Empire: The Rise and Demise of the British World Order and Lessons for Global Power

• Introduction
• Remarks
• Questions and Answers

Introduction

JOANNE MYERS: On behalf of the Carnegie Council I would like to welcome members and guests to our Books for Breakfast program. This morning we are pleased to have with us Niall Ferguson, the author of Empire: The Rise and Demise of the British World Order and the Lessons for Global Power. Every now and then a book or an author comes along causing a sensation. For our discussion this morning we have not only a book whose ideas have created excitement on both sides of the Atlantic but the author of this eloquently written work has himself created quite a stir for his original and rigorous thinking.

This provocative work is the latest in a series of publications by Professor Ferguson that have challenged conventional wisdom and have led many to deem him Britain's brightest young superstar historian. His book not only gives us a grand historical narrative of Britain's pursuit of an empire but it also describes a dream of global supremacy.

On the eve of the Second World War, over a fifth of the world's land surface and nearly a quarter of the world's population were under some form of British rule. It is perhaps not surprising that our guest this morning sees this unprecedented empire as the world's first experiment in globalization, one which he believes is pregnant with lessons for the world today.

As American forces are being deployed around the world, writers and pundits are continually questioning whether the United States is trying to be—or already is—an empire. The facts seem to indicate that we already are.

And, just as Americans are doing now, a hundred years ago the English also combined political, cultural, economic, and military hegemony with a very strong sense of their own virtue and high moral certainty. "The parallels between today's empire and yesterday's can never be exact," Professor Ferguson writes, "but it is clear that today's debate about American global power can only be enriched by a proper understanding of how the last great empire functioned."

To discuss how this island nation came to rule the world and to explain why we, who were once British subjects, should care about the history of this once mighty empire are just some of the issues Professor Ferguson will address this morning.

Even though he makes the case for the positive role played by the British Empire in world history, his book, drawing on lessons from the British experience, will also serve as a cautionary tale for the United States today.

Our guest is easily the most industrious British historian of his generation. He is a professor of financial history at New York University and a Senior Research Fellow at Jesus College Oxford. He was trained as an economist and has supported himself as a journalist. Professor Ferguson's work reflects his background, as his published works focus on 19th and 20th century European political and financial history. And, like all fine journalists, his writing is always lucid, engaging the reader from the first written word.

His books include Paper and Iron: Pity of War, an account of the origins of strategies and the meaning of the First World War; The House of Rothschild, the award-winning history of the bank that for generations played power broker in half a dozen European countries; and Cash Nexus: Money and Power in the Modern World, which offers a radical new history of the link between politics and economics. He also writes regularly for The Times Literary Supplement and The New York Times.

Please join me in giving a very warm welcome to Niall Ferguson.

Remarks

NIALL FERGUSON: Thank you very much.

It's odd to arrive back in New York after a summer's absence. In Britain our concerns are entirely with the past of the war in Iraq. We look entirely backwards, to ask ourselves questions through the Hutton inquiry as to whether it was right or wrong to intervene and overthrow the regime of Saddam Hussein on the ground that he possessed weapons of mass destruction which might imminently be used against us or our allies.

Your gaze is still directed forward. Nobody in London is asking what will happen next, which is rather disturbing.

When I wrote Empire for a British publisher, it had a rather different subtitle from the one with which you are familiar. Its British subtitle was How Britain Made the Modern World. I can remember a nice man from Basic Books saying this wouldn't quite do: "We need something that relates this to the United States."

I asked, "How could it be more relevant to the United States, which clearly was made by Britain in all essentials?"

He said, "No, this really wouldn't persuade an American reader."

He came up with a subtitle so long and containing so many spurious references to the United States that I had to edit it, and the result was The Rise and Demise of the British World Order and the Lessons for Global Power, which still seems absurdly long.

This morning I would like to make those lessons more explicit than perhaps they are in the book.

