Niall Ferguson - America's Oh Shit Moment

From The Daily Beast

Don’t call me a “declinist.” I really don’t believe the United States—or Western civilization, more generally—is in some kind of gradual, inexorable decline.

But that’s not because I am one of those incorrigible optimists who agree with Winston Churchill that the United States will always do the right thing, albeit when all other possibilities have been exhausted.


In my view, civilizations don’t rise, fall, and then gently decline, as inevitably and predictably as the four seasons or the seven ages of man. History isn’t one smooth, parabolic curve after another. Its shape is more like an exponentially steepening slope that quite suddenly drops off like a cliff.

If you don’t know what I mean, pay a visit to Machu Picchu, the lost city of the Incas. In 1530 the Incas were the masters of all they surveyed from the heights of the Peruvian Andes. Within less than a decade, foreign invaders with horses, gunpowder, and lethal diseases had smashed their empire to smithereens. Today tourists gawp at the ruins that remain.

The notion that civilizations don’t decline but collapse inspired the anthropologist Jared Diamond’s 2005 book, Collapse. But Diamond focused, fashionably, on man-made environmental disasters as the causes of collapse. As a historian, I take a broader view. My point is that when you look back on the history of past civilizations, a striking feature is the speed with which most of them collapsed, regardless of the cause.

The Roman Empire didn’t decline and fall sedately, as historians used to claim. It collapsed within a few decades in the early fifth century, tipped over the edge of chaos by barbarian invaders and internal divisions. In the space of a generation, the vast imperial metropolis of Rome fell into disrepair, the aqueducts broken, the splendid marketplaces deserted.

The Ming dynasty’s rule in China also fell apart with extraordinary speed in the mid–17th century, succumbing to internal strife and external invasion. Again, the transition from equipoise to anarchy took little more than a decade.

A more recent and familiar example of precipitous decline is, of course, the collapse of the Soviet Union. And, if you still doubt that collapse comes suddenly, just think of how the postcolonial dictatorships of North Africa and the Middle East imploded this year. Twelve months ago, Messrs. Ben Ali, Mubarak, and Gaddafi seemed secure in their gaudy palaces. Here yesterday, gone today.

What all these collapsed powers have in common is that the complex social systems that underpinned them suddenly ceased to function. One minute rulers had legitimacy in the eyes of their people; the next they didn’t.

This process is a familiar one to students of financial markets. Even as I write, it is far from clear that the European Monetary Union can be salvaged from the dramatic collapse of confidence in the fiscal policies of its peripheral member states. In the realm of power, as in the domain of the bond vigilantes, you’re fine until you’re not fine—and when you’re not fine, you’re suddenly in a terrifying death spiral.The West first surged ahead of the Rest after about 1500 thanks to a series of institutional innovations called the “killer applications”:

1. Competition. Europe was politically fragmented into multiple monarchies and republics, which were in turn internally divided into competing corporate entities, among them the ancestors of modern business corporations.

2. The Scientific Revolution. All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry, and biology happened in Western Europe.

3. The Rule of Law and Representative Government. An optimal system of social and political order emerged in the English-speaking world, based on private-property rights and the representation of property owners in elected legislatures.

4. Modern Medicine. Nearly all the major 19th- and 20th-century breakthroughs in health care were made by Western Europeans and North Americans.

5. The Consumer Society. The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better, and cheaper goods, beginning with cotton garments.

6. The Work Ethic. Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.

For hundreds of years, these killer apps were essentially monopolized by Europeans and their cousins who settled in North America and Australasia. They are the best explanation for what economic historians call “the great divergence”: the astonishing gap that arose between Western standards of living and those in the rest of the world.

In 1500 the average Chinese was richer than the average North American. By the late 1970s the American was more than 20 times richer than the Chinese. Westerners not only grew richer than “Resterners.” They grew taller, healthier, and longer-lived. They also grew more powerful. By the early 20th century, just a dozen Western empires—-including the United States—controlled 58 percent of the world’s land surface and population, and a staggering 74 percent of the global economy.

Beginning with Japan, however, one non-Western society after another has worked out that these apps can be downloaded and installed in non-Western operating systems. That explains about half the catching up that we have witnessed in our lifetimes, especially since the onset of economic reforms in China in 1978.

Now, I am not one of those people filled with angst at the thought of a world in which the average American is no longer vastly richer than the average Chinese. Indeed, I welcome the escape of hundreds of millions of Asians from poverty, not to mention the improvements we are seeing in South America and parts of Africa. But there is a second, more insidious cause of the “great reconvergence,” which I do deplore—and that is the tendency of Western societies to delete their own killer apps.

