Twenty Years Hence

Someone asked me the other day if I had an opinion as to how the world would look in twenty years' time. Well, in my last post I wrote about the enormous difficulty of making predictions for the coming year, never mind twenty years. But let me offer a historical analogy.

Between the years 1933-1945 the world slipped into a sort of black hole of barbarism and destruction, the likes of which had never before (or since) been experienced. This period saw hundreds of thousands of inhabitants of Nanjing butchered to death by Japanese forces; tens of thousands of civilians of Hiroshima and Nagasaki vaporized by American atomic bombs; hundreds of thousands of men, women and children in Tokyo and Dresden burnt to death by American and British bombers; a million inhabitants of Leningrad starved to death by the German army; the same fate befell three million Russian Prisoners of War under the gaze of the German army; the city of Warsaw destroyed, block by block, by German forces;  nearly six million Jews from all over the continent brought by train to death camps in Poland and Belarus to be murdered by the SS; 14 million defenseless and unarmed civilians murdered by the German and Soviet governments in an area of Eastern Europe named by Yale Professor Timothy Snyder as “The Bloodlands” (Bloodlands: Europe between Hitler and Stalin. New York, Basic Books, 2010). In the final years of this period the German government brought murder to a frenzied pace never before equaled.

The German government was, obviously, that of the Nazi Party.  It is worth pointing out that the Nazis won just 2.6% of the national vote in the 1928 elections.  Two years later they won over 30%. Their incredible gain in just two years almost defies belief and was, in 1928, expected or predicted by no one.  It is the eruption of the totally unforeseen that often has the greatest consequences.

The consequences of 1933-1945 were great: the emergence of the USA as a global superpower, the onset of the Cold War, the creation of the United Nations, the strengthening of Chinese communism, the beginning of the end of the European colonial empires. The period that began in 1933 was one of great destruction in itself and we still live with its momentous consequences today.

The innocence of 1913

So, for our analogy, let us step back twenty years before the period that I have described above, which brings us to 1913. Let us suppose we can ask someone in 1913 to forecast what the world will look like twenty years hence, in 1933. Is it likely that they will answer “The world will be at the dawn of a period of destruction the likes of which have never before been experienced and the consequences of which will be the emergence of USA….etc”?  Somehow I doubt it, not least because Nazism had yet to be invented and there had never been a communist revolution. 1913 lacked both a Nazi and a Communist government.

For the most part Europeans were still supremely confident in 1913. Literacy and standards of living were rising, , pensions and social welfare were becoming common, the power of steam and electricity had been conquered and the automobile invented, scientists were revealing the secrets of the atom, a communications revolution was taking place involving photography, film, telegraphy, radio and the telephone, industrialization was bringing creature comforts to the ordinary citizen, international trade had been liberalized, the British and French colonial Empires covered most of the world and were still growing, the British navy still ruled the waves, the German Empire was young and vibrant, the Russian and Austro-Hungarian Empires were centuries old but still expanding. For the most part the western world was incredibly optimistic, present trends were positive and few could argue against a positive prognosis regarding the coming twenty years.

Of course there were some clouds on the horizon and there were a few dissenting voices, though they were tagged “pessimists”. A small cohort of young intellectuals had become enamoured by the pessimistic philosophy of Nietzsche. In Vienna, Freud was exposing the irrational roots of the human condition.  An increasing number of British policy makers were worried about the aims and objectives of Germany; some were worried about the “Yellow Peril”, though they referred to China, not Japan who was a British ally. Science fiction writer H. G. Wells wrote a novel involving destruction raining down from the air (the airplane had just been invented ten years earlier).

A year later there was a world war.  Not the war that anyone was expecting, a “home by Christmas war”.  History had taught Europeans that wars between industrialized nations promised to be brutal but blessedly short.  Alas, as is so often the case, history taught the wrong lessons (or half wrong in this case). No one in 1913 had expected the type of war that they got.  But far worse was to come.

Twenty years on from 1933 and two new phenomena are in power: the Nazi and Communist single party states. Stalin has already unleashed a politically motivated famine in Ukraine that will kill over three million peasants; Hitler is taking his first cautious steps that will lead to the Holocaust. The stage is set, the clock is ticking. Millions of ordinary, innocent people in Poland and Belarus are about to experience an unimaginable and totally unpredictable savagery, carried out by the German and Soviet governments.  Europe’s Jews are on a precipice of a hard to imagine genocide, created and orchestrated by Germany but a true Pan-European undertaking, with the collaboration of French police, Dutch train drivers, Latvian nationalists, Polish informers, Ukrainian guards. Japan has already commenced the destruction of China.

None of this was inevitable.  None was the simple result of long-term trends. Human agency played the crucial role along each step of the way. Decisions were taken by individuals and groups, circumstances were fluid and changing, opportunities arose and were taken, ignored or were missed, misunderstandings arose and persisted. It was the complex interplay of thousands of personal and non-personal factors that led to the twelve years of destruction and its global and persistent consequences.

Of course we have to prepare for the future.  But convincing ourselves that we know what to expect is the worst possible way of doing this. Accepting the humbling state of uncertainty is far more realistic, and offers protection from the rantings of demagogues. We cannot expect the citizen of 1913 to have foreseen what was in store. Why should we expect anything else of ourselves?

