The Cash Nexus: Money and Power in the Modern World, 1700-2000 [Paperback]

Niall Ferguson (Author)

Book Description

Publication Date: February 21, 2002

Conventional wisdom has long claimed that economic change is the prime mover of political change, whether in the age of industry or Internet. But is it? Ferguson thinks it is high time we re-examined the link-the nexus, in Thomas Carlyle's phrase-between economics and politics. His central argument is that the conflicting impulses of sex, violence, and power are together more powerful than money. Among Ferguson's startling claims are: · Nothing has done more to transform the world economy than war, yet wars themselves do not have primarily economic causes. · The present age of economic globalization is coinciding-paradoxically-with political and military fragmentation. · Financial crises are frequently caused by unforeseen political events rather than economic fluctuations. · The relationship between prosperity and government popularity is largely illusory. · Since political and economic liberalization are not self-perpetuating, the so-called triumph of democracy worldwide may be short-lived. · A bold synthesis of political history and modern economic theory, Cash Nexus will transform the landscape of modern history and draw challenging conclusions about the prospects of both capitalism and democracy.

Editorial Reviews

From Publishers Weekly

In a work that neatly marries the subjects of his previous books, Ferguson, who made his name with controversial popular histories of World War I (Pity of War, 1999) and the Rothschild banking empire (House of Rothschild, 1998), continues to challenge conventional wisdom. Here, he argues that the enormous expense of war, which forces governments into fiscal innovation, is the primary agent of financial change and its political repercussions, which sometimes include starting new wars. In Ferguson's view, political crises defined broadly to include those spurred by religion, law and culture cause both wars and financial disasters; the ensuing political outcomes determine the long-term economic fallout. Economic events, on the other hand, affect politics in indirect and unpredictable ways. Emphasizing the nuances and exceptions to his argument, he marshals economic statistics to support it, though he does not discuss alternative explanations for financial change. Despite frequent, jarring digressions into the minutiae of 1980s British politics and in praise of Thatcherism, the book is lucidly argued. But for a history that focuses so much on war, it includes little discussion of the military. Most controversially, Ferguson challenges the orthodox assumption that the world is headed toward a peaceful, prosperous and democratic global future. Economic success does not always lead to stability, he argues, and economic freedom is neither necessary for economic growth nor sufficient for political freedom. Nor, he warns, will economic globalization necessarily lead to greater economic or political cooperation. (Mar.) Forecast: This book will be more talked about than read, though it will attract serious readers. Like Ferguson's The Pity of War, its merits should outlive the controversy over its predictions.
Copyright 2001 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

From Library Journal

In this scholarly tome, Ferguson (history, Jesus Coll., Oxford; The Pity of War) presents a heavily noted, high-level economic analysis of the impact of economic trends on political change. As he thoroughly analyzes the nexus between economics and politics, he delves deep into the complex relationship among economic principles and international war, political changes in major countries, social liberalization, and national demographics. He challenges the prevailing principles of well-known author Paul Kennedy (The Rise and Fall of the Great Powers), specifically that economic change is the prime mover of political change, contending rather that the conflicting impulses of sex, violence, and power are together more powerful than money. In the book's many dense chapters, Ferguson argues that political institutions have often dominated economic development, and he deftly integrates historical trends and eras, multiple economic principles and theory, as well as modern economic growth and development. This very complex economic analysis will well serve larger university libraries supporting higher-level study in economics, especially international economic theory. Dale Farris, Groves, TX
Copyright 2001 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

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Product Details

• Paperback: 576 pages
• Publisher: Basic Books (February 21, 2002)
• Language: English
• ISBN-10: 0465023266
• ISBN-13: 978-0465023264
• Product Dimensions: 9.3 x 6.1 x 1.6 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 3.7 out of 5 stars  See all reviews (23 customer reviews)
• Amazon Best Sellers Rank: #263,811 in Books (See Top 100 in Books)

More About the Author

Niall Ferguson is one of our most renowned historians. He is the bestselling author of numerous books, including The War of the World, Colossus, and Empire.

Customer Reviews

Most Helpful Customer Reviews

43 of 44 people found the following review helpful:

4.0 out of 5 stars Fascinating, if a little unfocused, April 23, 2001

By 

Kurt A. Johnson (North-Central Illinois, USA) - See all my reviews
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This review is from: The Cash Nexus: Money and Power in the Modern World, 1700-2000 (Hardcover)

In this monumental work, Professor Niall Ferguson traces the evolution of and relationship between money, the state and war. Beginning with a section on taxes (the earliest form of large-scale finance), the book continues with a history of bonds, currency and finance. Then, there is a great deal of information on how these financial institutions have influenced society. And, most importantly, the final chapters of the book look at money and finance on a global scale, analyzing everything including stock "bubbles", gold and military success and failure. This book was written in September 2000, which means that much of the author's data is right up-to-date!

The above description of this book does not begin to do justice to it. The author's knowledge is obviously encyclopedic, and this book covers a vast multitude of subjects relating to money and power. Indeed, my one complaint against this book is that, at times, does seem to meander from subject to subject, seeming to lose track of the point. However, that said, this is a fascinating book, one well worth taking the time to read.

As an aside, I must say that the author does seem to severely undermine Paul Kennedy's (author of The Rise and Fall of the Great Powers) concept of "imperial overstretch." Instead he raises up the possibility that countries have experienced "understretch" leading them into costly later wars (such as the British Empire before World War I), and that America may be understretching right now.