Ask yourself: who’s got the work ethic now? The average South Korean works about 39 percent more hours per week than the average American. The school year in South Korea is 220 days long, compared with 180 days here. And you don’t have to spend too long at any major U.S. university to know which students really drive themselves: the Asians and Asian-Americans.

The consumer society? Did you know that 26 of the 30 biggest shopping malls in the world are now in emerging markets, mostly in Asia? Only three are in the United States. And, boy, do they look forlorn these days, as maxed-out Americans struggle to pay down their debts.

Modern medicine? Well, we certainly outspend everyone else. As a share of gross domestic product, the United States spends twice what Japan spends on health care and more than three times what China spends. Yet life expectancy in the U.S. has risen from 70 to 78 in the past 50 years, compared with leaps from 68 to 83 in Japan and from 43 to 73 in China.

The rule of law? For a real eye-opener, take a look at the latest World Economic Forum (WEF) Executive Opinion Survey. On no fewer than 15 of 16 different issues relating to property rights and governance, the United States fares worse than Hong Kong. Indeed, the U.S. makes the global top 20 in only one area: investor protection. On every other count, its reputation is shockingly bad. The U.S. ranks 86th in the world for the costs imposed on business by organized crime, 50th for public trust in the ethics of politicians, 42nd for various forms of bribery, and 40th for standards of auditing and financial reporting.

What about science? It’s certainly true that U.S.-based scientists continue to walk off with plenty of Nobel Prizes each year. But Nobel winners are old men. The future belongs not to them but to today’s teenagers. Here’s another striking statistic. Every three years the Organization of Economic Cooperation and Development’s Program for International Student Assessment tests the educational attainment of 15-year-olds around the world. The latest data on “mathematical literacy” reveal that the gap between the world leaders—the students of Shanghai and Singapore—and their American counterparts is now as big as the gap between U.S. kids and teenagers in Albania and Tunisia.

The late, lamented Steve Jobs convinced Americans that the future would be “Designed by Apple in California. Assembled in China.” Yet statistics from the World Intellectual Property Organization show that already more patents originate in Japan than in the U.S., that South Korea overtook Germany to take third place in 2005, and that China is poised to overtake Germany too.

Finally, there’s competition, the original killer app that sent the fragmented West down a completely different path from monolithic imperial China. Well, the WEF has conducted a comprehensive Global Competitiveness survey every year since 1979. Since the current methodology was adopted in 2004, the United States’ average competitiveness score has fallen from 5.82 to 5.43, one of the steepest declines among developed economies. China’s score, meanwhile, has leapt up from 4.29 to 4.90.

And it’s not only that we’re becoming less competitive abroad. Perhaps more disturbing is the decline of meaningful competition at home, as the social mobility of the postwar era has given way to an extraordinary social polarization. You don’t have to be an Occupy Wall Street leftist to believe that the American super-rich elite—the 1 percent that collects 20 percent of the income—has become dangerously divorced from the rest of society, especially from the underclass at the bottom of the income distribution.

But if we are headed toward collapse, what would an American “Oh sh*t!” moment look like? An upsurge in civil unrest and crime, as happened in the 1970s? A loss of faith on the part of investors and a sudden Greek-style leap in government borrowing costs? How about a spike of violence in the Middle East, from Iraq to Afghanistan, as insurgents capitalize on our troop withdrawals? Or a paralyzing cyberattack from the rising Asian superpower we complacently underrate?

Is there anything we can do to prevent such disasters? Social scientist Charles Murray calls for a “civic great awakening”—a return to the original values of the American republic. He’s got a point. Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly.

What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent—to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic.

Then we need to download the updates that are running more successfully in other countries, from Finland to New Zealand, from Denmark to Hong Kong, from Singapore to Sweden.

And finally we need to reboot our whole system.

I refuse to accept that Western civilization is like some hopeless old version of Microsoft DOS, doomed to freeze, then crash. I still cling to the hope that the United States is the Mac to Europe’s PC, and that if one part of the West can successfully update and reboot itself, it’s America.

But the lesson of history is clear. Voters and politicians alike dare not postpone the big reboot. Decline is not so gradual that our biggest problems can simply be left to the next administration, or the one after that.

If what we are risking is not decline but downright collapse, then the time frame may be even tighter than one election cycle.

