Our turbulent times: Niall Ferguson on Trump, Brexit and ISIS

The conservative poster boy unloads on love, Trump, and the evils of Facebook.

When Niall Ferguson and Ayaan Hirsi Ali addressed a 350-strong crowd at the Art Gallery of NSW last night it was a first for the uber-couple of the international think set. He’s the economic history professor whose work on money, power and Western civilisation has made him a print and TV star. She’s the Somali-Dutch-American politician turned activist and writer whose critique of Islam has made her a hero to many — and endangered her life.

They have been married for five years but Ferguson tells Inquirer before the dinner to celebrate the 40th anniversary of the Centre for Independent Studies: “We have never as a matter of principle done any public events together. There are two good reasons for this; one is that we need to keep some kind of separation of the work that we do, and the second is that she is so much more charismatic than I am that I really lose out every time we are in the same room together.”

Such self-deprecation from the equally magnetic Ferguson is testament to Hirsi Ali’s pulling power, but at any rate, they have broken their rule as a favour to CIS founder Greg Lindsay, who introduced them in New York in 2009.

“He was Cupid,” says Ferguson. “(So) when Greg invited us to come to be part of the celebration, I said, ‘Ayaan, we have to do this.’ ”

Which is why Ferguson is sitting in Lindsay’s sparkling new ­office overlooking Sydney’s Botanical Gardens, readying himself for last night’s double act followed by an ideas retreat at Hayman ­Island and a lecture at the Sydney Opera House on Sunday evening.

It’s a gruelling program. On Monday he and Hirsi Ali and their four-year-old son will be back at Harvard, but only briefly. After 14 years on the US east coast, Ferguson is moving to Stanford as a Hoover senior fellow — another phase in a glittering career for the Oxford-educated Scot.

He’s in Sydney after two weeks in Beijing, where he is a visiting professor at Tsinghua University. His workload is immense and he confesses the past two years — during which he completed the first volume of a biography of Henry Kissinger — “have been the hardest working years of my life”. The book is his 14th but they are only a fraction of his prodigious output covering columns and television series.

The British tabloids have never quite forgiven him for exiting Britain for the US in 2002 but he says he remains connected: “I’m a trans-Atlantic man, I go back and forth across the Atlantic more often than is probably good for my health and I remain engaged in British public life. But, in the end, what happens in Washington matters more than what happens in London.” Indeed, he will likely sit the exam for US citizenship this year and has no regrets at becoming involved in American life, even if he is alarmed at the possibility of a president Trump. So alarmed in fact he will probably endorse Hillary Clinton, despite the fact he has long been seen as pro-Republican.

“For all her flaws, I think she would be a more predictable and much less disruptive force in the White House,” he says.

Donald Trump instead is a “formidable demagogue” who “has a connection with a very big chunk of the electorate” but whose rhetoric is “toxic”.

“It is very dangerous for the American populace to be let believe that its problems are to do with immigration, free trade — things that have served the American economy well. The last thing the world needs now is an American president embarking on a trade war with China, building a wall across the US-Mexican border and talking about a blanket ban on Muslim immigration.”

Worse still, Trump says he wants to “do a great deal with Putin”. “That really froze my blood,” Ferguson says. “The last thing we need is for the US to suddenly make friends with one of the most sinister figures in the international political system.”

The populism generated after the 2008 financial crisis is most obvious in the US this year but Ferguson says even Britain has a Trump, in the shape of former London mayor Boris Johnson.

“It is very striking to come to Australia and find no Trump because most countries in the northern hemisphere have a Trump, not just the United States,” he says. “The UK has Boris Johnson — same hairstyle, same populism.”

Ferguson thinks Australia has dodged a Trump figure because the financial crisis here was much less traumatic than in the US and Europe but he warns that “just because it hasn’t happened here yet doesn’t mean it can’t. The lesson for any Australian politician is, do not assume that your existing party system is invulnerable. Most established party systems in the democratic world have been disrupted in one way or other since the financial crisis with one form of populism or another.

