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Niall Ferguson – The Great Degeneration

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http://www.zerohedge.com/news/2013-05-04/niall-ferguson-%E2%80%93-great-degeneration

While Harvard historian Niall Ferguson's off-the-cuff remarks during the Q&A were in his words "as stupid as they were insensitive", the core message of his presentation was clear: the party of the last 20 years is now over and the longer we fail to address the real issues the bigger the hangover will be in the future. The central question Ferguson asks is whether our institutions, corporations and governments, are degenerating. As Lance Roberts of Street Talk Live notes Ferguson believes that without addressing the structural problems that plague the economy from production to employment – stimulus will fail. The reality is that the 'punch bowl' won't fix employment growth, economic growth or the rule of law.

Via Lance Roberts of Street Talk Live blog,

I am at the 10th annual Strategic Investment Conference in California which is put on annually by Altegris Investments and John Mauldin. Niall Ferguson is the Laurence A. Tisch Professor of History at Harvard University, a Senior Fellow of the Hoover Institution at Stanford University and a Senior Research Fellow at Jesus College at Oxford. He is also the author of 14 books including the must read “The Ascent Of Money: A Financial History Of The World.” The following are the notes from his presentation.

Capitalism and the rule of law the central theme of Niall’s forthcoming book “The Great Degeneration.”

What is it that ails us? Has there been enough stimulus or is the current economic malaise a symptom of something else?

Adam Smith – brought forth the idea of the “stationary state” where economies transition from growth to stability. However, it is the rule of law that allows countries to grow.

Historically, what makes nations strong is the guarantee that justice will be done. This is what separated Europe from China during the 1800’s. Today, the west is now approaching the “stationary state.”

So, the central question of the “great degeneration” is whether our institutions, corporations and governments, are degenerating. There are four symptoms of degeneration:

Breakdown of the contract between generations.

Excess regulation

Rule of lawyers

Decline of civil society

Have we ever had a civil society?

At first glance I prefer Tainters assessment.

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I like Ferguson, not sure about his assertion its not a 'monetary' problem however.

I think the civil society think is a relative point. There seems a fine line between too much govt (ie, post WW2 - yes, I know the 50s and 60s were a great time for reducing class inequality, unfortunately it was done by increasing inter-generational inequality, they produced an economic surplus during the 50s and 60s, but spent it too) and too little govt (ie robber barons, pre 1900 or so)

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I liked The Ascent of Money, but if (as reported) Ferguson is arguing that Keynes got his economics wrong because he was a Marmite miner, then he is straying into Norman Tebbit territory, isn't he?

I think he was just trying to sound witty, like putting in a tidbit to prove he was aware of Keynes personal life, and it came off a bit rude. The point stands though, that economists regardless of whether they have children, tend to think no further ahead than the next economic cycle, and more or less completely ignore demographics, despite its vast importance.

I guess one has to remember the at time below replacement rate demographics were an alien concept back then. The richer you were, the more children you had throughout history. Its probably only a couple of decades post WW2 that people voluntarily decided to have one or none children introducing a host of problems that didnt exist in Keynes day. Even retirement was probably a fairly rare concept then, at least as we today understand it. Expecting Keynes to predict the immense demographic shifts from 1970 on is a bit much.

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I liked The Ascent of Money, but if (as reported) Ferguson is arguing that Keynes got his economics wrong because he was a Marmite miner, then he is straying into Norman Tebbit territory, isn't he?

There's a lot of views along his lines out there now. The fac is ylou cannot stimulate a corpse. The more you do, the more you deceive yourself and the costlier a movement of each limb it becomes. Keynesianism does not work when you have a poor, uncompetitive and small manufacturing base. It will simply suck in imports and fail, creating a worse crisi than the first one it intended to assist. That is why Osborne will fail. He has no economic understanding or hostorical perspective and is frnakly not behaving as I might expect a Tory to do. He is cloaking socialis stimulus in tory language and hoping to get a spark of life out of a cadaver before the next election. Of course it will show a current through the veins, because he and the B of E (who should know better) have pumped £375bn of imaginary money into the system, subsidised the lending to business and retail mortgages and dressed this up as a sensible economic policy. Litttle enough has been done to deal with fundamental problems. You cannot skew the market reality for 6 yrs and expect a sustained revival. It is a building on sand.