Western Civilization's Killer Apps

COMPETITION
Western societies divided into competing factions, leading to progressive improvements.

THE SCIENTIFIC REVOLUTION
Breakthroughs in mathematics, astronomy, physics, chemistry, and biology.

THE RULE OF LAW
Representative government based on private-property rights and democratic elections.

MODERN MEDICINE
19th- and 20th-century advances in germ theory, antibiotics, and anesthesia.

THE CONSUMER SOCIETY
Leaps in productivity combined with widespread demand for more, better, and cheaper goods.

THE WORK ETHIC
Combination of intensive labor with higher savings rates, permitting sustained capital accumulation.
This essay is adapted from Niall Ferguson’s new book, Civilization: The West and the Rest, published by Penguin Press. The accompanying television series will air on PBS in 2012.

Many experts think the € may tumble on the back of the Greek debt crisis

Something very ugly is happening with currencies and to this observer, it looks like the beginning stages of competitive devaluation.

The problem's roots are in the unsustainable amount of government debt, borrowing and spending. We hear about Greece, by any measure a very small country, but Greece does not stand alone with some very bleak statistics, discussed in the video and article. Those statistics are not that far of from those of The United States.

In the most optimistic reading of events, Greece is said to have to cut spending and reduce their budget deficit by 4%. Easily said, but dangerously difficult to do. Greece, like all members of the euro zone, has another problem. It cannot devalue its currency. It uses the euro.

Either at the top, the Germans or French people are going to get tired of bailing out the lesser members of the European Union, or the smaller members will take the easy way out, drop the euro and return to their own currencies.

Unfortunately for the United States, we have a president in Barack Obama who sees nothing but increasing the size of government as the answer to every problem. He is probably the least fit person to fill that office at this time.

We are in trouble, big trouble, but at least we control our own printing presses.

__________________________



Can anyone fix the euro puzzle?

A crisis-strewn week has left the single currency on the edge of a precipice, write Edmund Conway and Bruno Waterfield

Published: 12:14AM GMT 14 Feb 2010
Telegraph

The summit started as it meant to go on – in chaos, confusion and unintended farce. The big moment – the heads of state meeting which is supposed to be the centrepiece of every European summit – was scheduled to begin at 10am in the wood-panelled Bibliothèque Solvay in Brussels' European quarter, but as the hour approached, it became clear that nothing was doing. As more time passed, it became clear that something was wrong. Eventually, Herman van Rompuy – the new European president, in charge of his first big set-piece – explained that a snowstorm had held up a number of the participants. The meeting would be delayed by two hours.

It was a poor excuse. Everyone knew what was really holding up the summit. Behind the scenes, in ill-tempered exchanges in private conference rooms nearby, the grand European plan to help prevent Greece sliding into economic collapse was unravelling – and fast. In a radical move, the leaders – from President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany to the European Central Bank (ECB) president Jean-Claude Trichet – had already agreed to throw out the usual European Council agenda and replace it with one topic: Greece's economy. The problem was that no one could agree on what to do about the stricken nation.

By now, the story will be painfully familiar. The southern European nation was having trouble raising money. Never the most sensibly-run economy, Greece had seen its budget deficit balloon to terrifying proportions in the wake of the recession sparked by the financial crisis. To make matters worse, the incoming government, led by Prime Minister George Papandreou, had uncovered the fact that their predecessors had hidden billions of euros worth of borrowing outside their official statistics. The combined effect was to cause a sudden sharp increase in the country's borrowing rates and its default insurance spreads, as investors speculated that it was entering a fiscal debt trap from which it could no longer escape.

In such circumstances, a country would devalue its currency, but this is not an avenue open to a member of the euro like Greece. With investors pulling their money out of the country at such a rapid rate that the interest rate spread between Greek and German government bonds hit its highest level since the creation of the euro, it became clear that someone was going to have to step in and help.

It wasn't merely that Greece, a relatively small economy, was close to collapse; it was that, left unchecked, the panic could spread to Spain, Portugal, Italy or Ireland – all of whom suffer the same ballooning budget deficits and overburdened consumers.

For a whole swathe of euro members to be allowed to crumble would beg questions about the entire euro project. Indeed, as Papandreou pointed out at the World Economic Forum at Davos last month, the attack could be seen as a speculative assault on the euro, targeted at first through its "weakest link". As if to bear out his point, figures from the Chicago Mercantile Exchange released on Monday indicated that speculators had amassed their biggest positions against the currency since its foundation more than a decade ago.

