Niall Ferguson warns US of new ‘Cold War’ reality

“Whether we like it or not, it is our responsibility to preserve world peace because no one else can do it. We cannot continue letting events and crises get out of control, we must, through sound management and planning, be in control so as to prevent being confronted by a crisis. This requires a sound economy, a strong national defence, and the will and determination to preserve peace and freedom,” famous words spoken by former US President Ronald Regan, outlining his plan for ”A Strategy for Peace in the 80s”.

In doing so, President Reagan established both a strategy and a global security framework that would bring about the demise of the Soviet Union, ending the Cold War and firmly establishing the entrenching the era of “Pax Americana” or the American Peace.

Fast forward nearly four decades and the world is once again on the precipice, if not already outright in a new and broader Cold War.

Where once the United States stood triumphant and unopposed in the world, today, the relationship between the United States and the People’s Republic of China has rapidly emerged as the key defining geopolitical, economic, and strategic “situationship” of the 21st century.

While this “situationship” is rapidly shaking the foundations of the post-Second World War order, it is just the latest incarnation of the historical norm that is defined by multipolar rivalry between great empires and great powers.

Unlike the “first” Cold War, which was largely characterised by the ideological wrestling match between the revolutionary Marxist/Leninist communist, Soviet-led world and the liberal democratic, capitalist, US-led world, this current incarnation of multipolar competition is far more holistic and all-encompassing in its nature.

Fast forward to today and the jubilation and hubris which characterised the years immediately following the collapse of the Soviet Union has now transformed into a far less optimistic vision of the future, as once again, great power competition and multipolarity are alive and well.

Not least of these is famed historian and senior fellow at the Hoover Institution at Stanford University Niall Ferguson in a piece for Bloomberg titled, Biden Can’t Pay His Way Out of Fighting Cold War II, in which he begins with rather poignant advice from history, saying, “As Britain found out against Napoleon, at some point you will have to put your own boots on the ground.”

Cold War II or Cold War III? The key theories

As it stands, there are two key, yet divergent and, in many ways, competing theories regarding the geopolitical and historic prism through which both the 20th century’s Cold War and the Cold War of today are being played out before us.

The first is a belief that the US–China relationship isn’t as bad as that of the US–Soviet relationship, or as Ferguson described it, the “the Aspen Strategy Group/Harvard University view”.

Opposing this first view is the Yale University/Hoover Institution view which believes that the world, as it stands, is more akin to the eve of the First or Second World Wars, or as Ferguson stated, “We confront a new Axis – China, Russia, Iran and North Korea – that in many ways poses a bigger threat than the Germany-Japan-Italy Axis of the late 1930s and early 1940s, or the early Cold War combination of the Soviet Union, China and the other communist-controlled states.”

For Ferguson, Cold War 2.0 is his preferred option, the lesser of two evils as it were, but it isn’t without its challenges or it’s high-risk flash points that could plunge the world into conflict, something he explained, saying, “For me, Cold War II is the good outcome. An American version of the Suez Crisis of 1956 – the abortive occupation of the Suez Canal by Britain, France and Israel – would be worse, in that such a humiliation over, say, Taiwan would signal the end of American primacy, just as Suez sounded the death knell of Britain’s Empire. Losing World War III would of course be the worst.”

Bringing us to the history of “Cold Wars” as a concept and effectively back around to the Yale University/Hoover Institution, that of the world being in a position of a “pre-war” state, similar to the period of build-up that characterised the German–British relationship in the lead-up to the First World War, or the similar environment in the lead-up to the Second World War both in Europe and in Asia.

For Ferguson, this also gives rise to the concept of a “Diet Cold War” or a Cold War where one party pays others to carry out their fighting for the larger power, now yes, I know, that typically falls under the moniker of a “proxy war”.

Ferguson explained, “Letting other people do the fighting is, after all, one of the four pillars of National Security Adviser Jake Sullivan’s grand strategy: “Help [fill in the blank] defend itself without sending US troops to war”. In practice, that means channeling money and arms to key countries – Ukraine, Israel, Taiwan – and hoping they can hold off the new Axis powers without the need for American ‘boots on the ground’.”

Going further, Ferguson added, “Unlike in Cold War I and the global war on terrorism, in other words, this time the US is seeking to avoid sending its own soldiers into battle. And this makes sense. If your debt burden is dauntingly high and set to keep growing even if you cut defence spending relative to GDP, you need Diet Cold War, in just the same way that overweight people opt for Diet Coke (and Ozempic).”

