221) Niall Ferguson, Ascent of Money

Niall Ferguson, _The Ascent of Money: A Financial History of the World_. New York: Penguin, 2008. v + 441 pp. $30 (hardcover), ISBN: 1594201929.

Reviewed for EH.NET by Niv Horesh, Faculty of Arts and Social Sciences, University of New South Wales.

Harvard’s Niall Ferguson is perhaps best known for his magisterial history of the House of Rothschild and, more recently, his exhortation against the risks of unbridled government borrowing and nebulous stimulus packages ostensibly designed to avert what is often termed the worst global economic crisis since the Great Depression. In the _Ascent of Money_ he harnesses his narrative skills to offer lay readership a captivating account of global monetary history from time immemorial to the twenty-first century. The book’s release coincided with an eponymous television series that has already been broadcast in much of the English-speaking world. Both the series and the book are immensely entertaining and readily accessible, but the latter arguably makes for a more convenient platform from which academics can approach Ferguson’s many insights.

The Introduction (pp. 1-17) prepares readers for what Ferguson perceptively identifies as the core stories attending the evolution of money over the last four millennia. These are many and varied, as one would expect. He is concerned with, inter alia, the “recurrent hostility” to financial intermediaries and religious minorities associated with them in early-modern European history; the triumph of the Dutch Republic over the Hapsburg Empire, the latter’s possession of silver mines in South America notwithstanding; the spread of paper money, fiat currency and invisible means of payment in the twentieth century; right through to the possible eclipse of American global primacy in the next two decades.

Titled “Dreams of Avarice,” Chapter One sets course by recounting how the Incas were flabbergasted by the “insatiable lust for gold and silver” that seemed to grip the Spanish conquistadors (p. 21). It then lays out with humor and verve the well-known story of Potosí, now a fairly sleepy town in the Bolivian Andes, which once provisioned Spain with untold amounts of silver. In the same breath, the chapter goes on to offer an overview of coinage since the seventh century BC. Notably, Ferguson sees the flow of silver from the Andes to Europe as a “resource curse” which removed the incentives for more productive economic activity, while strengthening “rent-seeking autocrats” in seventeenth-century Spain. Contrary to criticism of Eurocentrism often leveled at him, Ferguson carefully emphasizes here the contribution other peoples have made to modern finance: “... economic life in the Eastern world -- in the Abassid caliphate or in Song China -- was far more advanced” at least unt!
il Fibonacci introduced Indian algebraic precepts in early thirteenth-century Italy (p. 32); these were later reified by the Medicis into double-entry bookkeeping in the Florentine republic (p. 43).

By the early seventeenth-century, European financial innovation had shifted from the Italian city-states to the Low Countries, though it was still driven by the exigencies of costly and recurrent warfare and ambitions of monopolizing trade with the East (p. 48-49). This spurt of European financial innovation had actually long “preceded the industrial revolution,” a complex but much better-studied spate of events (p. 52). The financial and industrial revolutions then converged with the spread of joint-stock companies and proto-types of central banks in the latter half of the nineteenth century.

Subsequent chapters flesh out Ferguson’s analysis. Titled “Of Human Bondage,” Chapter Two (pp. 65-118) explores, for example, the distinctness of the European economic trajectory, beginning with how the majority of Florentine citizenry partook of financing the Republic’s debt in the fourteenth century. In the seventeenth-century, the United Provinces of the Netherlands combined the borrowing techniques of an Italian city-state “... with the scale of a nation-state.” The Dutch were able to finance their wars by pitching Amsterdam “as the market for a whole range of new securities” (p. 75). The eighteenth and nineteenth centuries are characterized by Anglo-French friction, but here Ferguson sees a yawning gap between protestant Britain where public debt defaults became rarer and public debt itself increased many-fold and the powers of landed aristocracy diminished while a professional civil service became more influential -- and Catholic France where public offices were often !
sold to raise money, tax collection was farmed out and government bond issues lost credibility. Notably, the incremental spread of, and popular faith in, British government bonds allowed Whitehall to borrow overseas as well, much to the detriment of Napoleon’s armies. Ferguson similarly believes that (p. 97) the reluctance of European investors to buy into Confederate bonds during the American Civil War doomed the South’s endeavors. This historic lesson is invoked toward the end of the chapter when discussing, in passing, the Bush Administration’s large budget deficits.

