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The Great Degeneration: How Institutions Decay and Economies Die [Format Kindle]

Niall Ferguson
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List of Figures


Beyond ‘Deleveraging’

Almost a quarter of a century ago, in the summer of 1989, Francis Fukuyama could boldly predict ‘an unabashed victory of economic and political liberalism . . . the Triumph of the West’ and proclaim that ‘the end point of mankind’s ideological evolution’ was ‘the universalization of Western liberal democracy as the final form of human government’.1 How different the world looks now. ‘Economic liberalism’ is a tarnished brand, while the proponents of ‘state capitalism’ in China and elsewhere openly deride Western democracy. The West is stagnating, and not only in economic terms. In 2013 the World Bank expected the European economy to contract and the US to grow by just 1.6 per cent. China would grow four times faster than that, India two and a half times faster. By 2018, according to the International Monetary Fund, the gross domestic product of China would approach that of the United States.* Those who invested in the West in 1989 have been punished (they have made nothing since 2000), while those who invested in the Rest have been richly rewarded. This ‘great reconvergence’ is a far more astonishing historical event than the collapse of communism that Fukuyama so astutely anticipated. At the time he wrote, the world’s centre of economic gravity was still firmly in the North Atlantic. Today it is beyond the Urals, and by 2025 it will be just north of Kazakhstan – on roughly the same line of latitude as it was in 1500, on the eve of Western ascendancy.2

The voguish explanation for the Western slowdown is ‘deleveraging’: the painful process of debt reduction (or balance sheet repair). Certainly, there are few precedents for the scale of debt in the West today. This is only the second time in American history that combined public and private debt has exceeded 250 per cent of GDP. In a survey of fifty countries, the McKinsey Global Institute identifies forty-five episodes of deleveraging since 1930. In only eight was the initial debt/GDP ratio above 250 per cent, as it is today not only in the US but also in all the major English-speaking countries (including Australia and Canada), all the major continental European countries (including Germany), plus Japan and South Korea.3 The deleveraging argument is that households and banks are struggling to reduce their debts, having gambled foolishly on ever rising property prices. But as people have sought to spend less and save more, aggregate demand has slumped. To prevent this process from generating a lethal debt deflation, governments and central banks have stepped in with fiscal and monetary stimulus unparalleled in time of peace. Public sector deficits have helped to mitigate the contraction, but they risk transforming a crisis of excess private debt into a crisis of excess public debt. In the same way, the expansion of central bank balance sheets (the monetary base) prevented a cascade of bank failures, but now appears to have diminishing returns in terms of reflation and growth.

Yet more is going on here than just deleveraging. Consider this: the US economy created 2.4 million jobs in the three years beginning in June 2009. In the same period, 3.3 million Americans were awarded disabled worker benefits. The percentage of working-age Americans collecting disability insurance has risen from below 3 per cent in 1990 to 6 per cent.4 Unemployment is being concealed – and rendered permanent – in ways all too familiar to Europeans. Able-bodied people are classified as disabled and never work again. And they also stay put. Traditionally around 3 per cent of the US population moves to a new state each year, usually in pursuit of work. That rate has halved since the financial crisis began in 2007. Social mobility has also declined. And, unlike the Great Depression of the 1930s, our ‘Slight Depression’ is doing little to reduce the yawning inequality in income distribution that has developed over the past three decades. The income share of the top 1 per cent of households rose from 9 per cent in 1970 to 24 per cent in 2007. It declined by less than 4 percentage points in the subsequent three years of crisis.

You cannot blame all this on deleveraging. In the United States, the wider debate is about globalization, technological change, education and fiscal policy. Conservatives tend to emphasize the first and second as inexorable drivers of change, destroying low-skilled jobs by ‘offshoring’ or automating them. Liberals prefer to see widening inequality as the result of insufficient investment in public education, combined with Republican reductions in taxation that have favoured the wealthy.5 But there is good reason to think that there are other forces at work – forces that tend to get overlooked in the slanging match that passes for political debate in the United States today.

