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Publications (69)
Policymakers generally have at least some historical assumptions, even if they have not been trained as historians. Often, these assumptions play a critical part in decision-making, especially in times of crisis. This article compares the reactions of George W. Bush’s administration to two epoch-making events: the 9/11 terrorist attacks of 2001 and...
A decade after the outbreak of the global financial crisis, a large trade imbalance between the world's two biggest economies, the U.S. and China, still exists and is more politically contentious than ever. This economic relationship, which we termed ‘Chimerica’ in 2007, seemed likely to end as a result of the global financial crisis. Yet this did...
In any airport bookshop from Boston to Beijing you will find entire shelves of books on how to succeed in business, the more credible of them written by authors who have themselves done so. It is a sign of just how long capitalism has been around that one of the earliest such books was written over half a millennium ago. It is a sign of how little...
This article explains that, while Walter Bagehot׳s Lombard Street had a rule about the central bank׳s role as a lender of last resort, it was not a precursor of the rules-based approach to monetary policy. Monetary policy rules came into fashion in the 1980s and 1990s when it became clear from the 1970s just how dangerous discretion could be. Under...
We ask whether developing countries reap credibility gains from submitting policy to a strict monetary rule. We look at the gold standard era, 18801914, to test whether adoption of a rule-based monetary framework such as the gold standard increased policy credibility, focusing on sixty independent and colonial borrowers in the London market. We cha...
Because they have failed to address the fundamental economic imbalances within Europe obscured by the single currency, each effort by European leaders so far to resolve the euro crisis has only deepened it. Without a decisive move toward fiscal and political union, accompanied by policies that push productivity and competitiveness toward convergenc...
This paper compares the patterns of foreign investment of two large capital-exporting coun-tries before 1914 -Great Britain and Germany. An original database of German capital exports, comparable to Stone's (1999) data for British capital flows was compiled for the period 1883-1913. Three classes of variables were tested as determinants of capital...
The life cycles of great powers have long been thought to follow a pattern of gradual rise and fall. But what if imperial collapse comes suddenly? A closer reading of history, from ancient Rome to the Soviet Union, suggests that empires fall quickly and without warning. A combination of fiscal deficits and military overstretch suggests that the Uni...
Thanks to the draining effects of the Iraq war and the financial meltdown emanating from Wall Street, a powershift away from American dominance is taking place. Caught between a rising China and an America in relative decline, the new leadership in Japan is recalibrating its post-World War II relationships. The G-20 has usurped the role once played...
For this specially themed issue, Foreign Affairs asked a number of prominent figures to recommend books that shed light on some aspect of the world ahead. Contributing their selections are Fouad Ajami, Madeleine Albright, C. Fred Bergsten, James Fallows, Niall Ferguson, Ayaan Hirsi Ali, Richard Holbrooke, Hu Shuli, Michael Ignatieff, Nicholas Krist...
In the summer of 1992, hedge fund manager George Soros was contemplating the possibility that the European Exchange Rate Mechanism (ERM) would break down. Designed to pave the way for a full-scale European Monetary Union, the ERM was a system of fixed exchange rates linking together twelve members of the European Union, including Britain, France, G...
What if the current recession turns out to be like the Great Depression of 1929-1933? Four years from now, the United States might find itself with a still-shrinking economy, half as many banks as in 2009, a third as many hedge funds, and retail banking resembling a public utility. The federal debt could be at $20 trillion, the top income tax rate...
The process of European economic integration slackened in the 1960s. National markets for goods, most services and labour were not being integrated because they were not really being liberalised. The exception to this rule was financial services, one of which - the sale of long-term corporate and public sector bonds to relatively wealthy investors...
Financial history is not conventionally thought of in evolutionary terms, but it should be. Traditional ways of thinking about finance, dating back to Hilferding, emphasize the importance of concentration and economies of scale. But these approaches overlook the rich "biodiversity" that characterizes the financial world. They also overlook the role...
