Wednesday night I attended a lecture by Niall Ferguson for the Chicago Council on Global Affairs at the Fairmont Hotel. The name of his presentation was "America: An Empire on the Cusp of Collapse."
I was a fan of Niall based on his book "The Pity of War" about World War One, which I thought was an interesting approach to the topic, although I did not share all of his conclusions.
Mr. Ferguson's presentation was not as depressing as the title sounds. In his articles he is prodding governments for better policies to tackle debt and working with lawmakers in the US and overseas that want to consider solutions. In a recent visit to Washington DC, however, Mr. Ferguson said that only three leaders wanted to meet with him.
His largest point was that the US and Western Europe had a giant advantage in economic power vs. their population when compared with Asia and the rest of the world in the period from the 1800's through the middle of the twentieth century. It appears that this advantage is eroding and the Asian economies (predominantly China) are closing that gap.
He stated that we needed to consider why Western Europe was able to take such as commanding lead in the first place, and by understanding this we would be able to think about how we might be able to "reboot" our economies to compete more effectively. Here are the six "killer applications" (and a link to an FT article by Niall) that Niall Ferguson said enabled Europe to lead Asia for so long:
1) Modern medicine
2) A science-based culture
3) A representative political system
4) Consumer society
5) Market capitalism
6) Work ethic
Mr. Ferguson said that China did embrace these concepts, with the exception of #3, a representative political system, although it was only recently that they began looking to their own consumers to fuel their economic growth rather than just exports. He said that it was interesting to see how successful that they had been with this selective view of the list and there is an open question of how sustainable their overall economy would be with their current political system. However, the current Chinese government is actually very popular with their people, as opposed to many of the Western governments that are incapable of implementing an effective response to the debt crisis.
As far as the debt crisis goes, he felt that the response to the Greek debt crisis was insufficient. He said he spoke with someone in Ireland who worked in a school who said his income had been cut 15% as Ireland responded to the debt crisis. He indicated that this sort of impact to the standard of living may be necessary to achieve the kinds of cuts needed to make the debt crisis manageable.
For the US, our debt load is in the same range as many of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) that are currently feeling the pain of this debt crisis. While the US has advantages over these countries (a higher rate of growth and our own currency which gives us the ability to devalue) we also have further to fall since we are also a military power across the globe, and soon our payments on interest (not reduction of debt) will cross our military spending level.
At the end of his talk, there were questions, and someone asked him one that gave him the ability to end the talk on something other than a bleak note. He compared the US to other European countries also facing a debt crisis and he said that the average American he talked to understood that we do have an issue and we need to do something about it, and that our culture and economics enable us to stand up and grab a hold of this issue if we were properly led by politicians who also took up the challenge. He said that he felt that some of the European countries had essentially passed the point of no return on these items.
In general, if you get a chance to see Niall speak, I would recommend attending. He is a good speaker, very intelligent and humorous, and it is an hour that goes by quickly. He also attempts to bring solutions and new thinking to these issues, he isn't just a "doom and gloom" guy who would revel in the fall of Western civilization (which distinguishes him from most of the professors at a typical US based liberal arts college).
Cross posted at Chicago Boyz