Book reviews: Money doesn't govern the world, author says
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Most "Wizard of Oz" fans will be surprised by one of Niall Ferguson's allusions to that fantasy in his latest book, "The Cash Nexus" (Basic Books, 552 pages, $30).
As he reminds readers, Dorothy, the Scarecrow, the Tin Man and the Cowardly Lion were directed to follow a meandering and dangerous "yellow brick road" to get to where they were trying to go.
"Few devotees of the classic Judy Garland movie are aware that the original 1900 book by Frank Baum was in part a satire on America's entry into the gold standard," Ferguson writes.
"In the eyes of the populists, the gold standard was a British and/or Jewish racket to depress Midwestern farm prices and enrich the financiers of Wall Street."
He proceeds to expound a long, erudite explanation of the gold standard to further his argument that, contrary to the lyrics of one of the best-remembered songs from the musical "Cabaret," it is not necessarily true that "money makes the world go around."
In fact, Ferguson argues passionately that other factors - such as power, the human propensity to violence and even sex - exert more influence upon the political life of nations and international relations than do economic forces.
It is from that premise that the title "The Cash Nexus" derives. It is a term used by the British philosopher Thomas Carlyle to describe the connection between economics and politics. That was also emphasized by economists David Ricardo and Joseph Schumpeter, philosopher George Wilhelm Friedrich Hegel and socialist Karl Marx.
Events in this century, most notably the waning of socialism and authoritarian government and the ascendancy of capitalism and democracy, have given rise, Ferguson maintains, to a need to discard such economic determinism in explaining history and fashioning public policy.
But Ferguson warns against concluding there is a causal connection between democracy and economic prosperity. Although that has become the conventional wisdom, cases such as the authoritarian "tiger" economies of Singapore, China and South Korea appear to fly in the face of that conclusion.
Nevertheless, he proceeds on the basis of evidence suggesting a strong connection between democracy and prosperity to make some strong public-policy criticisms and prescriptions. Some may choose to call those assertions provocative. Others may evaluate them as foolhardy.
He makes the case, for example, that the United States should act like an imperial power to further the spread of capitalism and democracy throughout the world. He goes so far as to suggest that this country should use military power to impose democracy on such rogue states as Iraq, just as it did in Japan and Germany after World War II.
Ferguson insists that imposing democracy on the world's rogue states would not increase the U.S. defense budget above 5 percent of gross domestic product and that the economic dividends would greatly exceed the costs.
The real reasons the United States will not do that are exaggerated fears of Chinese and Russian responses and a "pusillanimous fear" of military casualties, he writes.
"Perhaps, that is the greatest disappointment facing the world in the 21st century; that the leaders of the one state with the economic resources to make the world a better place lack the guts to do it."
There is a gold mine of historical information in Ferguson's book for students of history and economics. His allusions to Wagner, Tolstoy and Baum enhance the flow of his data-driven prose.
But he is out of his element in proposing a course for American policy-makers. His prescriptions would lead to this country's being perceived as the Wicked Witch of the West.
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