Niall Ferguson: Renews Debate with Paul Krugman Over US Stimulus
Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor at
Harvard Business School.
Area of Research:
Financial and Economic History, History of Colonialism.
Magdalen College, Oxford, B.A. (first class honors), 1985;
D.Phil., Oxford University, 1989;
attended University of Hamburg.
Ferguson is the author of High Financier: The Lives and Time of Siegmund Warburg. New York: Penguin Press, 2010;
The Ascent of Money: A Financial History of the World. New York: Penguin Press, 2008;
The Evolution of Financial Services. New York: Oliver Wyman, 2007;
The War of the World: Twentieth-century Conflict and the Descent of the West. New York: Penguin Press, 2006;
Colossus: The Rise and Fall of the American Empire. London: Allen Lane/Penguin Press, 2004. (Also published in the
U.S. as Colossus: The Price of America’s Empire);
Empire: How Britain Made the Modern World. London: Allen Lane/Penguin Press, 2003. (Also published in the U.S.
as Empire: The Rise and Fall of the British World Order and the Lessons for Global Power.);
The Cash Nexus: Money and Power in the Modern World, 1700-2000. London: Allen Lane/Penguin Press, 2001.
(Also published in the U.S.; Germany; Italy; Spain and South Korea; forthcoming in Turkey.);
The Pity of War. London: Allen Lane/Penguin Press, 1998. (Also published in the U.S. and Germany.);
The World’s Banker: The History of the House of Rothschild. London: Weidenfeld & Nicolson, 1998.
(Winner of the 1998 Wadsworth Prize for Business History. Shortlisted for the Jewish Quarterly/Wingate
Literary Award and the American National Jewish Book Award. Also published in the U.S. and Germany.);
Virtual History: Alternatives and Counterfactuals. London: Macmillan, 1997. (Also published in the U.S.,
Spain, Germany, Poland and Japan.); Paper and Iron: Hamburg Business and German Politics in the Era of Inflation,
1897–1927. Cambridge: Cambridge University Press, 1995. (Shortlisted for the Longman/History Today Book of the Year
award.) Author of radio series Days that Shook the World, BBC Radio 4.
Ferguson is also the author of numerous scholarly journal articles, book
chapters and reviews. Contributor to periodicals, including the Times,
Sunday Times, Financial Times, Daily Telegraph, New York Times, Independent, Guardian, Spectator, New Republic,
Wall Street Journal, Washington Post, Die Welt (Germany), Past & Present, English Historical Review, Economic
History Review, Economic Journal, Harvard Business Review,
Business History, International Finance, Foreign Policy,Foreign Affairs, and the Journal of Economic History.
Contributor to books, including Secrets of the Press: Journalists on Journalism, edited by Stephen Glover,
Penguin, 1999; Progress and Emancipation in the age of Metternich: Jews and Modernisation in Austria and
Germany, 1815-1848, edited by Andrea Hamel and Edward Timms, Edwin Mellen Press, 1999; The Short
Oxford History of Europe: The Nineteenth Century, edited by T.C.W. Blanning, Oxford University Press, 2000;
and Great War, Total War: Combat and Mobilization on the Western Front, edited by Roger Chickering and Stig
Förster, Cambridge University Press, 2000.
Also author of e-lecture,"Why the World Wars Were Won." Ferguson's works have been published in Spain, Germany,
Poland, Italy, and Japan.
Ferguson is a bestselling author and the recipient of numerous awards and fellowships including
among others: The Ascent of Money - International Emmy Award recipient for Best Documentary, 2009;
Wadsworth Prize for Business History, 1998, for The World's Banker: The History of the House of Rothschild ;
Short-listed for the Jewish Quarterly/Wingate Literary Award and the American National Jewish Book Award, for
The World's Banker, 1998;
Houblon-Norman Fellowship, Bank of England, 1998-99;
Short-listed for the History Today Book of the Year award"Paper and Iron: Hamburg Business and German Politics
in the Era of Inflation 1897-1927," 1995.