Historic precedent and the piper always needs to be paid

This approach to Cold War tactics and strategy isn’t without its precedent in history, with various examples throughout history dating from Rome, through to more recent periods of history during the Seven Years’ War and the Napoleonic era, something Ferguson detailed further, saying, “The culmination came in the French Revolutionary and Napoleonic Wars, when His Majesty’s Treasury threw money at just about anyone willing to fight France: Austria, Baden, Brunswick, Hanover, Hesse-Cassel, Hesse-Darmstadt, Morocco, Portugal, Prussia, Russia, Sardinia, Sweden and Sicily – not to mention the Prince of Orange, sundry ‘German Princes,’ ’Portuguese Sufferers,’ ‘Russian Sufferers’ and ‘Minor Powers, under engagements with the Duke of Wellington’.”

However, this approach of effectively “outsourcing” the fighting to slow down or distract major strategic adversaries only works for a while, eventually, the “paying party” will need to pay in more than just “treasure” and will need to pay in “blood”.

Ferguson stated, “It is also worth adding that paying subsidies was not a substitute for having British boots on the ground. It wasn’t Hessians, but Britons (as well as Dutchmen and Hanoverians) the Duke of Wellington commanded at Waterloo.”

This also spells major challenges for the United States, a nation that faces mounting public and private debt and waning interest in serving as the world’s policeman, particularly among large portions of middle America.

“There are lessons here for the US, a country that long ago lost control of its public finances, to the extent of running deficits above 5 per cent of GDP even when the economy is close to full employment. As a result, the federal debt in public hands is already at 99 per cent of GDP – in what may be the first inning of Cold War II – and projected by the Congressional Budget Office to reach 166 per cent in 30 years’ time,” Ferguson explained.

We are ultimately seeing the very real and very concerning implications of this reality, with Ferguson explaining, “The problems with being a broke paymaster are obvious. First, you have less money to throw around than you really need. Second, everyone knows it. The perfect illustration is the complete inability of President Joe Biden’s administration to get the government of Israel to do what it wants, namely stop killing Palestinian civilians caught in the crossfire of its efforts to eliminate Hamas in Gaza.”

The ongoing conflict in the Middle East isn’t the only place this strategy is playing out, with the ongoing war in Ukraine another such example of America embracing a strategy of paying others to do the fighting as a means of bleeding a major strategic competitor, in this case, Russia dry.

Ferguson explained that in the Ukrainian case, the outcome is more of the same, “For reasons that future historians will struggle to understand, the US suspended its aid to Ukraine in late 2023. Europeans did not fill the gap, with the result that Ukraine’s military capacity was diminished and Russia’s hopes of victory revived…

“The result is that Kyiv listens much less to Washington than it did in 2022 and 2023 – hence the recent spate of deep drone strikes aimed at Russia’s energy infrastructure, operations that cannot possibly have been approved by Team Biden, which it seems will (to quote John F. Kennedy) “pay any price, bear any burden, meet any hardship … to assure the survival and success of liberty” – except for higher gasoline prices in an election year,” Ferguson added.

For Ferguson, this political schizophrenia and inconsistency is a major failure of the United States that has, in many ways, created the opportunity for Russia and other revisionist powers to further expand their attempts to overthrow the post-Second World War and post-Cold War order.

He stated, “This has been a horrible failure of American policy. Turning off aid to Ukraine has unquestionably encouraged Putin to believe that victory can be achieved in a relatively short time frame … Any chance of a negotiated peace is vanishingly small so long as Putin believes he can win this war because the US has no staying power.”

However, with each passing day, a Ukrainian “victory” looks increasingly unlikely and mounting Russian pressure around Kharkiv ahead of prime “fighting season” over the European summer means that without a direct US or, more broadly, NATO intervention, Russia will ultimately “win”.

Broadly speaking, the same lessons could be extrapolated by Xi Jinping who remains firm on his commitment to reunify mainland China and the breakaway island democracy of Taiwan, bringing to the debate the age-old question of, “Is Taipei worth Honolulu, Los Angeles or San Francisco?”

Final thoughts

Regardless of whether we are in a “pre-war” or traditional “Cold War” environment, it is clear that successive generations of Australian leaders have let the country down, too entranced and seduced by the promise of “Peace Dividends” and the “End of History” to recognise the cold reality of the world, particularly developing concurrently with the “Clash of Civilisations” during the Global War on Terror.

Equally, many an academic, strategic thinker and policymaker were seduced by the march of hyper-globalisation and the ultimate triumph of liberal democratic values that either naively overlooked the importance of historical context, religion, ethnic loyalty and rivalry and ideology that has left Australia dangerously exposed and unprepared for the challenges we now face.

But it isn’t too late if we pivot and accept the realities we now face both globally and closer to home in the Indo-Pacific, we just have to have to as the US Marines say, “embrace the suck”.

Responding to the challenges arrayed won’t be easy, but if we can engage the Australian public and industry early and bring them along, I promise it will be worth it in the long run.

Because if we don’t, when it comes to paying the bill, the cost will be too devastating to comprehend.