc.com, http://www.bbc.com/portuguese/noticias/2013/09/130902_cidades_futuro_seul_ru Picture 7: amsterdamcity.com, https://amsterdamsmartcity.com/ Picture 8: extremlife.hu, http://extremlife.hu/ Picture 9: amsterdamcity.com, https://amsterdamsmartcity.com/ Picture 10: amsterdamcity.com, https://amsterdamsmartcity.com/ Picture 11: amsterdamcity.com, https://amsterdamsmartcity.com/ India Smart City Program Picture 1: JLL, http://www.jll.com/cities-research Picture 2: squarefootglobal.com, http://squarefootglobal. com/?p=644 Picture 3: livemint.com, http://www.livemint.com/ Picture 4: Snigdho Majumdar, http://www.igovernment.in/ article/2015/12/21/what-urban-india-wants-its-smart-cities Picture 5: nayaraipur.in, http://nayaraipur.in/ Picture 6: Zinnov Management Consulting Smart Cities Programme In China Picture 1: Donald Johnson, CCID Consulting, http://www.chinabusinessreview.com/smart-city-development-in-china/ China Catching Up with the Developed World: Historical Challenges, Reform Experiences, Challenges Of The Near Future Picture 1: Agnus Maddison, Chinese Economic Performance in the Long Run. OECD 2007 Table 1: Jonathan Anderson How to think on China 2006 UBS Investment Research Picture 2: OECD Economic Surveys China 2015 Book: Geo-Moment Figure 1 (p. 103): Share of per capita GDP growth, 2000-2015. Source: World Bank. Benjamin Henning, http://www.viewsoftheworld.net/?p=4822 Figure 3 (p. 105): Olivier H. Beauchesne: Map of Scientific Collaborations from 2005-2009 Figure 5 (p. 106): New World Powers of Innovation Source: Visually, http://visual.ly/measuring-global-innovation-patents-filed-andgranted Maritime Transport is in Crisis Figure 1: Baltic Dry Index 1985-2013, wikimédia, https:// en.wikipedia.org/wiki/Baltic_Dry_Index#/media/File:BDI.png Figure 2: Baltic Dry Index, own graph based on the data series of lloydlist.com, https://www.quandl.com/data/LLOYDS/BDI-BalticDry-Index Figure 3: Financial Times, https://www.ft.com/content/d74127ac3140-11e6-8825-ef265530038e Figure 4: telegraph.co.uk, http://www.telegraph.co.uk/finance/ 12108453/Zombie-ships-send-maritime-freight-into-worstcrisisin-living-memory.html Figure 5: Financial Times, https://www.ft.com/content/d74127ac3140-11e6-8825-ef265530038e Figure 6: OECD, http://www.oecd-ilibrary.org/docserver/ download/5jlr2h45q532.pdf?expires=1475580890&id=id&accnam e=guest&checksum=F8225AF6E398402D3FB5E5935C38540D Figure 7: UNCTAD, http://unctad.org/en/PublicationsLibrary/ rmt2015_en.pdf Figure 8: Wikimediacommons, https://en.wikipedia.org/wiki/ Ship_transport#/media/File:Shipping_routes_red_black.png 100 Years of the Trans-Siberian Railway Picture 1: wikimedia Picture 2: seacitymaps.com, www.seacitymaps.com Picture 3: http://liveracing.livejournal.com/646657.html Picture 4: Brockhaus and Enfron Encyclopedia Picture 5: http://nevsepic.com.ua/art-i-risovanaya-grafika/10098200-russkih-zhivopiscev.-chast5-108-rabot.html

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Picture 6: http://www.lecourrierderussie.com/societe/2016/10/ transsiberien-100-ans/ 7. Picture 7: geektimes.ru, https://geektimes.ru/post/281194/ Pictures 8 to 13: wikimedia Picture 14: berendakov.livejournal.com, http://berendakov. livejournal.com/ Picture 15: wikimedia Picture 16: Anton Romanov, Shutterstock China’s High-Speed Transport Figure 1: Wikipedia, https://en.wikipedia.org/wiki/List_of_ highspeed_railway_lines Figure 2: Wikipedia, https://en.wikipedia.org/wiki/High-speed_rail_ in_China Figure 3: Chen Min, Tang Hailong & Zhang Kun: Some Critical Issuesin the Development of Chinese High-Speed Rail: Challenges andCoping Strategies, Journal of Transportation Technologies, 2014, 4, pp. 164-174. 166. Figure 4: TonyV3112, Shutterstock Figure 5: Kiyoharu Takagi: Development of High-Speed Railways in China, Expansion of High-Speed Rail Services, Japan Railway &Transport Review 57., March, 2011. pp. 40-41. Figure 6: Ollivier, Gerald; Sondhi, Jitendra & Zhou Nanyan Figure 7: edited by author Book recommendation Picture 1: amazon.com, https://www.amazon.com/Rise-Fall-Nations-Forces-Post-Crisis/dp/0393248895 Picture 2: amazon.com, https://www.amazon.com/Arctic-GlobalAffairs-Region-Transformation/dp/1441131000 Picture 3: amazon.co.uk, https://www.amazon.co.uk/d/ Books/Easternisation-War-Peace-Asian-Century-GideonRachman/184792333X Picture 4: amazon.co.uk, https://www.amazon.co.uk/Far-AwayTravel-Change-World/dp/1784741124 Picture 5: amazon.com, https://www.amazon.com/War-Other-Means-Geoeconomics-Statecraft/dp/0674737210 Picture 6: amazon.com, https://www.amazon.com/Chinas-QuestGreatPower-Foreign/dp/1612518389