For the better part of the past decade, the world economy has been dominated by a world economic order that combined Chinese export-led development with US over-consumption. The financial crisis of 2007-2009 likely marks the beginning of the end of the Chimerican relationship. In this paper we look at this era as economic historians, trying to set...
Are world financial markets paying due heed to geopolitical risk? Despite unchallenged U.S. military supremacy, the financial consequences of a terrorist nuclear strike, or war in the Middle East or the Taiwan Strait—or some totally unforeseen conflict—could still be enormous. That globalization under a powerful hegemon has strengthened linkages am...
Constraints and room for manoeuvre in the German inflation of the early 1920s. It is generally assumed that there was no alternative to inflationary policies in Germany immediately after the First World War, because of the costs of demobilization and reparations. However, this view fails to distinguish between political miscalculation and economic...
A noted historian looks at parallels between this financial crisis and 1929 and shows what must be done to avoid Depression 2.0
This paper asks whether developing countries can reap credibility gains from submitting policy to a strict monetary rule. Following earlier work, we look at the gold standard era (1880-1914) as a "natural experiment" to test whether adoption of a rule-based monetary framework such as the gold standard increased policy credibility. On the basis of t...
Over the past five years the world has witnessed a spectacular boom in asset prices. This paper reviews different explanations for this phenomenon, and argues that future financial historians will point to the divergence between high returns on capital and the low cost of capital, not to excess liquidity or asset shortage, as the driving force in g...
This paper is a comment on Local Company Politics: A Proposal by Raymond J. Fisman and Eric Werker which can be found at: http://ssrn.com/abstract=2206524.
The twentieth century was the bloodiest era in history. Despite the comfortable assumption that the twenty-first will be more peaceful, the same ingredients that made the last hundred years so destructive are present today. In particular, a conflict in the Middle East may well spark another global conflagration. The United States could prevent such...
This article uses price data and editorial commentaries from the contemporary financial press to measure the impact of political events on investors’ expectations from the middle of the nineteenth century until the First World War. The main question addressed is why political events appeared to affect the world's biggest financial market, the Londo...
This article reassesses the importance of colonial status to investors before 1914 by means of multivariable regression analysis of the data available to contemporaries. We show that British colonies were able to borrow in London at significantly lower rates of interest than noncolonies precisely because of their colonial status, which mattered mor...
Can developing countries enhance credibility with international markets by adopting a hard currency peg? In this paper we review the hypothesis that adherence to the gold standard facilitated the access of peripheral countries to European capital markets in the first era of financial globalization. To test whether the gold standard worked as a cred...
Could globalization collapse? It may seem unlikely today. Yet despite many warnings, people were shocked the last time globalization crumbled, with the onslaught of World War I. Like today, that period was marked by imperial overstretch, great-power rivalry, unstable alliances, rogue regimes, and terrorist organizations. And the world is no better...
This chapter seeks to reassert the importance of Britain's formal empire in the 'unofficial mind' of the late 19th-century City of London, suggesting that even if they did not initially see independent gold standard countries as more risky than colonies, investors learned through experience that they were. The reality was that membership of the Bri...
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...
Going critical. American power and the Consequences of Fiscal Overstretch
Long before the American Empire becomes overstretched abroad, it will implode economically at home. The ‘implicit’ liabilities of the American government, including pension and medical benefits for baby boomers, are abysmal, and the Bush policy is no sign that the administrat...
This article asks whether there is any casual connection between the contemporaneous decline in industriousness and religiosity in Europe over the past 25 years. In the United States working hours and levels of religious faith and observance have held steady or even increased over this period. But in most European countries they have declined toget...
Critics of U.S. global dominance should pause and consider the alternative. If the United States retreats from its hegemonic role, who would supplant it? Not Europe, not China, not the Muslim world—and certainly not the United Nations. Unfortunately, the alternative to a single superpower is not a multilateral utopia, but the anarchic nightmare of...