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The problem with Niall is the experiment has been done. The results are in. And he's been proven wrong.

I realised he was full of it when he started going on about the six "killer apps" of western civilisation...

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There's a lot of views along his lines out there now. The fac is ylou cannot stimulate a corpse. The more you do, the more you deceive yourself and the costlier a movement of each limb it becomes. Keynesianism does not work when you have a poor, uncompetitive and small manufacturing base. It will simply suck in imports and fail, creating a worse crisi than the first one it intended to assist. That is why Osborne will fail. He has no economic understanding or hostorical perspective and is frnakly not behaving as I might expect a Tory to do. He is cloaking socialis stimulus in tory language and hoping to get a spark of life out of a cadaver before the next election. Of course it will show a current through the veins, because he and the B of E (who should know better) have pumped £375bn of imaginary money into the system, subsidised the lending to business and retail mortgages and dressed this up as a sensible economic policy. Litttle enough has been done to deal with fundamental problems. You cannot skew the market reality for 6 yrs and expect a sustained revival. It is a building on sand.

Im not sure why you might expect a tory to be any different. Every post war government, labour or tory, Repub or Dem has always tackled recessions through Keynesian stimulus. The ONLY exception (and even then only to an extent) was the 1980/81 period here and in the US as inflation was an even more politically sensitive issue than unemployment, allowing them to drop the Keynesian theme somewhat, and even then it was highly unpopular, with only the falklands saving Maggies skin. Unless inflation absolutely forces them to not be keynesian, they will always spend spend spend.

FWIW, this is what Krugman seems to have against current policy responses, he has argued that the 1921 depression austrians like to point to cannot be replicated in our current crisis because back then inflation needed to be cut off, whereas now, inflation is not a concern. (I assume Krugman would thus accept the Volcker tightening of the early 80s as well, although given that Krugman fully denies stagflation ever occured and is a complete Keynesian 'you cant have rising inflation and rising unemployment at the same time' ascriber, thats probably hopeful thinking) Personally, i think that is mistaken to look at inflation in such a nominal manner. To my mind if inflation is 3% but wage inflation 0%, its no less damaging than inflation at 13% but wage inflation at 10%. Either way, higher rates are required to bring asset values back to a value warranted by wages, and remove the speculative element.

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The notions of an unregulated free market and a fair society are incompatible- the fact that Ferguson fails to grasp this-or more accurately finds it deeply inconvenient to grasp this- means that his views wind up as being little more than neo liberal PR.

When he talks about the vital importance of 'rule of law' he is really expressing the desire for the inequalities bred by unregulated capitalism to be crystallised in a legal format backed by force- however this has nothing to do with 'justice'

To be fair free market capitalism never claimed to be about justice- it's only apologists like Ferguson who seem compelled to reframe it in a moral wrapper- it's as if Capitalism were an ugly baby and Ferguson it's father, demanding everyone else loves it the way he does. :lol:

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To my mind if inflation is 3% but wage inflation 0%, its no less damaging than inflation at 13% but wage inflation at 10%. Either way, higher rates are required to bring asset values back to a value warranted by wages, and remove the speculative element.

I thought the argument for limited inflation is that it forces everything to be continually re-priced to market. Therefore wages losing 3% of value a year feels bad for us as individuals, but maybe what is required?

Edited by the shaping machine

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Regulation is the primary tool of rentiers and monopolists to suppress competition.

All this talk about our supposedly unregulated financial system is nonsense - try setting up your own bank and you will find out just how "unregulated" the system it is.

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Ferguson is a 'sad little homunculus of rancour, chippiness and raw ambition'. He's not a historian, he's a shill for the banksters.

and gay basher.

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None of this seems to indicate anything more than the problem continues to be rent-seeking in all of its forms.

While welfare is viewed by some as rent-seeking, in fact it is obviously a response to it - welfare will of course increase in proportion with rent-seeking as some groups capture wealth at the expense of the majority - the disadvantaged will look to the government for help and to 'solve problems' and help will be required for societal stability - of course there are arguments as to how individual governments manage or use it, but the central need exists as long as rent is to be paid just to live.

The problem with folks like Ferguson is that they continue with their doublespeak about decreases in 'property rights', without providing any explanation, because conflation of property and land/nature is a central part of their ideology and also a central part of the drive behind rent-seeking and therefore a major part of the problem.

