By Phin Upham
So what historical situation is this crisis “like” – what’s the most useful analogy?
1) 1999 technology bubble. One could argue that this bubble burst but at least it left a legacy of progress in telecommunications and the internet which, while below expectations, has continued.
2) Oil Crisis that led to 1982 crisis? In this case, high oil prices and government mismanagement led to unhealthy nominal inflation rates – Volker correctly responded to rampant inflation with austere financial policy and the US emerged into a period of enormous productivity.
2) Is US like Japan in the 1980s? Japan was able to turn itself into an exporter to the US and keep a high savings rate.
3) The Great Depression? Perhaps but it seems that the proper analogy for the US in the great depression is perhaps China now – an exporter with strong industry who is beginning to flex global muscles.
Two books have invigorated a debate in political science over the extent to which history is relevant in global analysis. The first is Francis Fukuyama’s The End the History and the Last Man and the second is Samuel Huntington’s The Clash of Civilizations.
To overly simplify the arguments, the first argues that the political development of the world was over because democracy was soon to be the global rule and that democracies are stable and don’t evolve (in the sense of feudalism – monarchy – capitalism/democracy, sort of a socialist dialectic the socialists thought led eventually to communism). So the world will soon reach a democratic equilibrium.
The second argues that a global struggle for power was emerging for the first time due to globalization. Islam, Asia, and the West were in a life and death struggle for supremacy and the outcome was in doubt. Both argue that a paradigm shift has occurred in global history unlike the past – that analogies are rather pointless. Which is right? Are we in a new age of history, is it “different this time”? It is important to know.
About the Author
Phin Upham is a New York City and San Francisco based investor, who is a frequent contributor to blogs like the Venture Cap Cafe. He specializes in writing about business, investing, and philosophy. Click here to read more articles from Phin Upham.