Ferguson is a resident faculty member of the Minda de Gunzburg Center for European Studies. He is also a Senior
Research Fellow of Jesus College, Oxford University, and a Senior Fellow of the Hoover Institution, Stanford
Ferguson previously has held the following positions: Christ's College, Cambridge, England, research fellow, 1989-90;
Peterhouse, Cambridge, official fellow and
lecturer, 1990-92; Jesus College, Oxford University, fellow and tutor in modern history, 1992-2000,
professor of political and financial history, 2000- 02; Stern Business School, New York University,
Herzog Chair in Financial History, 2002-04.
When I was a schoolboy in Glasgow, I suppose I was treated to the usual smorgasbord of historical subjects that
most British school children study. A few weeks of the Romans, a few weeks of ancient Britains, some Scottish
history, and then it became a little bit more serious. The Wars of the Roses, the Reign of James the VI and I,
what was then called the English Civil War, or Revolution, but these days they call it something much fancier
like the British Civil Wars (plural). And I studied the 19th and 20th centuries at school too. I’m not sure
all of these different things were terribly well connected, but I did find myself drawn more and more to the
subject the older I got. And the turning point, I think was the year—and I’m guessing my age was 15 or 16—when
I was studying Hamlet in English Literature, and the 30 Years War in history. Now the study of the play, Hamlet,
is something that everybody should undertake, and I still have fond memories of the essay I wrote on the theme of
death in Hamlet.
But when I was studying the 30 Years War, I was encouraged by my history teacher, Bonnie Woods, to go to the Mitchell
Library, which is a wonderful library in Glasgow. And I went in, in search of books on the 30 Years War and was
absolutely stunned to find an entire shelf of books on the 30 Years War; the first of which was by Friedrich
Schiller, the great German sturm und drang dramatist and historian. And it was the realization that there were
so many different ways of thinking about the 30 Years War as opposed to the one play of Shakespeare called Hamlet
that shifted my attention from English to History.
Historical study differs from a great many other things; say the whole realm of the social sciences for two reasons.
Firstly, we’re not engaged in model building. We’re not trying to simply the world of human beings into some kind of
mathematical model. Historians live and breathe the complexity of the past and we accept that there really is a
sample size of one. There’s only one human history and we can’t rerun it in any laboratory, so we can’t be engaged
in a scientific endeavor. The second thing that history does is that it encourages that minority of human beings
who are alive, I think it’s only 7% of human beings who ever lived who are alive right now, to understand what
the other 93% experienced in their time.
So, historians build a bridge backwards through the generations, and at the heart of our enterprise is the imagination.
One has to imagine what it was to be in another time, in another predicament. And that active imagination is at the
heart of the historical process. The great philosopher, R.G. Collingwood said, “We are engaged in reconstructing past
thought on the basis of those remnants that other civilizations leave behind; the letters, the documents.” That’s
really what history is.
So, this combination of understanding complexity and reimagining past life seems to me to be a tremendously valuable
combination of skills. More reliable in my view than more formal forms of social science, as a way of understanding
the futures (plural) because there is no such thing as the future singular. There’s just multiple futures, and we
all collectively get to choose, or at least we try to choose, and it’s the combination of our decisions that produces
the one future that happens.
I have become more and more convinced with every passing year, that as an historian, I’m in a stronger position to
imagine plausible futures than somebody who is trained in another discipline. At least some of which has happened to
the last—the dead 93% of humanity just gives me more scenarios to draw from. Trying to think about the futures
requires a certain amount of thinking by analogy, and if all you’ve got to go on is your own lifetime experience
plus some model, I think you’re likely to get it wrong, whereas with historical understanding of past scenarios,
you’re probably going to be better at visualizing the futures than the competition. And that, I think, is an
extremely powerful for the study of history, not just by people who want to be professional historians, but also
by people who want to be good citizens, good decision-makers, good scenario-builders.
The study of history is all about time. For example, in the project that I am currently working on—which is a
provisionally titled “History of the West and the Rest," the rise of the west to predominance after around 1500—time
plays a key role. The Chinese had clocks, elaborate hydraulic water clocks; well before west Europeans had anything
like that. But when west Europeans began to build mechanical clocks, which they initially needed to get the timing of
church services right, a revolution began which was characterized by the rapid dissemination of smaller and smaller
timepieces. The Chinese had these huge clocks, they were pretty accurate, but they never had watches. They never had
clocks that you could just put in your living room. And so, I’m fascinated by the technological revolution of the
clock and the watch because, of course, that transformed the precision with which westerners could live their lives.
