BEWARE THE GUNS OF AUGUST / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( A MUST READ )

August 1, 2011 7:57 pm

Beware the guns of August

By Gideon Rachman

By the time this column is published I will be on holiday in France, and the US might finally have stepped back from the abyss of debt default.

Viewed from Europe, the American financial uproar is baffling. It is not just the entirely avoidable nature of the crisis. It is also its timing. The entire European political calendar is constructed around the idea that nothing ever happens – or should be allowed to happen – in August.

The drama that surrounded the the emergency eurozone summit in Brussels in late July was partly caused by the threat of financial chaos, if Greece was not lent more money. But an unstated reason for the sense of urgency of the leaders around the conference table was a desperate desire to get a deal wrapped up – before the holiday season began in earnest.

Judged in these limited terms, the summit deal might be counted a success. It surely has not solved the crisis in the eurozone. But the European Union’s leaders might have done enough to ensure that there will probably be no call for further emergency summits until after the rentrée in early September.

When something really drastic happens in the month of August, European leaders are often caught on the hop. In August 2008, when Russian tanks rolled into Georgia, David Miliband, Britain’s foreign secretary at the time, had to deal with the crisis on a mobile phone from a holiday villa in Spain.

But in fact, a study of history suggests that Europe’s leaders are kidding themselves if they think that August is a safe month in which to head for the hills or the beach. When Mr Miliband took the job as foreign secretary, he had marvelled at the thought that his vast office was the one from which Sir Edward Grey had looked out from, on the eve of the first world war, and pronounced the famous and ominous words: “The lights are going out all over Europe; we shall not see them lit again in our time.” Grey was, of course, speaking at dusk in early August 1914 – the month in which war broke out.

Twenty-five years later, in August 1939, Europe was once again hurtling towards war. On August 21, the Molotov-Ribbentrop pact between the Soviet Union and Nazi Germany was announced to a shocked world – making the invasion of Poland and a general war inevitable. On the night of August 31, Adolf Hitler ordered the German army to attack Poland.

The tendency for international crises to break out in August has persisted into the modern age. The Prague Spring in Czechoslovakia was crushed when the Soviet Union and its Warsaw Pact allies invaded in August 1968.

President George H. W. Bush certainly noticed that there was something a bit odd about the height of summer. The first three years of his presidency were characterised by August upheavals. In August 1989, the first breach in the Iron Curtain was made when Hungary opened its borders to Austria, starting off the train of events that led to the fall of the Berlin Wall a few months later.

In August 1990, Saddam Hussein’s Iraq invaded Kuwait – and within weeks President Bush was rallying a coalition to wage the first Gulf war. A year later, in August 1991, Mr Bush was informed that a coup was under way in the Soviet Union – and that Mikhail Gorbachev had been arrested. Within days, the Soviet Union begun to break up. By this time, the president had begun to spot a pattern: “What is it about August?” he asked aloud.

It is a fair question. One possibility is that the fact that the democratic world tends to be half-asleep, or at the beach, in August makes it the ideal month for dictators and autocrats to make their move. It may be no coincidence that Nazi tanks in 1939, Soviet tanks in 1968, Iraqi tanks in 1991 and Russian tanks in 2008, all got rolling during August.

While it seems to be almost standard practice for wars to break out in August, it would be something of a departure to stage a major financial crisis during the summer break. Some of my nerdier colleagues point out that there are precedents. Speculation against the pound forced Britain out of the exchange rate mechanism in August 1992; and the Thai baht collapsed in August 1997, setting the stage for the subsequent Asian financial crisis.

But, in the western world, the big financial crises have tended to wait until the autumn. The Wall Street crash of 1929, and its miniature version in 1987, both took place in October. True, the first sign of current crisis came via an injection of liquidy from the European Central Bank in August 2007. But the collapse of Lehman Brothers – lest you have forgotten – did not follow until September 2008.

Perhaps the current generation of American politicians will change this historic pattern and provoke a genuine financial crisis this very month. The euro crisis could also revive sooner than Europe’s politicians have bargained on.

But even if all this comes to pass, some perspective is in order.

Packed in my luggage for France is Guns of August, Barbara Tuchman’s classic work about the outbreak of the first world war. In the village in which I will be staying the memorial for those killed between 1914 and 1918 has the same surnames chiselled into the stone again and again, marking the fact that the same families lost a child in every year of the war.

It is a reminder that other Augusts in Europe have seen events that really do merit overused words like tragedy and crisis. By comparison, some conniptions in the US Congress seems like pretty mild stuff.
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Copyright The Financial Times Limited 2011.