Customer Reviews

The Cash Nexus: Economics And Politics From The Age Of Warfare Through The Age Of Welfare, 1700-2000

5 star:		(4)
4 star:		(5)
3 star:		(0)
2 star:		(1)
1 star:		(0)

 

 

The Cash Nexus is an overly ambitious attempt to re-examine the link between economics and politics in the post-Cold War period.

The most interesting part of the book is the first 6 chapters, which focus on how state institutions have emerged over time to serve the needs of war finance--the principal impetus behind the rise of the modern state. These institutions produce what Ferguson calls an optimal combination for producing power and include 4 institutions: a professional tax gathering bureaucracy; a parliament that accords a measure of representation to tax payers; the management of a system of national debt, which allows the state to borrow; and a central bank to manage a currency and the national debt. Ferguson maintains that this combination first emerged in Britain after the Glorious Revolution and was later exported to other countries and, together, produced many unintended benefits, such as an educated civil service and expanded capital markets which served the needs of the economy.

An important part of Ferguson's argument is that economic philosophies have produced two deterministic views of history--one Marxist and the other liberal capitalist. While one opposes capitalism and the other celebrates it, both see history as being essentially economic history. The modern variety of economic determinism (neoclassical economics) has produced three ideas that Ferguson criticizes: economic growth promotes democratization; economic success leads to re-election; and economic growth is the key to international power. While Ferguson's criticisms are interesting, there are a few shortcomings.

One is that he makes the mistake of equating wealth with money when discussing liberal economics. In fact, the term money seems to be a synonym for economics wherever Ferguson discusses modern economic ideas on history, but he does not take note of the fact that liberal economics--whether classical or modern--does not view money as being the core of the economy.

The dichotomy between Marxism and neoclassical economics appears too simple as well. He fails to note that much of the West--i.e., on the Continent of Europe--practices a rather different variety of capitalism than that suggested by the Anglo-American model, one that is corporatist and whose adherents are often in strong antipathy to open and competitive markets. The absence of this distinction becomes annoying when he discusses fixed exchange rates and monetary unions (Chapter 11). He argues that floating exchange rates and market instability cannot go on forever, that some sort of supranational controls are required. If we take the Anglo-American model to mean the way the United States and Britain operate, then fixed exchange rates and monetary unions are not part of that. In fact, proponents of this model generally argue against what Ferguson argues for.

Sections 3 and 4 (Chapters 7-14) cover so many different topics that the material does not integrate well into the core themes of the first two sections. A related matter is one of depth. While the research of other disciplines is frequently discussed (e.g., political science and economics), he often considers too thin a slice of that research to provide enough depth in any one place. While arguing against the idea that political manipulation of the business cycle always leads to re-election, for example, he does not engage most of the literature on this question.

Another issue is the way in which data is used. Some of his charts present data across so many years and countries that it is hard to see the detail in the movement of the figures. This is especially true when the figures contain extreme values during the world wars.

Ferguson returns to the warfare state at the end of the book to argue that the West is quite under-militarized and potentially vulnerable to more aggressive states. The United States should heed this warning and assert its role as a hegemonic power again. Ferguson concludes that money does not, after all, make the world go round. People are driven by motivations other than economic gain and power has many facets to it--some tangible and some not. While this may be true, it is not much of a revelation.

It's pretty obvious from the outset where Ferguson's arguments are going in this book and what his political philosophy and world-view is. He states in quite plainly in the end. In contrast to Paul Kennedy who argued in THE RISE AND FALL OF GREAT POWERS that "imperial overstretch" is the economic causal factor that was directly linked with "Great Power" decline, Ferguson sees political will (or the lack thereof) and "understretch" as the problem. He says in the world today "we've got economic globalization very much on a 19th century model" however "there isn't a global policeman with the kind of interests Britain had then". The real difficulty in his view is that "the leaders of the one state with the economic resources to make the world a better place [the US] lack the guts to do it." OK, so Ferguson sees the US adopting an "imperial" approach to world affairs, and he supports Friedman and Fukuyama who argued that the spread of capitalism and democracy are neccessary for freedom to bloom. Before we look at whether he convincingly makes his point there is a basic question that puts this whole discussion in context. How persuasive can a British writer be in directing his argument to Americans for a more economically activist role by their country, and how are we supposed to read this in our new world of narrower priorities?

If our American economic and political system is to be supported and encouraged, and we are his intended audience, then who is the target of Fergusons criticism? It's axiomatic that it's Marxist historians and supporters of historicism as Ferguson sees nothing "deterministic" or directional about economic history. Ferguson instead convincingly argues that a CASH NEXUS exists and it is there, in the linkage between money and power, where the real story lies. Indeed he says quite clearly that "money does not make the world go round...it has been political events - above all,wars - that have shaped the institutions of modern economic life: tax-collecting, bureaucracies, central banks, bond markets, stock exchanges."

The whole book is a development on this point. Financial statistics and bond yields are presented in chapters such as "The Money Printers: Default and Debasement", "Of Interest", "Dead Weights and Tax-eaters: The social History of Finance" and "Bubbles and Busts: Stock Markets in the Long Run". These chapters are obviously analytical and there is sometimes a flood of data that tends to dampen enjoyment of the book. The latter half of the book where Ferguson spends more time making the connections between money, power, politics, culture, and warfare and less time analyzing, is both more enjoyable to read and more instructive.

It's an interesting book well written and certainly very opinionated. It's broad ranging covering the last 300 years of western economic development and interdisciplinary in scope touching on philosophy, political science, geography as well as it's main subjects of history, finance, and economics. Opinionated history like this is always contentious but it's equally always enjoyable to read.

