By Niall Ferguson
At almost the same time I came across another similarity between the the Middle East and the US in The Middle East by Bernard Lewis (p. 178). Regarding the decline of the Middle EastAs in the 1870s, though, the upshot of this debt crisis is the sale of assets and revenue streams to foreign creditors. This time, however, creditors are buying bank shares not canal shares. And the resulting shift of power is from west to east.
Since September, Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks: Bear Stearns (NYSE:BSC), Citigroup (NYSE:C), Morgan Stanley (AMEX:MWD) and Merrill Lynch. Most commentators have been inclined to welcome this global bail-out: better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognise that these "capital injections" represent a transfer of the revenues from the US financial services industry into the hands of foreign governments. This is happening at a time when the gap between eastern and western incomes is narrowing at an unprecedented pace.
after about the 1500, Lewis writes :
Even the Mediterranean sea trade had been taken over by the Italian cities - without conquest, without pressure, simply by more active and more effective commercial methods. Apart from a few products like sugar and later coffee, Middle Eastern agriculture and industry were no longer able to provide an exportable surplus of commodities, and Middle Eastern traders had to depend increasingly on the transit trade between Europe and the further East.America is also overly reliant on the service sector, but for a long time it was argued that its strength (especially in the financial sector) makes up for America's weakness in manufacturing. Now America's service sector isn't even as American as it once was. Unfortunately, I don't see any transit trade saving the U.S.