The crisis of public finance is not uniquely American. Japan, Greece, Italy, Ireland and Portugal are also members of the club of countries with public debts in excess of 100 per cent of GDP. India had an even larger cyclically adjusted deficit than the United States in 2010, while Japan faced a bigger challenge to stabilize its debt/GDP ratio at a sustainable level.6 Nor are the twin problems of slow growth and widening inequality confined to the United States. Throughout the English-speaking world, the income share of the top ‘1 per cent’ of households has risen since around 1980. The same thing has happened, albeit to a lesser extent, in some European states, notably Finland, Norway and Portugal, as well as in many emerging markets, including China.7 Already in 2010 there were at least 800,000 dollar millionaires in China and sixty-five billionaires. Of the global ‘1 per cent’ in 2010, 1.6 million were Chinese, approaching 4 per cent of the total.8 Yet other countries, including Europe’s most successful economy, Germany, have not become more unequal, while some less developed countries, notably Argentina, have become less equal without becoming more global.

By definition, globalization has affected all countries to some degree. So, too, has the revolution in information technology. Yet the outcomes in terms of growth and distribution vary hugely. To explain these differences, a narrowly economic approach is not sufficient. Take the case of excessive debt or leverage. Any highly indebted economy confronts a narrow range of options. There are essentially three:

   • raising the rate of growth above the rate of interest thanks to technological innovation and (perhaps) a judicious use of monetary stimulus;
   • defaulting on a large proportion of the public debt and going into bankruptcy to escape the private debt; and
   • wiping out of debts via currency depreciation and inflation.

But nothing in mainstream economic theory can predict which of these three – or which combination – a particular country will select. Why did post-1918 Germany go down the road of hyperinflation? Why did post-1929 America go down the road of private default and bankruptcy? Why not the other way round? At the time of writing, it seems less and less likely that any major developed economy will be able to inflate away its liabilities as happened in many cases in the 1920s and 1950s.9 But why not? Milton Friedman’s famous dictum that inflation is ‘always and everywhere a monetary phenomenon’ leaves unanswered the questions of who creates the excess money and why they do it. In practice, inflation is primarily a political phenomenon. Its likelihood is a function of factors like the content of elite education; competition (or the lack of it) in an economy; the character of the legal system; levels of violence; and the political decision-making process itself. Only by historical methods can we explain why, over the past thirty years, so many countries created forms of debt that, by design, cannot be inflated away; and why, as a result, the next generation will be saddled for life with liabilities incurred by their parents and grandparents.

In the same way, it is easy to explain why the financial crisis was caused by excessively large and leveraged financial institutions, but much harder to explain why, after more than four years of debate, the problem of ‘too big to fail’ banks has not been solved. Indeed, despite the passage of legislation covering literally thousands of pages, it has got markedly worse.10 Today, a mere ten highly diversified financial institutions are responsible for three-quarters of total financial assets under management in the United States. Yet the country’s largest banks are at least $50 billion short of meeting new capital requirements under the new ‘Basel III’ accords governing bank capital adequacy. Again, only a political and historical approach can explain why Western politicians today call simultaneously for banks to lend more money and for them to shrink their balance sheets.

Why is it now a hundred times more expensive to bring a new medicine to market than it was sixty years ago – a phenomenon Juan Enriquez has called ‘Moore’s Law* in reverse’? Why would the Food and Drug Administration probably prohibit the sale of table salt if it were put forward as a new pharmacological product (it is after all toxic in large doses)?11 Why, to give another suggestive example, did it take an American journalist sixty-five days to get official permission (including, after a wait of up to five weeks, a Food Protection Certificate) to open a lemonade stand in New York City?12 This is the kind of debilitating red tape that development economists often blame for poverty in Africa or Latin America. The rationale for the FDA’s rigid standards is to avoid the sale of a drug like thalidomide. But the unintended consequence is almost certainly to allow many more people to die prematurely than would have died from side-effects under a less restrictive regime. We count and recount the costs of such side-effects. We do not count the costs of not allowing new drugs to be made available.

