Historian Niall Ferguson argues that today’s political polarization echoes the religious polarization of the Reformation. Both were brought about by technological disruption: The printing press, in the case of the Reformation; and the personal computer and internet, in the case of today. From Niall Ferguson’s Long Now Seminar “Networks and Power”: http://longnow.org/seminars/02018/nov…
The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.
BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.
The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.
But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.1
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.
The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.
In the United States, housing prices are now 8% higher than they were at the peak of the property bubble in 2006, according to the property website Zillow. The price-to-earnings (CAPE) ratio, which measures whether stock-market prices are within a reasonable range, is now higher than it was both in 2008 and at the start of the Great Depression in 1929.
As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.
If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterized also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war.
For example, during the Great Depression, US President Herbert Hoover signed the 1930 Smoot-Hawley Tariff Act, intended to protect American workers and farmers from foreign competition. In the subsequent five years, global trade shrank by two-thirds. Within a decade, World War II had begun.
To be sure, WWII, like World War I, was caused by a multitude of factors; there is no standard path to war. But there is reason to believe that high levels of inequality can play a significant role in stoking conflict.
According to research by the economist Thomas Piketty, a spike in income inequality is often followed by a great crisis. Income inequality then declines for a while, before rising again, until a new peak – and a new disaster.
This is all the more worrying in view of the numerous other factors stoking social unrest and diplomatic tension, including
- technological disruption, a
- record-breaking migration crisis,
- anxiety over globalization,
- political polarization, and
- rising nationalism.
All are symptoms of failed policies that could turn out to be trigger points for a future crisis.
.. Voters have good reason to be frustrated, but the emotionally appealing populists to whom they are increasingly giving their support are offering ill-advised solutions that will only make matters worse. For example, despite the world’s unprecedented interconnectedness, multilateralism is increasingly being eschewed, as countries – most notably, Donald Trump’s US – pursue unilateral, isolationist policies. Meanwhile, proxy wars are raging in Syria and Yemen.
Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation. By the logicof the political scientist Samuel Huntington , considering such a scenario could help us avoid it, because it would force us to take action. In this case, the key will be for policymakers to pursue the structural reforms that they have long promised, while replacing finger-pointing and antagonism with a sensible and respectful global dialogue. The alternative may well be global conflagration.
On social media, encountering opposing views can make people become even more wedded to their own... Jack Dorsey, repeatedly denied that Twitter’s algorithms are biased against conservative voices. His denials echoed recent statements he has made about the importance of exposing people to opposing political views. Indeed, he announced last month that Twitter was experimenting with new features that would actively expose people to such views.Mr. Dorsey’s goal of reducing political polarization is commendable. But his proposed solution — disrupting our social media “echo chambers” — may actually make things worse. Forcing Twitter users to encounter political views they disagree with, my research shows, can make them become even more wedded to their own... Scholars were once optimistic that social media could increase bipartisan dialogue by allowing virtually anyone to engage in public debate about politics. Yet mounting evidence suggests that Facebook and Twitter have allowed Republicans and Democrats to further segregate themselves... Then we paid half of them to follow for one month a bot we created that retweeted messages from elected officials and other opinion leaders from the other political party... Instead of reducing political polarization, being exposed to opposing ideas increased it. Republicans who followed a Democratic bot for one month expressed social policy views that were substantially more conservative at the conclusion of the study... Why did some social media users’ political views become more entrenched after we disrupted their echo chambers? One possibility is the structure of Twitter itself. Social psychologists have long argued that positive, intimate contact between members of rival groups across an extended period can produce compromise. But that is not what Twitter offers. Its character limits — combined with the anonymous, spontaneous nature of so many exchanges on the platform — simply may not be conducive to mutual understanding... a first step should be for Twitter to experiment with removing its character limits. Allowing people to voice their opinions in detail will not improve the civility of discourse by itself, but it may facilitate a better competition of ideas and increase the possibility for Democrats and Republicans to understand one another... Twitter should not force its users to view messages from a political party they oppose. Instead, it should create an alert system that makes people aware when they are being exposed predominantly to one point of view. The most pernicious effect of social media echo chambers may be that most people are unaware of how much their political views are influenced by selective exposure to information.
Finally, if Twitter is resolved to expose users to opposing political views, it should focus on doing so with specific issues. Republican and Democratic Twitter users appear unready to have broad conversations about politics. But breaking up the echo chambers that prevent cross-party discussion about market-based solutions to climate change, for example, might be more successful.