Not to begrudge Penguin Press or Harvard political economist Niall Ferguson their incomes, but a reader would save the price of his new book by reading Paul Krugman’s column in The New York Times and appending a no to whatever he affirms. And a yes to whatever he condemns.
Krugman believes in an active government role in restarting a sagging economy. Ferguson, much prized by conservative economists and politicians, finds such a role close to an abomination. Krugman calls deficits medicine in times of recession. Ferguson calls them poison.
“The Great Degeneration” is a brief book drawn from lectures and rendered in a forceful style of writing that perhaps works better if heard rather than read. It advances a mini-Spenglerian thesis aiming to account for the decline of the longtime era of Western progress, prosperity, confidence, and power. The causes: One, the overwhelming of democratic choice and initiative by the growth of the state. Two, the blunting of Darwinian vitality by regulations aimed at tempering its effects. Three, the displacing of the rule of law under its corrosive nibbling by lawyers. Four, the dwindling role played by associations — unions, guilds, and charitable and public interest groups — again compared with that of the state.
Ferguson’s argument against deficits is that whereas Britain survived its massive 19th-century debt from the Napoleonic wars by launching a huge industrial and colonial expansion to compensate, we have nothing today on that scale. We’ve had breathtaking technological advances, but electronics and the Internet lack the expansionist, job-creating muscle of railroads and highways and bridges.
THE GREAT DEGENERATION: How Institutions Decay and Economies Die
Over-regulation is another impediment to growth, he writes. It has become 100 times more expensive to bring a new product to market than 60 years ago. If salt were a new product the US Food and Drug Administration would ban it because it is toxic when overused. Adam Smith wrote of China as a “stationary” society compared with Western dynamism. Today we are China, and China is us. This seems to contradict Ferguson’s thesis that central control blights growth; however, he predicts that the Chinese boom will not last.
Ferguson’s argument against deficits is moral as well as economic. He cites Edmund Burke: “SOCIETY is indeed a contract . . . the state . . . is . . . a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born.”
He rejects the widespread blaming of banks for encouraging people to take out ruinous loans. It was the borrowers’ fault, he implies. He deplores efforts to curb Wall Street by regulation, but he also deplores the use of derivatives. Some regulations are necessary, he concedes, and, perhaps unexpectedly, calls for harsh punishment of those who violate the ones that exist; he blames the laxity of enforcement for their excesses. It brings to mind an old Tory phrase about “the smack of firm government,” which may seem contradictory (but then Ferguson rather relishes such a thing).
Ferguson cites the certainty of impartial treatment by the law as a factor in Western prosperity. He comes out in favor of common law, traditional in Britain and the United States, as against the written civil law used in Europe; though he goes on to excoriate the clubbiness, even corruption, in its use by 19th-century English courts. He is also, for someone who tends to be placed in the conservative camp, as vehement as any liberal in excoriating the growing inequality between the super rich and everyone else.
His model for thinking and writing about public affairs is the great English political economist Walter Bagehot. (Oddly, for someone who has hard things to say about our Federal Reserve, he praises Bagehot’s advocacy of autonomous power for Britain’s equivalent, the Bank of England.) Bagehot, of course, was a great English stylist who wrote with a near poetic lucidity. Not true of Ferguson.
Bagehot: “Credit is an opinion generated by circumstances.” At random, Ferguson: “[W]e do not know with any certainty how politics will affect a sector that is more vulnerable to expropriation and arbitrary taxation than any other because of the immobile nature of its assets.”
Like other conservatives, Ferguson is prone to use Darwin in writing about society; and he does have a nice passage comparing would-be statists and interventionists to the advocates of intelligent design. Nice, but misused. Darwin’s survival of the fittest was strictly an analysis of what goes on in the natural world. It was far from his gentle and scrupulous thinking to use it as a prescription for society. Darwin was no Darwinist.