Review of The Ascent of Money: A Financial History of the World (Hardcover)

Niall Ferguson has written an easily accessible and very entertaining history of finance, ranging from the clay tokens of Mesopotamia 5,000 years ago to the hedge funds of today.The title of this book has apparently been modelled on Jacob Bronowski's "The Ascent of Man,"and like that book it will be made into a television series.Being a television celebrity is not something that wins the admiration of one's peers in the history profession, to say the least.But those little rebukes are relatively mild compared to the scorn he received for his political views in Empire: The Rise and Demise of the British World Order and the Lessons for Global Power and Colossus: The Rise and Fall of the American Empire.In those works he argued that empire was beneficial not only to the mother country but the dominated countries as well.In this work he chronicles not only the history of money but also makes a case for liberalized finance.

Ferguson examines the financial subplot behind some of the major historical powers such as the role of money in ancient Mesopotamia, the denarius in Roman society, and gold and silver in the civilization of the Incas.He is very good in his descriptions of financial families like the Medicis and the Rothchilds, and how they became banking dynasties.Another memorable episode was the rise of Amsterdam as the world's financial center and the center's subsequent shift to London.

History is also filled with financial disasters of which we are well aware today.Ferguson tells the story of John Law and how he became France's head of finance.He engineered a financial bubble that took them several generations to overcome.Making matters worse, it occurred at the same time as the British South Sea Bubble.

Also instructive is the history of the first great globalization (1870-1914).(For this period also read Jeffrey Frieden's Global Capitalism: Its Fall and Rise in the Twentieth Century.)The world had become so economically interdependent that the pundits believed the possibility of war between great powers had been eliminated.This sentiment was famously expressed in "The Great Illusion" by Norman Angell.

Although this book was written before the current economic crisis, the last chapter is very prescient."From Empire to Chimerica" tells of the symbiotic relationship between China and America.The combined country "accounts for just over a 10th 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 of the last eight years".This relationship, in which China saves and America spends, and in which China's savings is used to enable America to spend even more, is clearly unsustainable.Ferguson sees this savings glut as the cause of the current subprime crisis.That, in my humble opinion, was one of the causes; there were many bad actors involved in this catastrophe, citizen-borrowers included.

Although it is not obvious to everyone in the midst of a crisis,Ferguson correctly points out that financial engineering is one of the great forces behind human progress.The history of finance is a process of creative destruction.Financial risk-taking is necessary for economic expansion and human development, and Ferguson does a good job in making the case.Too bad it reads like a script made for the History Channel.



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