There is an excellent discussion of this important and timely topic at the Small Wars Council. I strongly recommend dropping in! Here are a few comments.
(1) 4GW war is a just a conceptual tool, but a useful one
Debates like these show its power, generating new perspectives. Look at the comments posted at SWC. Note how they assume that States are the only significant actors. 4GW suggests that this is not so. Major states, the important ones in global finance, tend to be reactive, incrementalist, slow, and conservative. For example, it is as likely that the head of the People’s Bank of China will push the red button on his desk – instantly selling a trillion+ dollars of US bonds – as President Bush firing off ICBMs at China. But private actors are major players in global finance.
- Asian and European institutional bond investors hold hundreds of billions of US bonds. Their losses as the USD loses value, esp. the EU investors, have been horrific.
- Hedge funds wield over a trillion dollars in assets, far more than when they wrecked Europe’s Exchange Rate Mechanism on Black Wednesday 1992, or initiated a depression in SE Asia in 1997.
- US investors in foreign bonds, esp. in Canadian, Australian, and Euro bonds, have had large returns.
Relatively small moves by US or international investors could destabilize the dollar – currency flight. Or a massive move against the dollar by speculators could do so.
(2) We would know if we were on the brink of a crisis, wouldn’t we?
WWI was inevitable and obvious, the result of growing tensions in Europe. Or so the standard history reads. William Lind says …
One pebble touched off an avalanche. It did so because it occurred, not as an isolated incident, but as one more in a series of crises that rocked Europe in its last ten years of peace, 1904-1914. Each of those crises had the potential to touch off a general European war, and each further de-stabilized the region, making the next incident all the more dangerous. 1905-06 witnessed the First Moroccan Crisis, when the German Foreign Office (whose motto, after Bismarck, might well be, “Clowns unto ages of ages”) compelled a very reluctant Kaiser Wilhelm II to land at Tangier as a challenge to France. 1908 brought the Bosnian Annexation Crisis, where Austria humiliated Russia and left her anxious for revenge. Then came the Second Moroccan Crisis of 1911, the Tripolitan War of 1911-1912 (a war Italy actually won, against the tottering Ottoman Empire) and the Balkan Wars of 1912-13.
By 1914, it had become a question more of which crisis would finally set all Europe ablaze than of whether peace would endure. This was true despite the fact that, in the abstract, no major European state wanted war.
But this was not obvious to people at that time! Harvard historian Niall Ferguson looks at the prices of UK bonds (gilts). These show complacency right up the brink. City investors read of the mobilization orders, panicked, and the markets imploded. Of course, we are much smarter than they. We would know if the world was on the brink of a crisis. For more about this, please read “Political risk and the international bond market between the 1848 revolution and the outbreak of the First World War“, Economic History Review, February 2006.