I argue that there was a phenomenon in the 18th—and certainly in the 19th—century that might be characterized as "Anglobalization;" that the great integration of commercial, financial, and labor markets that occurred in the second half of the 19th century and continued up until 1914 would have been unthinkable without the existence of the British Empire; that globalization in its first incarnation was very clearly accompanied by political globalization; and that the existence of a political entity that governed literally a quarter of the world's population was an integral part of "Anglobalization I." And yet, to suggest that the United States is by analogy the empire of our own age of globalization is to invite heated rebuttals from Americans.

Imperial denial is a fascinating condition from which the majority of Americans continue to suffer, despite the fact that astute commentators—John Gaddis at Yale, Charles Maier at Harvard—have long argued that the United States has become an empire.

Almost everyone in the world outside the United States regards it as axiomatic that it is an imperial power. It is a term of abuse, particularly for our French friends, to refer to the United States as an hyperpuissance. That is simply an ironic neologism to describe an empire in our time.

And yet, the official line remains emphatically in the negative. If you compare, for example, Donald Rumsfeld's interview with Al-Jazeera shortly before the war in Iraq, in which he heatedly denied that the United States was an imperial power, with remarks made earlier this month by Secretary of State Colin Powell to exactly the same effect, two things strike you. The first is that here at least is something on which Rumsfeld and Powell agree. The second is that it is extraordinary that they—and indeed President Bush himself—constantly emphasize the difference between American power and bad, old imperial power.

The only way that one can sustain this distinction is by defining "empire" so narrowly as to exclude the informal empire—the forms of indirect rule that the United States traditionally practices—from the category of imperialism.

I will explain why the United States is an empire, what it has in common with its British predecessor; but then I will suggest that there are three very profound differences and draw some conclusions from these differences.

The resemblances are relatively easy to demonstrate, provided one does not apply an excessively narrow definition of empire, which would lead to the conclusion that the only significant American colony today is Puerto Rico.

If you consider the history of the United States in the normal language of European history, it has been an imperial power from its very inception. After all, the thirteen colonies that broke away from the British Empire in the 1770s account today for only less than 10 percent of the territory of the United States. It is worthwhile asking where the rest came from.

One interesting questions is why the United States' expansion stopped where it did. Why it did not extend to include all of Canada is one of the most interesting questions of North American history, one which I'm guilty of not having spent enough time discussing in Empire. Why did it stop at the Rio Grande to the south? Why did it extend as far as Hawaii but fail to absorb the Philippines, which were annexed at the same time?

American history needs to be understood in the normal language of history, the language of history which can be applied from the time of Alexander, to the time of Clive, to the time of Queen Victoria. We need to discard the language of exceptionalism and understand the United States as a normal empire, which behaves in the ways that empires have in the past.

But not all empires are the same. I count roughly sixty-eight empires in all history. They are all different. There is nothing unusual about claiming to be different. But much of what is different about the United States is also what makes the British Empire different from most empires.

Here are the resemblances between the two Anglophone empires:

Their project has been and remains broadly the same. From the 1830s or 1840s the British Empire began to commit itself more and more to a project of economic liberalization, aimed at global free trade, which fostered the integration of international capital markets, and which also allowed even greater freedom of labor movement than is the case today.

But it wasn't simply an Anglophone empire based on Adam Smith and economic freedom. It also aimed to promote in those territories which came under British rule, and even those that were only indirectly influenced—I think here of Argentina—certain institutions.

We tend to use the expression "the rule of law" rather casually today. The rule of law has certain very specific meanings, the most important of which is the safeguarding of rights of property and the existence of effective structures of legal arbitration and enforcement.