“In the US, the revolt against the political establishment began with the white working class, male, non-college-educated, mad-as-hell American, but it very quickly snowballed to the point that Trump is now attracting support right across the income distribution and right across the education distribution. While this may begin with the losers, the people who have lost out, it can quickly become a mass movement.

“It’s making arguments that must have some resonance in Australia because these are old arguments that have featured in Australian political life — it is anti-immigrant, anti-free trade, anti- political establishment.

“Most developed democracies have unwittingly created the seeds of populism in that social mobility has declined; opportunities for younger people have in fact been constricted. So while it is tempting to play by old political rules and use old political language, the most important thing that any democratic leader has to do today is to offer a compelling vision of a society that will offer real equality of opportunity and meaningful ­social mobility, not just upwards through income distribution but upwards generationally.”

The debate in Britain over quitting the EU — Brexit — also worries Ferguson, who is unforgiving towards its advocates, even fellow Scots such as British Justice Secretary Michael Gove: “When I hear people like Michael Gove say we should consider the Albania (trade) model for our relationship with Europe, I conclude that the people arguing for Brexit are out of their tiny minds.

“I am not a lover of the European Union: I don’t hum Ode to Joy (the official EU anthem) and yearn to go to Brussels. I was strongly opposed to the creation of a single currency … but there is a big difference between UK being part of a monetary union and leaving the EU altogether.” The economic consequences would be “seriously negative” for a country as reliant on inflows of foreign capital and an exit would threaten the City’s ­future as a financial centre, but as a historian Ferguson also believes Britain has “never done good by Europe by trying to escape from it”.

“History shows us that when Britain essentially abdicates from its European role, after some period of time it ends up having to go back into Europe to sort out the mess. Britain’s role historically has been maintaining the European balance of power when it has got out of kilter. An EU without Britain would be badly out of kilter.”

Ferguson is here at a time of intense debate on monetary policy and the Reserve Bank of Australia’s options.

Does he subscribe to the notion that no growth is the new normal, a thesis advanced by people such as Chicago economist Robert Gordon, who suggests we have ­entered the age of stagnation?

Ferguson is impressed with Gordon’s work and says: “I buy one part of his argument, that we tend to overstate the benefits of the most recent era of technological innovation compared with, say, the first industrial revolution, or indeed the big breakthroughs in technology that happened in the 20th century … But I am not convinced this means we are doomed to secular stagnation. I hazard a guess we are at the inflection point in terms of economic growth. “

For this, he relies on work by US economist Ken Rogoff, who argues the period of depressed growth after a crisis is between five and 10 years. “We are in that range now,” says Ferguson. “I feel we are coming out of the hangover phase and we will soon look back and say, you know what, the first quarter of 2016 was the end of the deflationary danger, and we will laugh that we ever talked about secular stagnation.” But he agrees central banks are having a tough time when it comes to pulling the levers.

“If you speak off the record with some economists who work at central banks, all admit that to a degree they are flying blind because the economics they studied at college has not really delivered in the way that might have been expected,” he says. “For a generation running the central banks there’s a huge mismatch between what they studied and what they have to do; an enormous amount of improvisation has gone on since 2008.” But it is hard for them to admit they are flying blind because part of their mission is to convey certainty and confidence. They are also often unable to say what they really think.

US Federal Reserve head Janet Yellen has an especially difficult role, according to Ferguson, because the Fed’s mandate is officially a domestic one but in practice it also has a “more or less secret” international mandate: “The Fed has had to reconsider the pace of its rate hikes with a view to international financial stability, I think rightly. But it can’t admit that it has done that because congress would be all over it.” Even so, central bankers had “one massive victory” because the big economies did not go into deflation after 2008.

“Let us not underestimate what the central bankers have achieved. I think secular stagnation and deflation probably lie ahead for the Japanese and Italians whatever they do, but I think the big economies have probably missed the deflationary disaster.”

