Niall Ferguson: Renews Debate with Paul Krugman Over US Stimulus

Basic Facts

Teaching Position: 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.
Education: Magdalen College, Oxford, B.A. (first class honors), 1985;
D.Phil., Oxford University, 1989;
attended University of Hamburg.
Major Publications: 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.
Awards: 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.
Additional Info:
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 University.
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.

Anecdote

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

Quotes

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 the 1980s....
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

"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 growing."... "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