Why exactly has social mobility declined in the United States in the past thirty years, so that the probability has more than halved that a man born into the bottom 25 per cent of the income distribution will end his life in the top quartile?13 Once the United States was famed as a land of opportunity, where a family could leap from ‘rags to riches’ in a generation. But today, if you are born to parents in the bottom income quintile, you have just a 5 per cent chance of getting into the top quintile without a college degree. What Charles Murray has called the ‘cognitive elite’, educated at exclusive private universities, intermarried and congregated in a few ‘super zip codes’, looks increasingly like a new caste, equipped with the wealth and power to override the effects of mean reversion in human reproduction, so that even their dimmer progeny inherit their lifestyle.14

The Stationary State

In two seldom quoted passages of The Wealth of Nations, Adam Smith described what he called ‘the stationary state’: the condition of a formerly wealthy country that had ceased to grow. What were the characteristics of this state? Significantly, Smith singled out its socially regressive character. First, wages for the majority of people were miserably low:

Though the wealth of a country should be very great, yet if it has been long stationary, we must not expect to find the wages of labour very high in it . . . It is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is in reality the cheerful and the hearty state to all the different orders of the society. The stationary is dull; the declining melancholy.15

The second hallmark of the stationary state was the ability of a corrupt and monopolistic elite to exploit the system of law and administration to their own advantage:

In a country too, where, though the rich or the owners of large capitals enjoy a good deal of security, the poor or the owners of small capitals enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins, the quantity of stock employed in all the different branches of business transacted within it can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by engrossing the whole trade to themselves, will be able to make very large profits.16

I defy the Western reader not to feel an uneasy sense of recognition in contemplating those two passages.

In Smith’s day, of course, it was China that had been ‘long stationary’: a once ‘opulent’ country that had simply ceased to grow. Smith blamed China’s defective ‘laws and institutions’ – including its bureaucracy – for the stasis. More free trade, more encouragement for small business, less bureaucracy and less crony capitalism: these were Smith’s prescriptions to cure Chinese stasis. He was a witness to what such reforms were doing in the late eighteenth century to galvanize the economy of the British Isles and its American colonies. Today, by contrast, if Smith could revisit those same places, he would behold an extraordinary reversal of fortunes. It is we Westerners who are in the stationary state, while China is growing faster than any other major economy in the world. The boot of economic history is on the other foot.

This book is about the causes of our stationary state. It is inspired by Smith’s insight that both stagnation and growth are in large measure the results of ‘laws and institutions’. Its central thesis is that what was true of China in Smith’s day is true of large parts of the Western world in our time. It is our laws and institutions that are the problem. The Great Recession is merely a symptom of a more profound Great Degeneration.

The Four Black Boxes

To demonstrate that Western institutions have indeed degenerated, I am going to have to open up some long-sealed black boxes. The first is the one labelled ‘democracy’. The second is labelled ‘capitalism’. The third is ‘the rule of law’. And the fourth is ‘civil society’. Together, they are the key components of our civilization. I want to show that inside these political, economic, legal and social black boxes are highly complex sets of interlocking institutions. Like the circuit boards inside your computer or your smartphone, it is these institutions that make the gadget work. And if it stops working, it is probably because of a defect in the institutional wiring. You cannot understand what is wrong just by looking at the shiny casing. You need to look inside.

Perhaps, on reflection, that electronic metaphor is the wrong one. After all, most institutions evolve organically; they are not designed in California by the historical equivalent of Steve Jobs. A better analogy might be with the collective structures we see in the natural world. Beehives are the classic example. Ever since the satirist Bernard Mandeville’s book The Fable of The Bees: or, Private Vices, Public Benefits, published in 1714, people have drawn parallels between humans in a market economy and bees in a hive. The parallel has its merits, as we shall see, though it is actually in our political organization rather than our economic organization that we most closely resemble bees (a point Mandeville well understood). The simple point is that institutions are to humans what hives are to bees. They are the structures within which we organize ourselves as groups. You know when you are inside one, just as a bee knows when it is in the hive. Institutions have boundaries, often walls. And, crucially, they have rules.

