PowerShift

Niall Ferguson wrote in the Financial Times

We are indeed living through a global shift in the balance of power very similar to that which
occurred in the 1870s. This is the story of how an over-extended empire sought to cope with
an external debt crisis by selling off revenue streams to foreign investors. The empire that
suffered these setbacks in the 1870s was the Ottoman Empire. Today it is the US. …. The US
debt crisis has taken a different form, to be sure. External liabilities have been run up by a
combination of government and household dissaving. It is not the public sector that is
defaulting but subprime mortgage borrowers. As in the 1870s, though, the upshot of this debt
crisis is the sale of assets and revenue streams to foreign creditors. This time, however,
creditors are buying bank shares not canal shares. And the resulting shift of power is from
west to east.
In other words, as in the 1870s the balance of financial power is shifting. Then, the move was
from the ancient oriental empires (not only the Ottoman but also the Persian and Chinese) to
Western Europe. Today the shift is from the US - and other western financial centres - to the
autocracies of the Middle East and East Asia.
…. It remains to be seen how quickly today's financial shift will be followed by a comparable
geopolitical shift in favour of the new export and energy empires of the east. Suffice to say
that the historical analogy does not bode well for America's quasi-imperial network of bases
and allies across the Middle East and Asia. Debtor empires sooner or later have to do more
than just sell shares to satisfy their creditors.

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