The Cash Nexus: Money and Power in the Modern World, 1700-2000 (Basic Books; 2001)

An acclaimed historian offers a radical new history of the links between politics and economics, one that draws unsettling conclusions about the future of both capitalism and democracy Does money make the world go round, as Cabaret's Master of Ceremonies sang to us? In The Cash Nexus, acclaimed historian Niall Ferguson offers a radical and surprising answer-No. Conventional wisdom has long claimed that economic change is the prime mover of political change, whether in the age of industry or the Internet. In our own time Paul Kennedy has claimed that economics provided the key to international power, while Francis Fukuyama and others have argued that capitalism doomed socialism and ensured the victory of democracy. Small wonder politicians are obsessed with the economy: the Clinton campaign motto-"It's the economy stupid"-sums up a central tenet of modern life. But is it the economy? Ferguson thinks it is high time we re-examined the link-the "nexus," to use Thomas Carlyle's term-between economics and politics, in the aftermath not only of the failure of socialism but also of the apparent triumph of American-style capitalism. His central argument is that the conflicting impulses of sex, violence, and power are together more powerful than money. In particular, political events and institutions have often dominated economic development. A bold synthesis of political history and modern economic theory, The Cash Nexus will transform the landscape of modern history and draw challenging and unsettling conclusions about the prospects of both capitalism and democracy. Cover......Page 1 Title page......Page 7 Copyright page......Page 8 Contents......Page 13 List of Tables......Page 15 1 Defense expenditure as a percentage of total public spending, 1891–1997 [44]......Page 68 2 Average annual central government budget deficits as a percentage of national product, selected periods [122]......Page 146 3 The growth and structure of the London Stock Exchange, 1853–1990 [131]......Page 155 4 European price inflation during and after the First World War [149]......Page 173 5 Increase or decrease in the British national debt by sub-periods, 1822–1997 [169]......Page 193 6 The structure of European national debts, circa 1993 [171]......Page 195 7 Determinants of fluctuations in the price of consols, 1845–1900, as cited in The Economist [184]......Page 208 8 The bondholders and the British national debt, 1804–1870 [198]......Page 222 9 Redistribution of income through taxes and benefits, United Kingdom 1992, by quintile groups of households [204]......Page 228 10 Dependency ratios, actual and projected, 1900–2050 [211]......Page 235 11 Individual membership of the three major British political parties, 1953–1997 [244]......Page 268 12 Foreign holdings of developed countries' national debts, circa 1993 [264]......Page 288 13 Wars, revolutions and the bond market, 1830–1914 [276]......Page 300 14 Anticipated and real premiums on selected international bonds, 1850–1983 [284]......Page 308 15 Indicators of commercial and financial globalization [291]......Page 315 16 A tale of two hegemons, 1870–1995 [294]......Page 318 17 Exchange rate regimes and inflation [330]......Page 354 18 Free, partly free and not free countries: the Freedom House Surveys for 1972–1973 and 1998–1999 [355]......Page 379 40 The rise of democracy, 1800–1996 [360]......Page 384 20 Average democracy score for 136 countries, 1975–1994 [372]......Page 396 21 The Jews in economic élites: selected statistics [381]......Page 405 22 World population and the number of independent states since 1871 [383]......Page 407 23 Military expenditure of the world's principal powers [413]......Page 437 List of Figures......Page 17 1 The "square of power" [15]......Page 39 2 Military personnel as a percentage of population, 1816–1986......Page 55 3 Defense spending per serviceman in Britain and the United States, 1816–1998 [34]......Page 58 4 Defense spending as a percentage of national product, 1850–1998 [46]......Page 70 5 Income tax as a percentage of taxation, 1866–1999 [72]......Page 96 Kafka's Castle......Page 111 7 Government employment as a percentage of total employment, 1960–1999 [93]......Page 117 8 Debt/GNP ratios since the late seventeenth century [126]......Page 150 9 Debt service as a percentage of government expenditure, 1802–1999 [136]......Page 