Based on the 2012 Reith lectures he gave, Ferguson’s sub-title to this book is important: ‘How Institutions Decay and Economies Die.’ He’s not talking about China, or India, or even Russia; countries riddled with incompetence, stifling bureaucracy and larcenous corruption.
No, he’s referring to the West: the USA, Europe and of course Great Britain. He attributes the relative economic decline of the West, fortified of course by the ongoing economic crisis, to a deeper collapse in four great institutions: representative government; the free market; the rule of law; and civil society.
These were the same institutions (he means the term broadly) that allowed the West to beat the rest over the last 500 years. Because the dazzling success of the West has, as Ferguson sees it, gone into reverse, he wants us to understand that the self-same institutions have fallen into decay. That’s the principle explanation for the reversal, he says – not de-leveraging, and not globalisation.
There’s a different narrative that Ferguson throws aside, even though it’s obvious and he admits it:
“Having been more than twenty times richer than the average Chinese in 1978, the average American is now just five times richer.” (p35)
Is this re-convergence really because the West has failed, or is it because several Asian nations — South Korea is in fact a better example than China — have done startlingly well for themselves?
Ferguson does admit that the West’s decline is relative, just as it was for British industrial growth in the early twentieth century. The rest-erners, he reminds us, have successfully borrowed many successful phenomena from the west, among them economic competition, the scientific revolution, modern medicine, the consumer society and a strong work ethic.
But he sweeps the paradox of rest-erner economic success, along with non-representative government, corruption and the absence of good laws, to one side. “What interests me here is what has gone wrong in the west.” If you can accept the sweeping style of argument up to here, the rest is good fun, and surely worth a read.
What follows from Ferguson is bold and, in places, controversial. He compares public accounts to Enron and says that Western national accounting is fraudulent. He says that in the name of being more efficient and hands-on, governments have over-regulated the economy and made it more, rather than less, fragile. The bond between the generations is broken because of unequally distributed debt obligations bestowed on today’s young, he argues, and the nourishment of associational culture, where strangers say hello to each other and belong to clubs, has been destroyed by Facebook. Private education is the best.
An alumnus of Magdalen and fellow of Jesus College, although principally at Harvard these days, Ferguson is frequently described by hacks as “dazzling”. It’s true.