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Niall Ferguson


A conversation with the Harvard University historian.

Question: What was your early history education like? 



Question: What is the value of historical perspective? 









Question: How do notions of time affect your work? 






Question: What gave rise to the West? 

Niall Ferguson: If you have been Dr. Who, if you were Dr. Who, and you took a trip in your TARDIS back to the year 1500, or 1400, somewhere round about the 15th century, you would have been very impressed by Beijing, probably the biggest city in the world at that time with it’s clean, wide streets, it’s dazzling palaces. You might also have taken a trip on the Grand Canal connecting it to Nanjing, the older imperial capital. You’d have been very impressed by what you might have seen at the Mughal Empire in India, you’d have been dazzled by the achievements of the Ottoman Empire in what is today Turkey. These great oriental empire in what is today Turkey. These great oriental empires would have really knocked your socks off. And if you’d have time to take in Peru, you’d have thought the Incas had something quite impressive going on. And the Aztecs in Mexico too. You’d then take a trip to London and you would have been very underwhelmed by this town—because it wasn’t a city, it was quite small. And it was very smelly and dirty because the sanitation standards were way lower than in Asian cities. You wouldn’t have been that impressed by the architecture, because apart from the Tower of London, most of it was pretty rudimentary. London Bridge was about the most impressive thing there. 

So, you certainly would not have put money at that point on London and other West European cities becoming the dominant entities of the next 500 years. Something happened that empowered the ramshackled little monarchies of Western Europe to become the masters of the world; the economic masters, the technological masters, the political masters. Something made these little countries—they were little countries: Portugal, England, the Netherlands, and then some were somewhat bigger, Spain and France—something empowered these countries and enabled them, over a period of time, to establish mastery over the much larger empires of the east, as well as over the entire New World as they called it, the Americas. 

And so I’ve been asking myself a lot for the last few years, what that was. And the course I’ve been teaching recently at Harvard had the title "Western Ascendancy, Mainsprings of the Global Power," which is a somewhat bombastic title, but gets to the heart of the matter. What was it that made the west dominate the rest? Why are the westerners superior to the resterners (if you will forgive that phrase)? And I’ve come to the conclusion that there were really six killer applications, killer apps, that originated in the West which it took ages for the rest of the world to download. And for the sake of brevity, I will tell you what the six were. Imagine bullet points. 

So, number one was competition, both political and economic. To talk about capitalism misses the point that Western Europe also had phenomenal competition between multiple institutions in the political sphere too. Autonomous cities you really didn’t find in the great Asian empires. But the fact that London was a semi-autonomous city in medieval England and that within London there were multiple corporations and guilds representing different crafts was really a very distinctive feature of that society. It was partly a consequence of the weakness of broad authority that there was no emperor in Europe as powerful as the Ming emperor of China. Charles V tried and ultimately failed to establish a monopoly of power, so competition is part of the story unquestionably. 

The scientific revolution that happened in the 17th century is killer app number two. Newton had no peer, no competitor in the eastern world, much less in the Americas, although the Asian empire has mathematics to a very high level and astronomy that sometimes bled into astrology, they just didn’t do the Scientific Revolution and were effectively offline when the Scientific Revolution happened as it did in western Europe with some traffic to North America. 

Number three killer app, well one might say democracy, but I think that would wrong because most western political institutions were not democratic in the strict sense until relatively recently, 19th century, early 20th century. It’s more that an idea of citizenship based on property ownership and representation took hold. First in the English-speaking world and then it spread. John Locke was in many ways the great theorist in this relationship between property and representation and the idea of some property-owning representative government spread from England to North America and then the United States found its most perfect form. When this became democratic, when the franchise was extended to non-property owners, democracy was much more likely to work where that foundation existed. It was the rule of law in a system where the law was made by property owners through a representative assembly. So, that’s killer app number three. 