Compared with the First World War, which ended quite quickly once the position of Germany became strategically hopeless, the Second World War proved exceedingly difficult to end even after the overwhelming economic advantage of the Allied powers had turned the strategic tide decisively against the Axis. Both German and Japanese forces continued to...
Niall Ferguson is Herzog Professor of Financial History at New York University's Stern Business School and senior research fellow at Jesus College, Oxford University. His most recent books are Empire: The Rise and Demise of the British World Order and Its Lessons for Global Power (Basic Books, 2003) and Empire: How Britain Made the Modern World (Al...
1. Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (Basic Books, 2003).
2. Andrew Porter makes the claim that "a process of globalization" was already underway in the 17th and 18th centuries. This is not borne out by empirical studies of price and wage convergence. See Kevin H. O'Rourke and Je...
There is, in theory, a plausible role for the European Union as the partner of a militarily assertive United States: the peacekeeper that follows in the wake of the peacemaker. The war in Iraq, however, has raised the possibility of a diametrically different role for Europe: as a potential imperial rival to the United States. There is no need to in...
Wars nearly always increase state debts; perhaps the most common of all postwar problems is what to do about those debts. The theoretical literature on this subject tends to distinguish between the international distributional conflicts which arise, usually described as the victors seeking to shift part of their debt burden onto the shoulders of th...
The natural world, financial crises, wars, history — all modelled in a pile of sand.
To date, the successful launch of Europe's single currency has proven the euroskeptics wrong. But over time, the euro will be gravely threatened if the countries in the eurozone do not put their fiscal houses in order. Generational accounting, a careful analysis of long-term trends, paints a bleak picture: unsustainable spending will bury future ge...
Few economic events have had a more profound or enduring impact than the German hyperinflation of 1923, still remembered popularly as a root cause of Hitler's rise to power. Yet many historians have argued that inflationary policies were, on balance, advantageous to post-1918 Germany, both boosting growth and helping to reduce reparations. The scho...
Few economic events have had a more profound or enduring impact than the German hyperinflation of 1923, still remembered popularly as a root cause of Hitler’s rise to power. Yet many historians have argued that inflationary policies were, on balance, advantageous to post-1918 Germany, both boosting growth and helping to reduce reparations. The scho...
In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth's golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts. This po...
It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far...
President Barack Obama reminds me of Felix the Cat. One of the best-loved cartoon characters of the 1920s, Felix w as not only black. He w as also very, very lucky. And that pretty much sums up the 44th president of the US as he takes a w ell-earned summer break after just over six months in the w orld's biggest and toughest job. His stim ulus bill...
Think of the economy of the United States as a dinosaur — one of those huge herbivores whose bulk shook the ground. A brachiosaur. A brontosaur. A diplodocus. Like them, the U.S. economy is mind-bogglingly enormous — two and a half times as big as the next largest economy in the world and almost as large as that of the six other members of the Grou...
Global markets boomed last year --and nowhere was the euphoria more pronounced than in the initial public offering of Industrial and Commercial Bank of China, the biggest IPO in history. But Chinese banking stocks were only the extreme example of a general surge in asset prices that also manifested itself on global bond markets, real-estate markets...
If only. Law rence McDonald begins his insider's account of the fall of Lehm an Brothers w ith seven "w hat if" scenarios, speculating on how different decisions might have saved his former employer. If only Dick Fuld, Lehman's chief executive, had listened to those w ho w arned of impending losses on the bank's property portfolio. If only Mr Fuld...
A FEW years ago we came up with the term "Chimerica" to describe the combination of the Chinese and American economies, which together had become the key driver of the global economy. With a combined 13 percent of the world's land surface and around a quarter of its population, Chimerica nevertheless accounted for a third of global economic output...
The paradox: Diminished risk (perception) in a seemingly risky world We appear to be witnessing what Dan Bernstein and Jason Rotenberg of Bridgewater have called 'the death of volatility … across global [capital] markets'. 1 They look back twenty years and find that their aggregated implied volatility index is as low now (at 10 per cent) as in thre...