So it was that a week before Thursday's summit, in a bilateral meeting in Paris, Sarkozy told Merkel that France and Germany would have to mastermind some kind of plan to protect Greece. His broad proposal was that the northern European nations should at the least issue a statement promising to stand behind Greece, and perhaps go so far as to spell out how much they would put into a potential lifeboat. Merkel was not convinced. For one thing, she was well aware that Sarkozy had his own political motivations for such a move: the alternative, an International Monetary Fund (IMF) bail-out, would enable IMF chief Dominique Strauss-Kahn, Sarkozy's most likely opponent at the next French election, to ride in and "save the euro".

But, more fundamentally, by organising a bail-out Germany would be seen as providing unfair support for a country which had proven itself incapable of fiscal rectitude. Such a move would not only be hideously unpopular with German taxpayers, it would potentially encourage poorer countries to follow Greece's lead. Moreover, under the German constitution, such moves were legally tricky to organise.

And so the battlelines were drawn prior to a week of frantic behind-the-scenes negotiations as the French and Germans tried desperately to find common ground.

Finally, it seemed as if the ministers had patched together a deal. Some kind of bail-out package – a "firewall" provided by a "coalition of the willing", according to insiders – would be revealed at the summit.

Then came van Rompuy's excuse about the snow. But it wasn't ice and water that delayed the summit. That morning, the key players – Merkel, Sarkozy, Papandreou, Jean-Claude Juncker, head of the euro group of nations, and Trichet – held a last-minute meeting. According to insiders, voices were raised with Trichet and Merkel banging fists on the table as Sarkozy and Juncker tried to push for a bail-out plan. The statement that emerged from the meeting was a thinly-disguised compromise. Three-quarters of it seemed to be focused only on insisting that the Greeks cut their budget deficit by 4pc this year; the final paragraph, which appeared to be specifically aimed at appeasing the French, said: "Euro area Member states will take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole," before adding: "The Greek government has not requested any financial support."

The hope was that the statement alone would be enough to reassure markets that in the event of a proper "sudden stop" in funding to Greece, the rest of the euro area would step in. However, the financial crisis has proven that without concerted plans to back them up, statements of broad intent are pretty useless at containing market concerns.

Within moments of the statement, the euro dropped to a nine-month low against the dollar and share prices in the euro area stalled. The rot continued on Friday and, according to economists, will persist unless finance ministers meeting tomorrow provide any detail on what a rescue package might involve.

What makes any hopes for clarity appear forlorn is that the euro has no mechanism for dealing with crises of this sort. It is monetary rather than fiscal union. As Martin Feldstein, a Harvard professor, puts it: "There's too much incentive for countries to run up big deficits as there's no feedback until a crisis."

The ECB could offer the country extra liquidity support, but there is a sense that unless other euro nations dip into their pockets the suspicions over Greece will linger – and those about the rest of the euro's debt recidivists. Juncker's plan would involve a web of bilateral loans from euro members, perhaps being made not directly but through state-owned banks, so as to circumvent those German constitutional obstacles.

However, it is an open question as to how the populations of those donor countries will take the proposal that they once again come to the rescue of their misbehaving neighbours. Nor indeed how the Greeks will take it when it emerges that their coruscating deficit cuts and public sector wage cuts are being overseen by the Germans. Although the political will is clearly still strong in Brussels to fight off any talk about a euro crisis, it is clear even to fans of the single currency that this is its single greatest test. According to Albert Edwards of Société Générale (himself not, it should be pointed out, a fan), "any 'help' given to Greece merely delays the inevitable break-up of the eurozone". The problem, he adds, is a "lack of competitiveness within the eurozone – an inevitable consequence of the one-size-fits-all interest rate policy.

"Even if the PIGS [Portugal, Ireland, Greece and Spain] could slash their fiscal deficits, as Ireland is attempting, to maintain credibility with the markets in the short term, the lack of competitiveness within the eurozone needs years of relative [and probably absolute] deflation."

This problem – that under eurozone rules Germany is able to pursue an entirely divergent economic strategy to its Mediterranean counterparts – suggests that the best course of action may be for Germany to pull out of the currency union, according to former Bank of England policymaker David Blanchflower.

"That might be the only solution," he says. "At the moment it simply isn't working. And the imbalance makes it almost impossible for countries like Greece or Ireland to escape from this situation."

It is not merely economists who have clocked on to this inherent weakness. According to Simon Derrick, of Bank of New York Mellon, the mood among investors feels not dissimilar to the time the Exchange Rate Mechanism faced speculative attack in the early 1990s.