31 of 32 people found the following review helpful:

2.0 out of 5 stars a mixed book, August 21, 2006

By 

lector avidus (USA) - See all my reviews

This review is from: The Cash Nexus: Money and Power in the Modern World, 1700-2000 (Hardcover)

Niall Ferguson is a professor of political and financial history who has written other well-received, albeit controversial, books. My feeling after reading this book was rather mixed.

[..]
This, I think, is where things become more complicated than the book suggests. Did England found the Bank of England and establish the other institutions that allowed the United Kingdom to become the global hegemon in order to become a global hegemon? Or did Parliament and the Bank of England etc. arise to meet other needs, and prove far more useful than originally foreseen? I strongly believe the latter to be true: Britain, as an island nation, had no neighbors, and was an (after 1066) invasion-proof distance from France. These factors almost certainly allowed the United Kingdom to generate a merchant class far more influential than its counterparts on the continent, engage in more maritime trade, and devote less to military spending than did land-locked nations that faced war at any time. In time, this merchant class, and the practice of dividing risks and participating in syndicates to conduct foreign trade almost certainly led to the culture and institutions that led to the Bank of England. Of course, if the Bank of England and the like did not arise as much from conscious policy decisions as from circumstances, it would seem more expedient to focus on the circumstances that led to the BofE and Britain's broad and deep credit markets, rather than on arcane policy decisions.

The rest of the book is an exhaustively documented look at the relationship between the health of various states and various financial indicators, such as debt, the presence of the gold standard, unemployment and the like. Some of the ideas may be provocative to some, but are very well-founded, and well worth reading, others less so. They are, however, not presented in a focused manner, and many of them are more advanced as "working hypotheses" than exhaustively proven. I believe that case studies examining multiple variables would have been more informative than attempts to reduce complex situations to a single variable.

Somewhat jarring is that some of the Ferguson's facts are wrong: in Chapter 12 he suggests that Switzerland succumbed to the Nazi tide, three pages later we learn that the opposite happened. To emphasize the importance of bullion he goes into the details of the movie based on Ian Fleming's "Goldfinger," but gets them wrong: the idea was not to sneak off with Fort Knox's gold - a logistical impossibility - but rather to render it radioactive and hence untradeable. At least one somewhat complicated book that Ferguson endorses is so flawed that its own author has repudiated it; this shouldn't happen in a polemic whose credibility is based on the author's ability to get his facts straight.

To sum up, parts of this book are quite interesting and stimulating, other parts less so. Having read this book, I personally would not choose to read it again.

28 of 32 people found the following review helpful:

2.0 out of 5 stars All Things to All People, October 30, 2001

By 

Michael Gerace (Worcester, MA) - See all my reviews
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This review is from: The Cash Nexus: Money and Power in the Modern World, 1700-2000 (Hardcover)

The Cash Nexus is an overly ambitious attempt to re-examine the link between economics and politics in the post-Cold War period.

The most interesting part of the book is the first 6 chapters, which focus on how state institutions have emerged over time to serve the needs of war finance--the principal impetus behind the rise of the modern state. These institutions produce what Ferguson calls an optimal combination for producing power and include 4 institutions: a professional tax gathering bureaucracy; a parliament that accords a measure of representation to tax payers; the management of a system of national debt, which allows the state to borrow; and a central bank to manage a currency and the national debt. Ferguson maintains that this combination first emerged in Britain after the Glorious Revolution and was later exported to other countries and, together, produced many unintended benefits, such as an educated civil service and expanded capital markets which served the needs of the economy.

An important part of Ferguson's argument is that economic philosophies have produced two deterministic views of history--one Marxist and the other liberal capitalist. While one opposes capitalism and the other celebrates it, both see history as being essentially economic history. The modern variety of economic determinism (neoclassical economics) has produced three ideas that Ferguson criticizes: economic growth promotes democratization; economic success leads to re-election; and economic growth is the key to international power. While Ferguson's criticisms are interesting, there are a few shortcomings.

One is that he makes the mistake of equating wealth with money when discussing liberal economics. In fact, the term money seems to be a synonym for economics wherever Ferguson discusses modern economic ideas on history, but he does not take note of the fact that liberal economics--whether classical or modern--does not view money as being the core of the economy.

The dichotomy between Marxism and neoclassical economics appears too simple as well. He fails to note that much of the West--i.e., on the Continent of Europe--practices a rather different variety of capitalism than that suggested by the Anglo-American model, one that is corporatist and whose adherents are often in strong antipathy to open and competitive markets. The absence of this distinction becomes annoying when he discusses fixed exchange rates and monetary unions (Chapter 11). He argues that floating exchange rates and market instability cannot go on forever, that some sort of supranational controls are required. If we take the Anglo-American model to mean the way the United States and Britain operate, then fixed exchange rates and monetary unions are not part of that. In fact, proponents of this model generally argue against what Ferguson argues for.

Sections 3 and 4 (Chapters 7-14) cover so many different topics that the material does not integrate well into the core themes of the first two sections. A related matter is one of depth. While the research of other disciplines is frequently discussed (e.g., political science and economics), he often considers too thin a slice of that research to provide enough depth in any one place. While arguing against the idea that political manipulation of the business cycle always leads to re-election, for example, he does not engage most of the literature on this question.

Another issue is the way in which data is used. Some of his charts present data across so many years and countries that it is hard to see the detail in the movement of the figures. This is especially true when the figures contain extreme values during the world wars.

Ferguson returns to the warfare state at the end of the book to argue that the West is quite under-militarized and potentially vulnerable to more aggressive states. The United States should heed this warning and assert its role as a hegemonic power again. Ferguson concludes that money does not, after all, make the world go round. People are driven by motivations other than economic gain and power has many facets to it--some tangible and some not. While this may be true, it is not much of a revelation.