The causes of the First World War have always been a favourite subject of history teachers. I remember fighting off sleep in my own school days, desperately trying to understand how some nutter blowing up an Archduke in Sarajevo could set in motion a chain of events leading inexorably to ‘The War To End All Wars’, which was in turn a major contributing factor to the Great Depression, which subsequently set the scene for the ‘War After The War To End All Wars’. Niall Ferguson, Harvard and Oxford professor and leading historical author, believes the economic and geo-political dominoes are in place for a 21st Century Sarajevo event to potentially plunge the world back into chaos.

Although Ferguson’s views are often controversial, he is no leftist radical. He was in favour of the invasion of Iraq, encourages the US to be more interventionist on the world stage, and characterises Europe as a power well beyond its sell-by date. However, he is no apologist for the Bush regime and is critical of many aspects of US policy. He lays out his causes for concern in the current edition of Foreign Affairs. The article is reprinted at truthout.org.

Ferguson argues that the United States, just like the British Empire in 1914, is dangerously overstretched. Militarily, there are neither the troop numbers nor the public support in the US for the level of intervention necessary to meet the Bush administration’s ambitious aims. From a financial point of view the country’s enormous and rising deficits greatly limit any room for manoeuvre in the event of any new and greater catastrophe which may be around the corner.

He uses China’s threats against Taiwan as an example. As China grows economically so does its temptation to flex its military muscles. Taiwan has long been regarded with envious eyes by Beijing. American pledges of support for Taiwan have up to now put a powerful brake on this ambition, but China’s leading role in financing the US deficit and supporting the dollar have left them in control of vast dollar reserves. Flooding the market with these reserves would cause the dollar to plummet, leading to spiralling interest rates and a depression in the US which would inevitably spread throughout the world. This puts Washington’s testicles firmly in Chinese hands. It is argued by some that this threat is tempered by Chinese reliance on the American market for its goods, but Ferguson argues that an economic or political crisis in China may tip the balance in favour of reckless but populist action against Taiwan.

In the early 20th Century Britain’s widespread global commitments meant that there was insufficient resources at home to successfully deter German ambitions in continental Europe. The resulting conflict sealed the fate of the British Empire. The US could similarly find itself unable to credibly deter the exploits of its real future rivals for global hegemony, as it wades deeper into the quagmire of the Middle East, preferring to ask foreign rival powers to bankroll its adventures rather than domestic tax payers.

Would the US’s traditional allies step in to help out? It would depend on the circumstances of course, but any Euro-US alliance would appear less likely in the wake of America’s snubbing of international institutions in the run-up to the Iraq invasion. A coalition of the willing against Iran would almost certainly lack British support this time, and Europe’s ambitions to sell arms to China sheds light on potential European ambivalence in future Sino-American rivalries.

Finally Ferguson considers the threat from global terrorism. He compares bin Laden and al Qaeda to the Lenin and the Bolsheviks, pointing out the dangers of an Islamist government with al Qaeda sympathies coming to power in the Middle East, in Saudi Arabia for example. He also points to al Qaeda’s unquestionable success already in contributing to the American deficit problem:

In a proclamation to the world before the recent U.S. presidential election, bin Laden declared that his "policy [was] bleeding America to the point of bankruptcy." As he explained, "al Qaeda spent $500,000 on the [September 11 attacks], while America, in the incident and its aftermath, lost--according to the lowest estimate--more than $500 billion. Meaning that every dollar of al Qaeda defeated a million dollars, by the permission of Allah." Bin Laden went on to talk about the U.S. "economic deficit ... estimated to total more than a trillion dollars" and to make a somewhat uncharacteristic joke:

[T]hose who say that al Qaeda has won against the administration in the White House or that the administration has lost in this war have not been precise, because when one scrutinizes the results, one cannot say that al Qaeda is the sole factor in achieving those spectacular gains. Rather, the policy of the White House that demands the opening of war fronts to keep busy their various corporations--whether they be working in the field of arms or oil or reconstruction--has helped al Qaeda to achieve these enormous results.

Ferguson’s conclusions are hardly heartwarming:-

We all know that another, bigger September 11 is quite likely; it is, indeed, bin Laden's stated objective. We all know--or should know--that a crisis over Taiwan would send huge shockwaves through the international system; it could even lead to a great-power war. We all know that revolutionary regime change in Saudi Arabia would shake the world even more than the 1917 Bolshevik coup in Russia. We all know that the detonation of a nuclear device in London would dwarf the assassination of Archduke Ferdinand as an act of terrorism.

But what exactly can we do about such contingencies, if, as with the Asian tsunami, we cannot say even approximately when they might occur? The opportunity cost of liquidating our portfolios and inhabiting a subterranean bunker looks too high, even if Armageddon could come tomorrow. In that sense, we seem no better prepared for the worst-case scenario than were the beneficiaries of the last age of globalization, 90 years ago. Like the passengers who boarded the Lusitania, all we know is that we may conceivably sink. Still we sail.

He offers no proposals for how to improve or rectify the situation. His attitude seems to be to ‘cross our fingers and hope for the best’ – to shell out for our deck chairs on the Lusitania and enjoy the view while it lasts.

And yet surely there are things which can be done. Firstly, the US must realistically reflect on the range of options currently available:-

1. Take a genuinely unilateral route, asking Americans to fund the necessary level of expenditure to play the role of omnipresent interventionist world superpower, and recruit sufficient military personnel to carry out the role, ie. implement the draft.

2. Carry on in the current theme, with the understanding that the deficit between large global ambition and small government is being in the thrall to whoever is supporting your currency and deficit, and the understanding that you may not have control over whoever has you by the balls in future. Surely this somewhat undermines the whole Global Unilateral Hyperpower argument in any case. Alternatively, balance the budget by slashing those annoying ‘big government’ responsibilities such as Medicare and social security.

3. Work for consensus with other allies, on the basis of which global burdens can be shared and common enemies can be faced together – a common front of democracies with the resources to offer a credible threat of military intervention as and when required, and the use of soft power where appropriate.

Sometimes even the richest of beggars have to admit that they can’t always be choosers. The US is in a strong enough position to ensure that other allies will need to make significant compromises as part of any consensus. This should provide sufficient grounds for progress, and is surely preferable to the first option, which will certainly be unpalatable to the American electorate, and the second which puts the US in the thrall of a potentially far less palatable partner.

In reality I’m sure we have a long way to go before this issue is resolved. In spite of the talk of building bridges, actions speak louder of a continued spirit of unilateralism. The nomination of Paul Wolfowitz to the World Bank was always going to be unpopular with everyone outside the neocon cliques, and European negotiations with Iran continue to be treated with disdain.

Ferguson’s writing is often sprinkled with hyperbole. He once commented on the merits of Scottish devolution that it may ultimately break up the Union and spark civil war with England. However, the logical conclusion of the points he makes in this particular article, that America’s current overstretch puts it in a position which is ultimately bound to become untenable, is hard to disregard.