In 1914, nobody thought a global war was about to be unleashed. There were regional conflicts and acts of terrorism, and there had just been a global financial crisis, but, politicians and bestselling books argued then, the deep financial and diplomatic ties between the powers would prevent any conflict. Today, some feel that things are similar: Major powers are pitted against one another in Ukraine, the South China Sea and the Middle East in a similar economic and diplomatic environment. Others feel that the post-Second World War order is so different, and the world so much less militant, that the comparison is unrealistic. Here we present two of the world’s best historians of the period on either side of this debate. Read and vote.
Sir Richard J. Evans : As we enter the centenary year of the outbreak of the First World War, journalists and historians in Britain and the United States have begun to suggest that there may be similarities with the world in our own time. “A century on,” wrote The Economist on Dec. 21, 2013, “there are uncomfortable parallels with the era that led to the outbreak of the First World War.” The catastrophe that overtook Europe and the world in 1914 was unleashed, says the magazine, by Germany, a rising power that challenged the supremacy of the British Empire, the global superpower of the day. Now, the magazine claimed, “the United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly.” Others, notably the historian Niall Ferguson and Japanese Prime Minister Shinzo Abe, have echoed this alarmist view.
How plausible are these parallels? Do we really need to worry that history is about to repeat itself right on cue for the centenary of the First World War? We might start by asking how that war began. Before 1914, the key trouble spot was located in the Balkans. As the Turkish-led Ottoman Empire was forced out of the region, all the new Balkan states armed to the teeth, buying up the latest weaponry from Europe’s leading arms manufacturers with loans supplied by the British, French and German governments. All of these countries were politically unstable, with governments periodically overthrown by force, notably in the Serbian coup of 1903; state bankruptcies in Greece and Bulgaria; and terrorist organizations flourishing, notably the Serbian ‘Black Hand’ and the Internal Macedonian Revolutionary Organization, which pursued policies of assassination to gain their objectives.
In 1912-13, the Balkan states took advantage of an Italian attack on the Ottoman territory of Libya to gang up on Turkey. They forced it back to the gates of Istanbul in the First Balkan War, then fought each other to a standstill over the spoils of victory in the Second Balkan War. The key influence in turning these regional conflicts into a world war, however, was the fact that these regional conflicts also involved the Great Powers.
Independent Serbia in particular, having expanded its territory thanks to the retreat of the Ottomans, was keen to incorporate further territory - inhabited by ethnic Serbs - that lay within the borders of the Austro-Hungarian Empire, run from Vienna. It was a Bosnian Serb, Gavrilo Princip, whose assassination of the heir to the Austrian throne in Sarajevo in June, 1914, lit the fuse that led to the outbreak of a general European war just over a month later, as the Austrians blamed Serbia, Russia leapt to Serbia’s defence, the Germans backed Austria, and the French backed Russia.
The road from a regional conflict to a global one seemed all too easy. Yet, since 1945, the occurrence of a similar sequence of events has seemed unlikely. One major reason for this lies in everything that has happened in the intervening century. Since 1945, we have feared a general war just as European politicians did between 1815 and 1905. Then, fear of the upheaval and destruction caused by the French Revolutionary and Napoleonic Wars brought the major European states together time and again in what was known as the Concert of Europe to resolve potential conflicts through international conferences. The Concert of Europe, like the United Nations of today, provided a forum in which diplomats and statesmen could work together to avoid war, and it largely succeeded.
There are clear parallels with the situation in our own time. The postwar settlement in 1945 rested on a general recognition that international co-operation in all fields had to be stronger than it had been under the League of Nations, the UN’s ill-fated predecessor. The destruction caused by the Second World War, with its 50 million or more dead, its ruined cities, its genocides, its widespread negation of civilized values, had a far more powerful effect than the deaths caused by the First World War, which were (with exceptions, notably the genocide of a million or more Armenian civilians by the Turks in 1915) largely confined to troops on active service. In 1945, Hiroshima and Nagasaki provided an additional, terrible warning of what would happen if the world went to war again.
In 1914, by contrast, very few people had any idea of the cataclysm that was about to descend on them. They thought the war would be short and sharp, limited in duration and scope, like the wars of the decades after 1815. Partly because of this record, war was seen by many in 1914 as not only inevitable but also positive. When it came, the war appeared to many as a release, a liberation of manly energies long pent up, a chance to do something glorious in a prosaic age.
The breakdown of the multipolar system of international relations under the Concert of Europe was one of the major factors leading to the outbreak of war in 1914. Up to 1904-5, Britain had regarded France and Russia as its main rivals for global influence, but as dangerous Anglo-French colonial differences in Africa were settled, and Russia turned away from Asia following its defeat by Japan, the rise of Germany took centre stage, and Europe divided itself, along the lines of the later Cold War, into two armed and increasingly antagonistic camps.
Today’s Balkan tinder-box has been replaced by the Middle East. But neither here, nor in East Asia, does it look as if regional disputes are going to escalate into global conflict. China is not challenging the United States militarily but economically; and in any case, it is far too simple to see the complex origins of World War I as lying in a German challenge to the British Empire: its roots lay in the Balkans, not in the North Sea.
