Niall Ferguson's New Essay, "Complexity and Collapse"

Niall Ferguson has a fascinating essay in the new issue of Foreign Affairs, “Complexity and Collapse: Empires on the Edge of Chaos.”

He argues that great powers don’t rise and fall gradually, as conventional wisdom suggests, but instead maintain a façade of stability for a long time before experiencing a swift collapse: “What if collapse does not arrive over a number of centuries but comes suddenly, like a thief in the night?” Ferguson suggests that great powers resemble “termite hill[s]” more than “Egyptian pyramid[s].”

He joins Nicholas Taleb in condemning the “narrative fallacy”: that is, contriving long series of antecedent phenomena to explain “fat tail” occurrences—for example, wars and famines—even when “the proximate triggers of a crisis are often sufficient” in doing so. Ferguson argues that fiscal crises are more often than note the culpable triggers.

He notes that a “small input”—typically a financial crisis—can cause great powers to collapse when it causes the system’s “component parts [to] lose faith in its viability.” His essay raises several questions:

— If empires indeed implode in such short, unexpected order, what purpose, if any, does long-term strategic thinking serve? Grand strategy? How can the US address increasingly long-term challenges—for example, climate change, the spread of infectious diseases, and the rise of emerging powers—if and when geopolitical tsunamis loom large?

— Although Ferguson roots most imperial collapses in fiscal crises, he subsequently notes that those crises aren’t to blame in and of themselves; rather, they’re guilty to the extent that they undermine the confidence of the system’s components. Given that great powers tend to experience numerous fiscal crises, what explains their ability to withstand—and emerge more resilient after—some, but not others? Put differently, can we identify a system’s confidence threshold, up until which its components have faith in its ability to self-correct following a fiscal crisis?

— Why do fiscal crises inspire greater doubts about a system’s durability than other fat-tail phenomena?

— Ferguson suggests that systemic risk is inbuilt into all political systems: “Regardless of whether it is a dictatorship or a democracy, any large-scale political unit is a complex system.” This proposition appears to imply a tradeoff between increasing the complexity—and, therefore, the functionality—of governance and reducing the degree of systemic risk. Is this tradeoff real, and, if so, how can it be optimized?