Number four is modern medicine. Once the West figured out what caused cholera epidemics, or why plague spread, or what tuberculosis was, it had a huge advantage over the rest. And so in the last 19th century into the 20th century, there was a revolution in human life expectancy, which is entirely the result of advances in the realm of medicine. And the great empires of the late 19th century, early 20th century used this knowledge to good effect, but in a somewhat brutal way because inseparably allied with these medical advances was a pseudoscience of race that essentially legitimized western imperial power by asserting that non-western peoples were subordinate forms of humanity. That’s the shadow side of this story I’m telling, which I want to emphasize because this is not a triumphalist story, it’s an exercise in comparative history. 

Killer app number five is the consumer society. The idea that everybody should have more than one set of clothes. And that sounds rather banal unless you’re a teenager in which case you immediately get it. But it’s hugely important, once you have clothing at the heart of your economy, textiles, textile factories, which were the key to the industrial revolution in England, and everywhere else, you need consumers too. And the big difference between spices and clothes—spices were the basis of the Dutch East India’s Company’s business and clothes, textiles, were the basis of the British East India’s Company’s business—is simple. The demand for clothes and spices, like nutmeg, is finite. It’s quite inelastic. There’s only so much you can consume a year. The demand for clothing is infinitely elastic. There is never enough in your wardrobe and it seems to be in most human lives. 

And so textiles and the industrial revolution that accompanies the spread of the consumer society really represents killer app number five. 

And finally, Max Weber had a brilliant idea about a hundred years ago, a little bit more that there was a Protestant ethic that generated the spirit of capitalism. Now, I think he was sort of half right about that because a work ethic clearly was something that differentiated the West from the rest through much of the period I’m talking about. Where he was probably wrong was attributing this exclusively to Protestantism because it turns out that many, many different religious cultures can get that work ethic. Jews had it roughly contemporaneously with Calvinists, and nowadays, of course, what we see is that work ethic spreading into all kinds of different civilizations most notably the Confucian civilization of China. 

So, the argument is a six-part argument. There are six killer apps that give the West predominance over the rest over about 500 years. And the final question, of course is: is it over? Is the end of western ascendancy? And it seems quite plausible to think that it is because, after all, these killer apps are no longer monopolized by the West. The rest have basically downloaded them all... to varying degrees, but with a pretty high degree of success. And that means it’s unlikely that the West will continue to occupy that position of extraordinary predominance that it had, say, 100 years ago when maybe 20% of people of the world lived in western empires, western societies, but they accounted for more than 50% of all global income. I think that’s pretty much coming to an end now. 

Question: What factors will determine the next phase of our collective cultural evolution? 

Niall Ferguson: It still seems plausible to me that these institutions I’m describing determine success or failure, at least in the realm of economic growth and political stability. The interesting thing is that the most rapidly rising, non-Western power of our time, which is the People’s Republic of China, has adopted most, but not all of the killer applications. So they’ve certainly downloaded competition that the economy of China is a planned economy at core, but it has a market economy wrapped around that. 

They have, of course, downloaded science, and there’s no barrier to non-Western societies engaging in scientific research today. 

Modern medicine, for sure, it was an interesting feature of communist regimes that they were quite good at using modern medicine to improve welfare for large populations. 

The consumer society, well they’re getting there. It’s been a saver society until recent times, but it is now policy in Beijing to encourage consumption among ordinary Chinese and to make China less reliant on exports to Western consumers. 

And as for the work ethic, well they have that in spades, its an extraordinary phenomenon that the people who work the longest hours in the world today are in fact in East Asia and not in the West. 

The one killer app they haven’t downloaded is, of course, our political model with its emphasis on private property rights and representation of the individual. And I don’t think they’re going to. It’s pretty clearly policy in Beijing to have five out of the six off the menu, but not that crucial third killer app which ultimately produces democracy. 

