Niall Ferguson has always had a certain shrewdness as a historian. As America invaded Iraq he wrote one of the definitive books on how it could sustain neoconservatism and just as the financial crisis was taking root he published The Ascent of Money, a ‘financial history of the world’ (although it is more accurately a history of financial innovation than a template for viewing historical events afresh, a few examples excluded). He is almost the historical equivalent of an ambulance chaser, but is saved by the qualification that he is most likely brilliant.
As a financial historian and currently enjoying notice for his biography of the post war financier Siegmund Warburg, Ferguson is well-placed to be invited to talk about modern banking on behalf of the St Paul’s Institute, a pseudo-academic institution with a mission to make people think ethically.
Indeed, Ferguson was up for the occasion, producing a polemical and stimulating narrative of a profession that has lost its character. Regulation, doesn’t come into it. For Ferguson, the problem is the loss of Protestant discipline, Enlightened self-inspection and relationship-based banking. The CEOs of today are young, mercenary and totally ignorant of if not malevolent towards their clients.
Arresting though these conclusions are, it is hard to truly evaluate them. Ferguson enjoys counter-factuals, and all the more so when he can be contrarian. To totally discount the level of controls on capital in the post war era, however, and to focus relentlessly on one thoughtful man and his exceptional mother (the hero of the lecture, according to Ferguson), one becomes quickly antiquarian and anachronistic.
Even if the culture of banking has changed, and it probably did so as much because practice changed with the removal of regulatory restrictions, the genie is now out of the bottle. Protestantism is no longer a dominating social force. Greed is arguably the new culture.
Ferguson has no truck with cultural change. Asked what we can learn from Islamic and Chinese methods of regulating banks, he is blunt. Islamism is the greatest threat to Western Civilisation of our times he says, perhaps influenced by his current amour; the dissident Ayaan Hirsi Ali. The Chinese will not help us. They have taken the lesson that we are not to be trusted and instead will crush us.
The root of Ferguson’s argument is that without trust, money cannot serve it’s purposes either as a store of value or a means of trade. Trust has been eroded by selective collateralisation and impersonal transactions, and the failure of ratings agencies to see through those trojan horses.
The idea of a hippocratic oath is attractive with the benefit of Ferguson’s talk of character, but without returning to some form of regulation, it seems unlikely that many traders will truly learn from history.