Development economists will tell you that the key element that explains why some countries get rich and others don't, why Botswana is what it is and Sierra Leone is what it is, is the role of institutions. I read a lot of economic literature before I started work on Empire and made a list of the criteria for economic success wherever I could find them. As my list of desiderata for economic growth grew longer and included not only economic openness but also the safeguarding of property rights, balanced budgets, stable currency, non-corrupt administration and some elements of political representation, it suddenly dawned on me that there was something uncannily familiar about it. It resembled almost exactly the benefits that British imperial administrators in the late 19th century and early 20th century claimed they were providing for the countries over which they ruled.

To attempt to create not only free markets but the institutions of civil society and the rule of law, without which free markets cannot function, and to attempt to create these institutions in remote foreign countries, with different cultures and resource endowments, has been tried before. If this is the project that we euphemistically call "nation-building," then it is no novelty other than in nomenclature. It has been tried before and there are lessons to be learned from its successes and its failures.

We could also compare the British and American empires in terms of their capabilities, the ways in which they have gone about achieving these ends.

Consider the importance of economic, non-state institutions in expanding British power in the 18th and 19th centuries. There is nothing new about multinational companies extending their influence beyond the shores of their home country. The East India Company was a multinational company, and the Rothschild Bank was one of the great financial institutions of the world economy 100 years ago, with an economic influence far greater in relative terms than that wielded even by Goldman Sachs today. The City of London, even more than New York today, exerted a kind of financial hegemony through firms like Rothschild's. A hundred years ago, it was a commonplace of criticism of the British Empire that power was wielded as much by financial institutions as it was by the Royal Navy.

Empire is not only about military power, although sometimes you get the impression that there are people in Washington who think that it is. American power and British power a hundred years ago consist of more than simply military capability. They also consist of what Joseph Nye calls "soft power," or cultural appeal. And, although Britain's cultural appeal wore off rather prematurely in the country that became the United States, it endured very successfully in many other countries for much longer.

By these measures you could argue that the United States is already, and has been at least since the Second World War, a more powerful empire than Britain's ever was.

Take simply an economic measure. The U.S. share in total world output lies somewhere between 22 percent and 31 percent. If you calculate it in current dollar terms, it's about 30 percent—in other words, to put it very crudely, if every American went on holiday simultaneously overseas, you could buy a third of the world's output with your combined annual incomes.

That's vastly more than Britain could ever command. At the very height of its economic power, in the aftermath of the industrial revolution, when Britain was the world leader in economic terms, total British output was still less than 10 percent of total world output. In economic terms you are already three times more powerful as an empire than Britain ever was.

In military terms, too, Britain never enjoyed a lead over its immediate rivals comparable with the lead the United States enjoys today. It is a vastly more powerful military empire than Britain's ever was.

And thanks to technology, its soft power reaches further than Britain's was able to reach a century ago.

What are the differences? Why is it that this vast Anglophone empire engaging in "Angloglobalization II" is so much less successful than version one?

Most Americans get quite cross if you tell them that they under-perform as an empire, but, given the United States' current extraordinary capability—economically, militarily, and culturally—it really should do much better. American lack of success at the game of empire is one of the most fascinating and under-researched subjects of modern history.

An article in a recent issue of Foreign Policy tried to rate American presidents in the nation-building game, and argued that only four out of sixteen attempts to democratize foreign countries had been successful. That points more or less in the right direction, but it understates some of the most important successes and failures since this story began in the 1890s, if not earlier.

What are the problems? Why did the United States fail to avoid the partition of the Korean Peninsula; the complete loss of Vietnam to Communism? Why did its annexation of the Philippines go wrong, and end rather embarrassingly in the 1930s, with the Philippines being granted their independence purely in order to fend off protectionist lobbies in Congress?

There are three fundamental differences between American power and British power a century ago, and they explain not only why the United States has had problems in the past in imposing its will in foreign countries but also why it is experiencing problems today in imposing its will on its two present colonies of Afghanistan and Iraq.

The first is what might be called the manpower deficit. The proportion of the American population which is enlisted in the armed forces has been declining steadily since certainly the mid-1980s, arguably since the time of the Korean War.