So, we’re running an interesting experiment which is to see whether or not it is actually dispensable. If you’re from Singapore, you think it is and it’s clearly the orthodox view in East Asia today that you can have all these different aspects of modernity, you can have these Western institutions, but you don’t need the political one. You can have it on the basis of enlightened authoritarianism. And I’ll have to say I’m a little doubtful that that will turn out to be right because we ran this experiment actually within the West because we had free societies in the West and we had unfree societies. The West generated lots of alternatives to itself. One was communism and one was national socialism. And these alternatives failed, and pretty dismally actually. 

It seems to me—and here I’m really following the work of the great Nobel laureate, Doug North,—the institutions of freedom, political freedom and economic freedom, are indispensable for an innovative society, that you can have science without freedom, but you probably can’t have scientific innovation. You can replicate what they do in the Western laboratories, but are you actually going to have the real breakthrough? And I think you have to have the full range of freedoms to be as innovative as, say, the United States has been over the last 100 years. 

Question: Can China continue without these democratic institutions? 

Niall Ferguson: Let’s take another trip back in time. It’s 1936 and you decide to go on a trip to the Soviet Union and you’re welcomed by our hosts, and taken on a tour of some absolutely spectacular construction sites. Perhaps you go to Magnitogorsk, this sudden eruption of industrial architecture in the middle of nowhere. And you are deeply impressed by what you see. You see skyscrapers in Moscow city transformed, and you come back to New York and say, I’ve seen the future and it works. Of course, at that time, the capitalist democratic model looks pretty badly broken. You just past three years since the trough of the Great Depression and it’s by no means clear in 1936 that the United States is out of economic trouble. 

There’s a great deal of unease about the way Western democracy functions. All over Europe, democratic regimes are falling because of a lack of belief in the democratic model, most notably in Germany. 

Fast forward to now, you take the same trip; you go to Shanghai, maybe you go to Chongqing further up the Yangtze and you see most spectacular construction site and you come back and you say, I’ve sent the future and it works. It’s just a few years since the failure of Lehman Brothers and the collapse of the Western financial model and wherever you look there is disquiet about the way the democratic process works. It’s at its most acute in countries like Greece, but only because Greece is further down the line of fiscal crisis than the other western countries today. 

So, there are reasons today why you might make the same mistake that George Bernard Shaw and Sydney and Beatrice Webb made when they went to the Soviet Union. What they got wrong was that they judged by the surface at the degree to which a truly alternative model had been established. They did not see, or chose not to look at the shadow side of Stalin’s system, which of course, included a vast network of prison camps, the Gulag and an atmosphere of terror in which no individual, including members of Stalin’s own family, could feel safe. 

China today is not Stalin Soviet Union, by any means; the levels of coercion and terror are far lower, and the degree of economic freedom is far higher. But it is still a planned economy right at its core. Chongquing is not being built into the biggest and fastest growing city in Asia all by market forces, it’s the result of a command economy run out of Beijing, and there is an absence of political freedom that is very real indeed for those who chose to criticize the system. 

Now, we should therefore be careful what we wish for when we start applauding the Asian model and denigrating our own. I’m in the frontline of the people who are critical of the way the United States has handled public finance over the last decade. And it seems to me that there is an urgent need for radical reform in that area before we end up in a Greek-style mess. 

But we’ve got to be really careful here to distinguish between epiphenomena, the way in which taxes are raised and public expenditures are managed, and the core phenomenon of our constitutional order based on individual liberty and free expression. That constitutional order is way, way more important than any of the outlying issues of fiscal reform. And it is a superior constitutional order than anything else available in the world today. And I still feel convinced that the experiment of organizing an industrial society without a representative form of government will fail, as it has failed everywhere else that it’s been tried everywhere else because, as I’ve said, the Chinese are not the first to attempt breakneck industrialization without political freedom. 

Question: How will the underlying weaknesses of the Chinese system play out? 

