Charles in charge: the future of the Commonwealth

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Hello and welcome to The Intelligence from The Economist. In London, I'm Jason Palmer. Every weekday, we provide a fresh perspective on the events shaping your world. Saudi Arabia's second city, Jeddah, was once a charming place. Now, vast empty patches scar the landscape. Most of its southern and central parts have simply been bulldozed ahead of a massive rebuild. Because these days, modernity trumps charm. And over the past few decades, China has had a nearly unbelievable economic ride. The question has come up time and again: when will its economy overtake America's? The pandemic and other factors have made that question even harder to answer. First up, though, as part of Queen Elizabeth II's state funeral yesterday, her coffin was drawn first to Westminster Abbey. And then through central London, the route lined with members of the armed forces and police. Gun salutes were fired each minute from Hyde Park. Some 2,000 guests attended the service in the Abbey, including around 500 heads of state and foreign dignitaries. Among them were leaders from the Commonwealth, a grouping of countries that expanded hugely under Queen Elizabeth's reign. She cherished her role as its figurehead, making a long tour of its member countries soon after her accession, and returning regularly to many of them. With a new king now in place, many wonder about the future and even the purpose of a club assembled in a very different age.

The current Commonwealth is a voluntary club, and the club's boosters like to mention that its countries cover a third of the world's population.

Zan Smiley is editor-at-large at The Economist.

More than a quarter of the United Nations membership and even a fifth of the world's landmass, and a third even of national waters. So it has a very big geopolitical and geographical reach.

And who is it that's at the head of this club?

It takes its cue originally from Britain, but it is emphatically not anymore absolutely run by Britain. It's a sort of cozy alternative, a post-imperial alternative to what was once, more than half a century ago, the British Empire. And so there are 56 members now, and on paper they're all equal. What is, I think, most important is that the smaller states, particularly the island states in the Pacific Ocean and in the Caribbean, have a good platform at the Commonwealth for voicing their worries.

And countries still want to be a part, even to join the Commonwealth.

Yes, I mean, some people are quite surprised, but in the past decade or so, countries that don't have a British heritage have joined, for example, Rwanda, and only this year Gabon and Togo.

But at the same time, there has been talk, including on this show, of the countries that want to leave the club.

Well, I think a lot of people have been saying that if a country wants to remove the Queen, or now the King, as head of state, that is in some way a slap in the face of the Commonwealth. This is a complete misconception. There are countries such as, for example, Barbados that became a republic earlier this year, which nevertheless is still a key member of the Commonwealth. Jamaica is very likely to become a republic. And of course, by far even more important, Australia may well become a republic in the next 10 years. But I think that that in no way reduces the heft of the Commonwealth as a club. And indeed, only about a quarter of the members at the moment, 14 in fact, still have the King as head of state. So it's a misconception that removing the monarch as head of state in some way weakens the Commonwealth.

But to a degree, it is the royal family that kind of does the cheerleading and the, let's say, membership work on the ground, right?

Yeah. So King Charles will have a sort of ceremonial role, and I think it'll greatly help by the fact that he does have a wide range of interests which are shared by many of the members of the Commonwealth. For instance, his interest in different religions, climate change, and environmental things, which are very close to the hearts of many of the members. And of course, most of the members do share a common heritage in terms of language, in terms of law, in terms of parliamentary systems. So I think it's natural that the monarch should have a sort of ceremonial role, but he certainly doesn't lay down the law. And it isn't immutable that the British monarch is the head of the Commonwealth. So I think it's only natural that King Charles will take a great deal of trouble to make sure that he matches his mother's enthusiasm for the club.

And thinking more pragmatically, what's— what does membership of the Commonwealth mean now in today's world? What are the benefits?

I think, to be absolutely frank, the boosters of the Commonwealth do sometimes struggle. To justify its existence. It used to have more of a diplomatic role. It had quite a role in bringing down apartheid in South Africa. It had a good role in pulling Southern Rhodesia out of rebellion and into becoming Zimbabwe. But these days, I'd say its only real achievements, and they are arguable, is that it has played quite a role in putting forward proposals to combat climate change. But I think at the end of the day, the real purpose of the Commonwealth is to be a sort of network, particularly so that the smaller countries in the Commonwealth and also poorer countries in Africa have a strong voice on the platform.

