Tag: The Ascent of Money

Essay 41: Then and Now Thinking

Historical thinking is a lifelong attempt to link something called “then” to something called “now.”  History as an academic field of study has a deep cleavage within it in that people like Foucault and Nietzsche think the links between then and now are often illusionary since history is mostly noise (i.e., disconnected chaos) and not “signal” (i.e., “cause and effect” chains of linear progress uncovered by “historian-detectives.”)

We explore this in this mini-essay by looking at the rise of what we call a service economy.

The great Russian thinker Alexander Herzen is traveling around Europe in the 1840s with Marx’s Manifesto appearing in 1848.  Herzen is amazed at the service sector in Paris:

“He was enchanted by the conveniences of Paris, especially the numbers of quick efficient services, from catering to house-cleaning, which made it unnecessary to employ private servants.”

(quoted in Revolutions of 1848:  A Social History. Priscilla Robertson, Princeton 1967, page 110 footnote)

In our own day, the leading economic historian, R.M. Hartwell, in his classic essay, “The Service Revolution:  The Growth of Services in Modern Economy 1700-1914” outlines a worldwide rise of services, and concludes his essay thus:  “The lesson of history is undoubtedly, that was has already happened in the United States, will happen elsewhere, and that the trend in employment towards the services in all developed and developing economies will result finally in a world-wide service revolution.”

(The Fontana Economic History of Europe: The Industrial Revolution, Fontana/Collins, 1980, page 394)

Shall we then “fold Herzen/Paris 1848” into this larger picture, Hartwell’s 1700-1914 or is that a false linkage?

This is an example of then and now analysis which is key to education.

Let us continue the past two essays:

We then use this kind of interesting “home-made puzzle” (one we made-up ourselves and did not read anywhere) and follow it up by entering the academic subject:

  1. Read the classic Manias, Panics and Crashes, the Prof. Kindleberger (MIT) classic.
  2. Discover that the Prof. Niall Ferguson miniseries on PBS, The Ascent of Money, doesn’t elucidate our particular query.
  3. Read Kevin Phillips’s Bad Money to get an introduction to the dangers of “over financialization.” (“hyper financialization”).

The “New York Times” in a piece The New York Times, 12 November 1910, describes the bank run in England including the Westminster Bank.   The movie is set in 1910.

We then begin to think that the collapse of Barings Bank in recent years (Nick Leeson scandal) radiating out from Hong Kong office, is not disconnected from the Barings Bank scandals of 1890. Historical thinking wants to see an arc or trajectory or larger and wider process, and not as disconnected, episodic and completely random.

The Anglo-American financialization process has led to many anomalies.

You might legitimately date the modern beginnings of this mega-process from the 1873 classic by Walter Bagehot of The Economist in his book, Lombard Street, where London is described as the money machine that governs the world and its fluctuations.

Hank Paulson, U.S. Treasury Secretary and Ben Bernanke of the Fed, warned Congressmen in Washington, in September 2008, that the global financial system was on the brink of collapse and needed “infinite” bailout money by that Monday morning, after the weekend.

These problems have yet to be seriously addressed and we might be in a new “bubble” at the intersection of real estate and financial system pathologies (i.e., where the world economy tends to become a kind of “betting parlor”).

Essay 40: Movies as a “Backdoor Into Financial History”

“Financial history” (the Professor Niall Ferguson PBS miniseries, The Ascent of Money, of recent years tries to “flag” this domain) can be exciting and eye-opening if the student fins the kind of “backdoor” into it that makes it all enchanting and not a tiresome slog through opaque textbooks.  Movies are a good way to “parachute” into fields, domains, areas of study:

The 1963 movie Mary Poppins is partly about bank runs and the “Tuppence” song in the movie communicates the centrality of London finance in the world of 1910, the setting of the movie:

“You see, Michael, you’ll be part of railways through Africa
Dams across the Nile, fleets of ocean Greyhounds
Majestic, self-amortizing canals
Plantations of ripening tea
All from tuppence, prudently fruitfully, frugally invested
In the, to be specific
In the Dawes, Tomes, Mousely, Grubbs
Fidelity fiduciary bank