On Bankers and Astrologers

It is that time of year again when some of us engage in the pleasant and harmless game of answering “What will the coming year bring?” There are a few things that we feel we know with some certainty.  For instance there will be earthquakes and tsunamis in Japan and some of these will claim fatalities.  But such a prediction is trivial, as Japan experiences thousands of quakes a year and a handful cause a handful of casualties. But no one, not even the experts, will dare to predict the next Big One.  There are some global trends that seem to be inescapable – the earth is heating up, it is very likely to continue and, as a species, we seem to be entirely incapable of getting our act together and doing something about it.  We simply blame our leaders. Meanwhile, the annual increase in greenhouse gas emissions during 2011 was the highest ever.  But the consequences of global warming are difficult to predict.  They are likely to be catastrophic, but in what ways exactly – that is the question.

Some things appear to be fairly safe bets for the coming year, and mostly they concern continuities rather than changes.  For instance, regardless of an increase or decrease of political turbulence in the Middle East, it is highly likely that the great Pyramid of Giza will remain standing, simply because it has a good record – it has been standing for over 5,000 years; it has presided over the ages of the Pharos, the Romans and Greeks, the Kingdoms of the Arabs and Ottomans, the very brief British Empire. Its survival for millennia means it is unlikely to disappear in 2012.

Similarly we can make an educated guess to distinguish between the continuities that are more likely to survive the year and those that are less likely to survive.  For instance it would seem more likely that the Great Wall of China will still be standing at year’s end than the Israeli wall that wraps itself around the Palestinian territories, simply because the former is much older and generally it is the new that disappears quickly rather than the old. The Great Wall of China has already outlived the walls that surrounded ancient Rome and the wall that separated Berlin, and it is likely to outlive the Israeli wall as well as Wall Street and our various firewalls.

Irrationally, we tend to think that those things invented during our own life times will last. I remember a student trip to Berlin and an expert from the West Berlin Information Service informing us that she would be long dead, that we would be long dead and forgotten, but the Berlin Wall would still be standing.  It was March, 1989. Eight months later the wall came down.

Our myopic obsession not only with the new, but with the illusion that our contemporary innovations possess incredible historical significance, borders on fetishism. Will Google or Twitter really outlast the Great Wall of China, not to mention the Great Pyramid of Giza? This is what makes games of predicting the future so hilarious and difficult. I would guess that it is extremely unlikely that Facebook will still be around in a hundred years’ time, though of course I might be wrong.

But making meaningful predictions is difficult. A leading British politician in 1974 predicted that it would take years before the country would have a female prime minister and added “not in my time”.  The politician was called Margaret Thatcher and she became prime minister five years later. The parlour game of predictions becomes most entertaining when participants begin to take their predictions seriously, the point when participants mix up their fantasies with a reality that has yet to materialize. The equivalent of today’s fortune tellers often go by the title economists or bankers. Their predictions are as likely to be true as those of astrologers.  Indeed I fancy that the occupation of the astrologer will survive that of the economist.  Some economists and bankers today believe they can anticipate the future – a logical fallacy as, by its nature, the future is unknown and a future anticipated would already be present in the present and consequently not be the future.

Dante, in his Inferno, positioned soothsayers deep within the bowels of Hell.  For trying to divine the future their terrible punishment was that “each was marvelously twisted between the chin and the beginning of the chest for the face was turned towards the kidneys, and they were forced to walk backwards, since seeing forward was taken from them”. (Canto 20;10-15). He describes: “the tears of their eyes were bathing their buttocks down the cleft” (Canto 20; 37-39.

Today we don’t condemn our soothsayers to hell, we pay them big bonuses instead, even when they get it wrong, which they do frequently.  As the world economic system totters on a precipice, they are left in charge  And they get it wrong, again and again and again.  Here are examples of predictions made by some leading economists/bankers last year. They come from the Swiss newspaper the Tages-Anzeiger.

As stock-markets crashed in the affluent West, many economists suggested investing in the emerging markets of the East. On January 25^th 2011 Philipp Baerstschi, Chief Strategist at the leading Swiss private bank Sarasin, stated that the Chinese stock market would rise “by about 20% by the end of the year”. Instead, by the end of 2011 the Chinese stock market decreased by 21.7%, one of the biggest losses of the year.

 David Kostin, Chief Strategist at Goldman Sachs stated on January 22^nd 2011: “We expect that the S&P 500 will rise to 1500 by the end of the year”.  Instead, on the last day of 2011 the S&P stood at 1,261 points. 

The influential American Hedge Fund manager John Paulson predicted in late 2010 “The price of gold will reach 2,400 dollars, a doubling by the end of 2011”.  Last Friday, the end of 2011, the cost of gold was 1,581 dollars per ounce, an increase of just over 10%, not a doubling.

In January 2011 Nick Beecroft, Senior Consultant to the Saxo Bank, predicted that in the second half of 2011 the Euro would recover against the Swiss franc “we can reckon on a clear increase to between 1.35 and 1.40”.  Instead the Euro nose-dived in late 2011 and only intervention by the Swiss National Bank stabilized the exchange rate (for now at least) at about 1.20.

Astrologers base their predictions on the positions of the stars.  Economists base their predictions on the much more ethereal concept of “present trends”.  But which trends will be of significance? How will they interact? What will be the consequence of the unforeseen? And what will be the influence of what John Maynard Keynes termed “the animal spirits” – the irrational dreams and hates of the human psyche?  Economists, plotting out their graphs and pie-charts, convince themselves of their own certainties, like the astrologists with their cosmic maps and horoscopes. As the philosopher A.C. Grayling has put it: “All around us we see developments which, naturally enough, we project linearly into the future, taking too little account of interactions between those developments, changes in moral and political fashion, the unexpected and unforeseen, and the unforeseeable.” (Ideas That matter: a personal guide for the 21^st Century. London, 2009, page 159).

Economists who believe they can see into the future are guilty of hubris.  They project a feeling of certainty. They need to nurture a sense of humility.  And before they do even more damage, they need to learn how to say and mean the important words “I do not know”.