The United States has yet to work out a way of making other people fight its wars in the way that the British made the Indians provide a very large part of their armed forces in the 19th—and indeed in the 20th—century.

The manpower deficit is not purely military either. It is very hard to have an empire without settlers. One reason that the British Empire was more successful than the French or the Dutch was simply that there were more people willing to leave the British Isles and spend their entire lives in hot, poor countries.

I once argued with a very nice man who works for The New York Times about why this was. I said, "You really have no appetite for going to live and spending your lives in hot, poor countries."

He replied, "You're right. I have no desire to go and live in Alabama."

Fewer than 4 million Americans live outside the United States today. Nearly all of them are either in Canada, Mexico, or Western Europe.

This, then, is an empire without settlers. Its manpower deficit is not simply manifest in the shortage of troops available for peacekeeping operations in Afghanistan and Iraq; it is manifest in the fact that virtually no Americans live in sub-Saharan Africa and hardly any live in the Middle East outside Israel.

An empire in the end, no matter how much technology can deliver, is about footprints on the ground. The United States imports people; it doesn't export them. Its manpower deficit is, therefore, one of its characteristic weaknesses and one of the reasons why, by comparison with the much smaller British Empire of a century ago, it has more difficulty in making its institutions stick when it tries to plant them overseas.

The second, economic deficit is one I hardly need to tell you about. It is a fiscal deficit, a balance of payments of deficit, and, according to some economists, a generational deficit of mind-boggling proportions.

In an article in the latest edition of The National Interest, Larry Kotlikoff and I have been trying to work out what it means to say that the United States has a fiscal imbalance of $45 trillion. This calculation has been made on the basis of generational accounting, and makes all official projections of the cost of the war in Iraq or of the federal deficit pale into insignificance. It's based on computing the present value of all anticipated revenues of the federal government and all anticipated expenditures, on the assumption of constant policy. The gap between the two—or "fiscal imbalance"—is so colossal that it is simply incomprehensible to most normal human minds.

And most of it arises not from America's imperial overstretch, in the sense that Paul Kennedy imagined back in the 1980s. Hardly any of this huge imbalance is a result of American military expenditures or nation-building programs. It's nearly all the result of the disastrous underfunding of the system of Medicare, and to a lesser extent Social Security, which will manifest itself as the Baby Boomers begin to retire.

There is a colossal difference in economic terms between your empire and the empire of my grandfather. In my grandfather’s time, Britain was the world’s banker, exporting a colossal proportion of its capital abroad.

If you look at capital flows in this age of globalization, in gross terms they are very impressive, and they keep a lot of men in London and New York gainfully employed; and yet they are in net terms tremendously disappointing, because they are nearly all flows of capital between rich countries. Scarcely any of this investment goes abroad to poor countries.

The contrast here with British imperial history could not be more pronounced. The British Empire was not only a colossal net capital exporter—its annual net export of capital averaged somewhere between 5 and 9 percent in the decade before the First World War—but a very large proportion of this overseas investment went to poor countries: went to sub-Saharan Africa, went to developing countries in Asia and in Latin America.

Why? Investors today are unlikely to risk putting money in Zimbabwe under the rule of Robert Mugabe. But investors a hundred years ago were attracted to the proposition of investing in Rhodesia, a country which, like all the countries under British rule in Africa, offered certainty to investors that they would not be defrauded.

In economic and fiscal terms, the United States is not quite the empire it seems when first we consider its resources because it is primarily an empire of consumption, and not of development. Its indifference, even to the Middle East as an area for investment, is very striking when one considers the statistics for U.S. foreign direct investment [FDI].

I had a row with an American editor about the fact that only one percent of U.S. FDI is in the Middle East. This editor, who was somewhat to the left of center, refused to believe that this could possibly be true because the United States must be fighting the war in Iraq because of sinister capitalist interests in that region. That simply isn’t the case.

There is one final difference between British and American empire. The most important deficit, which lames American power, is an attention deficit.