For some readers, I dare say, the word ‘institution’ still conjures up a Victorian vision of lunatic asylums: poor old Niall, he’s in an institution now. That is not the kind of institution I mean. I am talking about, for example, political institutions, like the British Parliament or the American Congress. When we talk about ‘democracy’, we are in fact referring to a number of different interlocking institutions. People sticking pieces of paper into ballot boxes, yes. Their elected representatives making speeches and voting in a large assembly hall, yes. But those things alone do not automatically give you democracy. Outwardly, the legislators of countries like Russia and Venezuela are elected, but neither qualifies as a true democracy in the eyes of impartial observers, not to mention those of local opposition leaders.

Just as important as the act of putting crossed or stamped papers in ballot boxes are the institutions – usually parties – that nominate candidates for election. Just as important as the parties are the officials – civil servants, judges or ombudsmen – whose responsibility it is to ensure that the elections are fair. And then it matters hugely how the legislature itself actually operates. A body of elected representatives can be anything from a wholly sovereign entity, as the British Parliament was until European law began to encroach on it, to an impotent rubber stamp, like the old Supreme Soviet. Its members can stoutly uphold the interests of their constituents (including those who voted against them), or they can be in hock to the vested interests that financed their election campaigns.

In August 2011, as Colonel Gaddafi’s regime in Libya was falling apart, a BBC correspondent in Benghazi spotted some remarkable graffiti on a wall. On the left side of the wall there was a classically straightforward revolutionary message: ‘The tyrant should fall, he’s a monster.’ Direct and to the point. But on the right side, the message was anything but simple. It read: ‘We want constitutional rule and for the president to have less authority and the four-year presidential term should not be extended.’17 As that (quite correctly) suggests, the devil in any political transition lies in the detail of the constitution, not to mention the rules governing the constituent assembly that designs it.

How does the legislature stand relative to the executive and the judiciary? Most constitutions spell that out. But how do the organs of civilian government relate to the military, a question of burning importance in Egypt? Nor can one stop there. Modern nation-states have developed a whole range of institutions that were undreamed of as recently as a hundred years ago, dedicated to regulating economic and social life and redistributing income. The welfare state is not part of democracy as the ancient Athenians conceived of it. In bee terms, the welfare state seems to create an ever increasing number of dependent drones whom the worker-bees have to support. It also employs a great many bees simply to transfer resources from the workers to the drones. And it seeks to finance itself by accumulating claims on future bees, in the form of public debt. In Chapter 1, I will consider this and other distributional aspects of democracy. In particular, I will ask if we are witnessing a fundamental breakdown in what Edmund Burke called the partnership between the generations.

These days, nearly everyone claims to be democratic. I have even heard it claimed that the Chinese Communist Party is democratic. ‘Capitalist’, by contrast, is a word too often used as a term of abuse to be much heard in polite company. How do the institutions of the democratic state and those of the market economy relate to one another? Do corporations play an active part in politics, through lobbyists and campaign contributions? Do governments play an active part in economic life, through subsidies, tariffs and other market-distorting devices, or through regulation? What is the right balance to be struck between economic freedom and government regulation? Chapter 2 will address these issues. The specific question I ask is how far very complex regulation has become the disease of which it purports to be the cure, distorting and corrupting both the political and the economic process.

A crucial institutional check on both political and economic actors is the rule of law. It is inconceivable that either democracy or capitalism could function without an effective system of justice, where the rules devised by the legislature can be enforced, where the rights of the individual citizen can be upheld and where disputes between citizens or corporate entities can be resolved in a peaceful and rational manner. But which system of law is better: common law? or some other form? The rule of sharia is clearly very different from the rule of law as the English political philosopher John Locke understood it.