Now Michael, when you deposit tuppence in a bank account
Soon you’ll see
That it blooms into credit of a generous amount
Semiannually
And you’ll achieve that sense of stature
As your influence expands
To the high financial strata
That established credit, now commands
You can purchase first and second trust deeds
Think of the foreclosures
Bonds! Chattels! Dividends! Shares
Bankruptcies! Debtor sales! Opportunities
All manner of private enterprise
Shipyards! The mercantile
Collieries! Tanneries
Incorporations! Amalgamations! Banks”

The current  U.S. Treasury Secretary Mnuchin was a foreclosure king of the Great Recession of 2008.  An American movie on “bank runs” is of course the classic It’s a Wonderful Life (with James Stewart as the local banker.)

The 1910 world of London finance show in the movie Mary Poppins can be now contextualized by realizing all of this crashed down in August 1914 which represents the beginning of post-WW 1 “deglobalization.”  Thus, finance and globalization issues haunt the present.

Walter Bagehot’s masterpiece of 1873, Lombard Street, is a kind of anticipation of this syndrome and Charles Kindleberger‘s (MIT) Manias, Panics and Crashes gives the sense of the underlying instability.

Kevin Phillips’s book Bad Money of 2008 outlines the dangers of “over financialization.”

The movie and the fun song can help a student find his or her way in to these areas and domains.

Essay 30: Magic or Sacred Geography as a Kind of Silent Education

Magic and its clone, sacred geography, are all around us and are crucial organizing principles for the way people think. Such emotions are an overlay over all formal education.

For Communists, the grave of Marx in Highgate Cemetery in England is sacred ground.  For some German soldiers after WWII who committed suicide on the steps in Feldherrnhalle (“Field Marshall’s Hall”—a display in Munich in Odeonsplatz of large statues of famous military leaders in German history), these statues and their place in Munich “means” something magical or sacred to them. North Koreans have Paektu Mountain which Kim recently ascended in a ritual addressed to the North Koreans. Think of Camelot or Lourdes.  Think of sites such as the Lincoln Memorial or Notre-Dame Cathedral in Paris or “holy sites” in Jerusalem or Mecca.

Think of magical and sacred things like the three imperial regalia in Japan which Emperor Hirohito fixated on at the end of WWII.

How does this kind of thinking permeate our lives in a way that nobody quite sees clearly:

The left in American politics (Bernie Sanders, Jeffrey Sachs, et al) explicitly or implicitly, think of Scandinavian social and economic systems as a kind of “magic geography” (i.e., defects and problems are not “welcomed” in their idealized visions). On the right, there’s a Singapore paradise of the imagination (what magic geography is) whereas Boris Johnson of England sees a “high wage, low tax” investment utopia which serve as a marvelous locale for the founding of both new businesses and new families. In this vision, men found businesses and women found or establish families, so everybody’s happy.

These competing visions can be traced back as far as you like, but we point to 1974 when Hayek (“the right”) and Myrdal (“the left”) shared the Nobel Prize for Economics.

Professor Niall Ferguson, the conservative Harvard (now Stanford) financial historian (you may have seen his The Ascent of Money PBS mini-series), had a program years ago on educational TV where he walked around places in Chile that he presented as a pension “heaven.” Chile is now kind of falling apart with street riots convulsing Santiago. (Ferguson’s ideal Milton Friedman of Chicago was the main advisor of General Pinochet after the 1973 Chilean coup.

What none of these people see is that social reality is complex and highly changeable and that “magicalizing” one place or system (Sweden, Hong Kong, Singapore, Chile) won’t work because successes that look solid or eternal are often caused by all kinds of “conjunctural” (i.e., of the moment) factors which don’t last “forever.”

Thus, much less “dogmatism” is called for so that one is not “swept along” by “ideological foolishness.” embedded in “magical geography” or its clone “sacred geography.”