Niall Ferguson: A parallel that I’ve drawn recently—which isn’t to everybody’s taste—is between China today and Germany 100 years ago. Let me emphasize, 100 years ago. Not in the 1930’s, in the 1910’s. A hundred years ago, Germany was one of the most dynamic societies in the world. It had a rapidly growing economy; it was leaping ahead of Britain in terms of industrial innovation; it had, already by 1910, the best universities in the world, much better than the American universities at that time incidentally; and it was also a country filled with a self-confidence that was shading into arrogance. As Germany rose, the hegemony of an English-speaking empire, Britain’s, was obviously called into question and that was something about which the Germans became more and more explicit. 

Kaiser Wilhelm II was somebody who had an uncanny ability to put his foot in his mouth, but much of what came out of that mouth about Germany’s ambitions to have a place in the sun, to have a world policy, a global policy, to have an empire and a Navy comparable in size to those of Britain, those were tings that ordinary Germans believed in too. Not all of them, but many. 

When I look at China today, I see a similar combination of rapid economic growth, impressive innovation, social transformation, but also political system that doesn’t want to change. That wants to essentially retain the institutions of 40 years ago, which was essentially what the Kaiser wanted too. And I also detect a real resemblance in the somewhat shrill nationalism that emanates from some parts of Chinese society, notably from relatively young Chinese. Its university-age Chinese who produce these rather mad patriotic videos whenever they feel that China has been slighted, whether it’s over Tibet, or Google, or whatever. 

So, there’s a Wilhelmian quality to China that takes a historian to spot and they’re doing Wilhelmian stuff. They’re terribly interested in natural resources in Africa, check that box. They’re building a much larger Navy than they’ve ever had before, check that box. They’re somewhat stridently challenging the rise of an English-speaking empire to call the shots around the world, check that box. And so on. So, it seems to me that the big challenge that the United States faces is very similar to the challenge that Britain faced 100 years ago. It’s a dynamic rival; it’s a rapidly growing rival. It’s starting to beat you on a number of different things, it’s producing way more qualified engineers than you are. And what you don’t want to admit to yourself is that this thing is not going to be in a comfortable symbiotic relationship with you indefinitely. Germany was certainly in that kind of a relationship with Britain in the 1870’s and 1880’s—trade between Britain and Germany flourished, there was all kinds of cultural exchange—but it’s not a stable marriage. 

If one rival is growing faster than the other, it is a rival, not a partner. And we are living in that transition today I think. It’s not exact, historians work with rough analogies, not with perfect matches. And there are all kinds of differences in which the cultural difference if perhaps the most important. The cultural difference between the United States and China is vastly greater than the cultural difference was a hundred years ago between Britain and Germany. They even shared members of the same royal family as their monarchs. But I think if you look at the key elements, the relationship has much in common. The economic element, the strategic element, and above all, I think there’s nationalist damage which is going to become more and more of a feature, I think, of relations between China and the United States. 

Question: How will the U.S./China relationship evolve? 

Niall Ferguson: The two things to remember about the relationship between China and the United States. One is that the demographics are about to turn against China quite sharply. The Chinese, because of the one-child policy in the Mao years and subsequently have a really serious demographic imbalance between the generations. That is going to become a major problem as the proportion of Chinese aged more than 65 soars in the next two decades. They also have a huge gender imbalance. And there are some provinces in China where male children are 20% more numerous than female children because of selective infanticide and so forth. 

The second point to remember is that the financial nexus between China and the United States is profoundly unstable. I’ve talked with my friend Moritz Schularick for three years now about Chimerica, the fusion of China and America in the economic sphere. And at the heart of that fusion was a kind of vendor finance where the Chinese lent us the money to buy their stuff. And they did this out of self-interest. At the same time, the Chinese accumulated vast quantities of U.S. dollar-denominated securities to keep their currency from appreciating. And that currency policy has produced a mountain of claims on the rest of the world. International reserves in excess of $2.4 trillion dollars, some 70% of which are in the U.S. dollar form. It’s not stable because the Chinese don’t want this mountain to get any bigger. They’ve come to terms with the fact that their currency must strengthen in the years ahead, and they’re looking for alternative routes to go down. Because if they’d just stay on this course that they’ve been on in the last 10 years, it’s pretty obvious what’s going to happen. Their U.S. dollar denominated claims at some point are going to become worth much less because the obvious way for the U.S. to get out of its financial difficulties is for the dollar to weaken and foreign claims on the U.S. to become worth less. 