In some ways, the key to comparing different codes of law is what might be called ‘the law of rules’: the way that law itself is made. In some systems, like Islam, the rules have been prescribed in considerable detail, for eternity, by a divinely inspired prophet. According to the stricter schools of Muslim thought, they cannot be changed. In others, like the English common law, the rules evolve organically, as judges weigh up the competing claims of precedent and the changing needs of society. Chapter 3 will ask the question whether one system of law – in particular, the common law – is superior to the others. I will also ask how far the English-speaking world still enjoys an advantage in this respect. In particular, I want to warn that the rule of law is in danger – at least in parts of the ‘Anglosphere’ – of degenerating into something more like the rule of lawyers. Are Americans really better served by their legal system than Englishmen were by theirs at the time of Dickens’s Bleak House?

Finally, there is civil society. Properly understood, it is the realm of voluntary associations: institutions established by citizens with an objective other than private profit. These can range from schools – although in modern times most educational institutions have been absorbed into the public sector – to clubs dedicated to the full range of human activities, from aeronautics to zoology. Once again we encounter the importance of rules, though here they may seem trivial, like the obligation on members of most London clubs to wear ties and keep their jackets on at dinner, even on a sweltering-hot evening.

There was a time when the average Briton or American belonged to a startlingly large number of clubs and other voluntary societies. It was one of the features of the English-speaking world that most impressed the great French political theorist Alexis de Tocqueville. But in Chapter 4 I shall ask why that is no longer true, and how far it is possible for a truly free society to flourish in the absence of the kind of vibrant civil society we used to take for granted. Are the new social networks of the internet in any sense a substitute for traditional associational life? I shall argue that they are not.

Why Institutions Fail

If we are like bees in the realm of politics, playing our assigned parts in an essentially hierarchical hive, we have more freedom of action in the economic sphere. There, our institutions recall the wildlife of the Serengeti, the ‘endless plains’ of northern Tanzania and southern Kenya. Some of us are wildebeest, grazing as we move in the herd. Others of us (rather fewer) are predators. I am afraid there are some scavengers and parasites, too. The whole thing is an ecosystem in which Darwinian forces are constantly at work, naturally selecting the fittest from the unfit. Likewise, in civil society, we form our groups and bands rather in the way that chimpanzees and baboons do. Like the clubs we humans used to be so fond of joining, a baboon troop has its rules and its hierarchies.

Revue de presse

Brilliantly written, full of wit and virtuosity, stuffed with memorable lines and gorgeous bits of information. A great read (The Times (on Civilization) )

A dazzling history of Western ideas ... epic (Economist )

This is sharp. It feels urgent. Ferguson... twists his knife with great literary brio (Andrew Marr (On Civilization) )

A masterpiece ... fascinating facts burst like fireworks on every page (Sunday Times )

Brings history alive for the reader with a dazzling knowledge ... peerless (Independent on Sunday )

Détails sur le produit

  • Format : Format Kindle
  • Taille du fichier : 1340 KB
  • Nombre de pages de l'édition imprimée : 179 pages
  • Pagination - ISBN de l'édition imprimée de référence : 0143125524
  • Editeur : Penguin (17 octobre 2012)
  • Vendu par : Amazon Media EU S.à r.l.
  • Langue : Anglais
  • ASIN: B009CTZ9II
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  • Moyenne des commentaires client : 4.0 étoiles sur 5  Voir tous les commentaires (3 commentaires client)
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2 internautes sur 2 ont trouvé ce commentaire utile 
4.0 étoiles sur 5 A Brief Summary and Review 18 juin 2013
*A full executive summary of this book will be available at newbooksinbrief dot com, on or before Tuesday, June 25.

