Niall Ferguson, "The Cash Nexus: Money and Power in the Modern World, 1700-2000"

An acclaimed historian offers a radical new history of the links between politics and economics, one that draws unsettling conclusions about the future of both capitalism and democracy. Does money make the world go round, as Cabaret's Master of Ceremonies sang to us? In The Cash Nexus, acclaimed historian Niall Ferguson offers a radical and surprising answer—No.

Conventional wisdom has long claimed that economic change is the prime mover of political change, whether in the age of industry or the Internet. In our own time Paul Kennedy has claimed that economics provided the key to international power, while Francis Fukuyama and others have argued that capitalism doomed socialism and ensured the victory of democracy. Small wonder politicians are obsessed with the economy: the Clinton campaign motto—"It's the economy stupid"-sums up a central tenet of modern life.

But is it the economy? Ferguson thinks it is high time we re-examined the link—the "nexus," to use Thomas Carlyle's term—between economics and politics, in the aftermath not only of the failure of socialism but also of the apparent triumph of American-style capitalism. His central argument is that the conflicting impulses of sex, violence, and power are together more powerful than money. In particular, political events and institutions have often dominated economic development.

A bold synthesis of political history and modern economic theory, The Cash Nexus will transform the landscape of modern history and draw challenging and unsettling conclusions about the prospects of both capitalism and democracy.

From the Inside Flap
The idea that money makes the world go round is a seductive one. From class conflict to the "feel good" factor, from Karl Marx to Bill Clinton, few of us would deny the importance of the economy in politics. Economic change has seemed to be the prime mover of political change whether in the age of industry or the Internet. The Clinton campaign motto in 1992—"It's the economy, stupid"—sums up a central assumption of modern life.

In The Cash Nexus, Oxford historian Niall Ferguson challenges this assumption by offering a radical new history of the relationship between economics and politics. Setting contemporary issues in a three hundred year historical perspective, he brilliantly redefines the "cash nexus"—the pivotal link from money to power.

Throughout modern history, Ferguson argues, the way states have managed their money has been crucial to their survival and success. It has been finance as much as firepower that has decided the fates of nations in the supreme test of war. And war itself has been the principal engine of financial innovation. Our lives today are still dominated by the institutions of the warfare state: income tax, parliaments, national debts, central banks and even stock markets. This is the "square of power" on which the great Western empires have been based.

Yet the evolution of these institutions over three centuries has been anything but a one-way street. There is no universally optimal equilibrium in the balance between taxing and borrowing, and sometimes a high debt burden can be a source of strength rather than weakness. The democratization of parliamentary institutions in the twentieth century has not always been conducive to economic stability and a bigger tax base. Sometimes the square of power can collapse into tax revolts, defaults, inflations or financial panics.

Ferguson arrives at provocative conclusions. Domestic political power may have more to do with campaign finance than with pre-election prosperity; but we should spend more, not less, on the democratic process. Financial globalization in the absence of imperial rule may prove too unstable to last; compared with past superpowers, the United States is neglecting its international responsibilities. Stock market bubbles and exchange rate crises may just be harbingers of a deeper crisis that could roll back the advance of democracy and capitalism.

A bold synthesis of political history and modern economic theory, The Cash Nexus has challenging and unsettling implications for the future of both capitalism and democracy. Its challenge to the United States to make more political use of its unmatched economic resources is bound to spark heated debate.

From Publishers Weekly
In a work that neatly marries the subjects of his previous books, Ferguson, who made his name with controversial popular histories of World War I (Pity of War, 1999) and the Rothschild banking empire (House of Rothschild, 1998), continues to challenge conventional wisdom.

Here, he argues that the enormous expense of war, which forces governments into fiscal innovation, is the primary agent of financial change and its political repercussions, which sometimes include starting new wars. In Ferguson's view, political crises defined broadly to include those spurred by religion, law and culture cause both wars and financial disasters; the ensuing political outcomes determine the long-term economic fallout.

Economic events, on the other hand, affect politics in indirect and unpredictable ways. Emphasizing the nuances and exceptions to his argument, he marshals economic statistics to support it, though he does not discuss alternative explanations for financial change. Despite frequent, jarring digressions into the minutiae of 1980s British politics and in praise of Thatcherism, the book is lucidly argued.

But for a history that focuses so much on war, it includes little discussion of the military. Most controversially, Ferguson challenges the orthodox assumption that the world is headed toward a peaceful, prosperous and democratic global future. Economic success does not always lead to stability, he argues, and economic freedom is neither necessary for economic growth nor sufficient for political freedom. Nor, he warns, will economic globalization necessarily lead to greater economic or political cooperation.

Forecast: This book will be more talked about than read, though it will attract serious readers. Like Ferguson's The Pity of War, its merits should outlive the controversy over its predictions.

From Library Journal
In this scholarly tome, Ferguson (history, Jesus Coll., Oxford; The Pity of War) presents a heavily noted, high-level economic analysis of the impact of economic trends on political change. As he thoroughly analyzes the nexus between economics and politics, he delves deep into the complex relationship among economic principles and international war, political changes in major countries, social liberalization, and national demographics.