So we are at a fork in the road: it’s now. I heard a Chinese economist two weeks ago say, “Our policy now is to buy no more U.S. government securities and not to sell all that we have at the same time.” Now if you think about what that means, the end of reserve accumulation by China, possibly a gradual winding down of Chinese exposure to U.S. securities, it means the end of a credit line to the United States that has been worth a awful lot to American consumers and American investors. It means that the Chinese support for the U.S. government bond prices is going. That means their price will drop, which means that U.S. interest rates will conceivably rise, and that of course, will act as a real dampener on U.S. recovery prospects when it happens. And I believe it is happening now. 

So, the big problem for the U.S. is realizing that this relationship is unwinding. When I hear American policymakers talk about this, I still hear the same riff that I was hearing two or three years ago. “They need us as much as we need them.” They can’t dispense with us as an export market, so they’re not going to risk destabilizing this relationship. I heard that just the other day at Harvard’s Kennedy School. And it’s profoundly complacent and wrong. The Chinese don’t think of it this way, they see this as a marriage on the rocks and they are actively looking, if not for another partner, then certainly for a divorce from this somewhat unreliable and spendthrift American spouse. 

Question: What will be the U.S.’s place in the world over the next 20 years? 

Niall Ferguson: As I said earlier, there are many futures and we don’t know which one will happen. But there’s no doubt that a quite probable future, looking ahead 10 or 20 years, has the United States as the waning empire crushed under a burden of debt accumulated in a relatively short period of time. No longer as economically dynamic as it’s been in the past; perhaps also plagued by internal political dissention. 

And on the other side, a China that appears to have found the magic formula to achieve 10% growth year after year. A China that is not only content with economic predominance, but starts to crave a strategic power, at least in the Asia-Pacific region that takes the form of a submarine fleet, aircraft carriers, deep-water ports. That future is a plausible one because similar things have happened in the past. And we would not be entirely surprised if an English-speaking empire began to wane, suffered from economic underperformance and was challenged by a rival empire to the East, which was achieving sustained higher growth rates. 

It’s one future, but I want to leave you with another future that is a little bit more cheerful. In this other future, the United States, because it still has a political institutional advantage, addresses its own internal problems, achieves quire radical fiscal reform, streamlines its tax system, cuts the entitlements that are about to bankrupt it, rejuvenates its politics, and embarks on a new era of optimism, propelled forward by the technological innovation and entrepreneurship that are still properties peculiarly strong in the United States. 

If the United States can use its advantages, both political and technological—and indeed entrepreneurial—to grow its way out of this crisis that it’s currently in, then the future is rosier for Western civilization. At the same time in this alternative future, China starts to bump up against the kind of weaknesses that Wilhelmine Germany also encountered. The social dissention in Wilhelmine Germany was really one of its defining characteristics. The Social Democratic party became the biggest party in the German parliament in 1912. And this was a Marxist party explicitly hostile to almost every aspect of the German regime. 

So there’s a sense in which one could imagine things going wrong in China and going right in the United States. History isn’t one simple, predictable narrative. It isn’t governed by the laws of physics or anything resembling them. There’s a huge uncertainty about what happens in both of these countries, not to mention the rest of the world, which makes the study of history so fascinating. It’s not linear, there isn’t some nice predictable curve that tells you when America’s power will decline and when Chinese power will ascend. It’s a very non-linear, chaotic, complex process that we as historians get to study. And that’s why when we talk about the future, we should correct ourselves and say, "futures" (plural) and here are the futures we have to choose from.
Recorded on April 19, 2010
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