The main argument: Over the past half-millennium the West has built up a substantial lead over other parts of the world when it comes to both economic power and material standard of living. Now, however, this lead is slipping away. Indeed, developing nations led by such powers as China and India are quickly closing the gap, as they are experiencing impressive economic growth, while the West is stagnating. Many argue that this is the natural result of globalization (and the fact that major corporations are taking advantage of cheaper labor in developing nations). For Harvard historian and writer Niall Ferguson, however, there is something deeper going on here. For Ferguson, the closing of the gap between the West and the Rest has less to do with the rise of the Rest, as the decline of the West.

Specifically, Ferguson argues that it is the West's political, economic, legal and social institutions that have allowed it to gain the upper hand over the past 500 years or so, and that now these institutions are beginning to deteriorate. The result: Western stagnation, and the catching up of everyone else.

Ferguson identifies 4 primary institutions that account for the West's success over the past half-millennium: 1. Democracy; 2. Capitalism; 3. The Rule of Law; and 4. Civil Society. Each of these, the author argues, has eroded in the recent past.

Beginning with democracy, Ferguson argues that the deterioration of democracy in our time has not so much to do with the break-down of the social contract between the individual and the state, as the break-down in the contract between the present generation and future generations.
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4.0 étoiles sur 5 good analysis 3 juin 2014
Par NP
Format:Format Kindle|Achat vérifié
The present economic and political situations of our sick Western states are summed up and analysed very well here. Analysis of the issues leading to a few keys towards remedies.... Book to be sent to our dear political leaders urgently...
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4.0 étoiles sur 5 une référence 12 mai 2015
Format:Relié|Achat vérifié
grand penseur conservateur, observateur de la vie politique contemporaine, Ferguson est un analyste remarquable des travers de la vie démocratique occidentale. Passionnant.
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175 internautes sur 181 ont trouvé ce commentaire utile 
4.0 étoiles sur 5 A Brief Summary and Review 18 juin 2013
Par A. D. Thibeault - Publié sur Amazon.com
*A full summary of this book is available here: An Executive Summary of Niall Ferguson's 'The Great Degeneration: How Institutions Decay and Economies Die'

The main argument: Over the past half-millennium the West has built up a substantial lead over other parts of the world when it comes to both economic power and material standard of living. Now, though, this lead is slipping away. Indeed, developing nations led by such powers as China and India are quickly closing the gap, as they experience impressive economic growth, while the West is stagnating. Many argue that this is the natural result of globalization (and the fact that major corporations are taking advantage of cheaper labor in developing nations). For Harvard historian and writer Niall Ferguson, however, there is something deeper going on here. For Ferguson, the closing of the gap between the West and the Rest has less to do with the rise of the Rest, as the decline of the West.

Specifically, Ferguson argues that it is the West's political, economic, legal and social institutions that have allowed it to gain the upper hand over the past 500 years or so, and that now these institutions are beginning to deteriorate (just as other nations increasingly copy what made the West successful in the first place). The result: Western stagnation, and the catching up of everyone else.

Ferguson identifies 4 primary institutions that account for the West's success over the past half-millennium: 1. Democracy; 2. Capitalism; 3. The Rule of Law; and 4. Civil Society. Each of these, the author argues, has eroded in the recent past.

Beginning with democracy, Ferguson argues that the deterioration of democracy in our time has not so much to do with the break-down of the social contract between the individual and the state, as the break-down in the contract between the present generation and future generations. Specifically, by taking on the astronomical amount of public debt that many Western governments have taken on over the past half-century, we have undermined our own growth and unjustly put future generations in hock. We have lived well at the expense of our progeny, and have set them up for failure.

With respect to capitalism, where once Western institutions led the world in making it easy for businesses to start-up and operate efficiently, now heavy and overly-complex laws and regulations stifle new businesses and send domestic corporations overseas. Western banks and financial institutions, the author argues, are not under-regulated, but poorly regulated. And what's more, they are not made to pay for their transgressions when they do breach the law (as witnessed, most recently, in the financial crash of 2008), thus they are invited to behave irresponsibly.

