Considering that FW is Canada-based this is a bit like coals to Newcastle,
but here's an interview of Niall Ferguson by Crrie Tait in the Vancouver Sun
<<<<
Niall Fergusons resumé could put you to sleep. Hes a senior fellow here, a
professor of this or that there. But despite hanging out with the
elbow-patch crowd, this Scottish intellectual and author smoothly blends
history, finance and politics all into one understandable package. At times
he is humorous, at others frightful. His relationship with Ayaan Hirsi Ali,
a Somali-Dutch intellectual who has a death threat looming over her head
after she was critical of Islam, also lends him an air of controversy. Mr.
Ferguson, whose latest bestseller is The Ascent of Money: The Financial
History of the World, was in Calgary this past week as the headliner at the
Teatro salon speaker series. He touched on everything from why he thinks
the International Monetary Fund will soon be bailing out Britain, to why
the United States must now tread carefully around the globe or risk the
wrath of China. And he shared his thoughts on money and power and who he
thinks will win the U.K. election.
Q What are your thoughts on the U.K. economic situation as it relates to
the election?
A The situation of the United Kingdom in fiscal terms is in fact worse than
the situation of Greece. That may come as a surprise to you, but if you
look at the most recent paper on the subject published by the Bank for
International Settlements, it is very clear. The trajectory of U.K. public
debt over the next 30 years, absent a major change of policy, will take it
to a mind-blowing 500% of GDP, which is about 100 percentage points worse
than Greece. If Britain had done what many right-thinking people thought it
should do and joined the euro, the situation of Britain would be worse than
that of Greece today. The only reason that Britain isnt an honourary member
of the PIIGS club, along with Portugal, Ireland, Italy and Spain, is that
it stayed outside the eurozone and therefore reserves the right to debase
the currency as an exit strategy. I dont know about you, but I dont find
that very cheery as a prospect
So, Britain has a massive fiscal crisis that is just about to break.
Whoever wins this election & they are going to have a ghastly task on their
hands to try to reform a system of entitlements and welfare and state
subsidy that has hugely expanded under Gordon Brown since 1997. I think
Britain was more ready for Thatcherism in 1979 than it is today, and yet it
needs it more today than it did then.
The situation is so unpromising that I would anticipate the International
Monetary Fund having to come into Britain as it did in 1976. So theres a
great deal of smoke and mirrors about this subject. None of the candidates
want to level with the British electorate, but the day after the election
well start seeing just how dire it is. And it will be a terrible indictment
of Gordon Browns time as chancellor of the exchequer and as prime minister.
Q Now that you think the West has lost its grip, is the East going to dominate?
A It is not quite as simple as that because theres a lag between economic
shifts and geopolitical shifts. China might well end up with an economy
larger than that of the United States in the next 20 years, but it is hard
to imagine it having comparable military power since the gap is much larger
in air power and naval power and land power. So, I dont think China will be
in a position to dominate, to use your word, the way that the United States
was able to dominate substantial regions of the world, and indeed the way
the Soviet Union did because of its military capability.
This is a more gradual process. I think it would be more correct to say the
world is returning to equilibrium. To a period in which, for centuries, a
small group of countries that I call the West had disproportionate power.
We just have to get used to a world where, for the first time in centuries,
China and India and Brazil are punching not above their weight, not below
their weight, but at their weight.
Q How will the West react?
A First, by falling apart. By stopping being the West. And we already see
that in the breakdown in harmony between the United States and the European
Union on a range of issues, beginning with Iraq, then Afghanistan.
Then there is this kind of slap-in-the-face feeling, for example, the
Copenhagen climate summit and the President of the United States arriving
to discuss the highly sensitive issues with his Chinese counterpart and
finding the Indians are already there, the South Africans are already
there, the Russians are already there. It is kind of like: Oh, who are you
again?
The President of the United States is no longer indisputably the most
powerful man in the world. There is a sense he has to deal with his Chinese
counterpart as an equal.
Q Are we there yet?
A I think were already there. Diplomatically, because of the financial
interrelationship between the United States and China, the President cannot
treat his Chinese counterpart anything other than an equal.
Q Do you think Chinas threats to sell U.S. T-bills to inflict financial
pain are real?
A I dont think they are going to pull a lever as harsh as that over Taiwan.
I think if the stakes were high enough, they might very well. If China
announced tomorrow were selling our Treasuries,the effect on the bond
market would be explosive. And it would cost the Chinese because their
dollar reserves would be worthless. But you have to remember most of Chinas
wealth is not in dollars, it is in renminbi. So they would lose on their
international reserves, but they would gain on every other asset that they
own. I think the question is: What issue is big enough to play that card?
Q What would prompt them to play it?
A There would need to be a major breakdown over something. For example,
lets conjure up a scenario where the United States finds itself having to
support Israeli attacks on Irans nuclear facilities. Now, the Chinese would
have some good options there. One would be to just let it play out and
watch. Another would be to very publicly seek to [exert] their leverage
over the United States by saying no, no you cant do this.And that would be
a very high-risk strategy, but I could imagine how that would work
So, I think at some point, the currency issue and the U.S. debt issue does
give the Chinese real power, just as the currency issue and the debt issue
gave the United States power over Britain in the 1950s, particularly at the
time of the Suez Crisis. So, you have to imagine a Suez Crisis where the
U.S. does something and the Chinese just decide were not going to support
that because by not supporting it we will make many friends.[T-bills] are a
strategic lever and they can be used to deter military and other actions.
Q Is it one of their most powerful levers to deter action?
A Yes.
Q Is Chinas rise to power a bad thing?
A It is not a bad thing that the most populous country in the world is
emerging from grinding poverty and hundreds of thousands of people who were
in subsistence agriculture now have better paying jobs. That cant be a bad
thing. The problem is that in the realm of politics, Chinas [position] is
not necessarily benign. They [do not] remotely share our ambitions to
improve the quality of governance in Africa. They couldnt care less. And
they have a very different political model, which is neither democratic nor
based on law in our sense, and if you want to know what Chinese power is
about, ask any Tibetan.
Q How does Africa fit into all this?
A In the eyes of the Chinese, it is a place with a lot of commodities and
very poor infrastructure, and the Chinese have figured out they can access
the commodities if they provide the infrastructure. So, they have a pretty
instrumental view of Africa. Given the West has a sentimental view of
Africa, which is they want to [help with] water, give it aid, help Africans
by giving them free malaria meds. And China, of course, thinks thats
absurd. They want to come in and buy stuff, give them highways in return.
And right now that model is working better.
Q Working better for China or Africa?
A Working better for Africa. Just look at the growth rate. Africa is
enjoying & rapid growth, and it is mostly on the back of sales of
commodities and the improvement of infrastructure. By comparison, weve had
50 years of development aid and achieved less. So [it is] not pretty in the
sense that what China does is bolster regimes in Sudan. They arent really
concerned about people being authoritarian. They are authoritarian, why
should they worry about governance in Africa? It is not their vision of
what matters, and if they can deliver economic growth and raise African
living standards, you cant really blame the Africans for saying: OK, these
people ask less of us [than] the aid agencies of the West and governments
in the West.
Financial Post
© Copyright (c) National Post
Keith Hudson, Saltford, England
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