Harvard’s Niall Ferguson is a well known and controversial historian who often looks into the financial past to plot parallels with contemporary times. Lately Ferguson has warned of a coming decline in the West and particularly in the US — see his 2006 book The War of the World: Twentieth-century Conflict and the Descent of the West.
Now Ferguson continues the theme In a recent op-ed in the Financial Times by comparing America’s declining financial state, if increasing debt is an indicator (and not everyone agrees on that), to the 1870s and the decline of the Ottoman empire.
… we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the US.
Ferguson looks at recent Middle Eastern and east Asian investments in Bear Stearns, Citigroup, Morgan Stanley and Merrill Lynch as a clear sign that a transfer of revenue from West to East is taking place, with geopolitical power possibly to follow.
Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.
In his post Super Tuesday speech, Mitt Romney called the United States the greatest nation ever to exist. Ferguson would certainly argue against that being the case today. If America is in decline politically and economically, what should be done about it? What role does business play?
