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79th Annual Summer Conference, August 5–8, 2010

Keynote Address by Dr. Margaret MacMillan

DR. MARGARET MACMILLAN, Warden of St. Antony’s College, Oxford University and author of bestselling books including Paris 1919: Six Months that Changed the World and Nixon in China: The Week that Changed the World. (Bio)

Moderator: GWENYTH BURROWS, President, CIPA

Summary by Tina Park, CIPA Youth Scholarship Recipient

Dr. MacMillan began her keynote address by looking back three years ago when she assumed the position as the Warden of St. Antony’s College, Oxford University. In that incredibly cold and wet autumn of 2007 when people lined up outside the bank with anxiety, the international community was much closer to catastrophe than we thought.

Dr. MacMillan argued that this juncture in history could both be a watershed moment or a wasted opportunity. We are forced to think about what we have been doing; it is too soon to tell whether it should be considered a wasted opportunity. Indeed, history offers examples of both. The natural human instinct is to forget too soon – the memory of autumn 2007 seems to have faded from public consciousness already, which could be very dangerous. History does not always offer lessons and it is even possible to find a historical precedent for virtually anything. What history tells us is that there have been times when we were forced to bring change under pressure, changes beyond our imagined capacity such as the development of penicillin or jet engine during the wartime. Just like how the governments undertook massive public works for reconstruction efforts and managed to pay for wars by raising taxes, the American and British government promptly responded in 2007 by nationalizing banks overnight – a deed that would have been unthinkable previously.

Indeed, history is replete with examples where a real catastrophe led to a real change. The Treaty of Westphalia (1648), which put an end to the Thirty Years War, gave birth to a new principle in international relations that borders of sovereign states ought to be respected. The Congress of Vienna marked the end of the French Revolutionary Wars and the Napoleonic Wars and guaranteed a period of stability until 1914. Everyone realized that wars led to a zero sum game and that they had a vested interest in a stable international system. Even the League of Nations in the aftermath of the Great War, whose effectiveness is often criticized due to the outbreak of the Second World War, cannot be seen as a complete failure. The League provided a forum and a mechanism to work collectively to promote prosperity for all; the international community, as a whole, learned from the attempt and the failure. When the western leaders sat down to discuss the global order in the post-WWII era, lessons learned from the League and the Great Depression gave rise to the Bretton Woods system featuring new institutions such as the GATT, the World Bank, and the International Monetary Fund. Essentially, these moments of crisis forced our predecessors to re-think, innovate and take the next step.

There are some common elements in all these crises. On the one hand, the sheer scale of the crisis and the “shake” of the old order must be noted: the Thirty Years War, the Napoleonic Wars, and the two World Wars produced catastrophes of unthinkable magnitude. On the other hand, these crises demonstrated that for a real change to take place, there had to be a general acceptance from the public about the need to change, coupled with leadership from the political elites. In today’s world, for instance, bringing a change to the American society is difficult despite President Obama’s capacity to lead because of the very nature of power division in the American system. Dr. MacMillan also warned against a false sense of security that could lead to serious disasters. Before even the Great War broke out, Europe came very close to war in 1908, 1912 and 1913. People failed to recognize how brittle the system had become by the summer of 1914; Munich was another case in which an honourable attempt to make peace and a false sense of relief resulted in an ultimate catastrophe.

However, it is necessary to keep in mind that the number of crises facing us today extends beyond the realm of finance. Because of our preoccupation with financial crisis, other issues have not received the attention they deserve. Specifically, there are three areas of great concern. The first area is social inequality – there is a growing gap between the rich and the poor in most western societies. There is a sense of hopelessness and powerlessness in the minds of ordinary Americans, not just in their generation but for their children’s generation as well. It challenges the assumption long held by the American public that things would get better if they worked hard enough. The emerging sense of bitterness and hostility could potentially be very dangerous. Second, enough evidence exists to prove that our environmental challenges will not go away. Denying the existence of the problem or refusing to take any action would not take us anywhere; it should be a matter of rational thought, not credo. Last, the international scene is changing. Internet has brought a tremendous change to the way we communicate, though the impact of “electronic revolution” may be overstated at times. Although some fundamental concepts in international relations, such as power (soft and influence) and nation-state, are still very important, power is shifting and it may be uncomfortable to live in a world in which we do not know the full extent of such transformation. The European Union is likely to remain as an economic union and not beyond that, especially given the result of the recent crisis in Greece. The United States is in a period of decline but has a long way to go before it becomes irrelevant. The United States still remains as the world’s major military, political and economic power and the decline of American power and influence will be met by the rise of other powers. The transition will not be an easy one, as seen in the case of Germany or Japan.

China is undoubtedly one of the rising powers in today’s world and re-thinking its position in terms of global balance. Despite its rhetoric about being a peaceful nation that has not taken any foreign territory, comparing the map of China in 1644 and 1911 proves otherwise. Or asking any Taiwanese, Tibetan, or Vietnamese citizen would provide a telling response to the rhetoric that “China needs its place in the Sun.” A growing number of Chinese citizens are receiving a highly nationalistic version of Chinese history and China’s place in the world, which is alarming to say the least.

In today’s world, there are many other problems facing humanity, least of which concern failed states like Somalia, terrorism and cyber-terrorism, which is increasingly on the rise, and the spread of nuclear proliferation. While we can focus on only so many things at once, many unresolved issues from history confront us, ranging anywhere from Palestine to Taiwan to India–Pakistan. How do we deal with these issues? Should we prioritize them or deal with them all at once? At the same time, western democracies also ought to figure out challenges of governance, such as low voting rates or overcoming self-interest for a greater collective good. The idea that we are somehow smarter than the generation before us has resulted in awful losses. Socializing such losses, in a new environment where the sense of mutual trust is no longer taken for granted, is inevitably loaded with both political and financial consequences.

On whether we have fully recovered from the financial crisis, Dr. MacMillan asserted that the crisis really affected the core of world system, which left terrible strains that still remain today. House prices were simply unsustainable; there were huge macro-imbalances, large deficits, explosion in asset prices – the housing prices increased by 92% in the United States from 1996 to 2006. An important part of the problem may be attributed to the faith in computers to crunch numbers and predict the future, which unfortunately overlooked human nature and behaviour. The number of personal bankruptcies skyrocketed, as did the unemployment rate and budget deficit. The main issue comes down to whether we are re-questioning the system that got us into the trouble in the first place. The belief in the “invisible hand” has had its day; there is now a wider recognition on the need for some regulation. Yet, debates on the precise nature or the extent of regulation are still in progress.

It is now time to reflect upon our own society and think about where we are going. It is not simply a question of technicality but also of morality; what the government should be doing, whether our institutions are strong enough, do we have the right leaders, are we prepared to pay the price, should we base our decisions on “rationality,” should we adopt concepts of psychology to understand human nature, what is our society for, what constitutes happiness, and what exactly constitutes a good society? These are questions that require serious debates and complex responses. An alternative is to ignore all these issues, or deny it. Or we may do both – grapple it, ignore it, and go on until the next crisis comes along.