So, time is something that I have long been obsessed with. And I suppose I’ve come to realize that the power of time
was one of the things that made the West ascend to dominate the rest for most of the last half-millennium.
Originally published as part of"Big Think Interview With Niall Ferguson" 5-14-2010
My research is motivated by the feeling that historians have tended to underestimate the importance of financial
markets in modern history, and that the great upheavals of our times can be illuminated by looking at the prices of
securities, exchange rates, and other market data. These offer invaluable clues as to the expectations of
contemporaries. How did people in the past conceive of, and choose among, the various futures open to them? If
investors anticipated war or a revolution, for example, they tended to sell a country’s bonds in the expectation of
higher government deficits and inflation, or to buy defense company stocks.
I have two tracks of research: qualitative (memoranda, letters, and diaries) and quantitative (securities prices,
exchange rates). To understand these sources better, I spend a lot of time talking with financial market
practitioners. I am keen on subverting established historical narratives with a sense of what might have been.
Currently, I’m working on the great economic and geopolitical crisis of the 1970s. Understanding what went wrong
then—from stagflation to Vietnam—might shed some light on our own time. Losing a war abroad, losing faith in a
President, watching the dollar drop, and the price of oil soar—it has a familiar ring.
Originally published as part of"Niall Ferguson illuminates historic upheavals by analyzing financial markets"
The Yard Magazine (Harvard), 5-22-2008
By Niall Ferguson
Are we on the brink of a 'great dying' in the financial world, one of those mass extinctions of species
that have occurred periodically, like the end-Cambrian extinction that killed off 90 percent of Earth’s species,
or the Cretaceous-Tertiary catastrophe that wiped out the dinosaurs? It is a scenario that many biologists have
reason to fear, as man-made climate change wreaks havoc with natural habitats around the globe. But a great dying
of financial institutions is also a scenario that we should worry about, as another man-made disaster works its way
slowly and painfully through the global financial system....
In 2007 the United States needed to borrow around $800 billion from the rest of the world; more than $4 billion
every working day. China, by contrast, ran a current account surplus of $262 billion, equivalent to
more than a quarter of the U.S. deficit. And a remarkably large proportion of that surplus has ended up being lent
to the United States. In effect, the People's Republic China has become banker to the United States of America....
The Dutch Republic prevailed over the Habsburg Empire, because having the world's first modern stock market was
financially preferable to having the world’s biggest silver mine. The problems of the French monarchy could not be
resolved without a revolution because a convicted Scots murderer had wrecked the French financial system by
unleashing the first stock market bubble and bust. It was Nathan Rothschild as much as the Duke of Wellington
who defeated Napoleon at Waterloo. It was financial folly, a self-destructive cycle of defaults and devaluations,
that turned Argentina from the world's sixth-richest country in the 1880s into the inflation-ridden basket case of
Financial history is essentially the result of institutional mutation and natural selection, as in the natural world,
the evolutionary process has been subject to big disruptions in the form of geopolitical shocks and financial crises....
Those who put their faith in the 'wisdom of crowds' mean no more than that a large group of people is more likely
to make a correct assessment than a small group of supposed experts. But that is not saying much. The old joke that
'Macroeconomists have successfully predicted nine of the last five recessions' is not so much a joke as a dispiriting
truth about the difficulty of economic forecasting. Meanwhile, serious students of human psychology will expect as
much madness as wisdom from large groups of people. A case in point must be the near-universal delusion among
investors in the first half of 2007 that a major liquidity crisis could not occur." --
Niall Ferguson in"The Ascent of Money: A Financial History of the World"
Conversations with History - Niall Ferguson, UC Berkley, 11-3-08
"With the Kaiser triumphant, Adolph Hitler could have eked out his life as a mediocre postcard painter ...
in a German-dominated Central Europe about which he could have found little to complain. And Lenin could have
carried on his splenetic scribbling in Zurich, forever waiting for capitalism to collapse--and forever be
Niall Ferguson in"The Pity of War: Explaining World War I"
Now, who said the following? 'My prediction is that politicians will eventually be tempted to resolve the
[fiscal] crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to
inflate away debt. And as that temptation becomes obvious, interest rates will soar.' Seems pretty reasonable to me.