In a similar vein, the idea that in strong societies justice is seen to be done is quite correct, but yet again ideology leads to a failure to see that a lack of justice is the very reason that the likes of socialism came about in the first place.

Evidence of decline is presented as the increasing view of US citizens that the government should solve problems - however it is hardly credible to argue that individuals should take responsibility for their own problems when the problems are institutional. People will naturally look for institutional solutions to institutional problems. Unfortunately, yet again, ideology prevents him and others seeing that if government is causing the problem (the main problem being the protection of rent-seeking) it is natural for people to expect that government should solve the problem.

Edited by shipbuilder

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When he talks about the vital importance of 'rule of law' he is really expressing the desire for the inequalities bred by unregulated capitalism to be crystallised in a legal format backed by force- however this has nothing to do with 'justice'

Apparently, according to one of the first posts on this thread, Ferguson said: "Adam Smith – brought forth the idea of the “stationary state” where economies transition from growth to stability. However, it is the rule of law that allows countries to grow."

I would guess Ferguson is thinking of the work of Hernando de Soto:

http://simple.wikipedia.org/wiki/Hernando_de_Soto_%28economist%29

In his books, de Soto says that an economy cannot go past the stage of a subsistence economy if there is not a formal system of owning property (land or goods).

Therefore, if true, and it would seem a reasonable argument, Ferguson is correct to argue that it is the rule of law that allows countries to grow

I don't see how you can be sure he is really expressing the desire for the inequalities bred by unregulated capitalism to be crystallised in a legal format backed by force - is there something I'm missing?

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None of this seems to indicate anything more than the problem continues to be rent-seeking in all of its forms.

While welfare is viewed by some as rent-seeking, in fact it is obviously a response to it - welfare will of course increase in proportion with rent-seeking as some groups capture wealth at the expense of the majority - the disadvantaged will look to the government for help and to 'solve problems' and help will be required for societal stability - of course there are arguments as to how individual governments manage or use it, but the central need exists as long as rent is to be paid just to live.

Perhaps, but its worth remembering that the modern welfare state was introduced by Otto Von Bismark :

http://en.wikipedia.org/wiki/Welfare_state

His paternalistic programs won the support of German industry because its goals were to win the support of the working class for the German Empire and reduce the outflow of immigrants to the United States, where wages were higher but welfare did not exist.

Also, worth noting:

Bismarck further won the support of both industry and skilled workers by his high tariff policies, which protected profits and wages from American competition, although they alienated the liberal intellectuals who wanted free trade.

The problem with folks like Ferguson is that they continue with their doublespeak about decreases in 'property rights', without providing any explanation, because conflation of property and land/nature is a central part of their ideology and also a central part of the drive behind rent-seeking and therefore a major part of the problem.

I disagree. I bet Ferguson is merely referring to the work of Hernando de Soto. That is all. I suspect you are reading too much into it.

In a similar vein, the idea that in strong societies justice is seen to be done is quite correct, but yet again ideology leads to a failure to see that a lack of justice is the very reason that the likes of socialism came about in the first place.

No. Bismark introduced the welfare state and he was no socialist.

In any case, the rule of law is one thing, justice is on the other hand would see to be somewhat subjective.

Evidence of decline is presented as the increasing view of US citizens that the government should solve problems - however it is hardly credible to argue that individuals should take responsibility for their own problems when the problems are institutional. People will naturally look for institutional solutions to institutional problems. Unfortunately, yet again, ideology prevents him and others seeing that if government is causing the problem (the main problem being the protection of rent-seeking) it is natural for people to expect that government should solve the problem.

Why is it natural for people to expect that government should solve the problem?

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Apparently, according to one of the first posts on this thread, Ferguson said: "Adam Smith – brought forth the idea of the “stationary state” where economies transition from growth to stability. However, it is the rule of law that allows countries to grow."

I would guess Ferguson is thinking of the work of Hernando de Soto:

http://simple.wikipedia.org/wiki/Hernando_de_Soto_%28economist%29

In his books, de Soto says that an economy cannot go past the stage of a subsistence economy if there is not a formal system of owning property (land or goods).

