“Keynesian” (after John Maynard Keynes) economists and historians tend to downplay the effects of inflation on the Weimar Republic; Ferguson, in contrast, takes the position commonly held by contemporary analysts, that hyperinflation was fatally undermining the stability of the German government. However, what most distinguishesPaper and Iron from earlier works on the topic is Ferguson's attempt to demonstrate how the hyperinflation could have been avoided. In his thesis, he argues that the German government could have installed conservative fiscal policies to halt the inflation. The social unrest accompanying the recession that most likely would have followed, Ferguson maintains, could have been controlled with authoritarian measures taken by the government. Most importantly, the revitalized bourgeois society to follow, Ferguson asserts, would have been less susceptible to the Nazi movement of the early 1930s. In Paper and Iron, Ferguson is offering an alternative scenario to what actually occurred, thereby presenting a “counterfactual” history.

Ferguson further explores counterfactual history in Virtual History (1998), a collection of essays for which he served as both editor and contributor. The volume examines the use of counterfactual hypotheses (such as “What if Nazi Germany had won World War II?” and “What if John F. Kennedy had lived?”) to provide alternative scenarios to now foregone historic events. In his introduction, Ferguson contends that the use of counterfactual historical argument is a necessary check against determinism—particularly Marxist determinism—which, in his view, treats history as a fixed, teleological narrative. Ferguson explains that by comparing alternative outcomes, a better understanding of what actually occured can be achieved, thus illuminating historical study further. In addition to the various “virtual history” chapters by others, Ferguson presents his own, a speculative survey of alternative events beginning in the seventeenth century and ending in the 1990s with the Confederation of American States declaring its independence from Stuart-ruled Britain. Ferguson's penchant for counterfactual history played a significant role in his next book, The Pity of War (1998), his best-known work to date. Drawing upon extensive analysis of economic and statistical data, Ferguson reconsiders the origins, rationale, and impacts of the First World War and advances several arguments that debunk standard historical interpretations of this much-studied topic. Most notably, Ferguson concludes that the war was neither inevitable nor necessary, and furthermore, that Britain was largely to blame for intervening in—and prolonging—a conflict that posed no immediate threat to its national interests. According to Ferguson, Britain actually feared France and Russia, and in order to create alliances with its imperial adversaries, it needed to attribute aggressive intentions to the Germans. In another controversial section, Ferguson suggests—citing Sigmund Freud's concept of the “death instinct”—that the war was further prolonged by the fact that both British and German soldiers actually enjoyed killing. Ferguson's counterfactual argument considers the less disastrous course of events if Britain had not entered into the war. According to Ferguson, Germany would have won the war and the internal problems that led to the rise of Hitler could have been avoided. Without Hitler, the Holocaust and World War II would not have occurred, as well as the subsequent Cold War between the United States and the Soviet Union. Instead, Germany would have remained content to dominate the European continent and would not have posed a significant threat to Britain. Moreover, Ferguson's argument goes, World War I was unnecessary. Had Britain not entered the continental conflict, Europe would still have turned out similar to the way it actually is today—dominated by a Germany more economically powerful than any other European nation. Ferguson's interest in economics is again apparent in the more conventional work, The World's Banker (also published in two volumes under the title The House of Rothschild.) This comprehensive history of the Rothschild financial empire documents the family's extraordinary rise from humble eighteenth-century origins in a Frankfurt ghetto to prominence as a leading international credit and investment franchise during the nineteenth and twentieth centuries. For his research, Ferguson was given unrestricted access to the Rothschild archives, including confidential letters, ledgers, and memos, some of which were encrypted in Hebrew code. The resulting work, in addition to illustrating how this fabled Jewish family acquired and extended its immense wealth, demonstrates the significant political influence the Rothschilds exerted on the sphere of world history.

Critical Reception

Since the beginning of his professional career, Ferguson has been associated with controversial positions in historical scholarship. The main exception to this trend is The World's Banker, which takes a rather traditional look at its subject. Reviewers found little, if anything, polemical in this extensive family history. Instead, critics were mainly divided in their opinions as to whether Ferguson had successfully managed to bring together the wealth of information from which he worked. Ferguson's unconventional approach to history was, however, the focus of critical commentary following the publication of Virtual History. While the use of counterfactuals had, for the most part, been confined to fiction (for example, novels featuring a world in which the Nazis prevail), Virtual History called attention to the use of them in historical studies. Though the several “What if?” essays of the volume were found to have varying degrees of success, Ferguson's introductory defense of counterfactuals was generally greeted as persuasive, opening the way for future discussions of their use. Ferguson's first book, Paper and Iron, was praised as a welcome reassessment of the period of German hyperinflation. In particular, the author was credited for examining the perspective of the Hamburg business elite and providing insightful analysis of Hamburg's social and business history. However, Ferguson's assertion that German hyperinflation posed as great a threat as the deflationary crisis a decade later has been questioned, as has his counterfactual argument that a conservative fiscal policy on the part of the German government to fight the inflation would have had beneficial results. Critics also questioned the author's sympathy for the economic troubles of the bourgeois elite, as well as his suggestion that rightist authoritarian measures could have been enacted to subdue the laboring class. The controversy surrounding Paper and Iron, however, was relatively minor compared to that following the publication of The Pity of War, Ferguson's most contentious book to date. In Britain, where World War I is remembered by many as a tragic demonstration of moral courage and sacrifice, the author's claim that Britain was at fault for creating the war was especially galling, especially in light of the tremendous human cost exacted on that nation. Despite this unpopular view, Ferguson was praised for effectively bringing economics into the debate concerning the origins of World War I. In its argument that the war between Britain and Germany was avoidable, though, The Pity of War is generally faulted for not taking into account the true nature of the rivalry between the two countries, as well as for greatly underestimating Germany's expansionist tendencies. Some commentators also suggest that the book expresses a political conservative's longing for the British imperial past. While his conclusions were not widely accepted, Ferguson was again credited with giving new life to a much-studied event. A critic of New Labour politics, Ferguson is often disparaged as a “Dial-a-Don,” a dismissive moniker attributed to certain British intellectuals who do not hesitate to give their opinions to the British media. Despite such criticism, Ferguson shows no inclination to change his approach to writing history, which has renewed interest in his subjects and established him as an academic celebrity.