In Our Time - Money

Episode Date: March 1, 2001

Melvyn Bragg and guests discuss the power of Money. In the Bible the Old Testament and the New Testament appear to agree about the power of money: Ecclesiastes says “Money answereth all things” and Timothy says “The love of money is the root of all evil”. It is a theme that seems to echo down the centuries with seemingly everyone from Karl Marx to the cast of Cabaret crying out “Money makes the world go around”. But are economic factors really the invisible hand behind all historical events? Can everything in the end be brought down to the influence of money? With Niall Ferguson, Professor of Political and Financial History at the University of Oxford; Richard J Evans, Professor of Modern History at the University of Cambridge; Jane Humphries, reader in Economic History at Oxford University.

This BBC podcast is supported by ads outside the UK. Thanks for downloading the In Our Time podcast. For more details about In Our Time and for our terms of use, please go to BBC.co.com.uk forward slash radio 4. I hope you enjoy the program. Hello, in the Bible, the Old Testament and the New Testament appear to agree about the power of money. Ecclesiastis says, money answers all things,

and Timothy says, the love of money is the root of all evil. It's a theme that seems to echo down the centuries. at least until Karl Marx writes Das Capital, but even on to the cast of Cabaret crying out, money makes the world go round. But our economic factors read the fundamental pulse of all historical events. Even more simply, can everything in the end be brought down to the influence of money. In Neil Ferguson's new book, The Cash Nexus, Money and Power in the Modern World,

he makes the case against economic determinism. He's professor of political and financial history at the University of Oxford, and is with me now. Also here to discuss the role of money in history is Richard J. Evans, Professor of Modern History at the University of Cambridge, and Jane Humphrey's reader in economic history at Oxford University. Neil Ferguson, before we get into the economic arguments, what grip has the Bible, the Old and the New Testament,

had on economic thought? An enormous grip in the sense that its moral critique of the power of money has proved very enduring. I mean, even those who purport to be atheists are in some ways steeped in the kind of moral condemnations of the power of money that are in the Old Testament and particularly in the New Testament.

And that's true of those great prophets of the impending disaster of capitalism in the 1840s, Marx and Thomas Carlyle, coming from completely different ends of the political spectrum, but both essentially making a moral critique that it really was the root of all evil, this growing importance of money and particularly of capital. So this Judeo-Christian, Christian, I,

has permeated into European and American societies, which is what we'll be talking about mainly in this programme and their ideas of economic theory. I think that's right. I mean, I think the notion that there would be some tremendous apocalyptic judgment that would bring capitalism down was hugely influential and attractive to radicals on both left and right in the 19th century and on into the 20th precisely because it played on this religious light motif of a moral judgment,

of a materialistic society. As I have already pointed out the rabbinical nature of Marx's work, didn't he? And he in turn was influenced by Hegel, who he stood on his head by replacing Hegel's notion of ideas with ideas of the economy, drawn largely from the British Industrial Revolution at the time. Can you explain Marx's relation to Hegel and why that was important for Marx?

Well, Marx comes out of the German idealistic tradition, and he takes a model of historical causation of the historical process, which is borrowed from Hegel, the dialectical method. Now, in Hegel's work, it's ideas. Yeah, that's the famous thesis, antithesis, synthesis, waltz, or whatever you care to call it,

a process whereby the historical process is driven forward by conflict between a thesis and its opposite, and out of that conflict comes the synthesis, the next stage. Now, what's interesting about Marx is that he takes this notion and adds to it

the ideas of economics that are emerging from Britain in the early 19th century, particularly David Ricardo's work. And it's really this merger between Hegel's idealism and Ricardian political economy that produces Marxism. I mean, most of the economics in capital is pretty much lifted from Ricardo. And that's really what Marxism is.

What Ricardo said was essentially that there were three sources of income in an economy. There was the rent from land, the profits from capital, and the wages from labour. Now that's very handy to have three if you're trying to apply a model from Hegel of thesis, antithesis, synthesis, synthesis. And essentially, Marx takes the class structure implicit in Ricardo, that is to say, aristocracy living from land, bourgeoisie living from capital and proletariat, living from their wages. And he suggests that conflict between these classes is really what is driving history forward. So instead of being conflicts between ideas, that had been Hegel's approach,

Marx says no, it's conflict between social classes, and these classes are defined by their economic functions. Richard Evans, does this mean that would you describe Marx as a determinist? He said that capitalism contains within itself the seeds of his own destruction. Do you think that he meant the economy inevitably governed all historical processes? Well, I actually looked up determinism in the dictionary before I came into the studio. And it says simply that it's the belief that events can be caused by forces beyond the human will.

