By LeRoy Lawson
Niall Ferguson, The Ascent of Money: A Financial History of the World (New York: Penguin Group, 2008).
Thomas Friedman, Hot, Flat, and Crowded: Why We Need a Green Revolution—And How It Can Renew America (New York: Farrar, Straus and Giroux, 2008).
My individual retirement account had plummeted by 40 percent when I read Niall Ferguson’s brilliantly timed The Ascent of Money. If there was any comfort to be culled from the Harvard history professor’s lectures to a nation of newly or nearly bankrupt investors, it was in the old adage “misery loves company.”
This reader wasn’t the only person duped by the economy. In a quick survey of money’s “ascent” from the clay tablets of ancient Mesopotamia to the hedge funds of today, Ferguson tells tales of money’s mesmerizing, seductive betrayal of the innocents (and not-so-innocents).
Captivating, About the Mess We’re In
What I like best about Professor Ferguson’s treatment of money, credit, and banking is this: I can understand him. Whether he’s speaking of Roman denarii, Italian liras, Japanese yen, newly minted eur-os, or American dollars; or tracing the rise of banking from the loan sharks in Italian city-states to Amsterdam’s dominant financial center (which yielded later to London and even later to New York); or charting the recurring bubbles and bursts of modern capitalism, he can tell a captivating story, and tell it simply enough to help make sense of the mess we’re currently in.
And Ferguson is a good source to turn to if you’re still wondering why, in our most recent bubble, it was possible to get “a 100 percent mortgage with no income, no job and no assets,” a phenomenon pretty difficult for us Depression-born conservatives to even imagine.
Along the way are some reminders we can’t always trust the experts. A famous example: On October 16, 1929, Yale University economics professor Irving Fisher solemnly declared that American stock prices had “reached what looks like a permanently high plateau.” Only a few days later came “Black Monday” (October 28), when the stock market plunged by 13 percent, and then the next day a further 12 percent. Altogether, in the next three years, 89 percent of the U.S. stock market was wiped out, not regaining its 1929 peak until November 1954. At the same time, industrial output and the civilian labor force dropped by close to a third “if a modern definition is used.” So much for the experts.
I especially enjoyed Ferguson’s last chapter, “From Empire to Chimerica,” in which he explores the growing interdependency of Chinese and American economies. He points out that together these countries account “for just over a tenth of the world’s land surface, a quarter of its population, and a third of its economic output, and more than half of the global economic growth in the last eight years.” This relationship, in which “China saves and America spends” is unsustainable. Which means, of course, another Ferguson book will be forthcoming to explain the new mess we’ll be in.
I recommend The Ascent of Money to other noneconomists. It’s a good primer if you want to learn about how money works. Along the way you’ll gain insight into the mysteries of the worlds of credit, bonds, stocks, insurance, real estate, globalization, hedge funds, and behavioral finance in general.
Most of all, though, you’ll learn the elementary lesson that the real subject here is trust. “‘In God We Trust’ it says on the back of the ten-dollar bill, but the person you are really trusting when you accept one of those in payment is the successor to the man on the front (Alexander Hamilton, the first Secretary of the US Treasury).” It is also about trust in banks, businesses, employers, neighbors. No trust, no transactions. And as our recent exploding bubble proved yet again, when trust departs, the economy collapses.
Maybe we should actually try trusting in God!
Irritating, but Not to Be Ignored
While we are on the subject of the economy, let me mention Pulitzer Prize-winner Thomas Friedman’s Hot, Flat, and Crowded. It isn’t about economics specifically, but about a planet that’s growing too hot (global warming), economically quite flat (remember Friedman’s The World Is Flat on globalization?), and stiflingly crowded (so many people, so little space). In this volume he proposes solutions to global warming and suggests the way for the United States to recover its lost ground as the globe’s economic and political leader is by taking the initiative in going green in energy and industry.
Appalled by America’s post 9/11 loss of focus and by the threatening global environmental crisis, Friedman believes the solution to our hot, flat, and crowded condition is to replace our inefficient energy practices (relying primarily on carbon fuels like coal, oil, natural gas, corn ethanol) with renewable resources (wind, sun, water). It will soon—within mere decades—be too late for us to reverse the trend if we don’t act now. If China and India adopt America’s wasteful habits, as they are wont to do, humanity will simply not be able to sustain the West’s current standard of living. Too many people, too few natural resources.
Five major challenges confront us: ever scarcer supplies, massive transfer of wealth to oil barons (“petrodictators”), disruptive climate change, have-nots growing in numbers and desperation, and loss of biodiversity.
Since Friedman believes oil will never be sustainably cheap again, he calls for 100,000 people in 100,000 garages trying 100,000 things in the hope that five of them will “break through” in technological innovations that can save us. He believes the battle over “green” will define the early 21st century just as the battle over communism (“red”) defined the last half of the 20th.
This is an irritating book. Irritating, because he presents facts and trends we don’t want to face. Irritating, because he pounds away, hitting the reader over the head again and again, I suppose because he’s not sure we’re paying attention and because the issue matters so much to him. And irritating because a conscientious Western reader can only squirm when confronted with our carelessness in acting as stewards of the planet (remember Genesis 2:15? “The Lord God took the man and put him in the Garden of Eden to work it and take care of it”).
You may not enjoy this book and probably will frequently argue with the author—but he raises issues we can’t ignore for reasons political, economical, and spiritual.
LeRoy Lawson, international consultant with Christian Missionary Fellowship International, is a CHRISTIAN STANDARD contributing editor and a member of Standard Publishing’s Publishing Committee. His column appears at least monthly.