So not a matter of burnishing democratic credentials. There was certainly a time when the Commonwealth was associated with that.

Yes, no, that is an important feature of the Commonwealth. I mean, on paper, its main purposes are to enhance democracy and to enhance economic development, but they do have to be, to be frank, quite flexible on the democratic front. The last big meeting of the Commonwealth was held in Rwanda, whose democracy record is not by any means Brilliant. But they have in the past suspended countries that have had military coups in places like Nigeria and Pakistan. But on the other hand, there are one or two autocracies I can think of, for instance, Brunei, and there's still a sort of monarchy, almost absolute monarchy in Eswatini, formerly Swaziland, which still somehow retain membership. So I'd say the qualifications are fairly flexible. One feature which should be mentioned is that a lot of the Commonwealth boosters have wanted India as its numerically biggest country to take a bigger role. If India was more involved, I think the Commonwealth might have a bit more heft.

And by and large, just kind of reading between the lines of what you've said, you still seem to believe fairly strongly that it is a force for good in the modern world.

Um, yes, I think it's a force for good, quite simply. As a talking shop, it isn't as influential as it used to be, and networking is a slightly unpleasant term with tones of public relations and so forth. But I think it is a good networking gathering, and I think most of the members of it think it's still worth persisting.

Thanks very much for joining us then.

Thank you very much indeed.

Saudi Arabia, as we now know it, is less than 100 years old. But Jeddah, one of its principal cities, is more like 1,500 years old. That long, rich history, though, is doing little to stop much of the city being flattened Jeddah is Saudi Arabia's second largest and also its most charming city.

In many ways, it bears far more resemblance to other cities across the Red Sea on the Egyptian side than it does to the Saudi heartland.

Nicholas Pelham is a Middle East correspondent for The Economist.

People speak with a different accent to the rest of Saudi Arabia. They tend to be more relaxed. It's a port city, more cosmopolitan. It used to be the old diplomatic capital. It was where, in some ways, kind of Saudis could go to breathe a little more freely than they used to be able to when the rest of the kingdom was in the grip of a sort of religious obscurantist fever. Much of the city, perhaps a third, is now a wasteland. In many ways, it resembles some of the war-torn cities that I'm used to reporting from, whether it's Mosul or Aleppo, except in this case, it isn't war that has flattened much of Jeddah, it's bulldozers. It's a kind of willful act of demolition, and it's happening on an absolutely massive scale. I mean, when I first saw this, I would drive for mile after mile through what used to be the southern suburbs of the city, and there was just nothing there.

So why is this happening? Why is the city being flattened?

Part of the problem with all of this is that many of the 5 million people who live in Jeddah simply don't know. Hundreds of thousands have woken up one morning to find the words "Ikhla, evacuate," scrawled in red ink on their walls. The electricity and the water is then turned off, and nobody tells them what their future is. They don't tell them where they're going to go, or there's no kind of plan for rehousing them or for compensating them. And it's really sort of part of, I think, what to many Saudis feels like this megalomaniac agenda of the crown prince. They're really just trying to fathom what is going on. They've heard that he wants to build these mega cities, smart cities elsewhere in the kingdom. They've heard about NEOM, But quite what's in store for Jeddah, nobody has really explained.

And how are Saudis dealing with this situation?

Those who have the means are getting out of Jeddah altogether. There's been a large influx into the capital, Riyadh. Some are leaving the country. Those who are less well off are moving into other parts of the city that are still standing. As a result of that, kind of rents have soared. The city is kind of gridlocked with heavy traffic. It's really sort of a large city that has been crammed into a much smaller one. If you add them all up together, this is an area that's larger than Hiroshima and Dresden combined after the Second World War. And just kind of one Jeddah official described it as the collateral damage of authoritarianism. Another key part of this story is that Jeddah was the port whereby pilgrims used to come to Mecca, an hour or so's drive inland. That's the great pilgrimage city of Islam. And many pilgrims would come and they would stay. And kind of one of the confusions of Saudi Arabia is the nationality laws. There are lots of people who are resident in the kingdom but don't have nationality, though they've been there for generations. And as a result, if you're not a national, you can't own property. So they can't prove ownership, and they're just being sort of shunted on with nowhere to live. And this really incorporates kind of a large swathe of Saudi society.

