Niall Ferguson’s ‘The Ascent of Money’ Essay (Book Review)
Updated: Jul 20th, 2020
Niall Ferguson’s book “The Ascent of Money” is one of the most investigative works that attempt to describe and determine the origin and progress of the financial system in human history. It traces the origin of money as a means of exchange and measure of value, financial systems, institutions and debts.
In fact, the book traces the genesis of the financial system, which the author believes started in Mesopotamia and the ancient Egypt. The author further argues that the evolution of the world financial system was “as important as any other technological innovation and evolution”. In fact, the book attributes the success of human development to the evolution of the financial system.
Niall Ferguson develops a compressive analysis of the current situation in the global financial system. In this book, the Ferguson derives information from various historical accounts.
Noteworthy, the book uses a review of literature as the study method, which has allowed the author develop a comprehensive historical timeline that begins at Mesopotamia and ancient Egypt. To determine the birth of the monetary system, Ferguson refers to stone and clay tablets discovered from the ruins of various cities in Mesopotamia, Egypt and other parts of Europe and Asia.
It is important to note that the author goes beyond analyzing mere historical accounts. He develops an idea of monetary evolution from mere historical accounts. In fact, the author argues that every historical event in the past had a monetary secret that influenced evolution.
In addition, he argues that the evolution of societies was driven by monetary and technological developments. In addition, the author has extensively used case studies to develop his ideas and arguments. For instance, the author refers to the 2008-2010 and 1930s financial crises, calling them as mere examples of the evolutionary trend of the monetary systems.
Comprehensive Book review
According to Ferguson, “every historical event has a unique financial secret”. For instance, the European Renaissance, which led to expansive changes in arts, music, education, science and other aspects of life, was backed by a financial secret. It was driven by a market boom, which allowed most financiers of art, literature, music and science make fortunes and accumulate wealth.
The author uses the Medici case study to elaborate how aristocrats and capitalists of the time used the prevailing social and political dynamic to make money. Similarly, similar events have taken place throughout human history, which have shaped the history and evolution of the world financial systems.
To develop this argument, the author reviews a wide volume of historical, financial and economic materials. In developing his thesis through literature review and case analysis, Ferguson has divided his book into several episodes that elaborate the history of the world financial system from the primitive trade in Mesopotamia to the modern global system.
An introduction episode provides an in-depth analysis of the current situation in the global monetary and financial system. This chapter introduces the relationship between the monetary system and its history.
In the subsequent sections, the author provides a compressive analysis of the historical timeline through which the monetary and financial systems developed, starting with the primitive financial systems in Mesopotamia to the complex system in the modern world. In addition, the author provides a final section that tends to explain how the monetary systems will descent in the near future.
The first episode provides an analysis of the origin of money, including banking and financial systems. The episode “dreams of Avarice” argues that every civilized society must respond to the forces of demand and supply, which calls for exchange of goods and services. Therefore, a method for measuring value must exist.
This phenomenon explains the origin and evolution of money. According to the author, it is possible to live without money. However, this is possible only when members of a tribal group depend entirely on hunting and gathering. In such cases, the group does not need money because they do not need to save, buy clothes, food and build permanent residence. All what they want is food, which is provided by nature.
For example, the ancient tribes such as the Inca in Americas lived in a world surrounded by massive gold, forest, diamond and other resources, yet they had no interest in the resources because they did not know their worth. However, with the coming of the Europeans, the groups realized that these things were part of their natural wealth. Thus, life changed after the incoming of the financial systems.
Using this historical example, the author attempts to refute the claims and hopes of Marxists and communists that money is evil and will one day end as people work for the common good. Using the North Korean case, Ferguson argues that even the most critics of capitalism and monetary reliance (the Marxists and communists) have found it difficult to dispense money. In addition, Ferguson uses the Nukak Maku case study to explain the relationship between civilization and monetary system.
When the Maku community left their hunting and gathering ten years ago (2002), they found the Colombian civilized society very attractive because basic needs such as food, shelter and clothing are available as long as they have money. Ferguson also traces the origins of the Banking system to the “promises to pay” culture in Babylon, which was an agreement made on clay tablets. In addition, the Medici banking system in Italy and the Shylock culture in Britain are significant events that led to the development of the banking system.
The development of the financial system as the empire of the rulers of the world is explained in the Human Bondage episode. Using historical approach and case studies, the author develops a theory to argue that the bond market of the Italian Renaissance made some families and groups rich because they controlled such things as arts, music, education, books, manufacturing and science. For example, Ferguson says that the Rothschilds were the most powerful family in 1800s because they controlled the bond market and war finance.
These individuals and groups created additional issues such as euphoria, bubble, distress, displacement and discredit. According to the author, these aspects were meant to harness wealth at the expense of the entire population.
Along with these evolutions came a number of other phenomena. For instance, the new market and financial systems brought aristocracy, especially in terms of assets. The evolution of the stock market systems made owning huge sums of money in cash was less attractive because the value of money was set to change due to market dynamics. As such, aristocrats converted their money from cash to property, especially in terms of real estates. In the US and Europe, “homeowners” became the new model of financial controllers.
Lastly, the author talks of the chimerica, a term used in reference to the globalized financial and economic systems in the 19th and 20th centuries. According to the author, globalization started in the 19th century after the financial systems allowed international trade through investment in foreign markets. The western nations actively invested in the east, including Japan and China. Being Rich did not mean owning land or other items at home. Rather, the financial systems allowed foreign investment through banking and stock markets.
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