CREDITS EDITOR-IN-CHIEF Norbert Csizmadia MANAGING EDITOR Anton Bendarzsevszkij EDITORIAL BOARD Ágnes Bernek Anton Bendarjevsky László Körtvélyesi Géza Salamin Péter Szatmári György Szapáry István Szilágyi Ákos Vajas COPY EDITOR István Czene ART EDITORS Gyula Nagy Zsófia Szabó

AUTHORS Ferenc Bánhidi Anton Bendarjevsky Norbert Csizmadia Ráhel Czirják Tamás Dani Viktor Eszterhai Sára Farkas Niall Fergusson László Gere John Gerzema Péter Klemensits György Matolcsy Eszter Polyák Fruzsina Simigh András Szűts Zita Vajda DATE OF PUBLICATION December

PUBLISHED BY: Pallas Athéné Geopolitical Foundation H-1013 Budapest, Döbrentei utca 2., Hungary

William A. Callahan: China Dreams: 20 Visions of the Future Picture 1: amazon.com, https://www.amazon.com/China-Dreams20-Visions-Future/dp/0190235233 Bill Hayton: The South China Sea Connectography: Mapping the Revolution of Networks Picture 1: google books, https://books.google.hu/books/about/Connectography.html?id=MrVcCwAAQBAJ&source=kp_cover&redir_ esc=y John Thackara – How to thrive in the New Economy Picture 1: designophy.com, http://www.designophy.com/interview/ design-article-1000000021-john-thackara.htm Picture 2: amazon.com, https://www.amazon.com/How-ThriveNext-Economy-Designing/dp/0500518084 Female Artists Around the World Picture 1: rtp.pt, http://www.rtp.pt/antena1/antena1-fado/mundoonovo-disco-de-mariza-sera-editado-em-outubro_8895 Picture 2: Courtesy Photo, http://www.billboard.com/articles/ columns/latin-notas/6509444/lila-downs-new-album-balas-ychocolateinterview Picture 3: News and Noise, https://newsandnoise.wordpress. com/2014/05/13/the-saharawi-need-an-identity-an-interviewwith-aziza-brahim/ Picture 4: ekultura.hu, http://www.ekultura.hu/hallgatnivalo/ajanlok/cikk/2016-09-12+10/anoushka-shankar-land-of-gold-cd Picture 5: ponderosa.it, http://ponderosa.it/label/3/like-a-birdorspirit-not-a-face Picture 6: natacha-atlas.com, http://www.natacha-atlas.com/ Picture 7: rokiatraore.net, http://www.rokiatraore.net/ne-so-2016/ Picture 8: sojo.net, https://sojo.net/biography/jenna-barnett Picture 9: Spotify, https://play.spotify.com/album/2OmZw4ZXE Slz1g5WldjzLn?play=true&utm_source=open.spotify.com&utm_ medium=open

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LEGAL & PRIVACY STATEMENT

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An essential selection of

book workshops consisting of 4 titles

(SCENARIOS OF THE FUTURE) George Friedman and György Matolcsy

“expect the unexpected” “see the events of the world through the eyes of decision-makers”

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NORBERT CSIZMADIA

GEO-FUSION

GEO-Fusion: Age of “Tech-Knowled(Ge)ography” The New Mapping of the 21st Century and rediscovery of the World 192

It is a characteristic of networks that they not only describe the world but also influence it. The first maps of the New World launched the colonisation, while the knowledge of the human gene map reformed the medical science. The connection of known elements gives birth to something more and something new; however, surprising meetings and border make astonishing, epoch-making, scientific, technical, economic and cultural breakthroughs lead the way: These are fusional meetings.