So people in one way or another are trying to get away from the bulldozers, but what are people saying about the changes that are happening?

Initially, I think it has to be said that there are many Saudi residents of in some ways pleased that their city was finally gaining some attention in Crown Prince Mohammed bin Salman's 2030 Vision. It had largely been left out of that. And so they kind of thought, well, you know, maybe these bulldozers are coming to rebuild Jeddah. And it's a city which is fraught with problems. There are these large unplanned districts where some of them were tantamount to slums, which were kind of home to criminal gangs or drug mafias and even prostitution rings. But generally, the city, and especially the southern part of the city, had poor drainage. It was prone to flooding, badly needed a facelift. Lift. But the problem was that when people saw just simply the scale of what was going on, this joy turned to consternation. And it's grown as this demolition has moved further north, tearing down old Saudi houses, mosques, and villas, kind of fairly new-built high-rises as well, and moving up the airport road in the north. And you sort of see block after block where the lights just go out. And I think there's real concern now that this is coming close to the Old City, which is a UNESCO Heritage Site. And nobody quite knows where it's going to stop or what's going to replace it.

And I guess it goes without saying that there haven't been mass protests about all this.

Yeah, this isn't a country where protest is allowed. It used to be a place where people could chatter and tweet fairly freely, but all that has changed under the Crown Prince, Mohammed bin Salman. So, there were people who did initially sort of put up concern videos on TikTok and other social media, but those have sort of waned as well. There's a real sense that because Jeddah has never really been part of the kind of fabric Saudi story, it's now paying the price of demolition.

So you say that people don't know what ultimately this is for, how far it will go. Are there any guesses as to where this ends?

Well, Saudi friends of mine are saying, you know, maybe this demolition is punishment for not fully embracing Mohammed bin Salman's Vision 2030. There are others who say that maybe perhaps there is a brighter future coming. I have spoken to officials who insist that there are plans in the works for rebuilding Jeddah. Some have compared Prince Mohammed to Emperor Napoleon III, who leveled the slums of Paris and replaced them with a leafy, posh area in the mid-1800s. There are some who say that southern Jeddah might become a gateway to the nearby holy city of Mecca. They describe how it could have lagoons and canals. It could be a second Venice. And it has to be said that this isn't a city which has been entirely neglected. The authorities have put on a film festival. They did use it to stage the Grand Prix. There has been a Korean pop show. You know, there are some who feel that perhaps there is a glimmer of light that this could be a city that's rebuilt. And this could be the beginning of a revival.

And what odds do you give that? You've invoked the posh parts of Paris, of Venice. Do you see that happening?

It has to be said that in Saudi Arabia, there is a long history of promises which don't come to fruition. Even in Jeddah, a project was announced 13 years ago that would overhaul the city, was going to cost $45 billion, and that was going to revamp Jeddah. But the population never really saw any sign of that. This time there are plans for a waterfront and an opera house that people have seen, but it's in a very small sliver of the city around the old desalination plant. And that really is kind of it. So for homeless Saudis, for homeless residents who don't have Saudi nationality, the prince's master plan, Vision 2030, for now remains more about destruction than reconstruction.

Thanks very much for joining us, Nicholas.

Jason, always a pleasure. Thank you for having me.

If you like the crisp style of The Economist, sign up for Economist Education's 6-week online course on business writing and storytelling. Learn to write with clarity, punch, and pith, and gain the tools to become a more effective business communicator. The course is designed by many of the journalists that you hear on the show. Register now and get a 15% discount as a listener to The Intelligence. Go to economist.com/writingcourse and use the discount code INTELLIGENCE at checkout. The world's two largest economies by GDP are America and China. After that, it drops off fast. They're miles ahead of their closest rivals, such as Japan and Germany. Let's now focus on the world's second largest economy, China. China is in troubled waters yet again.

Its economy is riddled with not one, but two multiple crises.

Estimates by the IMF put America ahead of China by a full $5 trillion of annual output. But there's long been talk of whether or when China might take the lead. A lot has happened in China, weak data and so forth. Do you think that's getting incrementally more a weakness story too?

It's getting factored in for sure.

