Sunday, 22 May 2016

Niall Ferguson: Scornful, Controversial and Brilliant

Even though this last week involved Great Lectures by Great Speakers, including Yeonmi Park (the young girl who escaped North Korea) and Yanis Varoufakis (the controversial and heterodox economics professor and formerly Finance minister of Greece), I must admit that Niall Ferguson's more crowded lecture tonight at the infinitely more magnificent venue of Sydney Opera House, was in a league of its own. How could I possibly say otherwise, when within ten minutes he referred to a rather obscure character of my beloved Harry Potter as well as favourably discussing McCloskey's brilliant story of why the Industrial Revolution (or the Great Enrichment) happened?

Indeed, the entire evening felt like he intentionally tried to please me. Anti-PC, rallying against the Welfare state and intergenerational imbalances, corrupt establishment politicians, mocking Trump, and filling his excellent speech with subtle rebuttals and off-handed criticisms of famous historians and economists.

In a way, Ferguson is the ideal historian. He's funny and charming, arrogant and scornful, incredibly knowledgeable in a very wide range of topics and he has a sufficiently good grasp of economics to actually do relevant history. His overarching message is to study Applied History, use history instrumentally to better understand the situations we face in the present. He came into history once he realized that writing history essays was the only thing he was really good at, and he told us in a sassy and arrogant way what still keeps him going; before starting on his massive current work on Kissinger, he was going through an incredible amount of Kissinger's unpublished material and said:
"I realized that everything that was written on him before was completely wrong!"
This amazing self-confidence and burning desire of proving people wrong fuels many of us 
and contributes to a living and flourishing academic environment. Which, of course, is diametrically opposed to the "post-modernist mumbo jumbo" that currently rules our 21st century universities, a fact Ferguson repeatedly mocked and scornfully pointed out for his colleagues in history departments; the mostly irrelevant focus on "sex, class and race" is futile, and a fair dose of his Applied History would benefit their work immensely.

He spent a fair time discussing the phenomenon Trump rather than the actual politics. The distant establishment, the "Check Your Privilege" garbage and self-censorship of media and universities have in a sense created the Trump movement. Ferguson's hardly novel point is that corrupt politicians and their wasteful building up of national debts and massive welfare states and housing bubbles have created a situation where young people rightly feel that society is stacked against them - and Trump is the natural outcome. He resonates with such voters, and so it doesn't really matter what his policies are - or that he can "believe 5 contradictory things before breakfast".

Ferguson also convincingly pointed out that the post-GFC reference to the 1930s Great Depression and lead-up to Second World War so commonly used in academia as well as politics and media is mostly misguided. Is this really the 1930s all over again?
"Populism is not the same as fascism: If economic crisis and rise of fascism is all you know about the 1930s then every populist looks like Hitler."
The subtle nod yet criticism of Eichengreen's latest book The Hall of Mirrors is brilliant indeed. I could add to the quote that if all your analysis of the 1930s is completely wrong, then your plans to stop this alleged Hitler figure are spectacularly gonna miss their mark.

Ferguson invites us to consider two more points, intuitively very appealing. First, the relevant historical comparison to make for the financial crisis and alleged Secular Stagnation (another not-so-subtle criticism) is not the 1930s & the rise of Hitler, but the 1870s and the rise of Denis Kearney. His populism and racist attitude towards Chinese immigrants contributed to the passing of the infamous 1882 Chinese Exclusion Act, that prevented Chinese migrants into the U.S. Ferguson draws the parallell to Trump and warns us that a ban on Muslim immigration to the U.S. under a Trump presidency is hardly unlikely - and that we shouldn't underestimate populists' commitment to their programs.

Secondly, he points out to the Chicken Littles of the world of politics, that populist Trump does not necessarily mean hostile tension and World War III, by telling us that social progressives were the ones that led Europe to war in 1914 - not the demagogues and populists.

His predictions are of course based on historical examples, and he openly admits that history is an art and that human interactions are "too complex to model". That's academic speak for "I might be wrong" and is of course very welcome.

But not everything is ideal in Ferguson's talk, far from it. My first problem lies of course with Ferguson's ultimate dismissal of McCloskey's story - in favour of his own (famously depicted in Empire) that British ideas together with Institutions can account for The Great Divergence. The problem here is of course how he fails to deal with McCloskey's convincing critique of such institutional stories: they are way too small to account for the massive increase in wealth that we have seen over the last 250 years and besides, all those institutions he praised - rule of law, private property, stable regimes, free trade, consumer society etc - have been present in earlier societies, ranging from 13th Century Ottoman Empire to Ancient China.

My second problem lies with him trying to claim some fame for having predicted the GFC. It's easy for people to backtrack history and claim that "well, I knew about it all the time", but much harder to speak out loudly before - and especially to put your money where your mouth is and short the financial securities that allegedly were about to blow up. I don't know enough about his predictions in 2006, but I have a feeling that this is slightly disingenuous.  

I should end by making some enemies in my own camp, as McCloskey recently joked the other week, with the quick and abrupt response Ferguson gave to a technical question about monetary policy and the Fed's balance sheet. Economists such as Bob Murphy or Peter Schiff have repeatedly made the claim that the Fed has no exit strategy to its massively inflated balance sheet, and whenever it unwinds its position and floods the market with treasury bonds, the markets will collapse and sky-high interest rates will potentially force the U.S. government into defaulting on its debt. No, Ferguson said, the Fed doesn't have to unwind its positions. It can do what central banks did after WWII, where their balance sheets were also massive after having monetized debt for the war effort; they simply allowed economic growth and inflation to make those balance sheets redundant - and Ferguson argues that the Fed can do so again.

Maybe. I'm not entirely convinced, and it might involve some seriously damaging inflation.

Overall, I'm terribly happy to have had the chance to listen to one of our time's absolutely most productive and influential historians, as well as having a small chat about Glasgow with him. I thoroughly enjoyed his talk, and I'm looking forward to dive into my newly acquired copy of The Great Degeneration (see George Melloan's review article here - or my own review posts here and here)

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