The American media and public are impatient in their desire for success abroad. Barely five days had passed after the beginning of hostilities in Iraq and the talk was of the war getting "bogged down." The war was over in twenty-one days. Still, to many of my new neighbors in New York, it seemed to have taken an unconscionably long time.

Today the conventional wisdom is that the American intervention in Iraq is going badly wrong, that the United States is bogged down, in a quagmire. Yet scarcely six months have passed!

If you were to look at West Germany six months after the United States occupied a part of it in 1945, you would not detect the economic miracle of the 1950s. Were you to be transported back to MacArthur’s Japan six months after the great man stepped off the plane onto Japanese soil, you would not yet see significant signs of recovery in that country. In the history of empires, six months is a blink of an eye.

Until American politicians, opinion formers, and voters grasp that undertakings, whether they are called "colonization" or "nation building," take time—that they cannot be accomplished within a two-year election cycle, that they may not even be accomplished within a decade—the United States should desist from such activities.

One of the most obvious lessons of British imperial history is that, by and large, the longer the British stayed somewhere, the better its long-term prospects for economic development and political stability. And by "long" I mean an average of between 150 and 200 years.

The British ruled Iraq, on and off, formally and informally, for about forty years. That wasn’t enough, and they knew it. But if you were to ask the average American, "Do you envisage American troops being present in Baghdad in the year 2043?" the gasp of horror would be loud.

I’m trying to understand why the American time horizon is so short, why this imperial republic is, as it were, asthmatic when it comes to empire, short of breath when it commits itself abroad.

I have spent a long time looking at opinion polls taken during the Korean War, the Vietnam War, the first Gulf War, and now this year in the aftermath of the second Gulf War. There is a very familiar pattern when one looks at these charts. It’s a ski slope. Success brings popularity that very swiftly wears off.

You can’t have an empire on Wal-Mart principles: "lowest prices always." It doesn’t come cheap. Eighty-seven billion dollars is a serious underestimate of how much it will cost to transform Iraq into a stable and functioning market economy capable of fostering democratic institutions.

But money isn’t the real problem. The real problem is time. This cannot be done in a matter of a few months. When I read opinion pieces arguing that it is time for the U.S. to withdraw, as Jeff Sachs argued recently in The Financial Times, my heart sinks, because this is the classic syndrome that has bedeviled American undertakings in nation-building from the very outset, from the time of the Philippines and Theodore Roosevelt.

The United States has lessons to be learned from the past, not just from the American past, but from the past of another empire. Until Americans understand both the costs and benefits of the last great experiment in Anglophone empire, they will not understand the costs and benefits of the project they have undertaken in our own time.

Thank you.

Questions and Answers

QUESTION: You seem to suggest two things, that empire left behind institutions in the countries that it colonized, institutions that essentially were recipes for future success; and, somewhat later in your talk, you talked about the investment that was made in developing countries.

Aren’t you, however, overlooking one key question: for whose benefit were these institutions and investments made? This was the fundamental question that bedeviled nationalists in the British Empire throughout that time.

First, the various institutions that were created were aimed at strengthening the Empire, not at benefiting the ruled—everything from courts to uphold the sanctity of metropolitan contracts, to railways to take goods extracted from the soil to the ports to ship them back to the home country, to even the nominal efforts at education to create a class to interpret between the rulers and the ruled in most colonized countries.

You mentioned world input. One striking statistic is that India’s share of world output was something like 14 or 15 percent before the British got there and somewhat under 2 percent when the British left. So that must point to some part of the answer.

And I wonder whether that doesn’t actually explain why the British Empire managed the otherwise improbable feat of making revolutionaries out of Americans.

NIALL FERGUSON: It doesn’t matter economically that the investments that were made in India’s infrastructure were primarily intended to yield profits to British investors. Provided that the railways were built, as John Maynard Keynes pointed out in the 1920s, that benefit flowed to Indians too. And, as he argued, if one of the great trunk railways in Canada defaulted on its obligations, Canadians still had the railway and British investors had nothing.