When it comes to the rule of law, where once the West did well to protect contracts and property rights, now tort law has allowed civil suits to run amok and choke the legal system. Meanwhile, copyright law now deeply favors the established over the up-and-coming, which has stifled innovation and progress. The Rule of Law has become the Rule of Lawyers.

When it comes to civil society, where once most Western citizens freely donated their time and money to worthy causes and charities, and flocked to join associations, clubs and organizations that promoted both civic-feeling and the public good, now citizens largely hide behind their televisions and computer screens and wait for the government to take care of the less fortunate and any and all public goods.

For Ferguson, unless we reverse the current deterioration of our institutions, we can expect our stagnation to continue (and we also run the risk of having our societies crash outright).

The book is well-written and, for the most part, well argued. However, at 150 pages (before notes), it is quite lean. Several of the points could have used additional defending, with additional evidence. Also, the author largely eschews any talk of where he believes the reforms in each of the institutions could and should begin. This is a significant oversight, in my mind. All in all, some good ideas, but more fleshing out of the material would have been helpful. A full summary of the book is available here: An Executive Summary of Niall Ferguson's 'The Great Degeneration: How Institutions Decay and Economies Die'
160 internautes sur 174 ont trouvé ce commentaire utile 
5.0 étoiles sur 5 The partnership between the generations 19 octobre 2012
Par Daniel Weitz - Publié sur Amazon.com
This is a review of "The Great Degeneration: How Institutions Decay and Economies Die" which is the kindle title of this work, and is no longer available on kindle.

The author is concerned about the "Degeneration of the West" into a "Stationary State" similar to that of China during the previous centuries. This he believes is due to the weakening of traditional civil institutions, crony capitalism, inefficient bureaucracy, and the decay of our legal system. Needless to say, this has drastic political and economic consequences for our society, with the widening gap of economic inequality being a symptom of the problem. Other symptoms are the rise of a welfare state that exploits those who work for those that have become "entitled". The abandonment of what Edmund burke called "The partnership between the generations", is also the abandonment of what is our true social contract. The excessive public and private debt is a symptom of a deeper problem; the breakdown of the generational social order.

For the rise of Europe Ferguson rejects the theories of Diamond (geographic factors), North and Wallace (transition to open access society), Max Weber (Protestant Capitalism) and Pomerants ("ghost acres"). The author argues that it is not so much as geographic and cultural factors (citing the two Koreas and the city of Nogales on the US-Mexican border), but rather the role of an inclusive elite vs. an exclusive elite with extractive institutions. He agrees with the argument of De Soto that dysfunctional institutions force the poor to live outside the law without title to the property they often "own". This is "dead capital" that cannot be used to increase wealth.

Ferguson argues that the cause of the economic meltdown of the banks was not lack of regulation but rather the inefficiency of the current laws and regulatory system that failed to give jail time to the miscreants that violated the laws. He also believes that greater expertise is needed by the regulators rather than strict rules; we need an experienced pilot with good judgment, not a mandatory auto-pilot that follows pre-programed rules and cannot adjust to changing conditions in an unknowable future.

Other chapters deal with the importance of a good legal system and the need to maintain a civil society. We seem to have done our best to kill a civil society by replacing it with a cradle to grave government welfare system, the danger of which was pointed out by the prescient De Tocqueville almost 200 years ago.

The author's conclusions are troubling, with a final reference to President Obama, as the "stationary mandarin" (the famous "you didn't build that" speech) who feels that government institutions and bureaucracies are the key to growth and not individual initiative supported by a good legal system, civil institutions, and competition. Other problematic issues raised is the enormous debt-burden in the West.