Therefore, if true, and it would seem a reasonable argument, Ferguson is correct to argue that it is the rule of law that allows countries to grow

I don't see how you can be sure he is really expressing the desire for the inequalities bred by unregulated capitalism to be crystallised in a legal format backed by force - is there something I'm missing?

Calling for strong rule of law to protect private property rights is fine. When you treat, as Ferguson and others do, land and nature in the same way as other property, then inequalities and rent-seeking are straight away 'crystallised in a legal format backed by force'.

When that which provides us with the basics to stay alive is allowed to be captured exclusively by individuals, it cannot be by any other way.

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Perhaps, but its worth remembering that the modern welfare state was introduced by Otto Von Bismark :

http://en.wikipedia.org/wiki/Welfare_state

His paternalistic programs won the support of German industry because its goals were to win the support of the working class for the German Empire and reduce the outflow of immigrants to the United States, where wages were higher but welfare did not exist.

Also, worth noting:

Bismarck further won the support of both industry and skilled workers by his high tariff policies, which protected profits and wages from American competition, although they alienated the liberal intellectuals who wanted free trade.

Yes, which illustrates my point that the welfare is not a creation of political ideology and somewhat inevitable.

I disagree. I bet Ferguson is merely referring to the work of Hernando de Soto. That is all. I suspect you are reading too much into it.

Treating land and nature exactly the same as other private property is still wrong no matter who thinks it.

No. Bismark introduced the welfare state and he was no socialist.

In any case, the rule of law is one thing, justice is on the other hand would see to be somewhat subjective.

I wasn't referring to the welfare state here. Socialism as an ideology was a response to a perceived lack of justice in the way the fruits of production were captured.

Why is it natural for people to expect that government should solve the problem?

I explained this in the paragraph you have quoted. If government have caused a problem, who else are people going to expect to solve it?

Edited by shipbuilder

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Calling for strong rule of law to protect private property rights is fine. When you treat, as Ferguson and others do, land and nature in the same way as other property, then inequalities and rent-seeking are straight away 'crystallised in a legal format backed by force'.

When that which provides us with the basics to stay alive is allowed to be captured exclusively by individuals, it cannot be by any other way.

I think you are being unfair in singling out Ferguson for treating land and nature in the same way as other property, when just about everybody other than Georgists and Marxists do exactly the same.

Ferguson is just expressing what I would guess 99% of planet's population happen to think.

He is not weird, or evil, just normal.

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I think you are being unfair in singling out Ferguson for treating land and nature in the same way as other property, when just about everybody other than Georgists and Marxists do exactly the same.

Ferguson is just expressing what I would guess 99% of planet's population happen to think.

He is not weird, or evil, just normal.

No, it's part of an ideology which in recent history has happened to succeed and therefore become widely accepted. Common land existed widely in the past, many ancient cultures see the distinction between land and nature and other property. Even the likes of Locke saw the distinction, even though he believed that the distinction was overcome by the application of labour.

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It is not natural for people to expect government to solve problems for them.

Consider Sharia courts and their Jewish equivalents:

http://www.telegraph.co.uk/news/uknews/9841370/Sharia-divorces-could-be-allowed-after-legal-ruling.html

You didn't answer my question, though - if the government have caused the problem, who else will people expect to solve it?

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Treating land and nature exactly the same as other private property is still wrong no matter who thinks it.

To me, you considerably weaken your arguments by referring to justice and of things being wrong.

Says who?

God? Who's God - your God?

This is the language of the preacherman.

I suspect you will say you are an atheist or at least an agnostic. But I seem to recall Nietzsche made the very astute observation that humanism is Christianity without the Christ. So, same old same old, welcome to the new boss, same as the old boss. There, right there, is a very destructive ideology - and I bet you can't even see it.

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To me, you considerably weaken your arguments by referring to justice and of things being wrong.

Says who?

God? Who's God - your God?

This is the language of the preacherman.

I suspect you will say you are an atheist or at least an agnostic. But I seem to recall Nietzsche made the very astute observation that humanism is Christianity without the Christ. So, same old same old, welcome to the new boss, same as the old boss. There, right there, is a very destructive ideology - and I bet you can't even see it.

I refer to what people perceive as justice as does Ferguson. My own personal beliefs are irrelevant. The idea that land and nature can be treated in the same way as other property is logically wrong.

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  • 242 Brexit, House prices and Summer 2020

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