First, this book deserves more publicity and more praise. It deserves to be included in the ongoing debates between Francis Fukuyama's "End of History" approach, Huntington's "Clash of Civilizations" and finally Kennedy's "Imperial Overstretch" Hypothesis.

I haven't read such a well argued, informative and in addition entertaining non-fiction book since "Guns, Germs and Steel". I was overjoyed when that book won the recognition it deserved. I hope this book does as well.

In addition, this book is important because it hits on today's news. Read the section on Debt management, and then see how you feel about Bush's tax cuts, or defence policy. This is not to say the book is partisan, but the author is a financial historian, and will bring up new ways of thinking about current topics.

If your are interested in financial history, the link between finances and politics, you will find this book fascinating.

Professor Ferguson tries to examine the link between money and history. However Mr. Fergusson changes the argument around and persuades the reader that money does not influence history so much as warfare does. According to Mr. ferguson it is fighting between countries that has given rise to the modern state. One cannot predict when a nation will journey to war and so an apparatus(tax gathering and bond issuing) is left in place to cover any sudden conflict. Mr. Ferguson points out correctly that the state has moved away from a warfare viewpoint of government function to a welfare viewpoint. The best part of the book is the last chapter which criticizes the US for not getting involved in other countries' affairs due to a post Vietnam ambivalence. I would highly recommend this book simply because there is nothing out there right now which examines history in a different light. I would have given this a 5 star rating but Professor Fergusson tends TO REPEAT HIMSELF at times.

Call me superficial, but this book is as good as its author is handsome, which means it's great. What an incredibly good-looking, intelligent, articulate man. (Saw him speaking at a dinner meeting in New York City on C-SPAN.) Ferguson posits here a nearly heretical notion for many Americans to swallow -- that in times of plenty a rich nation ought to consider using its surplus to not only keep peace, but actively make peace around the world through pro-active and creative use of money and re-tooled military personnel. What a pleasure to hear that there are those like Ferguson who envision unselfish and cooperative ways to use tech-sector wealth -- that intellectuals vis-a-vis the cyber era are not all following Ayn Rand's unique brand of Darwinism - e.g., that only the fittest -- or richest --survive.

Niall Ferguson's Cash Nexus draws further connections between money and power issues from 1700-2000, revealing a radical new history of the relationship between economics and politics in the course of 300 years of world history.

In this monumental work, Professor Niall Ferguson traces the evolution of and relationship between money, the state and war. Beginning with a section on taxes (the earliest form of large-scale finance), the book continues with a history of bonds, currency and finance. Then, there is a great deal of information on how these financial institutions have influenced society. And, most importantly, the final chapters of the book look at money and finance on a global scale, analyzing everything including stock "bubbles", gold and military success and failure. This book was written in September 2000, which means that much of the author's data is right up-to-date!

The above description of this book does not begin to do justice to it. The author's knowledge is obviously encyclopedic, and this book covers a vast multitude of subjects relating to money and power. Indeed, my one complaint against this book is that, at times, does seem to meander from subject to subject, seeming to lose track of the point. However, that said, this is a fascinating book, one well worth taking the time to read.

As an aside, I must say that the author does seem to severely undermine Paul Kennedy's (author of The Rise and Fall of the Great Powers) concept of "imperial overstretch." Instead he raises up the possibility that countries have experienced "understretch" leading them into costly later wars (such as the British Empire before World War I), and that America may be understretching right now.

Niall Ferguson's The Cash Nexus (Money and Power in the Modern World 1700 - 2000) is sure to upset many. It is an impressive look at economic history for the last three hundred years in order to show that there is nothing deterministic about the apparent success of capitalism and democracy in our time. This is the most effective aspect of the book as the author makes a clear case for smashing the myth that the "End of History" has been achieved by the double helix of capitilism and democracy. It is effective in demonstrating the complexity behind the ups and downs in the various fates of countries. He relies on Britain and America predominantly and they both figure into his concluding discussion of the need for America to become involved in exporting democracy and free markets to "rogue" states (never clearly defined), by military means if necessary. This somewhat startingly conclusion is too simplistically presented at the end of the book, particularly as the theories and ideas throughout the rest of the book are far more broad ranging and complex. Nonetheless, the ideas are presented well and argued competently. Some of the economics did soar over my head and while not agreeing with everything, the book does give one much to think about. It is sure to be a controversial read that has some interesting ideas.

This is not a book review. I just want to correct the number of pages. The number of pages in this book is 552, not 380 recorded above.

This is an interesting book as it is part of "the new history". Ferguson is a person who heads a team of researchers who collect a range of data. This data is then written up into a book.

It is an interesting approach and breaks free of the simple narrative history of years gone by. This book is basically a history of the financial mechanisms of government and their effects.

It is unusual to read a book which is written from what is largely an ideology free perspective. (The author has a mild bias towards free market mechanisms but he would not doubt suggest that instead of these representing a defined ideological position they reflect current what is now commonly accepted across the board as economic fact.) In some ways it is quite refreshing. The book also writes history free of the sorts of biases brought about by seeing history as a process. The development of democracy or the development of a national identity for instance.

One thing which astounded me was the fact that no one ever in reality tried to manage overall levels of demand as advocated by Keynes. Even when Governments accepted Keynsian orthodoxy, they never used deficient financing to offset unemployment because of balance of payment considerations.

The book basically sees the development of British financial institutions as the key to a large amount of modern history. Britain pioneered the use of salaried officials to collect tax, when they borrowed arrangements were put in place to ensure that such a debt would be repaid. The British system was successful in financing wars, the major expense of states until the 20th century and was adopted by all other states.

The book however is more than a history of the financial arrangements of states. It is a discussion about the role of governments, what they have done historically and the sorts of things they do now and what challenges they face. Well worth a read.