Day By Day

Monday, March 20, 2006

Niall's Numskulls

Niall Ferguson has long split his time between being a serious [and talented] historian and indulging himself in popular [and profitable] commentary. In both aspects he is worthy of notice because he thinks seriously about big things and his thought is informed by a deep appreciation of historical contexts.

This weekend, in a mostly frivolous column filled with obscure references to British pop culture, he makes some very important observations.

1) The current global system of exchange is of immense benefit to people around the world. It is lifting literally billions of people out of abject poverty while simultaneously enriching developed regions.

2) The progress of this system is not inevitable -- the first global system, based on European imperialism, collapsed nearly a century ago. It is therefore appropriate for us to consider the conditions that might precipiate such a collapse in our own time.

3) He sees only three potential threats that could bring the entire system down. They include a global war on the order of the Great War of 1914, a global pandemic like that of 1918, or institutional malfeasance on the part of the United States Government.

To explain the last point -- the US economy is the engine that drives the global system and it is therefore imperative that the US act responsibly so as to promote confidence in the stability of the system. But the US Congress has not been acting responsibly recently. The cancelling of the Dubai Ports Deal sent a shock through the international investment system and, more disturbingly, Congress last week came within four votes of repudiating the national debt. That would have been the practical effect of refusing to raise the debt limit.

He writes:

Today the Numskulls doing the most to lobotomise the global mind are to be found (not for the first time in history) in the US Congress. Earlier this month, Senators effectively blocked a company based in the United Arab Emirates from acquiring facilities in American ports on the ground that their employees might help Islamist terrorists.

Not content with this insult to Middle Eastern investors, the same body last week came within a hair's breadth of defaulting on the federal debt, voting by just four votes to increase the legal debt ceiling. Given that around half that debt is held abroad, this was playing with financial fire.

Never in the history of the world economy has one advanced economy been as reliant on inflows of foreign capital as the United States today. It's that international overdraft which allows Our Man to keep sucking in and consuming foreign goodies. Unfortunately, the Numskulls in Congress seem more worried about impending mid-term elections than the stability of the global economy.

Read the whole thing here.

It is perfectly legitimate for members of Congress to worry more about re-election than the intricacies of the global economy. But that is also a good reason for congresscritters to defer to the executive branch in such matters, rather than trying to micro-manage foreign and military affairs.

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