Two big thinkers on the way the world is going

A few weeks ago, at the annual TED conference, an organisation dedicated to ideas worth spreading', I interviewed a few interesting women. The first was Anne-Marie Slaughter. Anne-Marie came to the British media's attention in the wake of an article she wrote in US magazine The Atlantic on the difficulties women face as they try to combine modern super-jobs with family life. But long before this became her specialist subject she is now writing a book on the topic she was very well known in her field as a professor of politics and international affairs at Princeton.

So, while we talked a lot about women and work (I remain horrified that there is no such thing as maternity leave in the US instead people "patch together sick days and vacation days" to have time with their newborns), we moved quickly on to the future of the world. Slaughter is pleasingly upbeat on Japan.

Unlike most commentators, she has noticed that if you look at GDP growth per head in Japan it has been growing faster than most of the rest of the developed world for many years and is doing so even in overall GDP terms at the moment. She also points out that Japan is now an expert in two of the areas that the rest of the world most needs help with at the moment: energy sustainability and ageing populations.

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She also agrees that, given the regional tensions (she reckons the media doesn't pay nearly enough attention to the Japan/China relationship), the US is highly unlikely to disapprove of any of prime minister Shinzo Abe's efforts to grow Japan's economy further. We were in happy agreement on all of this.

On to America. I had just interviewed David Stockman on his book The Great Deformation a best-seller that explains exactly what is wrong with America ("almost everything", says David). Does Anne-Marie agree that it is all over for the US? Most certainly not.

She isn't much bothered about US debt as a whole: the US is growing again and deficit projections are falling. It may be that the sands of power and influence will shift around, with the US shifting to closer "vertical" trading with Latin America. And it may be that China keeps growing its economy at a good pace (although that's far from a given), but it is still worth remembering just how far China has to go to catch up with the US. GDP per head in America is about $50,000. In China it is more like $10,000. So, while America may have seen a sticky spot in the last few years, the odds are, says Slaughter, that it will, as usual, come through just fine.

Forget business as usual

My next interviewee, economist Dr Dambisa Moyo, wasn't so convinced. Moyo has just given a TED talk about the relative virtues of different political systems. She isn't convinced that America has its political system, let alone its economics, right. The clue is in the title of her book (a must-read for your summer holidays): How The West Was Lost: Fifty Years of Economic Folly And the Stark Choices Ahead. I wonder what she thinks the right choices are. If she was a benevolent dictator of America, what would be her first move?

To "invest in education" and to take a proper look at how the US creates incentives for the three key ingredients of economic growth: capital, labour and productivity. Take capital. Here the US has taken policy makers and effectively moved them from being regulators and providers of public goods, into becoming "portfolio managers". They have been allowed to adjust interest rates at will to make one asset class look attractive over another at any given time.

It might be well-intentioned making houses look cheap to buy via low interest rates just reflects the nice idea that everyone should have a house. But "that is not what the role of a government should be". When the government steps out of its proper role to distort markets you get consequences in this case the debt crisis.

Then look at the way the US has distorted labour markets. Thanks to the US public sector's huge pension entitlements and high salaries, "total compensation is $10,000 higher" per year in the public sector than in the private. The situation is much the same in Britain. You might think it isn't a problem, but it is. Because, as Dambisa says, people behave rationally. So "people who should be involved in research and development, innovation and ingenuity the backbone of Western industrialisation are moving into the public sector". This is a huge flaw in the way America is organised.

Then there is welfare, with the problem again being the wrong incentives. She points to the effectiveness of "conditional aid transfers" in the likes of Brazil and Mexico. "You send your child to school, you get $20. Your child has a great attendance record, say 98%, you get $100. You get your child inoculated, you get $100." You can quibble about how this should work, but at least it "embeds incentive back into policy".

In education in the US, for example, we should perhaps be talking about paying people to study sciences and mathematics rather than anything else, because this is where the US and Europe can have an edge and bring a "broader societal benefit" as a result.

Democracy needs to improve

These things are hard for politicians looking for re-election to tackle which bring us back to the US political system. Dambisa is a "big believer in liberal democracy". But "I really think we need to reassess this mismatch between the political cycles". The US effectively has an election every two years, but its "economic, structural problems" are much more long term. If that was reconfigured to every eight years, politicians might have the "bandwidth and the space" to get something done.

We move on to talk about commodities Moyo's most recent book, Winner Take All, is on China's race for resources. She firmly believes that an "imbalance" between supply and demand remains, such that commodities prices are going to be structurally higher for some time to come.

Take oil: ten years ago it hovered around $20 a barrel; now it's more like $100.And "I think we are more likely to see $120, $150 a barrel than we are to see $20 again", despite shale gas exploration and the potential for American energy independence. Shale could be "transformational", says Moyo, but so far no one has enough information to be sure. The wells deplete quickly, estimates of the volumes of gas are constantly being adjusted, and the environmental effects remain unclear. It is far too early "for euphoria".

She mentions the three "key drivers" of commodity pricing "population, wealth increases and urbanisation" and notes that the thing that makes ours a "unique time" is "the speed of growth of the global population". This puts huge pressure on resources. I wonder if rising wealth and urbanisation will stop population growth in its tracks well-off people living in cities don't have many children. Perhaps, she says, but the forecasts are still for there to be ten billion people on the planet by 2100; so between now and then, "the demand for natural resources against the scarce, finite, and depleting supply metrics" suggests that there's only one way for commodity prices to go "which is up" (this, by the way, is one reason to believe in the African century' idea).

Rising pressure on resources coupled with rising populations very often leads to war. When I worry about a commodity that might bring war to large parts of the world, my mind turns to water (note, for example, that the Middle East has 5% of the world's population but a mere 1% of its fresh water supply). So, it turns out, does Moyo's mind.

In Winner Take All, she refers to a database of water wars of which there have been a good many. The superficial reason for conflict can often be different, "but the real reason is resources and specifically around water so yes, I do expect that there will be significantly more water wars related to this scarcity".

Our interviewees

Anne-Marie Slaughter, 54, is a professor of politics at Princeton University. Between 2009 and 2011, she worked as director of policy planning at the US State Department, which she continues informally to advise, overseeing the Quadrennial Diplomacy and Development Review.

She has argued that if international aid is to be effective, governments and aid agencies need to form partnerships with the private sector. Foreign Policy magazine has named her as one of the leading foreign policy thinkers for four years in a row. From September, she will take up the position as director of the New America Foundation, a policy think tank. She has also written six books, most notably 2008's The Idea That Is America: Keeping Faith With Our Values In A Dangerous World, on US foreign policy.

Dambisa Moyo, 43, has worked for the World Bank and investment bank Goldman Sachs, and is known for her views on the impact of aid to Africa, contrasting it with the more business-orientated approach of countries such as China. Her 2009 book, Dead Aid: Why Aid Is Not Working And How There is Another Way For Africa, became an international bestseller, winning acclaim and criticism in equal measure.

She has followed it with two other books. How the West Was Lost: Fifty Years of Economic Folly (2011) argues that the inability of Western countries to make tough economic and social decisions will lead to their decline unless they make major changes. Her latest, Winner Take All: China's Race for Resources And What It Means For The World, argues that China's need for commodities will push up prices, lowering global living standards.