Professor says recession has put U.S. ‘on the edge of chaos’
ASPEN, Colorado – The Aspen Institute never promised that all the big notions aired at its popular Aspen Ideas Festival will be full of hope and inspiration.
The sixth annual festival opened with a sobering vision of the future from financial historian and Harvard professor Niall Ferguson, who declared that history indicates the U.S. is an empire “on the edge of chaos.”
“My working assumption is that the financial crisis that began in the summer of 2007 has accelerated a fundamental shift in an economic balance of power,” Ferguson told an near-capacity audience in the Greenwald Pavilion, which holds 750 people.
Even before the crisis, Goldman Sachs predicted that China would overtake the U.S. as the world’s economic superpower by 2027, according to Ferguson. “The financial crisis has unquestionably hit the U.S. much harder than China,” he said.
American politicians don’t have a sense of urgency, Ferguson contended. They feel the country can limp along for another 20 years or so in its current financial health without making tough decisions about fiscal policy. He believes they are wrong. The federal government’s debt has grown so large in the last decade that the U.S. will inevitably devote an increasing amount of taxes to it. Meanwhile it’s facing a greater burden through the Medicare and Social Security programs as Baby Boomers grow old and frail. It’s also currently fighting two wars. All that while revenues have plummeted in the recession.
“If you really want to see when an empire is getting vulnerable, the big giveaway is when the costs of serving the debt exceed the cost of the defense budget,” Ferguson said. He predicted that’s coming in the U.S. within the next six years.
Ferguson has engaged recently in bitter philosophical battles over public fiscal policy with economic and Pulitzer Prize winning New York Times columnist Paul Krugman. Krugman wants the Obama administration to spend more to stimulate the economy and concentrate in a longer term to reduce the federal debt; Ferguson believes it is imperative to reduce the debt as quickly as possible.
The were some audible challenges among audience members to Ferguson’s vision, but also enthusiastic cheers.
Ferguson was interviewed in an opening presentation at the Ideas Festival by journalist David Gergen. Magazine editor and real estate magnate Mort Zuckerman was also on the panel.
Zuckerman said he believes America still possesses the most innovative and hard-working private sector. There is also a substantial amount of money available for investment. Therefore, the U.S. can still emerge from the recession as a strong country, he said.
“We will recover the energy we frankly have lost in the last year or 18 months,” Zuckerman said.
But, like Ferguson, he is concerned about government fiscal policy.
“We really have, I think, some of the worst public policies in place today,” Zuckerman said. He claimed there is outright “hostility” to the business culture that helped build the country.
Zuckerman said he believes private sector business leaders and workers understand the competitive situation America is in and are willing to adapt. The public sector is the problem, he claimed. He accused elected officials, in general, of being more concerned about short-term gains to political careers than the long-term health of the country.
“Public policy could drowned everything. This is where I think we’re going to come closer to the edge than I ever thought we could,” Zuckerman said.
To add to the doom and gloom, Ferguson said the collapse could come much quicker than people realize.
“Most empire collapse fast,” Ferguson said. “They’re complex systems. They exist on the edge of chaos. It doesn’t take much to tip them over and when they tip over, they fall apart really quickly.”
He cited the Soviet Union as an example and noted Rome’s collapse happened in just a generation.
If the U.S. fades as a world economic and military superpower, Ferguson sees dire consequences, regardless of whether or not China replaces it. One result of the U.S. loss of power, he predicted, is the greater Middle East “spiraling out of control.”
Ferguson claimed America can finding solid fiscal footing by making tough decisions – soon – on federal deficits. He also advocated easing taxes on small companies and corporations to spur investment and hiring.
The Ideas Festival gets into full swing today and continues through July 11. There will be more than 180 sessions with close to 300 leading “thinkers and doers” in government, business, education, culture and numerous other fields.
Individual tickets are available to some events. More information is at http://www.aifestival.org/.
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