The Cash Nexus

Niall Ferguson’s previous books include The Pity of War (1999) and House of Rothschild: The World’s Banker, 1849-1999 (1999). The Cash Nexus: Money and Power in the Modern World, 1700- 2000 is Ferguson’s next scholarly contribution to an understanding of how war, political systems, and financial systems are related to each other.

Ferguson’s massive volume is intended as a critique of economic determinism, the view that economic activities determine political and social behavior. He argues that the connections between the political and economic spheres are complicated and that each can affect the other in ways that depend on specific historical circumstances. One of his particular targets is historian Paul Kennedy, who argued in The Rise and Fall of the Great Powers (1987) that when nations flourish economically they tend to over-extend themselves militarily in order to protect their markets and that military over-extension in turn leads to economic decline.

Using an impressive array of historical statistics, Ferguson argues that war is generally the stimulus for the development of political institutions. War is expensive and it creates the need for taxation and governmental borrowing. Taxation in many instances leads to representative government and borrowing helps create central banks. Ferguson sees dangers in the extension of welfare states, since welfare spending uses wealth that could be invested in the productivity and power of nations. Contrary to Kennedy, he maintains that the greatest threat to powers like the United States is not military over-extension, but under-extension, since failing to keep up the military weakens the ability of democracies to keep up in the global power struggle.

Ferguson’s argument is an intriguing one, and a valuable response to economic determinism. His citation of long lists of statistics, while impressive, often results in the ideas becoming lost in a welter of facts. The statistics may also try the patience of some readers.

Sources for Further Study

America 184 (May 28, 2001): 26-27.

The American Scholar 70 (Spring, 2001): 142.

Booklist 97 (March 1, 2001): 1213.

The Economist 358 (February 10, 2001): 84.

History Today 51 (May, 2001): 54.

Library Journal 126 (March 15, 2001): 92.

National Review 53 (April 30, 2001): 52.

The New York Times Book Review 106 (March 25, 2001): 9.

Publishers Weekly 248 (February 12, 2001): 194.