100 Years Ago Today, WWI Began

It varies depending on which country you’re in (e.g. August 1 in Germany, August 3 in France, August 4 in the UK), but 100 years ago today, World War I began in earnest. The following four years saw a deadly conflict that crossed the globe and took the lives of 16 million people and injured 20 million more, and led directly to the greater conflagration of WWII.

The conflicts of the past sixty years or so, as damaging as they were and taking their own toll of human suffering, have been mild blips by comparison to the wholesale slaughter that took place on the Western and Eastern fronts.

By sheer coincidence, I’ve been listening to a rendition of Barbara Tuchman’s “The Guns of August”, a superbly written and sobering historical account of the build up to the war and its pivotal first month. May we never see anything like this ever again.

Links of the Day

Jhong-Wha Lee & Ju Hyun Pyun argue that globalisation (specifically growth in trade) reduces the probability of conflict:

"The results may derive from the fact that an open global trading system will prevent a state from initiating a war against any trading partner because other trading partners in global markets prefer to do business with a "peaceful" player. Hence, global trade openness of the dyad can reduce the incentive to provoke a bilateral conflict. We also think that open states can be more peaceful because they become more susceptible to political freedom and democracy. They apply international law better and employ good governance. Trade openness can also lead to an "expansion of bureaucratic structure," which concerns itself with economic interests in addition to security interests — and is thus less likely to support military action."

Does that mean "engagement" is better than "sanctions"? Shall we then engage more with Iran, Myanmar and North Korea?

Jon Danielsson says more regulation is not the answer for financial market reform:

"In a financial crisis, where financial institutions are required by regulations to hold minimum capital, just that fact is destabilising. If asset prices are falling, the financial institutions need to sell high-risk assets which depress the price and therefore by itself erode their capital. This is why risk-sensitive capital increases systemic risk and forces banks to withdraw lending...Indeed, the banks are now doing what they are supposed to do. They are being prudent. It is a bit disingenuous of regulators and politicians demanding that the banks increase lending when the banks are just following the regulations designed by the very same regulators and approved by the very same politicians."