160 10 British money supply and inflation (annual growth rates), 1871–1997 [152]......Page 176 11 The real growth rate minus the real interest rate in Britain, 1831–1997 [168]......Page 192 12 British and French bond yields, 1752–1815 [173]......Page 197 13 Major bond yields since 1700 [176]......Page 200 14 The yield on consols, 1754–1998 [178]......Page 202 15 Monthly bond yields, 1914–1948 [180]......Page 204 16 U.S. long-term bond yields, 1979–1989 [182]......Page 206 17 Real returns on British and American bonds since 1700 [197]......Page 221 18 Relative poverty rates before and after taxation and transfers, 1991 [206]......Page 230 19 Two alternative ways of achieving generational balance [210]......Page 234 20 President Clinton's approval rating and the Dow Jones index, 1993–2000 [221]......Page 245 21 Government lead and the "misery index", 1948–2000 [225]......Page 249 22 The real cost of British elections: candidates' declared general election expenses, 1880–1997 [241]......Page 265 23 Total general election expenditure of the three main British parties, 1964–1997 [242]......Page 266 24 Conservative and Labour parties, central expenditure (routine and election), 1900–1992 [243]......Page 267 25 Individual Labour Party membership as a percentage of the UK population, 1928–1977 [245]......Page 269 26 Unadjusted yields on European bonds, London prices, end of week, 1843–1871 [275]......Page 299 27 Government bonds as a percentage of all securities quoted on the London Stock Exchange, 1853–1990 [281]......Page 305 28 Yield spreads over consols, 1870–1915 [285]......Page 309 29 The Dow Jones industrial average daily closing price, 1896–2000 [298]......Page 322 30 Stock market indices since 1800 [300]......Page 324 31 The UK 'Equity Risk Premium', 1700–1995 [303]......Page 327 32 Inflation-adjusted UK stock market index, 1700–1998 [308]......Page 332 33 British share indices since 1811 [309]......Page 333 34 American and British stock market bubbles [313]......Page 337 35 The Mississippi and South Sea bubbles, 1719–1720 [315]......Page 339 36 The Mississippi bubble: money and share prices [316]......Page 340 The Yellow Brick Road......Page 352 38 World gold production, five yearly totals, 1835–1989 [332]......Page 356 39 'Progress' of the Ecu/Euro [339]......Page 363 41 The average democracy 'score' for 29 European countries, 1900–1950 [362]......Page 386 42 Real national product indices for European democracies, 1919–1939 [366]......Page 390 43 Real national product indices for European 'dictatorships,' 1919–1939 [367]......Page 391 Uniting the Nations?......Page 409 45 Circles of interest [424]......Page 448 List of Illustrations......Page 20 1 James Gillray, Begging No Robbery:—i.e.—Voluntary Contribution:—or John Bull, escaping a Forced Loan, 1796 [24]......Page 48 2 James Gillray, after "F. L. Esq.," John Bull Ground Down, 1795 [52]......Page 76 3 H. Heath, after George Cruikshnak, The Pillar of State, or John Bull Overloaded, 1827 [78]......Page 102 4 Francis Jukes, An Historical, Emblematical, Patriotical and Political Print..., 1785 [106]......Page 130 5 James Gillray, Midas, Transmuting all into Paper, 1797 [138]......Page 162 6 Anon. (English School), The National Parachute, or John Bull conducted to Plenty and Emancipation, 1802 [164]......Page 188 7 Anon. (English School), The Tree of Taxation, 1838 [190]......Page 214 8 Cheffins, King Cash!—The Boss of Every Election, from "Illustrated Bits," 1885 [218]......Page 242 9 Thomas Derrick, Sentiment on the Stock Exchange, from "Punch," 1938 [262]......Page 286 10 George Cruikshank, The "Stystem" that "Works so Well!!"— or The Boroughmongers' Grinding Machine, 1831 [297]......Page 321 11 Olave Gulbransson, Worshipping the Almighty Dollar, from "Simplicissimus," 1923 [322]......Page 346 12 Olave Gulbransson, President Wilson mounted on Morgan's Gold Mountain, from "Simplicissmus," 1916 [347]......Page 371 13 James Gillray, The Plumb-pudding in danger: or State Epicures taking un Petit Souper, 1805 [374]......Page 398 14 James Gillray, The Giant Factotum amusing himself, 1797 [391]......Page 415 Acknowledgments......Page 21 Abbreviations......Page 23 Introduction: The Old Economic Determinism and the New......Page 25 The New Determinism......Page 32 The Cash Nexus Untied......Page 34 Section One: Spending And Taxing [21]......Page 45 1 The Rise and Fall of the Warfare State [23]......Page 47 The Intensity