Back then the targets were currencies; this time they are government bonds. But the objective is the same – to test whether governments really have the political will to persevere with a system plagued by inherent economic weakness and illogicality.

Has any hedge fund put its head above the parapet in this destructive trade, as George Soros did back then, owning up to shorting the pound before successfully "breaking" the Bank of England? Not yet, though the rumours are that John Paulson, the man who made billions betting against the US housing market, has significant positions against some of the weaker euro members. But a currency union is rather more difficult to break than an exchange rate agreement. Betting against the Europeans' political will to further integration remains a gamble.
Still, the difficulties have at least offered Gordon Brown a rare opportunity for genuine self-satisfaction. After all, he decided in 2003 – against Tony Blair's wishes – not to join the single currency, and only now is it clear how wise that decision was. Britain, though marred with similar fiscal difficulties as Greece, has at least had the luxury of being able to devalue the pound.

Business Secretary Lord Mandelson, the arch europhile, still clings on to the dream, saying last week: "I think in the longer term it would be in Britain's interests to be part of the eurozone."

Even with sterling, the UK can hardly rest easy. For one thing, British banks have a large balance sheet exposure to the troubled Club Med nations – estimated by the Bank for International Settlements to be around £240bn – so any collapse there would trigger a secondary crisis in London.

Second, the Greek crisis serves as a reminder that no country is immune to a sudden investor exodus. And if one runs one's finger down the list of leading nations, no prizes for guessing which country has a Greek-style combination of rocketing budget deficits, high current account shortfalls and rising national debt.

Globalization, 17th Century Style, What has changed?

Trade and globalization: We are what we buy and how we buy it

Trade and globalization — the rules governing what we buy and sell — are now playing such a decisive role in almost every major policy that we ignore it at our peril, writes columnist David Sirota.

By David Sirota
Syndicated columnist Seattle Times

Trade and globalization — when not referencing blockbuster sports transactions or raucous street protests, debates over these abstract terms can give Ambien and Jack Daniels a run for their money as a cure for insomnia. Of course, that's the problem — the rules governing what we buy and sell are now playing such a decisive role in almost every major policy that we're falling asleep at our peril.

Most are familiar with trade and globalization, if at all, through the prism of heavy manufacturing in the so-called "old economy." We know, for instance, how NAFTA-style pacts helped destroy our factory job base.

The economics were unabashed and straightforward: By eliminating the tariffs we charged for goods made in countries with negligible wage and human rights laws, Washington removed disincentives for mass offshoring. With "free trade," our government effectively encouraged corporations to transfer production facilities abroad so as to cut costs via the cheap labor, slave working conditions and rampant union busting that flourishes in the developing world.

No surprise — two decades into this allegedly glorious "free trade" era, an ever-bigger swath of Flyover America looks just as flicks like "Roger and Me" predicted: rusted, abandoned, boarded up, and/or otherwise resembling a nuclear test site.

Even less shocking, that apocalyptic reality has been largely ignored by a political and media establishment that believes economic emergencies are only those that threaten Wall Street bankers. Indeed, if the Beltway chattering class has paid attention to trade reform at all, it has portrayed the cause as a boring "special interest" crusade of supposedly selfish unionists and crazed anarchists.

Circumstances, however, have undermined the narrative power of that deliberately dishonest cliché.

In 2009, trade and globalization have transcended their "old economy" ghetto and become central to the "new economy," health care and even the Earth's very survival.

Remember the stimulus bill that promised a job-supporting down payment on the infrastructure and technology needed to rebuild our country? Yeah, well, the success of lobbyists in neutering the legislation's "Buy American" provisions in the name of "free trade" has steered much of that money into subsidizing job growth offshore.

Worried about skyrocketing health-care costs? If you are, then you ought to be wondering about laws that bar Americans from using "free trade" to purchase lower-priced medicines from abroad.

And what about reducing greenhouse-gas emissions? You interested in avoiding a climate catastrophe? Then realize the planet's future has far more to do with good old-fashioned tariffs than any neoliberal techno-babble about "cap and trade."

That's right, because global climate change is just that — global — we must both reduce our own pollution and compel other nations to reduce theirs. We can certainly try that through saccharine promises in a treaty, but it's far more effective to use the market.

