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Can we tackle the challenges of “tomorrow” without the wisdom of “yesterday”?

LISTEN (HEADPHONES RECOMMENDED): At the 2012 Israeli Presidential Conference, Harvard Professor Niall Ferguson outlines the four categories of predicting the future, inspired by history and bizarrely, Donald Rumsfeld.

The assembled speakers during the plenary session focusing on the issue of the economic future for the world. (Far-Left): Alan Bollard, Governor Bank of New Zealand. (Centre-Left): Niall Ferguson. (Centre): Richard Haas, President Council on Foreign Relations. (Centre-Right): Martin Wolf, Associate Editor Financial Times. (Far-Right): Stanley Fishcher, Governor Bank of Israel (photo credit: Daniel Easterman).

Professor Niall Ferguson, the acclaimed Harvard and Oxford historian, economist, consultant and television personality, once again graced the glitzy light-effect laden stage of the fourth annual Israeli Presidential Conference in Jerusalem last month.  The conference, organized under the auspices of the industrious octogenarian President Peres, is one of the largest in the Jewish world, attracting over 5,000 participants and 200 speakers from Israel and abroad.

Criticized by some as an incoherent and disjointed affair, lectures, speeches and workshops featured everything from psychology to the Arab spring, to the rise of Asia and cloud computing.  However, the over-riding theme of the conference was essentially about thinking and planning for the future or “tomorrow”.  Something Israelis, even by their own admission, are not terribly good at.

Professor Ferguson on the big screen during his speech at the 2012 Israeli Presidential Conference
(photo credit: Daniel Easterman).

As usual the conference organizers were able to secure a star-studied array of high-profile personalities from the worlds of politics, technology, economics and science including Henry Kissinger, Tony Blair, Google Chairman, Eric Schmidt, world-renowned sexologist “Dr Ruth” and even Zionist infant terrible, Peter Beinart.  But out of all these highly regarded and accomplished individuals, perhaps none were able to encapsulate the challenges of “tomorrow” quite so ably and succinctly as Professor Ferguson.  Probably this is because very few people in the world have the same command that Ferguson has over such a variety of distinct yet inter-related subjects.    From the history of the British Empire to high finance and the intricacies of macroeconomics, to his understanding of the importance of technology; not only does Ferguson seemingly know it all, but crucially he knows how to explain it all, and he does so in a compelling and user-friendly fashion.

This year, Niall Ferguson in his own words “conjured up the spirit of Donald Rumsfeld” by structuring his lecture according to the famously clunky categories of “known knowns” and “known-unknowns” first propounded by the much-maligned Former Secretary of Defense during the Iraq War.

So what will be the most serious challenges of tomorrow Professor Ferguson?  Well, the most obvious one or “known known” as Ferguson insists on calling it, is the ongoing economic crisis plaguing the United States and Europe.  When governments on both sides of the Atlantic were forced to bail out the banks for their profound recklessness and ill judgment, the tremendous mountains of debt they incurred were then of course transferred to the balance sheets of sovereign states.  While a second great depression was narrowly avoided in the short-term, the western world is now reeling from what can best be described as a all-mighty economic hang-over after binging on enormous sums of credit in the form of numerous budgetary and monetary stimulus packages.

The so-called “PIGS” economies of Portugal, Ireland, Greece and Spain have so far fared worst in this latest round of global economic misery, but Ferguson also thinks that the US is not so far behind despite the fact that it is still (barely) the largest economy in the world.  If the bond markets finally catch wind of the precarious state of America’s finances, Ferguson believes (as he has stated elsewhere) that we could literally be in for a world of trouble.  As yet, it is difficult to predict when this tipping point will be, but barring a radical change in policy, it is hard to see how the US will be able to evade this outcome indefinitely.  Meanwhile, Western economies will continue to sputter along at infuriatingly low or even minus growth rates.

In terms of the next category of “known unknowns”, these are as Ferguson says, things we think are going to happen, but don’t really know when or where.  For Ferguson, this is essentially the category of future military conflict and war, namely in the Middle East where the Syrian civil war is still raging and a possible pre-emptive strike against Iran still looks likely.  And then of course there is the continued failure on the Palestinian track, which Ferguson forgets to mention.  The PA under Abbas and Fayyad are becoming increasingly unpopular and their hold on power over the restive populations of the urban sections of the West Bank seems to be slowly weakening.  A sudden outpouring of violence and anger in the West Bank in the wake of continued Syrian instability could plunge the region into further chaos and misery.

Skipping over the third category of “unknown unknowns” which essentially deals with the destabilizing effects of rapid and unforeseen technological advancement, we now move on to final category of “unknown knowns”, which Ferguson himself has confusingly titled.  Despite the perplexing nomenclature, this is perhaps the most important category.  Drawing on major historical events as our guide, we see that wherever there is a dramatic improvement in living standards and a rising middle class, there is also an accompanying rise in revolutionary political sentiments.  Nowhere is this most true today, than in China, the great economic and geopolitical story of our time.  If the growing legions of middle class Chinese start demanding western political rights as well as western brands and economic standards, we could potentially see much greater instability in China with consequences for the whole world.  As Ferguson warns, when great powers change places, and a monumental “reconvergence” between different empires occurs, the ensuing process is not usually smooth and painless.

According to Ferguson, this last category is not just the most important, it is also the one that only those familiar with history and the lessons of “yesterday” can employ for the good of tomorrow.

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