A major strength of this work is the extensive documentation cited in the notes.
58 internautes sur 62 ont trouvé ce commentaire utile 
5.0 étoiles sur 5 Link between institutions and economic performance 16 février 2013
Par Hubert Shea - Publié sur Amazon.com
In this book Professor Ferguson maintains that economic prospect in the western world will continue to be gloomy if politicians fail to take radical reform of the four institutional pillars that have led the western world to maintain its economic hegemony since the sixteenth century. He dispels the widely-held proposition advocated by Max Weber and David Landes (P.27) that culture is a key independent variable to determine economic growth which differentiates economic trajectory of rich countries from the poor ones. Nor does he accept other plausible perspectives and interpretations (natural resources and forces, climate, and technoptimism) to account for the rise and fall of the western economy. To him, a holistic institutional transformation from extractive (limited access) to inclusive (open access) ones (P.30) is a panacea for the current stationary economy in the western world.

In terms of the four institutional pillars, Professor Ferguson maintains that key maladies with western institutions encompass meager regulatory enforcement in the financial sector, rotten rule of law, government encroachment in the civil society, and breakdown of social contract between the generations (Edmund Burke's concept of contract in which the current fiscal policies cannot inexorably create huge debts at the expense of the young and the unborn). Professor Ferguson disagrees with Keynesian economists who are advocates of low interest rate and issuance of public debt to stimulate economic growth.

In this book Professor Ferguson is quite pessimistic towards institutional degeneration in the western world because economic and political processes are dominated by rent-seeking elites (P.151) whereas non-western countries such as China have painstakingly achieved astonishing economic growth by downloading killer applications (best practices) of the western world.

This book traces the causes of economic stagnation of the western world from the institutional perspective. Professor Ferguson is an eminent historian and this book contains abundant and useful information about historical development of laws and institutions in the Anglo-American world.

This book is relevant to readers who are interested in understanding how institutions can influence political and economic development in the western world.
82 internautes sur 94 ont trouvé ce commentaire utile 
3.0 étoiles sur 5 Freedom, Choice, and Institutions 18 juin 2013
Par J. Dretler - Publié sur Amazon.com
Format:Relié|Achat vérifié
Freedom, Choice and Institutions

In his latest book, "The Great Degeneration", Niall Ferguson brings up elements of his former books (The Ascent of Money, Civilization,) and updates them with mention of Nassim Taleb's "Anti-Fragile", Acemoglu and Robinson's "Why Nations Fail", Reinhart and Rogoff's" Growth in a Time of Debt", as well as earlier works by Hernando de Soto, Mark Buchanan , Charles Murray, and the classics "Lombard Street" by Walter Bagehot and "Democracy in America" by de Tocqueville.

What is missing, in my view, is the depth and degree of explanation present in his other works.

He has a consistent and refreshingly negative view of the evils of government over- regulation and policies that obstruct business formation. Our current dangerous path as a society based on dependency rather than competition driven growth also comes in for criticism.

He prefers choice and competition. This includes privatization of schools, less consumer protection, increased ease of business formation, and protection for investors and creditors.

In this book Ferguson discusses the elements that contributed to the growth and historical outperformance of the West and seem to be currently out of fashion. Regard for individual initiative and an open adaptable but limited and general rather than specific framework of law created efficiencies.

Civil structures and a sense of community effort were widespread before cradle to grave dependencies existed. Ferguson cites the decline of membership in clubs and voluntary service societies as a negative societal factor.

He seems to agree with those who support increased urbanization for productivity gains and the opportunities that specialization and differentiation offer, but there are no examples of the community or social efforts he says we need emerging in the urban environment.

These are all important topics and seriously considered. I just think they deserve a bigger book.
26 internautes sur 30 ont trouvé ce commentaire utile 
5.0 étoiles sur 5 Hits home? 20 juin 2013
Par R. Kirby - Publié sur Amazon.com
Upon reviewing book reviews, the books which get all five stars and one stars, or mostly so, usually
seem to have struck some nail squarely on the head, with applause from some and howls of anguish from others.
After hearing Niall Ferguson speak (on the BBC's Reith lectures), I formed the opinion that he is intelligent and articulate, with a particular viewpoint. For those reasons alone, he is worth reading, even if his point of view does not aways agree with yours (or mine). The personal attacks by some reviewers merely illustrate the acuity of his insights.
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