Scottish academic Niall Ferguson blasts Germany for austerity ‘fetish’

Niall Ferguson looked rested and ready for action as we sat in the roof garden of Athens’s Hotel Grande Bretagne on the day he was due to speak at the Delphi Economic Forum earlier this month. The previous evening, the distinguished Scottish historian had addressed an event at the Constantine Karamanlis Foundation, where he had defended the Trump administration’s priorities and urged Europe to emulate the new American president in his commitment to spur economic growth and adopt a robust foreign policy.

I told him that I found his talk very interesting and disagreed with about 83 percent of it. He laughed and replied, with feigned disappointment, that the aim was for the audience to disagree with 100 percent of what he said.

However, the goal for Ferguson – who lives in the US and is a senior fellow at the Hoover Institution at Stanford – is not just to provoke: He was a harsh critic of Barack Obama’s economic and foreign policy, and genuinely hopes the new government, under the guidance of House Speaker Paul Ryan, will implement the necessary reforms that will restore the lost dynamism of the American economy.

The US is in urgent need of tax reform and steps to rationalize the “bloated” welfare system and deregulate the economy, says Ferguson. The legislative priorities will be set by Ryan and the Stanford historian does not think there will be any resistance from the White House – not even to policies that depart from Donald Trump’s populist rhetoric.

Turning to the 44th president, Ferguson dismisses the economic recovery as “anemic” and, in any case, the “work of [Federal Reserve chief] Ben Bernanke, not of Obama.” He refers to Obamacare as nothing more than a “band-aid” and makes the rather extreme claim that the $800 billion stimulus package “accomplished nothing.”

He is equally outspoken against Obama’s legacy in foreign policy. “We have forgotten the lessons of the 90s,” Ferguson says in reference to the West’s interventions in places such as Bosnia and Kosovo. “The situation is far from ideal but it is far better than a state of war. This should also be the aim in the Middle East.”

Ferguson argues that in the aftermath of the Iraq invasion, which he supported, a new mentality of retreat took hold, which permeated the Obama administration and led to a series of hesitant, ineffective moves in the international arena. “Iraq was abandoned and Syria was left to burn. Then there was the tilt to Iran and the nuclear agreement – with the crazy expectation that a 10-year deferral of its nuclear program would bring about some wonderful liberal transition,” says Ferguson. “If the Nobel Peace Prize were given for speeches, then Obama would deserve it. But it’s actions that count, not speeches.”

Ferguson stresses the need for stability in the Middle East and North Africa, warning that all the elements – economic, demographic and ideological – “are there for a much bigger conflagration than what we’ve seen so far.”

“The withdrawal of the US from the international scene under Obama did a lot more damage than the interventions of the neoconservatives,” Ferguson claims.

What is needed now, the historian says, is a “diplomatic-political vision for the Middle East, which will replace the [World War I] Sykes-Picot Agreement and settle issues that have been around for decades.

“I believe, for example, that there is a strong argument for a Kurdish state and for the view that an alliance between Turkey and the West is no longer feasible. And all of this, of course, matters hugely to Greece, which is on the front line of all this – something that many in the European Union refuse to acknowledge.”

But even if we were to agree with Ferguson’s criticism of Obama, what makes him believe that the Trump administration will do a better job, given the opposing voices within it and the president’s fundamental lack of knowledge of foreign policy? And how would this new vision be implemented? With American ground forces?

Ferguson restricts his response to saying that the plan should not be overly reliant on American ground forces, before launching into a treatise on the nature of modern war. It is obvious that he too has no idea what form the new US government’s foreign policy will take.

Ferguson recently stated that he had been wrong to support the Remain campaign in the UK referendum. “We deserved to lose. There were no compelling arguments to support Britain’s membership of the EU.” The main problem now, he explains, is that this is “the longest and most expensive divorce in history, which will absorb all the energy of the British government. We don’t want Brexit to become a version of the Greek tragedy, with the entire time consumed arguing with bloody European bureaucrats, but I’m afraid that this is where we’re heading.”

Rising Euroskepticism and the chaos in Washington seem to support those who argue the West is in decline. Among them is Ferguson, who has explained the success of the West as the product of six “killer apps”: competition, the scientific revolution, property ownership, modern medicine, the consumer society and the Protestant work ethic. In a lecture on the subject five years ago, the academic claimed that emerging countries of the East have “downloaded” these apps, as they start losing their power in the West. Is this true, though? Doesn’t the absence of the rule of law in countries like China mean that they are at a disadvantage against liberal democracies in the long term?