The enormous expansion of India’s infrastructure in the late 19th century, particularly the construction of its railway, telegraph, port systems, the expansion of its area of irrigated land, were primarily intended to make British India a going concern.

But one shouldn’t underestimate the developmental intention that was there. It’s very striking when one reads about the way in which officials conceived of their role in India, that they did see themselves as at least attempting a fundamental transformation of India’s economic institutions.

I agree with you that in its first phase, in the late 18th century to early 19th century, British rule in India was exploitative, extractive, and in no sense beneficial to the Indians, because it was primarily about raising revenue through taxation. But that fundamentally changed, and in the age of "liberal empire" there was an authentic developmental as well as a profit motive.

But because the British liberals were obsessed with balanced budgets, the "night watchman state," above all else, it is clear that they did not invest enough in education and public health to enhance significantly per capita GDP growth in India.

And the same could be said, interestingly, of Egypt, where there was undoubtedly, under Cromer, a development intention, where great infrastructure projects were undertaken but where the dividends in terms of per capita growth were dismal.

We must make an extremely important distinction. The British got certain things right. They made poor countries attractive to investors. If you compare the size of the railway networks in China and those in India circa 1913, there is a substantial difference, because it was clearly far safer to invest in railways in India than in the politically uncertain China.

But the British theory of growth was an extremely liberal fundamentalist theory. They thought that with a small state, balanced budget, and sound currency, free trade would do the rest. We now know that had they invested substantially more in education and public health, they might have seen greater gains.

Nevertheless, if you want to look at the difference between Britain and her former colonies in economic terms, it’s worth asking yourself just how much independence achieved.

I did a simple calculation to show the ratio of British per capita income to Indian per capita income over the very long run. It reached its maximum extent in 1979. And in the case of more or less all of Britain’s African colonies, income and equality between Britain and the African countries has vastly increased since independence. You could conclude that if the British had really wanted to impoverish people in developing countries, they would have given them their independence long before, because nothing has impoverished people in sub-Saharan Africa quite like political independence.

The question of "in whose interests is the empire" is in some ways not quite the right question. Empire was in the interests of both rulers and ruled in that it channeled investment capital to poor countries at relatively low interest rates.

That it didn’t deliver Canadian-style growth rates in India isn’t explicable in terms of ruthless British exploitation. It's explicable in that there wasn’t quite enough imperialism: the British didn't do quite enough to achieve that kind of growth.

As for the Americans, at the time they threw off British rule in 1776 the colonists were the richest people in the world, with the highest standard of living, the best health care, and indeed the best educational institutions—far better than their English counterparts. If ever there was a revolution of rising expectations, that was it.

QUESTION: You built up a fantastic theory in the first half and then, with equal brilliance, demolished it in the second half. You outlined differences crucial to the nature of an imperial project: the willingness to live in hot, poor countries, and the belief that this actually matters and that it is the right thing to do and that you want to get on with it. Americans still don’t believe that.

The British experience is not such a convincing reason why they should believe it. Yes, Britain invested a lot in poor countries, but you've now divided them into the countries whose indigenous inhabitants were displaced, if not exterminated, and are now inhabited by white people of partly British stock, and the countries that are still poor.

NIALL FERGUSON: The American lessons from Empire may well be "don’t go there." It is far from clear that the United States should regard the British model as a template for a new age of Anglophone empire. An understanding of the costs and benefits will lead to an informed decision. At the moment, we are very far from being in a position to make that decision.

The phenomenon of imperial denial—the sense in which Americans engage in quasi-imperial projects but pretend that they will be short term, pretend that they can all be home by Christmas—is the worst of all possible worlds, when the United States behaves in an imperial way without recognizing the full implications, the full costs and benefits, of the undertaking.

