Real crises aren’t fixed overnight

It is extremely hard to know how big a crisis is while it is actually unfolding. Retrospectively, we tend to think of crises — whether financial or geopolitical — as one-day wonders: Think of “Black Monday,” the stock market crash of Oct.

It is extremely hard to know how big a crisis is while it is actually unfolding. Retrospectively, we tend to think of crises — whether financial or geopolitical — as one-day wonders: Think of “Black Monday,” the stock market crash of Oct. 19, 1987, or 9/11, the terrorist attacks of six years ago. This notion of short, sharp shocks fits in well with our human inclination to live for the moment. Perhaps it is also a symptom of our era’s chronic attention-deficit disorder.

Yet the really big crises in history unfolded over months and years, not mere days. In these protracted sequences of events, there were many gloomy nights, but also many false dawns. Because hope springs eternal, people tended to attach more importance to the latter, mistaking them for real dawns and blinding themselves to the underlying downward drift…

Today’s geopolitical crisis is playing out in a similarly extended time frame. Just as investors seize on scraps of good news as they track the stock market from hour to hour, so it’s still possible for die-hard supporters of President Bush to point to improvements in the security situation in Iraq.

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Since the “surge” of additional U.S. troops got underway earlier this year, there have been marked declines in Iraqi military and police fatalities and in the number of victims of multiple fatality bombings, according to the Brookings Institution’s Iraq Index.

This great crisis of U.S. foreign policy, like the slow-burning financial crisis we are living through, will play out over hundreds, if not thousands, of days…

As in the early 1970s, the underlying geopolitical and financial crises of our time are in synch — and inexorable.

Excerpted from a piece by Niall Ferguson in LA Times, September 3

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