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Peace through business?

Niall Ferguson

TEXT OF INTERVIEW

KAI RYSSDAL: Next week marks the fifth anniversary of the war in Iraq. Five years on, the United States is still divided over whether the best hope is a political solution or more troops on the ground. But what if the answer is an economic one?

Harvard historian Niall Ferguson says that could happen. In his most recent book "The War of the World" he says economic instability leads to conflict but viable market economies can end it. Especially, he says, in the Middle East.

NIALL FERGUSON: I don't think it's a mystery that the Middle East is the danger zone in the world today. Just as Central and Eastern Europe was the big danger zone of the mid-twentieth century. It's a rather similar place. If you look at income levels, the Middle East is about where Central and Eastern Europe were a hundred years ago. If you look at the degree of ethnic disintegration, the potential for ethnic conflict, it's strikingly similar. That was the great fulcrum of 20th century conflict. My fear is that the Middle East will be the fulcrum of 21st century conflict.

RYSSDAL: I'd be curious then about your thoughts then between a functioning free market in the Middle East and democracy there?

FERGUSON: Well, there's no simple relationship, and in many ways it's intermediated by civil society, by the emergence of the middle class, which is sufficiently educated and sufficiently prosperous to be willing to make democracy work. It's not enough, to put it really simply, to show up in a country, topple the bad guy, hold an election, proclaim the privatization of the economy and go home. That's not the way the process works. In fact, if you look at the lessons of history they clearly indicate that the transition towards a market economy and the transition towards a functioning democracy are quite gradual and intertwined processes that need quite a lot of luck, as it were, to succeed.

RYSSDAL: If your analysis holds and economic volatility leads to conflict, does it then hold that economic stability can resolve those conflicts?

FERGUSON: It certainly helps. We've lived through a period of very low economic volatility since, really since the 1980's. Of course, August came and we are not back in the realm of quite serious financial volatility.

RYSSDAL: Well, let me translate it to the present situation in Iraq and ask you what might have to happen in terms of economic stability there for the U.S. to be able to detach itself and for there to be political stability?

FERGUSON: A huge amount still has to happen before we can talk about U.S. withdrawal. I think one needs to be absolutely clear about how far away Iraq still is. It takes a long time to go from anarchy, which is essentially where much of Iraq has been since the overthrow of Saddam, to anything resembling economic and political stability. And it's going to be very hard indeed to persuade the many Iraqi's who fled the country, most of whom were of course the educated and wealthy Iraqis, to return. Without some kind of human capital and real financial capital, there isn't going to be much investment. All the Iraqi economy is at the moment is a fairly precarious gasoline station which pumps out crude oil. There isn't a whole lot else going on. And so it's going to take years, I think, of very careful American nurturing, for the situation there to stabilize enough that people will want to invest in companies and start building up a market economy there. This is not going to happen overnight. And we should all be realistic about that.

RYSSDAL: The book by Naill Ferguson that got us talking to him in the first place is called "The War of the World." He is also the Laurence A. Tisch professor at Harvard University. Professor Ferguson, thanks so much for your time.

FERGUSON: Kai, it's been a pleasure.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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