Niall Ferguson, “The Ascent of Money,” Penguin Press, 2008
It's way past time to utter the dread G word about the economy, the G word being "Godzilla." The economy as we now experience it, is like the monster in the 1998 American remake: it rises from unfathomable depths before marching through Manhattan kneecapping skyscrapers with casual flicks of its tail. That movie was criticized for making Godzilla too big for the screen. It's true that rarely could the extent of the creature be squeezed into a frame. But that's just what makes American Godzilla such a good image of current crisis, the extent of which continues to defy efforts to frame and contain it.
If you'd like a somewhat more nuanced and informative guide to the crisis than pondering the ways of supersized Godzilla, it's worth considering Niall Ferguson's, "The Ascent of Money." He writes: "It is not too much to say that in mid-2008 we witnessed the. . . symptoms of a world war without the war itself." In a war a people gives of itself completely. Is nothing short of warlike effort what it takes to salvage the current economy? Ferguson doesn't answer that pressing question. But he does provide an absorbing history of financial institutions, and of money.
If there is one thought to take from this book it is that financial institutions, per se, are not the enemy. Banking is not opposed to the developments of industry and technology that we credit for the modern world; it is an equal among those developments. The goal that Ferguson set for himself with this book was to, "break down that dangerous barrier which has arisen between financial knowledge and other kinds of knowledge." He's done well in that effort.
And it is a dangerous barrier. I suspect that many of us are undertaking to break it down on our own as best we can. Walter Benjamin once remarked that in the twentieth century we were all compelled to act like detectives (Benjamin himself had a pronounced weakness for detective narratives). Maybe, in the twenty-first century we are all, similarly, compelled to be economists.
Another virtue of Ferguson's book is that it deals with gold, the gold standard, and the gold bugs who advocate it as the only inherently valuable form of money. Ferguson treats the issue historically. He shows that the Spanish empire, which amassed gold, nevertheless, because it lacked financial institutions, borrowed from the Dutch, who may not have had much in the way of gold but had created banks. He writes, as he describes the evolution of credit, that: "What the conquistadors failed to understand is that money is a matter of belief."
In response to those who may still believe that gold is the only — as in Platonically — rock solid money, he concludes: "Money is not metal. It is trust inscribed." It's true, of course, though Ferguson doesn't delve into the question — he's not your financial advisor — that when economies flounder, individuals often revert to gold.
If there is a weakness to the book, it is that Ferguson insists, in a long chapter, on giving a Darwinian cast to the evolution — the creation, destruction, and survival — of financial forms. Perhaps it would be best in books of this sort to spare the reader that kind of prolonged exegesis and stipulate in advance: Darwinism assumed. Do it yourself.
Ferguson's is a useful, mostly well-written book. He does at times fuss in his prose like the professor he is (Harvard, Oxford). But the book is better than the BBC show which will be out on DVD in April. That show, as seen on public television, cuts out key sections of his argument, rendering it puzzling and fragmentary. That's television for you. However, the show, like the book, does convey that Ferguson, who is avowedly politically conservative, makes George Soros, who is anything but, the hero of the piece.
Back to Godzilla.