Chapter Three (“Blowing Bubbles,” pp. 119-178) zooms in on arguably the most significant economic entity of our time: the joint-stock company. Ferguson aptly dubs it “perhaps the single greatest Dutch invention of all.” Here, he elides earlier -- though fairly short-lived -- occurrences of comparable entities both in Europe and in pre-modern Asia. But there can be little doubt that the establishment of the Dutch VOC (1602) marked a veritable turning point, not least because it underlay the growth of the world’s first bourse. Indeed, the establishment of royally-chartered companies principally aimed at trade with Asia seems to have underpinned the rise of stock exchanges and public debt in Europe’s Northeast as a whole. The rise of public debt and publicly-listed equity was beset by frequent speculative bubbles, from which emerged a more sophisticated British credit economy.

Chapter Four (“The Return of Risk,” pp. 176-229) takes up a swag of issues from the impact of Hurricane Katrina on the U.S. psyche, through how the Great Fire of London (1666) created demand for insurance policies, to Japan’s welfare system and Milton Friedman’s mentorship of Latin American finance ministers. By comparison, Chapter Five (“Safe as Houses,” pp. 230-82) is more singularly framed around what Ferguson perceptively calls “the passion for property” in the home-owning democracies of Anglo-Saxondom. He aptly reminds us (p. 233, 241) that as recently as the 1930s, little more than two-fifths of U.S. households owned their home compared with over 65% today, and traces back this staggering social transformation to the New Deal and the Civil Rights Movement. The expansion of home ownership was facilitated in the late 1930s by then-novel institutions like Fannie Mae, which are at the heart of the recent sub-prime meltdown. In that sense, but not in that sense only, Fergus!
on does a wonderful job of explaining well beyond clichés the linkages between the Great Depression to today’s global finance crisis. He then points the finger (p. 269) at rating agencies such as Moody’s and Standard & Poor’s for obfuscating the precariousness of collateralized sub-prime mortgages, which financial “alchemists” turned into tradable debt obligations.

In essence, the last chapter (“From Empire to Chimerica,” pp. 283-340) is dedicated to China’s resurgence in the twenty-first century, and subtly considers whether this might ultimately result in a catastrophic Sino-American military confrontation. From a China specialist’s perspective, it is perhaps a pity that a scholar of Ferguson’s wisdom and insight stops short of opining whether we are witnessing at present the rise of a new form of capitalism with Chinese characteristics (e.g. capitalism without democracy) or simply gradual Chinese adaptation to Western market norms. Academic pedants might also quip that Ferguson draws heavily on Kenneth Pomeranz’s path-breaking book, _The Great Divergence_, when writing that living standards in Europe and China were on par as late as the eighteenth-century (p. 285). This might have called for a more detailed discussion, given that earlier parts of the book allude to the Italian city-states (fourteenth century) as the progenitors of E!
urope’s financial revolution. Similarly, Ferguson’s assertion that the “... ease with which the [Chinese] Empire could finance its deficits by printing money discouraged the emergence of European-style capital markets” (p. 286) might sound a little facile to specialists, not least because note issuance was all but abandoned by late-Imperial dynasties.

However, these are minor criticisms that do not detract in any way from the wonderful feat of storytelling which Ferguson has again pulled off. This book makes for a bold and original attempt to provide a comprehensive history of what, some say, makes the world go around. It is likely to turn into a best-selling classic, and a must-read item in countless undergraduate courses.


Niv Horesh is Lecturer in Chinese Studies at the School of Languages and Linguistics, University of New South Wales, Sydney, Australia. His first book, _Shanghai's Bund and Beyond_ (Yale University Press, 2009), is the first comparative study in English of foreign banks and banknote issuance in pre-war China. His second book (forthcoming in 2010), is a comprehensive socio-economic account of Shanghai’s rise to prominence (1842-2010).

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