The lessons of Empire are only partly to do with economic development. There are two rationales of Empire.

One is the altruistic. It’s sad that people in Sierra Leone are so poor. It would be nice if, with better institutions, they weren’t so poor. That altruistic developmental argument is an extremely convincing one, but it is not likely to convince a majority of the American electorate.

There is a second and more powerful argument, which has to do with security. Compared with the United Kingdom a hundred years ago, the United States is far more vulnerable because of the cheapness of destructive technology to its enemies. In that sense, empire has its own self-interested rationale: the periphery needs to be controlled; the borders are the danger zones.

Whether the United States is altruistic or not, it can ask itself a question about self-interest: is it really in the interests of the United States to pull out of Iraq and allow Baghdad to become the new "university of terrorism" in succession to Kabul in Afghanistan? The answer is "obviously not."

It has not been an option for the United States to withdraw into what was once facetiously called "splendid isolation." This has not been an option, certainly since Pearl Harbor. In my view, it ceased to be an option long before that.

So the question then becomes: for America’s own security how can it make empire work? Then the economic developmental benefits are of second-order importance. They are important because you need local elites to collaborate with you.

The most important message of my book is that the British were only able to "rule" a quarter of the world’s population with the collaboration of indigenous elites. When that collaboration was withdrawn, as in India, when they failed to maintain the collaboration of the very Anglophile educated elite they had created themselves, then British rule didn’t last long.

What the United States must learn is how to win the collaboration of elites. If you want people there to cooperate with your authority, the last thing you should do is say that you’re going to leave. Why would anyone risk his life collaborating with a provisional authority in Iraq or in Afghanistan or anywhere else if he knew already that its American sponsors would be gone within a year?

This is the fundamental problem of the time horizon. As long as Americans keep promising to leave, as long as they make it clear that their imperial authority is a short-term phenomenon, they will find it impossible to elicit collaboration from indigenous elites.

At the moment we see a spectacular illustration of this point. As American authority becomes more provisional-looking, so it becomes harder to maintain order. If you were an ordinary Iraqi—or a well-educated Iraqi, the kind of person who might well be of use to an American authority—why would you want to get involved with an operation that is going to be wound up in the foreseeable future, leaving you tainted as a collaborator and liable to reprisals under whatever monstrous regime emerges from the rubble?

That's the argument for empire. It doesn’t need to be developmental, though it helps, but it does need to be done in such a way that consent is forthcoming.

QUESTION: Whether you like it or not, we will be on our way out by next year. With the presidential election coming, I can almost certify that we will be half-way gone by the spring, if not sooner.

On the question of manpower, the United States had a vast continent to fill up, and "go west, young man" became the calling cry, and still remains that, in this country. We didn’t have primogeniture, we didn’t have the second son phenomenon, or those who had to go overseas. There were many historical differences that adumbrate in your book.

We live in a post-colonial era in which intervention in the affairs of other states is prohibited by the Charter and by international law. It's not the same historical phenomenon. So you can't make a "mutatis mutandis" argument.

Thirdly, if you look at the economic structure, as long as American consumers continue to buy everything that China and Japan produce and you get a colossal debt with it, we are keeping the world economy afloat. Not all of the world economy, but a very large part of the developing economy comes from American consumption. It’s causing our own problems.

The historical circumstance in which we find ourselves is grossly different from 18th-19th century England, so it strikes me as very odd to see some of the comparisons you make.

NIALL FERGUSON: Americans want to believe, "We're different; it's different now; there can't be lessons from anybody else's history because American exceptionalism rules that out."

I hope very much that you are wrong about the departure of the United States from Iraq, but I wouldn’t be surprised if you are right. There will be hell to pay if that is the outcome.

As to whether history has valid lessons for the 21st century, I think it does. You're right in one respect: the flows of population will not magically reverse themselves. These are profound tectonic structural phenomena, and they continue to make the United States a magnet for settlers. It’s just that it's a different kind of settler that flocks here. The transformation of America itself from within, through migration, will have its own profound historical implications.

