Is America headed for a great depression similar to what began in 1929? Or has it already begun to put the recession in its rear view mirror and is to soon resume its roll as global policeman?
For Niall Ferguson, one is the worst-case scenario, the other the best case. And that presents a real challenge for business leaders trying to predict how the world will look just four years from today. In 2013 will the economy be contracting or expanding? Will the top income tax rate be 45 percent or 35 percent? Will the S&P 500 be jetting at 976 or slumming at 418? Will the president be Barack Obama or Jeb Bush?
Maddeningly Ferguson, the controversial Harvard historian and economist, doesn’t offer his own opinion in his Harvard Business Review article The Descent of Finance. But he convincingly plays out scenarios that lead to both results, so you can go along for the ride and see which seem more plausible to your way of thinking. (Judging from earlier writings, Ferguson seems to side with the more pessimistic view, believing that the Western world’s over-reliance on debt won’t be solved by writing more debt.)
Oh, and what’s that bit about the United States again becoming the world’s policeman? Ferguson suggests that as bad as the econ crisis is in America, other countries are suffering more. Economic instability leads to political unrest. The world’s hot spots will continue to get hotter. “If the financial crisis turns up the heat in old hot spots and creates new ones at either end of Eurasia, the world may spend the next eight years wishing for more, not fewer, U.S. interventions,” Ferguson offers.
Look ahead to 2013. As a business strategist, what does the world look like to you and how does your business respond?