The surprising thing is that this was none other than Paul Krugman, the high priest of Keynesianism, writing back
in March 2003. A year and a half later he was comparing the U.S. deficit with Argentina's (at a time when it was 4.5
percent of GDP). Has the economic situation really changed so drastically that now the same Krugman believes it was
'deficits that saved us,' and wants to see an even larger deficit next year? Perhaps. But it might just be that the
party in power has changed. --
Niall Ferguson in"An Empire at Risk," Time, 12-7-09
"The risk is that at some point your fiscal policy loses credibility in the eyes of investors....
Then, very quickly, you will find yourself in a debt spiral of rising rates, widening deficits, crumbling
credibility and yet more rising rates."... "The markets are fine until they are not fine... For more than a year since our debate began, it's the Chinese who've
been consistently agreeing with me, saying that they regard the course of U.S. fiscal and monetary policy as
dangerous. So it’s not just me you are arguing with, Paul, actually, it’s the Chinese government." --
Niall Ferguson at the World Knowledge Forum in Seoul, Oct. 2010.
"The risk is that you finally stretch the credulity of financial markets to the breaking point, and investors —
not only in the U.S., but abroad — say, 'You know what? U.S. fiscal policy really is out of control,'"...."The comparison just suggests a complete historical ignorance on their part.""In the Depression ... the stock
market fell 85 percent; the unemployment rate was 25 percent. Right now, the U.S. economy, its gross domestic
product is about 2 percent below its pre-crisis peak. The unemployment rate is below 10 percent — the economy is
"Globalization had collapsed by 1932 — before Roosevelt even came into office — so it was relatively easy to engage
in fiscal or monetary stimulus, because there was virtually no trade, and there was virtually no capital movement
across borders."..."It is no coincidence that the United States has been engaging in massive deficit finance and massive quantitative
easing — to use the technical term for printing money — and that simultaneously, there have been surges in commodity
prices and in emerging markets."..."If the Fed is making dollars available virtually for free to the financial system, don't be surprised if people
take that money and instead of investing in, I don't know, a new car factory in Michigan, they go and try and
invest it in a more profitable way."..."Nobody really wants to invest in any significant way in new plans under conditions of uncertainty, and there's huge
policy uncertainty."..."They're also going to have to stabilize the monetary position, which means probably higher interest rates. Because
of that uncertainty, a lot of businesses are just sitting on their hands."..."Confidence is a huge part of what makes an economy grow."..."I have news for you — most of the academic economists know fantastically little about the way that the real world
works, because they spend a lot of their time doing applied mathematics and devising fancy models that effectively
simplify the way the world works, because that sounds really clever.""What this crisis has revealed is that that cleverness is of very little value in the real world." --
Niall Ferguson in"Why Another Stimulus Might Not Help Us Rebuild", NPR, 10-17-2010
About Niall Ferguson
"Ferguson differs from most other historians by believing that hyperinflation could have been
prevented, that it was due largely to the fear of revolution which might follow deflation, to the continued
weakness of the German central authorities, and to the underlying policy of wishing to sabotage the reparations
payments." -- Sidney Pollard, Business History
"Ferguson shows himself both erudite and cogent in staking out the ground. While building on the insights of
predecessors like Bury, Popper, or W.B. Gallie, Ferguson reformulates the essential arguments with characteristically
late twentieth-century appeal to chaos theory in reconciling causation and contingency." --
Peter Clarke, London Review of Books about"Virtual History: Alternatives and Counterfactuals"
The Rothschilds'"enthralling story has been told before, but never in such authoritative detail."...