of War......Page 49 Men of War......Page 52 Bangs Per Buck......Page 54 The Abolition of Distance......Page 62 Costing War......Page 64 The "Demilitarization" of the West......Page 72 2 "Hateful Taxes" [51]......Page 75 Family Silver......Page 77 "Taxes on Every Article"......Page 81 "Picking over the Fruits": Direct Tax......Page 88 The Two Sisters......Page 97 The Poet As Taxman......Page 99 3 The Commons and the Castle: Representation and Administration [77]......Page 101 Taxation and Representation......Page 103 Representation Without Taxation......Page 107 Servile States......Page 118 From Warfare to Welfare......Page 124 Section Two: Promises To Pay [103]......Page 127 4 Mountains of the Moon: Public Debts [105]......Page 129 The Origins of Public Debts......Page 131 Bonds, Banks and Bubbles......Page 136 War Debts and Their Legacy......Page 141 Scaling the Mountains......Page 144 Do Public Debts Matter?......Page 152 Debt Service......Page 157 5 The Money Printers: Default and Debasement [137]......Page 161 How Not to Pay......Page 164 The Inflation Tax......Page 168 Rules and Discretion......Page 175 From Indiscretion to Independence......Page 181 From Independence to Irrelevance?......Page 185 6 Of Interest [163]......Page 187 Yields......Page 189 Expectations: The Past and the Present......Page 194 "Events, Dear Boy"......Page 201 Section Three: Economic Politics [187]......Page 211 7 Dead Weights and Tax-eaters: The Social History of Finance [189]......Page 213 The Birth of the Rentier......Page 216 The Tax-Eaters......Page 219 The Euthanasia of the Rentier?......Page 224 The New Tax-Eaters......Page 227 Generation Games......Page 231 An Unwelcome Answer......Page 238 8 The Silverbridge System: Electoral Economics [217]......Page 241 Are You Better Off Now?......Page 243 A Problem for the Theory......Page 246 The Political Business Cycle......Page 251 The Vote Function......Page 252 Politikverdrossenheit......Page 258 Politics As Business......Page 262 The Political Economy of Sleaze......Page 271 From Private to Public Corruption......Page 275 Towards the Political Market......Page 280 Section Four: Global Power [259]......Page 283 Terrifying Everybody......Page 285 Capital Flows: Between Politics and the Market......Page 289 Origins of the Bond Market......Page 291 "The True Lords of Europe"......Page 293 Measuring Political Risk, circa 1830–1870......Page 296 Empire......Page 302 The Paradox of Convergence, 1870–1914......Page 307 The Crisis of the International Bond Market: Lessons for Today?......Page 312 Globalization Past and Present......Page 314 Plankton......Page 317 How High the Dow?......Page 320 The Shadow of 1929......Page 328 Other Booms and Busts......Page 330 The First Bubble......Page 334 Calculating "The Madness of People"......Page 343 11 Golden Fetter, Paper Chains: International Monetary Regimes [321]......Page 345 The Twilight of Gold......Page 349 Currency Unions......Page 362 12 The American Wave: Democracy's Flow and Ebb [346]......Page 370 A Parisian in America......Page 374 The Ascent of Democracy......Page 377 The Three Waves......Page 382 Democracy and Prosperity......Page 387 The Spirit of Democracy......Page 394 13 Fractured Unities [373]......Page 397 A Balkan World?......Page 399 Men and Maps......Page 401 Untying the Nations......Page 406 14 Understretch: The Limits of Economic Power [390]......Page 414 The Illusion of Peace......Page 419 Giving War a Chance......Page 420 The Chance of Victory......Page 424 A Democratic Peace?......Page 428 The Benefits of Militarism......Page 429 The Precautionary Motive......Page 433 Costing Kosovo......Page 438 The Case for Stretching......Page 441 Conclusion [419]......Page 443 Appendices [427]......Page 451 A The biggest wars in history [428]......Page 452 B Multiple regression of British government popularity and economic indicators [429]......Page 453 C The global bond market, June 1999 [431]......Page 455 D Public debt burdens in 1887–1888 [432]......Page 456 E Economic and social indicators and the inter-war crisis of democracy, 1919–1938 [434]......Page 458 Introduction......Page 459 1 The Rise and Fall of the Warfare State......Page 460 2 "Hateful Taxes"......Page 464 3 The Commons and the Castle: Representation and Administration......Page 468 4 Mountains of the Moon: Public Debts......Page 471 5 The Money Printers: Default and Debasement......Page 476 6 Of Interest......Page 