Niall Ferguson is a fabulous author and his book, “The War of the World: History’s Age of Hatred” is a great starting point. He was interviewed for today’s Globe and Mail on the recession. His “There Will be Blood” comment stole the title, understandably.
“There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.”
As he says, the above is a pretty basic assessment. But, here comes a key observation:
“The question is whether the general destabilization, the return of, if you like, political risk, ultimately leads to something really big in the realm of geopolitics. That seems a less certain outcome. We’ve already talked about why China and the United States are in an embrace they don’t dare end. If Russia is looking for trouble the way Mr. Putin seems to be, I still have some doubt as to whether it can really make this trouble, because of the weakness of the Russian economy. It’s hard to imagine Russia invading Ukraine without weakening its economic plight. They’re desperately trying to prevent the ruble from falling off a cliff. They’re spending all their reserves to prop it up. It’s hardly going to help if they do another Georgia.”
“I was more struck Putin’s bluster than his potential to bite, when he spoke at Davos. But he made a really good point, which I keep coming back to. In his speech, he said crises like this will encourage governments to engage in foreign policy aggression [emphasis added]. I don’t think he was talking about himself, but he might have been. It’s true, one of the things historically that we see, and also when we go back to 30s, but also to the depressions 1870s and 19980s, weak regimes will often resort to a more aggressive foreign policy, to try to bolster their position. It’s legitimacy that you can gain without economic disparity – playing the nationalist card. I wouldn’t be surprised to see some of that in the year ahead.
And to defuse the weight of the above:
“Property ownership is something that our societies, particularly English-speaking societies, seem to be drawn towards. The notion that the majority of people should own their own homes dated from the 30s. It didn’t really become a reality until the 50s. We’ve sort of pushed the home ownership rate up to what seems to be its maximum, and beyond. It will clearly come down. The lesson of the subprime crisis is that you shouldn’t give mortgages to people who can’t afford them. Duh …”
And, while it looks up for Canada, perhaps not the same elsewhere:
But the good news is only as good as this: the United States, which is Canada’s biggest trading partner, is not going to suffer as badly as many other economies around the world. And that means that from Canada’s point of view, it’s not standing right on top of the biggest fault lines in the global system. The biggest fault lines in the global system are in Asia. They may also be in Eastern Europe. That’s where things are going to be really unpredictable.”
As I mentioned with Bosnia, the recession can only aggravate ethnic tensions still simmering after the war. Which, in retrospect, was not that long ago. Moreover, areas like Kosovo are wholly dependent on international aid. The area has little to no industry; a shaky government populated with Kosovo Liberation Army ex-soldiers; and an aggressive Serbian government to the North. Aid is bound to decline over the coming years; hard-work is bound to unravel as weak countries fight for a piece of the global pie (unsuccessfully), and poverty will be on the up.
However, Ferguson seems pretty confident that we’re not heading towards a WWIII, so perhaps it’s time to stay positive, celebrate, and, as Bush might have put it, go shopping!