It has become a commonplace idea that today’s frothy financial markets are oblivious to the stream of bad news from eastern Europe, not to mention the Middle East. But that does not mean the news is not really bad at all. New York and London were equally blasÃ© about the origins of the first world war. It was not until three weeks after the Sarajevo assassination that the London Times even mentioned the possibility that a European political crisis might lead to financial instability. Nine days later the stock exchange closed its doors, overwhelmed by panic selling as investors suddenly woke up to the reality of world war. Let no one reassure you that this crisis has somehow been “priced in”. No one priced in the guns of August 1914.
This should give not only historians pause. If great historical events can sometimes have causes that are too small for contemporaries to notice, might not a comparable crisis be in the making today? What exactly makes our July crisis different? Is it because we now have the UN and other international institutions? Hardly: with Russia a permanent member of the UN Security Council, that institution has been gridlocked over Ukraine. Is it because we now have the EU? Certainly, that eliminates the risk that any west European state might overtly take Russia’s side, as France and Britain did in 1914, but it has not stopped EU members with significant energy imports from Russia fighting tooth and nail against tougher sanctions.
What about the role of globalisation in diffusing international conflict? Sorry, you could have made the same argument 100 years ago (indeed, Norman Angell did, in his book The Great Illusion). Very high levels of economic interdependence do not always inoculate countries against going to war with each other.