481 7 Dead Weights and Tax-eaters: The Social History of Finance......Page 484 8 The Silverbridge System: Electoral Economics......Page 487 9 Masters and Plankton: Financial Globalization......Page 493 10 Bubbles and Busts: Stock Markets in the Long Run......Page 498 11 Golden Fetter, Paper Chains: International Monetary Regimes......Page 501 12 The American Wave: Democracy's Flow and Ebb......Page 505 13 Fractured Unities......Page 508 14 Understretch: The Limits of Economic Power......Page 510 Conclusion......Page 513 A......Page 515 B......Page 516 C......Page 522 D......Page 525 E......Page 526 F......Page 528 G......Page 531 H......Page 534 J......Page 536 K......Page 537 L......Page 539 M......Page 540 N......Page 544 O......Page 545 P......Page 546 R......Page 548 S......Page 549 T......Page 553 W......Page 554 Z......Page 556 B......Page 557 C......Page 560 D......Page 561 E......Page 562 F......Page 563 G......Page 565 I......Page 566 L......Page 568 N......Page 569 P......Page 570 R......Page 571 S......Page 572 T......Page 573 U......Page 574 W......Page 575 Z......Page 576 The Cash Nexus Is The Crucial Point Where Money And Power Meet. But Does Money Make The Political World Go Round? Does The Success Of Democracy Depend On Economic Growth? Does Victory Always Go To The Richest Of The Great Powers? Or Are Financial Markets The True 'masters' Of The Modern World? With The Analytical Boldness And The Grasp Of Dazzling Detail For Which He Is Now Famous, Ferguson Offers A Fascinating Account Of The Evolution Of Today's Economic And Political Landscape, From 'sleaze' To The Single Currency. Far From Being Driven By Iron Economic Laws, He Argues, Modern History Is The Product Of Unpredictable Political Conflicts; And It Is Their Impact On Volatile Financial Markets That Can Make Or Break An Empire.--jacket. Spending And Taxing. The Rise And Fall Of The Warfare State ; Hateful Taxes ; The Commons And The Castle : Representation And Administration -- Promises To Pay. Mountains Of The Moon : Public Debts ; The Money Printers : Default And Debasement ; Of Interest -- Economic Politics. Dead Weights And Tax-eaters : The Social History Of Finance ; The Silverbridge System : Electoral Economics -- Global Power. Masters And Plankton : Financial Globalization ; Bubbles And Busts : Stock Markets In The Long Run ; Golden Fetter, Paper Chains : International Monetary Regimes ; The American Wave : Democracy's Flow And Ebb ; Fractured Unities ; Understretch : The Limits Of Economic Power. Niall Ferguson. Includes Bibliographical References (pages 491-532) And Index. Niall Ferguson has a strong predilection towards making many small points seem like they prove his broader arguments. They rarely do, and his books amount to imperialist propaganda, pushing for a greater likelihood that his fantasy of having the U.S. pick up the imperial torch from the UK will some day come true. Well Niall, with the U.S. invasion of Iraq, you got your wish. You were dead wrong. The book can be seen as a case for war in Iraq, even before 9/11. Check out the final chapter/last paragraphs. You were wrong, Niall. And you were wrong about the benefits the British Empire provided for the broader world. Niall essentially tries to cover up the dark side of the British Empire, making a new imperialism seem like it might be useful...and fun. Readers wanting to get something more than old 19th-century assumptions repackaged for the 21st century need to look elsewhere. His numbers hide disgusting unreformed racism and brutal imperial violence. He downplays the negatives, and creates the impression that the world needs more American-style imperialism. Iraq. Good call. "The cash nexus is the crucial point where money and power meet. But does money make the political world go round? Does the success of democracy depend on economic growth? Does victory always go to the richest of the great powers? Or are financial markets the true 'masters' of the modern world?". "With the analytical boldness and the grasp of dazzling detail for which he is now famous, Ferguson offers a fascinating account of the evolution of today's economic and political landscape, from 'sleaze' to the single currency. Far from being driven by iron economic laws, he argues, modern history is the product of unpredictable political conflicts; and it is their impact on volatile financial markets that can make or break an empire."--BOOK JACKET.