Harold James : As we get closer to the centenary of Gavrilo Princip’s act of terrorism in Sarajevo, there is an ever more vivid fear: it could happen again. The approach of the hundredth anniversary of 1914 has put a spotlight on the fragility of the world’s political and economic security systems.
At the beginning of 2013, Luxembourg’s Prime Minister Jean-Claude Juncker was widely ridiculed for evoking the shades of 1913. By now he is looking like a prophet. By 2014, as the security situation in the South China Sea deteriorated, Japanese Prime Minister Shinzo Abe cast China as the equivalent to Kaiser Wilhelm’s Germany; and the fighting in Ukraine and in Iraq is a sharp reminder of the dangers of escalation.
Lessons of 1914 are about more than simply the dangers of national and sectarian animosities. The main story of today as then is the precariousness of financial globalization, and the consequences that political leaders draw from it.
In the influential view of Norman Angell in his 1910 book The Great Illusion, the interdependency of the increasingly complex global economy made war impossible. But a quite opposite conclusion was possible and equally plausible – and proved to be the case. Given the extent of fragility, a clever twist to the control levers might make war easily winnable by the economic hegemon.
In the wake of an epochal financial crisis that almost brought a complete global collapse, in 1907, several countries started to think of finance as primarily an instrument of raw power, one that could and should be turned to national advantage.
The 1907 panic emanated from the United States but affected the rest of the world and demonstrated the fragility of the whole international financial order. The aftermath of the 1907 crash drove the then hegemonic power – Great Britain - to reflect on how it could use its financial power.
Between 1905 and 1908, the British Admiralty evolved the broad outlines of a plan for financial and economic warfare that would wreck the financial system of its major European rival, Germany, and destroy its fighting capacity.
Britain used its extensive networks to gather information about opponents. London banks financed most of the world’s trade. Lloyds provided insurance for the shipping not just of Britain, but of the world. Financial networks provided the information that allowed the British government to find the sensitive strategic vulnerabilities of the opposing alliance.
What pre-1914 Britain did anticipated the private-public partnership that today links technology giants such as Google, Apple or Verizon to U.S. intelligence gathering. Since last year, the Edward Snowden leaks about the NSA have shed a light on the way that global networks are used as a source of intelligence and power.
For Britain’s rivals, the financial panic of 1907 showed the necessity of mobilizing financial powers themselves. The United States realized that it needed a central bank analogous to the Bank of England. American financiers thought that New York needed to develop its own commercial trading system that could handle bills of exchange in the same way as the London market.
Some of the dynamics of the pre-1914 financial world are now re-emerging. Then an economically declining power, Britain, wanted to use finance as a weapon against its larger and faster growing competitors, Germany and the United States. Now America is in turn obsessed by being overtaken by China – according to some calculations, set to become the world’s largest economy in 2014.
In the aftermath of the 2008 financial crisis, financial institutions appear both as dangerous weapons of mass destruction, but also as potential instruments for the application of national power.
In managing the 2008 crisis, the dependence of foreign banks on U.S. dollar funding constituted a major weakness, and required the provision of large swap lines by the Federal Reserve. The United States provided that support to some countries, but not others, on the basis of an explicitly political logic, as Eswar Prasad demonstrates in his new book on the “Dollar Trap.”
Geo-politics is intruding into banking practice elsewhere. Before the Ukraine crisis, Russian banks were trying to acquire assets in Central and Eastern Europe. European and U.S. banks are playing a much reduced role in Asian trade finance. Chinese banks are being pushed to expand their role in global commerce. After the financial crisis, China started to build up the renminbi as a major international currency. Russia and China have just proposed to create a new credit rating agency to avoid what they regard as the political bias of the existing (American-based) agencies.
The next stage in this logic is to think about how financial power can be directed to national advantage in the case of a diplomatic tussle. Sanctions are a routine (and not terribly successful) part of the pressure applied to rogue states such as Iran and North Korea. But financial pressure can be much more powerfully applied to countries that are deeply embedded in the world economy.
The test is in the Western imposition of sanctions after the Russian annexation of Crimea. President Vladimir Putin’s calculation in response is that the European Union and the United States cannot possibly be serious about the financial war. It would turn into a boomerang: Russia would be less affected than the more developed and complex financial markets of Europe and America.
The threat of systemic disruption generates a new sort of uncertainty, one that mirrors the decisive feature of the crisis of the summer of 1914. At that time, no one could really know whether clashes would escalate or not. That feature contrasts remarkably with almost the entirety of the Cold War, especially since the 1960s, when the strategic doctrine of Mutually Assured Destruction left no doubt that any superpower conflict would inevitably escalate.
The idea of network disruption relies on the ability to achieve advantage by surprise, and to win at no or low cost. But it is inevitably a gamble, and raises prospect that others might, but also might not be able to, mount the same sort of operation. Just as in 1914, there is an enhanced temptation to roll the dice, even though the game may be fatal.
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