Saturday, January 03, 2009

I told you so...

Says Professor Niall Ferguson.  

His new book The Ascent of Money was plugged by Ed Vaizey (OP) recently on BBC Parliament's BookTalk and I'm definitely tempted to get hold of a copy later in the year. 

I only caught two episodes of the accompanying Channel 4 series which appeared to have been hastily re-edited after the events of the late Autumn on Wall Street. 

Ferguson is famously a counter-factual historian - building his analysis of major world upheavals from what-if scenarios, such as the notion that Europe might have done a lot better for itself if Britain and Germany had avoided such a head-on conflict in 1914. 

The marriage of economic convenience between Britain's empire (then rather nicely plugged into China) and German manufacturing was the pinnacle of the first great era of globalisation and it all fell apart when some Balkan loon whacked Archduke Ferdinand. 

Now we have Chimerica, explained Ferguson in Part 6 - a system whereby China saves using US Dollar Treasury Bonds which keeps itc currency weak and its products cheap for American consumers, who meanwhile have (or had) access to one of the largest sources of easy credit in economic history. 

In Part 4 Prof. Ferguson had been not so much counterfactual as not-all-the-factual, something I was taught very early on at Cambridge was the greatest sin a historian could commit. An episode that would supposedly explain why insurance doesn't really work in truly exceptional moments of crisis and disaster went off on an extended ideological gripe about welfare spending. 

Ferguson rather too blithely permitted the 'Chicago Boys' their moral compromise with Pinochet's murderous regime in Chile, failing to point out that a) the Friedmanites' policy's led to the biggest banking clusterfuck since, well, now...and b) that it was the series of consecutive socialist administrations that have followed the reintroduction of democracy in Chile which have really consolidated the 'economic miracle' there. 

It was Professor G.R. Elton who greeted the '86 intake of historians at Cambridge with a valedictory speech detailing his long fight against ideologues in the faculty. Historians' job was not to generate new theory through a selective gathering of the facts, but rather to make sure that theories developed elsewhere were exposed to the maximum number of historical facts in order that complex, muddled reality would always triumph over simplistic models (such as Marxism, his own great bugbear!). 

Ferguson himself concluded his series with the suggestion that the 'Quants' - those fiendishly clever mathematical types dedicated to predicting future market movements  - are prone to basing their prognostications on their own, inevitably limited, experience of the past.  As a result many were chewing on roast black swan this Christmas...

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