The Cash Nexus: Economics And Politics From The Age Of Warfare Through The Age Of Welfare, 1700-2000 (Paperback)

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.

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.