KUALA LUMPUR (Sept 6): Historian Niall Ferguson has warned that the world is sleepwalking into an era of political and economic upheaval akin to the 1970s — only worse.
Speaking to CNBC at the Ambrosetti Forum in Italy, Ferguson said that the catalyst required to spark a repeat of the 1970s — namely inflation and international conflict — had already occurred.
“The ingredients of the 1970s are already in place,” Ferguson, a Milbank Family senior fellow at the Hoover Institution, Stanford University, told CNBC’s Steve Sedgwick on Monday (Sept 5).
Ferguson said the monetary and fiscal policy mistakes of last year, which set this inflation off, are very alike to the 1960s, likening recent price hikes to the 1970s’ doggedly high inflation.
“And, as in 1973, you get a war,” he continued, referring to the 1973 Arab-Israeli War — also known as the Yom Kippur War — between Israel and a coalition of Arab states led by Egypt and Syria.
As with Russia’s current war in Ukraine, the 1973 Arab-Israeli War led to international involvement from then superpowers the Soviet Union and the US, sparking a wider energy crisis.
Only that time, the conflict lasted just 20 days.
Russia’s unprovoked invasion of Ukraine has now entered into its sixth month, suggesting that any repercussions for energy markets could be far worse.
Ferguson said this war is lasting much longer than the 1973 war, so the energy shock it is causing is actually going to be more sustained.
2020s worse than 1970s
The historian said politicians and central bankers have been vying to mitigate the worst effects of the fallout by raising interest rates to combat inflation and reducing reliance on Russian energy imports.
But Ferguson, who has authored 16 books, including the most recent Doom: The Politics of Catastrophe, said there was no evidence to suggest that current crises could be avoided.
“Why shouldn’t it be as bad as the 1970s?” he said. “I’m going to go out on a limb: Let’s consider the possibility that the 2020s could actually be worse than the 1970s.”
Among the reasons for that, he said, are currently lower productivity growth, higher debt levels and less favourable demographics now versus 50 years ago.
“At least in the 1970s, you had detente between the superpowers. I don’t see much detente between Washington and Beijing right now. In fact, I see the opposite,” he said, referring to recent clashes over Taiwan.
