le 16 mai 2009
Ferguson comes up again as an unabashed defender of empire(s), especially those espousing financial capitalism as modus operandi. So much so that he touches revisionist overtones at times.
Had this been just a history book, however partial, Ascent of Money would have been only half bad. However, Ferguson's ideological positions only add insult to the periodic injury produced by financial capitalism.
Staying with history for a while, the book makes for a quick traversal of modern financial instruments and some of the supporting institutions and ideologies. Assuming the role of historian of finance, Ferguson doesn't seem to worry about proving anything; a narrative from the perspective of the victors, in (t)his case, the Anglo-Saxon financial elites, might do just as well. One comes away with the idea that financial capitalism is better, necessary, and almost always self-sufficient. Moreover, the welfare state should be viewed not only as a half-baked idea of capitalists, but also past its due date by now.
Here are few examples of missing pieces from Ferguson's take one the rise of financial capitalism: Nowhere is the goal of financial capitalism explicitly stated. I would posit that financial markets are supposed to help/guide us to do the best resource allocation (read, optimal) with the idea of maximizing social welfare. The "us" above is the state and voting citizenry, and not the financial elites alone. Without any compass at work, it's easy for the author to ignore the societal costs of financial capitalism--in the UK/US case, the disappearance of production followed by de-professionalization, and misallocation of resources during, and in the aftermath of, bubbles. In other words, if we look only at what financial capitalism creates, in isolation from other countries or its own side effects, Ferguson's book is right on the money. Otherwise, the market as compass is just as accurate as communism.
Ferguson doesn't seem to make much of his own statistics on how much more we spend on, let's say, healthcare and education for much lower returns. In fact, Schumpeter himself, one of the apostles of capitalism, once said that one of our problems in the US was the professional quality, or lack thereof, of our government employees. Hmm, could this have anything to do with how financial capitalism allocates human resources and/or how a society worships the high priests of finance?
In any case, fear not the current crisis, for Ferguson has embarked into the next expedition of financial capitalism as charted by the Harvard behavioral finance-, and MIT's Andrew Lo's financial evolutionist/adaptive markets-hypotheses. He does so by means of the last chapter in the book, a veritable illustration of plus ça change, plus c'est la même chose. In plain English, it's just the tools and possibly the actors that needed change, provided that the masters, ideology and the fools remain the same.
Rating this book is not easy. It should take 4 stars for the historic part, 2 stars for ideology, and 0 stars for partiality. All in all, for a 2-star book the interested reader may do better to borrow. And, yes, it reads fast and there is plenty of detail surrounded by historical context that make Ascent of Money a decent read.
Nota Bene: Why is it that, in this book, Niall Ferguson writes so dismissively about George Soros' ideas on financial markets reflexivity? Soros has built his fortune also by leveraging the reflexivity he recommends be tamed by adequate understanding and regulation of the financial markets. Unfortunately, Ascent of Money contributes only partially to that understating, and reads little about financial markets regulation.