about power in this 21st century.

And basically, what I'd like to tell you

is that power is changing,

and there are two types of changes

I want to discuss.

One is power transition,

which is change of power amongst states.

And there the simple version of the message

is it's moving from West to East.

The other is power diffusion,

the way power is moving

from all states West or East

to non-state actors.

Those two things

are the huge shifts of power

in our century.

And I want to tell you about them each separately

and then how they interact

and why, in the end, there may be some good news.

When we talk about power transition,

we often talk about the rise of Asia.

It really should be called

the recovery or return of Asia.

If we looked at the world

in 1800,

you'd find that more than half of the world's people

lived in Asia

and they made more than half the world's product.

Now fast forward to 1900:

half the world's people -- more than half -- still live in Asia,

but they're now making

only a fifth of the world's product.

What happened? The Industrial Revolution,

which meant that all of a sudden,

Europe and America

became the dominant center of the world.

What we're going to see in the 21st century

is Asia gradually returning

to being more than half of the world's population

and more than half of the world's product.

That's important and it's an important shift.

But let me tell you a little bit about

the other shift that I'm talking about,

which is power diffusion.

To understand power diffusion

put this in your mind:

computing and communications costs

have fallen a thousandfold

between 1970

and the beginning of this century.

Now that's a big abstract number.

But to make it more real,

if the price of an automobile

had fallen as rapidly

as the price of computing power,

you could buy a car today

for five dollars.

Now when the price of any technology

declines that dramatically,

the barriers to entry go down.

Anybody can play in the game.

So in 1970,

if you wanted to communicate

from Oxford to Johannesburg

to New Delhi

to Brasilia

and anywhere simultaneously,

you could do it.

The technology was there.

But to be able to do it,

you had to be very rich --

a government, a multinational corporation,

maybe the Catholic Church --

but you had to be pretty wealthy.

Now, anybody has that capacity,

which previously was restricted by price

just to a few actors.

If they have the price of entry into an Internet cafe --

the last time I looked, it was something like a pound an hour --

and if you have Skype, it's free.

So capabilities

that were once restricted

are now available to everyone.

And what that means

is not that the age of the State is over.

The State still matters.

But the stage is crowded.

The State's not alone. There are many, many actors.

Some of that's good:

Oxfam,

a great non-governmental actor.

Some of it's bad:

Al Qaeda, another non-governmental actor.

But think of what it does

to how we think in traditional terms and concepts.

We think in terms of war

and interstate war.

And you can think back to 1941

when the government of Japan

attacked the United States at Pearl Harbor.

It's worth noticing

that a non-state actor

attacking the United States in 2001

killed more Americans

than the government of Japan did in 1941.

You might think of that

as the privatization of war.

So we're seeing a great change

in terms of diffusion of power.

Now the problem is

that we're not thinking about it in very innovative ways.

So let me step back

and ask: what's power?

Power is simple the ability

to affect others

to get the outcomes you want,

and you can do it in three ways.

You can do it with threats

of coercion, "sticks,"

you can do it with payments,

"carrots,"

or you can do it by getting others

to want what you want.

And that ability to get others to want what you want,

to get the outcomes you want

without coercion or payment,

is what I call soft power.

And that soft power has been much neglected

and much misunderstood,

and yet it's tremendously important.

Indeed, if you can learn

to use more soft power,

you can save a lot

on carrots and sticks.

Traditionally, the way people thought about power

was primarily in terms of military power.

For example, the great Oxford historian

who taught here at this university, A.J.P. Taylor,

defined a great power

as a country able to prevail in war.

But we need a new narrative

if we're to understand power in the 21st century.

It's not just prevailing at war,

though war still persists.

It's not whose army wins;

it's also whose story wins.

And we have to think much more in terms of narratives

and whose narrative is going to be effective.

Now let me go back

to the question

of power transition

between states

and what's happening there.

the narratives that we use now

tend to be the rise and fall

of the great powers.

And the current narrative is all about

the rise of China

and the decline of the United States.

Indeed, with the 2008 financial crisis,

many people said this was

the beginning of the end of American power.

The tectonic plates

of world politics were shifting.

And president Medvedev of Russia, for example,

pronounced in 2008

this was the beginning of the end

of United States power.

But in fact,

this metaphor of decline

is often very misleading.

If you look at history, in recent history,

you'll see the cycles of belief

in American decline

come and go every 10 or 15 years or so.

In 1958,

after the Soviets put up Sputnik,

it was "That's the end of America."

In 1973, with the oil embargo

and the closing of the gold window,

that was the end of America.

In the 1980s,

as America went through a transition in the Reagan period,

between the rust belt economy of the midwest

to the Silicon Valley economy of California,

that was the end of America.

But in fact, what we've seen

is none of those were true.

Indeed, people were over-enthusiastic

in the early 2000s,

thinking America could do anything,

which led us into some disastrous

foreign policy adventures,

and now we're back to decline again.

The moral of this story

is all these narratives about rise and fall and decline

tell us a lot more about psychology

than they do about reality.

If we try to focus on the reality,

then what we need to focus on

is what's really happening

in terms of China and the United States.

Goldman Sachs has projected

that China, the Chinese economy,

will surpass that of the U.S.

by 2027.

So we've got, what,

17 more years to go or so

before China's bigger.

Now someday,

with a billion point three people getting richer,

they are going to be bigger than the United States.

But be very careful about these projections

such as the Goldman Sachs projection

as though that gives you an accurate picture

of power transition in this century.

Let me mention three reasons why it's too simple.

First of all, it's a linear projection.

You know, everything says,

here's the growth rate of China, here's the growth rate of the U.S.,

here it goes -- straight line.

History is not linear.

There are often bumps along the road, accidents along the way.

The second thing is

that the Chinese economy

passes the U.S. economy in, let's say, 2030,

which it may it,

that will be a measure of total economic size,

but not of per capita income --

won't tell you about the composition of the economy.

China still has large areas

of underdevelopment

and per capita income is a better measure

of the sophistication of the economy.

And that the Chinese won't catch up or pass the Americans

until somewhere in the latter part,

after 2050, of this century.

The other point that's worth noticing

is how one-dimensional

this projection is.

You know, it looks at economic power

measured by GDP.

Doesn't tell you much about military power,

doesn't tell you very much about soft power.

It's all very one-dimensional.

And also, when we think about the rise of Asia,

or return of Asia

as I called it a little bit earlier,

it's worth remembering Asia's not one thing.

If you're sitting in Japan,

or in New Delhi,

or in Hanoi,

your view of the rise of China

is a little different than if you're sitting in Beijing.

Indeed, one of the advantages

that the Americans will have

in terms of power in Asia

is all those countries

want an American insurance policy

against the rise of China.

It's as though Mexico and Canada