“I still believe that the new convergence between the West and the others will continue, in part because the others are doing some things right and also because the West has lost its way, with its excessive regulatory burdens and huge debts,” says Ferguson. “China has adopted almost all of the apps, but it does not have the rule of law, and the result is that wealthy Chinese want to get their money out of the country. However, China has done incredibly well without the rule of law – it has gone from the grinding poverty of 1978 to become the world’s second biggest economy in 2016.”

When it comes to the long run, however, the Scot still puts his money on the US: “I have an enormous amount of faith in the institutions of the Constitution, and also in the instincts of the American people and the people who emigrate there.”
 

Lessons from UK in Thatcher era

Naturally, the great Greek implosion also came up. For Ferguson, who espoused Thatcherism as a student at Oxford in the early 80s, Britain’s experience in the 1970s holds lessons for present-day Greece.

“I grew up in a Britain that was falling apart: strikes, three-day weeks, power cuts, garbage on the streets, double-digit inflation,” he says. “So much frustration and disgust had built up by 1979 that radical change was possible. So, when a country needs deep institutional change, it may first need to go through a crisis that will create the political consensus needed to promote these reforms.”

When Margaret Thatcher was elected party leader, I note, she was in the minority even within her own party on economic policy, at the time when the left enjoyed an ideological hegemony in Britain. The leader of Greece’s New Democracy, Kyriakos Mitsotakis, is in a very similar position today. What must he do to succeed as Thatcher did back then?

“Opposition within the party is easy to deal with. Electoral victory is the ultimate argument within a party. Thatcher marginalized the Wets [Tories who opposed her economic program] by winning successive elections, with the help of the Falklands War, which acted as a deus ex machina,” says Ferguson. He adds that Thatcher also had an “intellectual avant garde,” a group of academics and writers who fiercely defended liberal economic reforms in the media at the time.

“It was exhilarating for me, as a young Glaswegian coming from socialist Scotland, to meet all these bright young people who were ready to argue in favor of Thatcher and against the miners, against all the forces of darkness. This is the sort of thing Greece needs today,” says Ferguson.

However, I observe, no matter how dedicated to liberal economic reforms and the restructuring of the public administration a government may be, Athens remains trapped in a fiscal framework that has been imposed from outside and leaves little room for recovery.

Though fiscally conservative, Ferguson agrees, berating Berlin for its “fetish” with austerity, which has had “tremendously harmful consequences on Greeks’ standard of living.” “There is simply no justification for that,” he says.

“The worst things the Germans did in relation to Greece is that they always waited until the last minute to approve the release of loans, thus maximizing the toxic uncertainty,” adds Ferguson.

Elaborating on his argument, he places it in the broader historical context of Germany’s policy toward Europe: “When you build a monetary union aimed at a deeper unification of Europe, you can’t then reject the idea of transfer union. The difference between Helmut Kohl and Angela Merkel was nicely summed up by Kohl himself when he accused her of putting Germany first and Europe second. I don’t think that Kohl would have treated Greece as Merkel and [Finance Minister Wolfgang] Schaeuble have.”

The Scottish academic dismisses the notion that Merkel is the West’s last hope. “She may be gifted tactically, but strategically she has been a disaster” for Europe, Ferguson notes.

On the other hand, didn’t Merkel defend European values with her stance on the refugee crisis? Didn’t she send the signal that we can help people who are being persecuted rather than succumb to our fear of the Other?

“To begin with, Germany is not contributing to the effective management of the problem at its source in the countries of the Middle East and North Africa. It is treating it instead like some kind of natural disaster,” counters Ferguson.

Failure to manage the crisis in the Arab world, he added, “cannot be fixed by creating a crisis in your own country,” by allowing entry to “a large number of people, mainly Muslims, who are not refugees but economic migrants.”

The policy was “reckless,” the historian argues, for two reasons: “First, the countries of Northern Europe have done very badly at integrating migrants from the Muslim world – just look at the comparative rates of unemployment between the native-born population and migrants. Secondly, let us not overlook the cultural problem that has been created, as multiculturalism plus the innate reluctance of these communities to assimilate has led to the ghettos that we know in many European cities.”

Given this background, the only surprise for Ferguson is that populists like France’s Marine Le Pen and Geert Wilders in the Netherlands are not enjoying even more popularity.