And that's a sort of anodyne definition. And I think we're talking about that in terms of the economy. But all that Marx ever really said was that it was the ultimately determining factor. What he did not say, of course, is that every event has economic causes. On the contrary, you find that when Engels, his collaborator, was asked to explain their views to say, some disciples of theirs later on in his life in the early 1890s.

He wrote a series of famous letters, in which he said that Marx and Engels and himself had never actually meant to say at all that everything was explicable in economic terms, that individual wills did have an effect, and there's what he called a parallelogram of forces, to say all kinds of different wills, conflicting with one another, different kinds of influence in history,

and only the ultimately moving force, as it were, behind it all, somewhere in the deep distance, was economic. But as I understand it, that letter was written after Marx's death, and it was maybe the first bit of Marxist revisionism, was Marx himself. You were saying that Marx himself was not an economic determinist. Determinist didn't do what Neil Ferguson said he did, take Hegel's ideas of the three states and apply them to the economy and use that as the engine that drove the culture through.

Yes, no, Neil, it's absolutely right there. But, of course, it all comes down to them when you look at actually, events in history, then the economic often fades into the background. Remember that Marx at one point, when confronted with a very crude version of his ideas, peddled by some of his disciples, looked at them and said, well, all I know is I'm not a Marxist. Jane Hampery's, do you think Marx was an economic determinant? Well, yes, I do, but I don't think that the development of Marx, modern Marxists, would have a linear model of causation.

I take Richard's point that he just made that the economic is often in the world. the background of some actual historical outcome. The metaphor is not push and shove here. The metaphor, ironically, in view of Neil's title of his book, may well be nexus. Maybe that leads us back to the parallelogram of forces. I'd like to go back to this business of whether Marx was an economic determinist or not, because if he wasn't, that takes the argument in a completely different direction. He did say categorically, in the Communist Party manifest of the history of all who the two

existing societies as a history of class struggle. He based class on his view that your social position in the structure came from your structural position in the economy. Now that seems to me to say that he was, if we can call somebody an economic determinist, he's a long way towards being there. Am I completely agree? We mustn't let Marx off the hook just because Engels subsequently tried to play it down. I mean, in the same way that Keynes in the 1940 said, oh, actually I'm not a Keynesian when he heard his theories being vulgarised. It's a sure sign that you're a serious theorist when you deny your followers because they're too simplistic. If you read Capital as well, I mean, this is a theory of history, which is an explicit and rather

repetitive. It's actually a dreadful book. I don't recommend it as bedtime reading unless you're an insomniac, but it repeatedly states that the prime motivation, the driving force of history, is this class conflict, is this process of conflict between classes. And not only that, but it tells you where history is going to end up with a crisis of capitalism. Now, to me, the interesting thing is that Marx was right to spot the crisis-prone nature of the capitalism that was emerging in the 1840s. It was undoubtedly very prone to volatility. But he didn't really understand financial markets. And that's what interests me.

It's not that it doesn't matter. It does matter. It's hugely important in the 19th century. You couldn't have a discussion of 19th century history that left the economy out. The problem is that Marx read his Ricardo, sat in the British Library, and apart from a brief flotation with the stock market in which he lost money, He had absolutely no contact with the real world of financial capitalism, which he loved to write about. And that's really the problem. He didn't understand it.

Generations of historians who were attracted by the predictive power and, if you like, the biblical authority of Marx, were in a sense also denying themselves a proper understanding of how financial markets operate in history. That's really what my book's about. It's trying to show how they really work, not to say they don't matter. Richard? Yes, I broadly, I'd agree. No, I think that Marx and a lot of historians overestimated the rationality of people, of human beings and groups of people. It's always a temptation for a historian to look at the past and try and make sense of it as we have to by ascribing rational motives for people's conduct.

And one of the most interesting things that's happened to history and historians in the last 10 or 15 years is that we've really started to take on board the extraordinary irrationality that you find. all kinds of areas of history and to explore that and I think that's a very exciting and interesting thing to do. At the same time, I wouldn't want to rule out economic motivation altogether. I think there clearly are some people and some groups who do successfully interpret what their economic needs are and then try and go for it, as it were, from that reason.

Very simple example would be trade unions, for example. I'm not saying that highly rationales. institutions by any means. But still the basic drive to improve wages and so on and economic position of workers is as a kind of economic nationality from their point of view. Let's go back. Let's go to the Industrial Revolution now, Jane Humphers, a period of great economic

change which it's claimed led to democratic freedoms in the 19th century. Do you see those two as related the economic changes which came in the Industrial Revolution leading to democratic advance? Well, individual's self-interest may draw economic development and economic growth, what's very important in unleashing that individual self-interest is the rules of the game.