The idea that international law was invented by Woodrow Wilson is a common American misconception. When Britain occupied Egypt in 1882, there was an extremely complex international legal position to be taken account of. The great powers had been regulating the affairs of the Near East for many years, and the treaty arrangements that governed the future of Egypt's governance were complex affairs in which the interests of France and Britain were quite evenly balanced.

When the British acted unilaterally by occupying Egypt, it happened partly because a French domestic political crisis took the French out of the equation momentarily. But the long-term diplomatic consequences of this unilateral action were extremely damaging for Britain and made its diplomatic position much weaker in the so-called "scramble for Africa."

The UN Security Council represents the great powers today—or one might say the great powers of yesterday in some cases—much as the congresses and conferences of foreign ministers in the 19th century brought them together. The treaties that governed the outcomes of the political struggles in Belgium, Greece, Egypt latterly, were complex legal documents. The question of whether to act multilaterally or unilaterally was as much a question for Britain’s statesmen a hundred years ago as it is a question for America’s statesmen today.

We mustn’t imagine the world as so different. We must try to understand how very like the late 19th century world our world has become, not only in its economic structures but also in its diplomatic structures. The aspiration to produce international courts of arbitration can be traced back to 1899, the first conference to that end at The Hague.

The second point is: who is keeping whom afloat in the world economy? Your argument was that American consumers are keeping the Chinese, and perhaps increasingly the Indian, economies afloat.

Another way of looking at it is that the central banks of Japan and other Asian countries are keeping the United States afloat. With 46 percent of the federal debt now in foreign hands—you’d have to go back to the time of the Louisiana Purchase to find a comparably high share—we are at one of the turning points in international financial history.

America has gone from being a debtor in the 19th century to a creditor in the 20th century and back to being a debtor. But it is a debtor in a very different situation from the debtor of the 19th century. It's a debtor that's borrowing for consumption, both public and private, and relying on institutions abroad to finance that consumption by their readiness to hold U.S. bonds and to accept very meager returns on those holdings.

This is not a sustainable situation, but when it changes, the pressure will be intense. It will make itself felt, as it already is making itself felt, through the U.S. bond market, and that in turn will make itself felt on the U.S. economy, as long-term interest rates rise and Fed monetary policy begins to lose its effectiveness.

We live in interesting times, and they will become more interesting. As they do, they will reveal the true Achilles heel of the colossus, if I can mix my classical images.

QUESTION: You summarized the deficits, and in particular the attention deficit and the "short-termism." Is there the inner self-confidence and the strategic vision to change before a very nasty reversal?

You indicated that the British Empire had a lesson or two in the multidimensional nation-building administrative area. Are there some lessons for the future for the United States internationally that can be taken from that?

NIALL FERGUSON: Can American policy change? Can the republic become a true empire? I doubt it.

I can’t resist remarking that it took more than 400 years for the Roman Republic to become a fully fledged empire, so you’re really only half-way there. It will be a good deal of time before Julius Caesar finally crosses the Rubicon in American history, but perhaps this crisis will bring that crossing closer.

Are there lessons from the British past? There are, but, as I’ve just tried to intimate, there may be lessons from the past of other empires, too. I quite deliberately mentioned the Roman Empire there because the more I have studied Britain’s imperial history, the more struck I have been by the differences as much as by the resemblances.

It has become a cliché that America is the new Rome, but I’m fascinated by how few people understand the implications of that analogy.

The United States has a choice: it could learn to be more like the British Empire, which managed to combine a respect for representative institutions and the rule of law with the exertion of power far beyond its own shores. But there is also a possibility that in its struggle to reconcile overseas commitments with its own republican ideals the United States will end up as another kind of empire, rather more akin to the empire we saw in the movie Gladiator.

JOANNE MYERS: Thank you very much.