As a historian he has skin in the game but Ferguson argues central banks must rely less on economic models and more on economic history: “Somebody put it to me this way — we left out of the models all the things that turned out to really matter, and indeed we, as monetary economists, systematically ignored things like demographics or even debt and credit cycles because we were trying to create these elegant, mathematically beautiful models.”

He has long believed that the ­future of Western civilisation is in large measure determined by what happens in the US, and remains sanguine about US power.

It’s true that a more isolationist US is converging with a world having one of its periodic “anti-American spasms” but Ferguson argues: “If the world is about to bid farewell to the American policeman, I’d like to know who’s taking over, and if you look around and ask who the candidates are for global policing, they include the mafia boss known as the Russian president, the leader of the Chinese Communist Party. Oh, and let’s not forget those guys who proclaimed the caliphate in the Middle East who shouldn’t be underestimated because they’re roughly where the Bolsheviks were in 1917.”

Even so, the response to Islamic State has been a shambles.

“We’ve bungled this very badly. I think there were perfectly straightforward military options at every step of the Syrian civil war that the President dismissed and I think, even now, we’re missing a straightforward military option which would pretty quickly destroy Islamic State. It would require the deployment of Special Forces and maybe some supporting army and Marine Corps units but it wouldn’t be Iraq. We need to strike Islamic State. We have the capacity to do it … It’s not like these guys are great fighters … I’m really frustrated because the longer we leave Islamic State, the more dangerous it becomes.”

What’s needed to fix America’s problems — from public finance to the justice system to its schools — is a politician like Ronald Reagan, not Trump. “We are in the process of getting exactly the wrong kind of leader if Trump wins because Trump’s message is our problems don’t have anything to do with ourselves, they are all to do with these other people — Mexicans and Chinese. It’s a great delusion and it unfortunately encourages the postponements of internal structural reforms that the US clearly needs … All that’s missing in the United States is the kind of leadership that uses political skill, which Trump undoubtedly has, to sell the right remedies, which he is not doing.

“So, we need a new Reagan. There’s no sign of it. You know, we auditioned plenty of people for the part and we ended up with Trump. That’s pretty depressing.”

After two weeks teaching in Beijing — where not only did the students work incredibly hard but he was expected to teach a Harvard semester in a fortnight — he’s impressed at how the work ethic can be adjusted by a society.

“When we see the Asian work ethic in action, you see what happens when you change the incentives in the society,” he says. “I mean, the incentives were entirely inimical to the work ethic under Mao … Everything changed after Deng Xiaoping and we see the consequences, and impressive they are.”

It’s a different story in the West, where so much work is carried out in a “half-baked way”. “People keep telling me all the productivity statistics must be wrong because technology is supposed to make us more productive,” he says. “I ask myself, ‘What percentage of time does the average office worker spend on Facebook, on social networks?’ I have a strong suspicion that the internet and its associated technologies have created opportunities to waste time undreamt of by previous generations.”

The impact on society is profound: “If you are on Facebook, Twitter and WeChat and Whats­App, constantly communicating with your contemporaries, which seems to be the norm, you’re not reading War and Peace. You really can’t read anything long.

“I think there has been a collapse of serious reading among a generation of my students who are cut off from the great works of world literature. How can we pos­sibly preserve our civilisation if the next generation has read 1 per cent of what we read? How can that work? They are in danger of being cut off from the great truths of the human condition by their own incessant chatter with one another.”

To those unperturbed by the loss of privacy on the net, Ferguson says: “You wait, when the tools of Facebook and its ilk fall into the wrong hands — and history tells us that it is hard to keep governments and information technology separate from one another — then we will all look back and say, ‘We gave up our privacy for a mess of pottage’.”

Niall Ferguson’s weekly column from The Sunday Times appears in Inquirer. He will speak at the Sydney Opera House on Sunday night. Details at sydneyoperahouse.com