That has turned out in recent years to be an ever trickier question.

China was once, centuries ago, the world's largest economy, largely by virtue of having the world's biggest population. And for a long time, economists have been expecting it to regain that crown.

Simon Cox is The Economist's China economics editor.

But right at the moment, it's going through a period of particular economic difficulty. Some of those difficulties are self-inflicted. So now a number of economists wonder whether China will in fact ever overtake America, whether the day of overtaking will ever arrive.

And what would China have to do in order to make that day arrive?

So Surprisingly little in the sense that because China's population is 4 times the size of America's, its GDP per person, so its national income per person, only has to reach about a quarter of America's for its economy as a whole to be the same size as America. So if you think of GDP per person as some measure of the level of development, China doesn't have to get that sophisticated in order to become the world's biggest economy. And indeed, by one measure, China is already the world's biggest economy. Now, one of the problems with these comparisons is you need to convert each economy into the same currency. So typically we convert China's economy into dollars, and there are two ways of doing that. One is just to use the familiar market exchange rates that we're all accustomed to, so roughly 6.8 yuan to the dollar. The other way is what economists call purchasing power parity. And this is an attempt to put the same prices on similar goods. And the reason this is necessary is that prices actually differ quite a lot between these two economies.

So by one measure, China has already surpassed America. By the most common measure, not. And you mentioned that there are a few things holding China back in that regard.

Yes. So the immediate problem is twofold. It's the zero-COVID policy. This is the attempt to stamp out every outbreak of COVID-19 as it occurs, even if that means locking down big cities and suppressing gathering and social movement, all of which is bad for the economy. So that has hurt China's growth this year, and there's no real end in sight for that policy. And then on top of that, there's this long property cycle that China is coming to the end of, and that has depressed construction, depressed property sales. And it speaks to an even more fundamental concern, which is demographic. China's population could well have peaked this year or last, and that typically has been associated elsewhere with weak growth and stagnant demand. And that is again, a big long-term worry hanging over China. By some estimates, its workforce could shrink by about 15% over the next 15 years, which would be a drag on growth.

That all sounds pretty bleak for China. Is that true even into the longer term?

One intriguing possibility is that China might actually overtake America by around the mid-2030s, but then because of this demographic decline, it might fall back again. There's a research firm called Capital Economics that has likened this to Il Sorpasso, which was the moment when Italy's GDP overtook Britain's, but then that Italian lead didn't last too long. And they think that might also happen with China. They've sort of jokingly quipped that this would please everybody. It would make both the China bulls correct and the China bears correct.

But given all the things that you say are in play on this question, that seems like a very long-term, bold guess to be making that far in the future.

Yes, none of this is easy to predict. A lot of forecasts have already been shown to be very wrong. In fact, one of the most difficult things to predict is not just growth in the amount of goods and services. But also how they're priced and the exchange rate between these two economies. Because a lot of the catch-up we've seen in the past decade or so has come not from China growing faster, but from the fact that prices in China have risen faster and that the exchange rate has strengthened. Indeed, last year, if you combine all these things— growth, rising prices, and a stronger exchange rate— China's GDP in dollar terms grew by 20%. So if that kept up that pace, the overtaking would happen. Reasonably quickly. But this year, it's been a much more depressing outlook and the exchange rate has actually weakened against the dollar. So this is extremely difficult to predict and makes this game even more fun.

And I guess the question is how much it matters then to be the largest economy by that measure, which you say kind of has its own weaknesses and so on. Is this the right thing even to be focusing on?

Well, for some questions, no, it isn't. For some questions, the purchasing power parity measure I mentioned before, is a better measure. So if you're looking at things like carbon emissions or consumption of electricity, in some ways it's the amount of physical goods and services you are producing that is the most important thing. But I think for sort of global bragging rights, GDP at market exchange rates is probably the appropriate measure. Of course, a marked slowdown in China's growth is gonna be important in and of itself, regardless of what it means for global rankings.

Thanks very much for your time, Simon.

Thanks very much.

That's all for this episode of The Intelligence. Let us know what you think of the show. You can get in touch at podcasts@economist.com and you can subscribe to The Economist at economist.com/intelligenceoffer. The link is in the show notes. We'll see you back here tomorrow.