The Rothschilds"never became big American players. They liked to lend to the government of a country before they
did commercial business there, but this was difficult when the United States was a genuinely loose federation, some
of whose states were 'among the least reliable' of all borrowers in the nineteenth century, and especially when
Andrew Jackson was conducting his war against the Bank of the United States."..."The Rothschilds were renowned for
their intelligence, in every sense of the word." -- Geoffrey Wheatcrof, New York Times Book Review about"The House of Rothschild"
A triumph of historical research and imagination. -- Robert Skidelsky, The New York Review of Books
about"The House of Rothschild: Volume 2: The World's Banker: 1849-1999"
Brilliant... enthralling... proves that academic historians can still tell great stories that the rest of us
want to read. -- The New York Times Book Review about"The House of Rothschild: Volume 2: The World's Banker: 1849-1999"
"Ferguson is right: they were more like royalty than aristocracy. They knew their worth, and also that it was
unprecedented."... Ferguson"writes impeccably, and with empathy. ... This is a major achievement of historical
scholarship and historical imagination. Ferguson's work reaffirms one's faith in the possibility of great historical
writing." -- Fritz Stern, the New Republic about"The House of Rothschild"
"An entertaining, engaging romp through four centuries of British imperialism." -- Los Angeles Times about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"Brilliantly challenges the simplistic focus on racism, violence and exploitation.... A concise and lucid
exposition.... Popular history at its best." -- Washington Post about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"Engrossing, opinionated and immensely entertaining." -- The Globe and Mail about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"Fluently written, engaging, beautifully designed and spectacularly illustrated.... Empire is a model of how to
do popular history." -- The Economist about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"Though Empire is scrupulous scholarship, it is also a rattling good tale." -- Wall Street Journal about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"Vivid and often insightful history." -- The Nation about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"A splendid history.... If Americans want to be convinced of the benefits of empire, as well as apprised of its costs,
they need merely pick up Ferguson's dazzling book." -- Weekly Standard about"Empire: The Rise and Demise of the British World Order and the Lessons for Global Power"
"A heartbreaking, serious and thoughtful survey of human evil that is utterly fascinating and dramatic . . .
superb narrative history." -- The New York Times Book Review about"The War of the World"
"Ferguson's best book, by far, since The Pity of War . . . from bond markets to the face of battle, he has returned
to the themes of his earlier book and to his strengths." -- Paul Kennedy, The New York Review of Books about"The War of the World"
"Wielding at once the encyclopedic knowledge of an accomplished scholar and the engaging prose of a master
storyteller, Ferguson commendably brings fresh insights to a history by now familiar. . . . A tour de force."
-- San Francisco Chronicle about"The War of the World"
"Even those who have read widely in 20th-century history will find fresh, surprising details."
-- The Boston Globe about"The War of the World"
"A fascinating read, thanks to Ferguson's gifts as a writer of clear, energetic narrative history."
-- The Washington Post about"The War of the World"
"Before regulators throw block trades, bond swaps, bridge financing, butterfly spreads and Black-Scholes out
with the bathwater, they should find time to read Niall Ferguson's The Ascent of Money." --
The Wall Street Journal about"The Ascent of Money: A Financial History of the World"
"[An] excellent, just in time guide to the history of finance and financial crisis."
-- The Washington Post about"The Ascent of Money: A Financial History of the World"
"Shrewdly anticipates many aspects of the current financial crisis, which has toppled banks, precipitated
gigantic government bailouts and upended global markets." -- Michiko Kakutani, The New York Times about about"The Ascent of Money: A Financial History of the World"
No longer the banking force it formerly was, the Warburg name belongs to historians now. Ron Chernow
chronicled the clan in The Warburgs (1993), and here the notable economic historian Ferguson (The Ascent of Money,
2008) depicts Siegmund Warburg (1902–82), who in his prime was the most important and influential member of the
family. Verbose for someone trained in accountancy, Warburg amassed written opinions about virtually everything,
furnishing Ferguson with an abundance of source material that he synthesizes with a practiced hand. Throughout his
life, Warburg was never passionately interested in money. His early aspiration for an academic or political career
was thwarted by the Nazi ascendance in his native Germany. Warburg immigrated to London, where, from the platform
of his reestablished banking business, he involved himself in intelligence during WWII and in proffering advice
to Labour Party politicians afterward. Sketching in the bibliophilic Warburg's intellectual interests, Ferguson's
comprehensive biography ably integrates the private, public, financial, and philosophical facets of Siegmund
Warburg's character. -- Gilbert Taylor, Booklist about"High Financier: The Lives and Time of Siegmund Warburg"