He challenges the prevailing principles of well-known author Paul Kennedy (The Rise and Fall of the Great Powers), specifically that economic change is the prime mover of political change, contending rather that the conflicting impulses of sex, violence, and power are together more powerful than money. In the book's many dense chapters, Ferguson argues that political institutions have often dominated economic development, and he deftly integrates historical trends and eras, multiple economic principles and theory, as well as modern economic growth and development.

This very complex economic analysis will well serve larger university libraries supporting higher-level study in economics, especially international economic theory.

From Booklist
Ferguson is a history fellow at Oxford's Jesus College and author of The House of Rothschild (1998-99), an exhaustively detailed, well-crafted chronicle of the banking dynasty. Today it is an oft-repeated notion that global corporations have supplanted national governments in setting policy and wielding influence. But Ferguson contends that throughout the last 300 years, economics has not been the primary driving force behind political and social change. He suggests that sex, violence, and power have been significant factors in shaping world events. He pulls together a boggling array of data and historical references to reach provocative conclusions, some of which seem to be contradicted by current events. For example, he predicts that individual national currencies will proliferate—even as more countries announce that they are switching from their own system to either the dollar or the euro. Time will tell!

Contents

List of Tables
List of Figures
List of Illustrations
Acknowledgments
Abbreviations

Introduction: The Old Economic Determinism and the New
 The New Determinism
 The Cash Nexus Untied

Section One: Spending And Taxing
 1 The Rise and Fall of the Warfare State
  The Intensity of War
  Men of War
  Bangs Per Buck
  The Abolition of Distance
  Costing War
  The "Demilitarization" of the West
 2 "Hateful Taxes"
  Family Silver
  "Taxes on Every Article"
  "Picking over the Fruits": Direct Tax
  The Two Sisters
  The Poet As Taxman
 3 The Commons and the Castle: Representation and Administration
  Taxation and Representation
  Representation Without Taxation
  Kafka's Castle
  Servile States
  From Warfare to Welfare

Section Two: Promises To Pay
 4 Mountains of the Moon: Public Debts
  The Origins of Public Debts
  Bonds, Banks and Bubbles
  War Debts and Their Legacy
  Scaling the Mountains
  Do Public Debts Matter?
  Debt Service
 5 The Money Printers: Default and Debasement
  How Not to Pay
  The Inflation Tax
  Rules and Discretion
  From Indiscretion to Independence
  From Independence to Irrelevance?
 6 Of Interest
  Yields
  Expectations: The Past and the Present
  "Events, Dear Boy"

Section Three: Economic Politics
 7 Dead Weights and Tax-eaters: The Social History of Finance
  The Birth of the Rentier
  The Tax-Eaters
  The Euthanasia of the Rentier?
  The New Tax-Eaters
  Generation Games
  An Unwelcome Answer
 8 The Silverbridge System: Electoral Economics
  Are You Better Off Now?
  A Problem for the Theory
  The Political Business Cycle
  The Vote Function
  Politikverdrossenheit
  Politics As Business
  The Political Economy of Sleaze
  From Private to Public Corruption
  Towards the Political Market

Section Four: Global Power
 9 Masters and Plankton: Financial Globalization
  Terrifying Everybody
  Capital Flows: Between Politics and the Market
  Origins of the Bond Market
  "The True Lords of Europe"
  Measuring Political Risk, circa 1830–1870
  Empire
  The Paradox of Convergence, 1870–1914
  The Crisis of the International Bond Market: Lessons for Today?
  Globalization Past and Present
  Plankton
 10 Bubbles and Busts: Stock Markets in the Long Run
  How High the Dow?
  The Shadow of 1929
  Other Booms and Busts
  The First Bubble
  Calculating "The Madness of People"
 11 Golden Fetter, Paper Chains: International Monetary Regimes
  The Twilight of Gold
  The Yellow Brick Road
  Currency Unions
 12 The American Wave: Democracy's Flow and Ebb
  A Parisian in America
  The Ascent of Democracy
  The Three Waves
  Democracy and Prosperity
  The Spirit of Democracy
 13 Fractured Unities
  A Balkan World?
  Men and Maps
  Untying the Nations
  Uniting the Nations?
 14 Understretch: The Limits of Economic Power
  The Illusion of Peace
  Giving War a Chance
  The Chance of Victory
  A Democratic Peace?
  The Benefits of Militarism
  The Precautionary Motive
  Costing Kosovo
  The Case for Stretching
Conclusion

Appendices
 A The biggest wars in history
 B Multiple regression of British government popularity and economic indicators
 C The global bond market, June 1999
 D Public debt burdens in 1887–1888
 E Economic and social indicators and the inter-war crisis of democracy, 1919–1938
Notes
Bibliography
Index

Tags: qHistory, qEconomics, qFinance, qWorldPolitics

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