That's the beauty of Democratic Ohio Sen. Sherrod Brown's proposal. A new levy on goods made in ways or in nations that ignore greenhouse-gas caps doesn't merely discourage American companies from moving jobs to countries whose domestic laws tolerate pollution. It also economically advantages green products/companies/nations, raises revenues for clean-energy innovation and — most important — appreciates the borderless nature of the crisis.

"Carbon dioxide emissions expand if a company closes down in Toledo, Ohio, and moves to Shanghai, where the emissions standards are weaker, " Brown says.

Put another way, as coma-inducing as the words "trade" and "globalization" may seem, we are what we buy and how we buy it. That means the cause of trade reform isn't everything — increasingly, it is the only thing.

David Sirota blogs at OpenLeft.com. E-mail him at ds@davidsirota.com

The baffling world of money and history unscrambled by Niall Ferguson.

This is a long clip, but worthy of a listen while you do something else. I have followed Niall Ferguson for some time and he is no fool. He puts the current financial situation in an historic perspective.

The Dark Days Ahead, a Multi-Ethnic Nightmare.

"In the pre-historic state, men were designed to regard other men, the 'other', with considerable suspicion and hostility… It's quite tempting to bump off the men and steal the women. That's essentially the primitive model for human conflict. What I try to suggest is that that model is there, submerged in human beings - particularly in men - and that what happens in the twentieth century is that when civilisation is torn away so to speak, these urges are set loose; and you see people behaving with real savagery."

"We could have another War of the World"
Transmission date: Sunday 16 September 2007 Radio Netherlands

From the interview: Listen here

Niall Ferguson on the scale of violence in the twentieth century:

"What's really interesting about the twentieth century is that even though the population of the world was much much larger than in any previous century, there really were enormous numbers of people killed directly as a result of organised violence … You get up in the neighbourhood of 170, 180 million all told, with more than 50 million dying in World War II alone."

On the "prophetic" quality of H.G.Wells' The War of the Worlds:

"There you have a wonderful science fiction work written in 1898 that clearly envisions warfare as the destruction of cities by high-powered invaders, and my conceit (if you like) is to say that it happened just as Wells predicted - but without Martians. It happened because human beings were able to turn on one another, and treat one another as aliens."

On the paradox of progress in the twentieth century:

"The twentieth century ought to have been so much better. It's a century of unparalleled material progress - and yet if anything this capacity for organised violence seems if anything to grow, and to become more lethal."

On which parts of the world invite the most violence during the twentieth century:

"It turns out to be the most ethnically mixed, heterogeneous parts of the world that are the most dangerous in the twentieth century. That's why central and eastern Europe is so interesting, because [that's where] there's a sort of patchwork of different ethno-linguistic groups living cheek-by-jowl in 1900. And those really are the places where the killing fields of the twentieth century are located."

His explanation for why civilised societies can descend into savagery:

"In the pre-historic state, men were designed to regard other men, the 'other', with considerable suspicion and hostility… It's quite tempting to bump off the men and steal the women. That's essentially the primitive model for human conflict. What I try to suggest is that that model is there, submerged in human beings - particularly in men - and that what happens in the twentieth century is that when civilisation is torn away so to speak, these urges are set loose; and you see people behaving with real savagery."

On why the outcome of the Iraq War should not discredit the idea of future military interventions:

"The great danger at the moment is that the failure of the American intervention in Iraq is discrediting the project of liberal or humanitarian intervention altogether. I think that would be a terrible non sequitur. If people said, 'look what went wrong in Iraq - therefore we should never intervene in sovereign states again, we should leave Zimbabwe to go to hell in a handcart, we should leave Sudan…' - that would be a fatal wrong conclusion to draw from the history of the last seven years."
"The prospect of a nuclear armed Iran should terrify everybody … But - what do you do? If you've played the card of pre-emption once and ended up with a complete fiasco on your hands, it's much much harder to play it a second time, and this, I think, is the huge dilemma that currently confronts western statesmen - not least President Bush himself."

On the prospect of another War of the World:

"It seems to me what's happening in Iraq is very much the classic scenario where the empire [the US] loses its grip and goes down in a pretty ugly way, with insufficient forces failing to hold the line and finally running for the exit … We could have another War of the World in the making, only this time its headquarters, its focal point, will be the Middle East, rather than central and eastern Europe."

On his fears for the future:

"If history has anything to teach us, it's the vulnerability of processes of global integration, and the speed with which our civilisation - no matter how globalised it may seem - can revert to the really ugly side of human nature."

Niall Ferguson is Laurence A Tisch Professor of History at Harvard University; Niall Ferguson.org


Listen here or here