Top historian Niall Ferguson warned Friday that the world is sleepwalking into an era of political and economic upheaval similar to the 1970s — only worse.
Speaking to CNBC at the Ambrosetti Forum in Italy, Ferguson said the catalyst events had already happened to trigger a repeat of the 1970s, a period marked by financial shocks, political clashes and civil unrest. But this time, the severity of those shocks was likely greater and longer lasting.
“The ingredients of the 1970s are already there,” Ferguson, Milbank Family Senior Fellow at the Hoover Institution, Stanford University, told CNBC’s Steve Sedgwick.
“Last year’s monetary and fiscal policy mistakes that caused this inflation are very similar to those of the 1960s,” he said, comparing recent price increases to the stubbornly high inflation of the 1970s.
“And just like 1973, you get war,” he continued, referring to the 1973 Arab-Israeli war — also known as the Yom Kippur War — between Israel and a coalition of Arab states led by Egypt and Syria.
As with Russia’s current war in Ukraine, the 1973 Arab-Israeli War sparked international involvement by the then superpowers of the Soviet Union and the US, leading to a wider energy crisis. Only then the conflict lasted only 20 days. Russia’s unprovoked invasion of Ukraine has now entered its sixth month, suggesting that any impact on energy markets could be much worse.
“This war is going to last much longer than the 1973 war, so the energy shock it’s causing will actually last longer,” Ferguson said.
2020’s worse than the 70s
Politicians and central bankers have battled to mitigate the worst of the fallout, by raising interest rates to fight inflation and reduce reliance on Russian energy imports.
But Ferguson, who has authored 16 books, including his most recent “Doom: The Politics of Catastrophe,” said there was no evidence that the current crises could be avoided.
“Why wouldn’t it be as bad as it was in the 1970s?” he said. “I’m going out: Let’s look at the possibility that the 2020s could be even worse than the 1970s.”
Top historian Niall Ferguson has said the world is on the cusp of a period of political and economic turmoil similar to the 1970s, only worse.
South China Morning Mail | Getty Images
Among the reasons for this, he said, were lower productivity growth, higher debt and less favorable demographics now compared to 50 years ago.
“At least in the 1970s you had detente between superpowers. I don’t see much detente between Washington and Beijing right now. In fact, I see the opposite,” he said, referring to recent clashes over Taiwan.
The fallacy of global crises
People like to believe that global shocks happen with some degree of order or predictability. But that, Ferguson said, is a misconception.
Rather than spreading evenly through history, like a clock curve, disasters tend to happen nonlinearly and all at once, he said.
“The divisions in history are really not normal, especially when it comes to things like wars and financial crises or, for that matter, pandemics,” Ferguson said.
“You start with a plague – or something that we don’t see very often, a really big global pandemic – that kills millions of people and disrupts the economy in all sorts of ways. Then you hit it with a big shock in monetary and fiscal policy. And then add you the geopolitical shock.”
That miscalculation leads people to be too optimistic and ultimately unprepared to handle major crises, he said.
“In their minds, the world is kind of averages, and it’s not likely that there will be really bad results. This leads people to be … slightly over-optimistic,” he said.
For example, Ferguson said he polled attendees at Ambrosetti — a forum in Italy attended by political leaders and the business elite — and found that low-single digit percentages expect investment in Italy to decline in the coming months.
“This is a country headed for a recession,” he said.