Historian Neil Ferguson warned Friday that the world is sleepwalking during a period of political and economic upheaval similar to the 1970s.
Ferguson told CNBC at Italy’s Ambrosetti forum that the events that triggered a repeat of the 1970s, marked by economic shocks, political conflicts and social unrest, are already happening. is. This time, however, the severity of these shocks is likely to be greater and more persistent.
Ferguson, a Milbank Family Senior Fellow at Stanford University’s Hoover Institution, told CNBC’s Steve Sedgwick, “The 1970s elements are already in place.
“The mistakes of last year’s monetary and fiscal policies that caused this inflation are very similar to those of the 1960s,” he said, likening the recent rise in prices to the stubbornly high inflation of the 1970s.
“And like in 1973, you go to war,” he continued, referring to the 1973 Arab-Israeli War (also known as the Fourth Middle East War) between Israel and a coalition of Arab states led by Egypt and Syria. known) was mentioned.
Like Russia’s current war in Ukraine, the 1973 Arab-Israeli war led to international engagement from then-superpowers the Soviet Union and the United States, sparking a broader energy crisis. Only then the conflict lasted only 20 days. Russia’s unilateral invasion of Ukraine is now entering its sixth month, suggesting the impact on energy markets could be even worse.
“Since this war has been going on so much longer than the 1973 war, the energy shock it’s causing will actually last longer,” Ferguson said.
Politicians and central banks have raced to mitigate the worst effects of the fallout by raising interest rates to combat inflation and reducing Russia’s reliance on energy imports.
But Ferguson, who has authored 16 books, including his latest Doom: The Politics of Catastrophe, said there was no evidence that the current crisis could be averted.
“Why isn’t it as bad as the 1970s?” he said. Consider the possibility that the 2020s will actually be worse than the 1970s.
Leading historian Neil Ferguson says the world is entering a period of political and economic upheaval similar to the 1970s, but worse.
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Among the reasons, he said, are the current slowdown in productivity growth, rising debt levels and unfavorable demographics compared to 50 years ago.
“At least in the 1970s, there was détente between the superpowers. Today, we don’t see much détente between Washington and Beijing. In fact, I see the opposite,” he said. . Recent clashes over Taiwan.
Humans tend to believe that global impacts occur with some degree of order and predictability. But that’s a mistake, Ferguson said.
In fact, he said, disasters tend to occur non-linearly, all at the same time, rather than spread evenly across history like a bell curve.
“Historical distributions aren’t really normal, especially when it comes to wars, financial crises, and pandemics for that matter,” Ferguson said.
“You start with a plague — or something we rarely see, a truly massive global pandemic — killing millions of people and disrupting the economy in all sorts of ways. And it will be hit with a fiscal policy shock…and add a geopolitical shock.”
He said that miscalculation makes humans overly optimistic and ultimately unprepared to deal with major crises.
“In their heads, the world is kind of average, and it’s unlikely it’ll turn out really bad. This makes people a little too optimistic,” he said.
As an example, Ferguson surveyed participants at Ambrosetti, an Italian forum for political leaders and business elites, and found single-digit percentages expected to see a decline in investment in Italy in the coming months. It turned out to be the first half of the table.
“This is a country heading into recession,” he said.