Niall Ferguson of Harvard spoke with Barron’s about the interface of geopolitics and economics in the U.S, and globally. He emphasizes the importance of political stability to economic prosperity, noting that “[g]lobal order and stability need to be underwritten. It doesn’t just happen.” He opined that “[t]he global economy needs a strong hegemonic power to reduce conflict, ensure freedom of the seas, and so forth.” Therefore, he believes that the U.S. needs to act as a global policemen, noting, “[i]t better not be the Chinese or the Russians.” The reason: “A world in which the U.S. yields regional power to China or Russia is one in which the rule of law is driven back.”
Ferguson sees excessively complex regulation and expensive entitlement as domestic problems limiting the United States’ ability to fill its peacekeeping role globally. He sees some reason for hope regarding health care, noting “the employer-pays insurance system is loopy and ripe for revolution . . . I can’t imagine in 10 years’ time that when you visit you doctor, someone will hand you a clipboard with a badly photocopied form that you’ll have to fill out for the nth time. That’s ludicrous,” and Ferguson expects companies to reduce costs through innovation. While Ferguson also thinks tax simplification is likely in the near future, He is far less sanguine on overly complex regulation, however: “I don’t see any light at the end of the tunnel . . . there are too many people who benefit from it.”
Internationally, Ferguson express strong concerns about China and firmly endorses India. Asked, “What is the biggest risk to global markets?” Ferguson responded: “China.” He continued: “If there is a policy error in China, it could cause huge instability.” Ferguson notes that China is a one-party system and, therefore its’ leaders interests are threatened by expansion of their citizens’ economic freedom. He notes that a middle class demands property rights, which requires non-corrupt oficials and courts, which is “asking the one-party state to loosen its grip on power. The Chinese are terrified of anything like that.” On the other hand, Ferguson takes a very positive view of India: “India has rule of law . . .and a representative government and free press. . . . I’m broadly bullish about India’s prospects. The problems India faces are fixable . . . China’s problems are much more difficult.”
Other points, such as recent increases in violence and terrorism, the European refugee crisis, and the risk of destabilization in Saudi Arabia, help to illustrate why Ferguson believes that economic stability is closely related to geopolitical stability, and that the United States needs to step up as the global policeman.