Lawyers, Guns, and Money. - Review - book review

The Cash Nexus: Money and Power in the Modern World, 1700-2000, by Niall Ferguson (Basic, 552 pp., $30)

British historians in general, and at Oxford University in particular, have for years been a crew of small-scope fact-grubbers and/or Marxist derivatives. With rare exceptions, they have little or nothing to contribute to the study of mankind or the great issues of the day. But then there is Oxford's Niall Ferguson. He is the author of one weighty book about the Rothschilds and another on the First World War. There is a lot of him about in the British media. He is a big-picture historian, searching out whatever it may be that throws light on events, and ready to challenge accepted opinion. If reports are to be believed, he earns gigantic advances, permitting him to employ talented researchers. Here, in short, is a phenomenon in the making. And not the least part of it is that he is a genuine conservative.

A conservative is one who takes it for granted that human nature is constant. Projects based upon some utopian view that human nature is open to change, through appeals to reason or by force, are doomed to cause more of the wars and bloodshed that comprise the planet's whole record. The historian's business, as Ferguson understands and practices it, is to measure the social and material changes brought about by evolving institutions and technologies against human standards that remain constant.

The Cash Nexus is the result of a commission from the Bank of England to study the bond market, an uninvitingly specialized subject. The gentlemen of the Bank may be surprised to have received for their money this canter through the uplands of high ideas and speculative themes, starting up many hares on the way; in fact pursuing many of the main questions raised today by political theorists, social scientists, and economists. Elegant and apposite literary quotations jostle alongside spidery graphs that strain eye and mind alike. The general reader is likely to dismount at the end of the ride rather shell-shocked by the rapid fire of statistics, but finally impressed, if a little bewildered, by the enormous range and ambition of it all.

Granted the constancy of human nature, there has always been war and always will be-so Ferguson opens the argument of The Cash Nexus. Like the poor, the lust for power will always be with us. War is expensive; someone has to pay for it, either the ruler or his subjects and citizens, which means taxation. Taxation brings consequences, on the one hand bureaucracy and centralization, on the other demands by tax- payers for representation. War ultimately, then, forms states and nations, no bad thing.

Why, Ferguson continues, do some states and nations win wars, and above all why did the British emerge from the 18th century more powerful than the French, who had superior resources in all respects? The answer lies in their relative institutions.

The British developed a central bank; a system of funding through the national debt that allowed them to pay for policies undertaken; and a parliament that set about safeguarding property and the rule of law. Exporting capital and fortifying the empire with it, they acquired a hold on the global economy, and this proto-globalization was a force for peace and stability. The French instead had revolution and Napoleon. In short, if the objective is power, it helps to have money, but money in itself is no guarantee of achieving that power.

People far and wide appreciated the British model and imitated it for themselves. All sorts of good things came with it and some clever tricks too, the subtleties whereby governments fund what they do-having their debt taken up by bond-holders, for instance, or dissipating it through inflation. The gradual empowerment of electorates brought social change in its wake, when voters asked for, or were given, the welfare state in place of the warfare state. The one is about as expensive as the other, with similar repercussions. In one chapter (cowritten with Glen O'Hara), Ferguson puts the proposition that welfare spending does little or nothing to advance governments and their purposes. In the final analysis, you cannot buy voters through prosperity (witness Al Gore) any more than you can control markets. Too many arbitrary and unquantifiable variables are in play.

Two recent utopian projects are Communism and the European Union. Communism did not correspond to human nature and so self-destructed. Ferguson quotes the extraordinary figure that for every 19 tons of steel produced under Stalin, at least one Soviet citizen was deliberately killed in one way or another. He examines the several previous projects of monetary union in Europe, all of which ended in collapse. Today's European Union is unable to develop the supporting institutions it must have; it suffers from generational imbalance, meaning that too few young tax-providers are obliged to support too many elderly tax-consumers; and there is neither labor mobility nor immigration that might serve as a remedy. At a time when each and every people, down to and including Chechens and Kosovar Albanians and Basques, seeks independence and sovereignty, the EU aims to be transnational, and that too destines it for self-destruction.