And that's what historians very often mean by the institutional framework. And the institutional framework in Britain was particularly good for unleashing the forces of self-interest, of material self-interest. and here particularly the state, the balance between the king and parliament which was introduced with the glorious revolution, fended off excessive rent-seeking and fended off taxation that may have blunted that economic initiative.

In this process, it's quite interesting to try and tease out the causation, the sequence of events, because it seems to me to actually to begin with royal warfare, to go from that to the need for taxation and to go from that to the need for some kind of institution which is going to say okay to the taxation and parliamentary representative institutions turn out to be a really good way of getting people to agree to taxation to pay for war. Now the expansion of the franchise which goes on in the 19th century

seems to me to be partly about whitening the tax base and responding to changing, if you like, economic and social pressures that are very closely linked with the issue of taxation. I think it's taxation and representation, which we really are talking about here. But I'm trying to see connections between economic history and other developments in society. It has been generally thought, rightly or wrongly, you can say wrongly, that the industrial revolution began a great push towards democratisation because of the empowerment and enfranchisement in economic terms of massive the people in cities and so on, so forth.

Needs, demands led to their wanted responsibilities. I think it's slightly misleading because it seems to me that the institutional story, the Industrial Revolution and in some ways causes it. I mean, it's really before you're an industrial society in 18th century, England, that you get the institutions of the central bank and the national debt and the tax system and the representatives of home. This is where an economic history might disagree with it, I'm going to pass the Richard. They might say, look, the economic is fired Zioner.

The Industrial Revolution in this country crept in quietly in dribs and drabs in little valleys up in the north, which has suffered for it ever since, and grew up. that way, it was not institutionally driven. It was not driven by banks of England, or William of Orange bringing new what's it's over, or the glorious revolution. It was driven by chaps making inventions and going on from there.

Now, that could be said to be, look, this is a clear, pure example of the economic forces working their way into this country at a particular time, and because of that, X, Y, and Z happens. I'm saying this is a very good example of economic history, the power of economic force,

at work in history. Richard Evans. Yeah, but I take the point, but of course it's how many removes are we dealing? What is the causal nexus to use the phrase we're using this morning between industrialization and democratization, and I think there are many other factors that come in between. I mean, clearly without industrialization, without all the massive economic changes involved,

without the huge growth of towns, there would probably not have been an enfranchisement of them, of the mass of the people. But actually then trying to explain why that happened is quite a complicated business. Education comes in, for example. People are not, on the whole, going to demand the vote when they don't have it

if they're not educated enough to read, to become politically aware and so on. And you can say, right, education is an economic necessity. But there are many other reasons, of course, moral reasons, religious reasons, indeed, why the elites in 19th century Britain thought that the matters had to be educated. And there are many other reasons. If you take a European perspective, then you can see, for example,

that the extension of the vote to all adult males in Bismarck's Germany was for a completely different set of reasons because Bismarck thought that the masses were basically uneducated for that tugging peasants who'd all vote for his side, for the conservative side, a terrible miscalculation in the long run. but that was his calculation. So it's a very complex picture in which the economy is often very much in the background

and there I think I'd agree basically with Neil's point. You can't draw a kind of one-to-one argument. But what is in the background can still be the driving force? We know that, don't we? So what's your final take on that in the industrial revolution? Well, yes, firms, entrepreneurs, production. This is the basis of the Industrial Revolution and human self-interest,

moving those things forward. But the institutional framework really here has to be thought of as one which nurtures and encourages these activities. This is a really very big question we're talking about here. That is the saying, does economic development leads to democratisation?

And of course there have been American modernisation theorists and people like Francis Fukuyama who've argued that, yes, it does. Inevitably, in fact, Fukuyama says that now communism has gone, history's come to an end, everybody will be democratic and liberal and will live happily ever after. And so far, it hasn't happened.

There is no obvious connection in the present-day world between economic development and democratisation. There are plenty of developing regimes in the third world, which there seems to be no movement at all towards democratisation, though there's headlong economic development. Well, one of the exhilarating things about Neil Ferguson's book is it moves in an essayistic fashion from one major subject to another, and we're going to sort of mirror this slightly this morning.

So I'm going to go from that to the Depression in the 20s and 30s. And a commonly held thought is collapse of economy, 182% peaking inflation in the Weimar, enter fascism. There you have a direct cause and effect. Right. What's your take on that, Neil? Well, I was raised on this. I mean, my intellectual origins, such as they are, are in modern German history, and explaining, as we all had to try and do, the rise of Hitler.

And my first work was on the great hyperinflation of the early 1920s, which seemed to me to be a prime suspect in this process. And it's only relatively recently that I've started have doubts about the viability of this model that says, it's the depression stupid, it's the depression that leads to the collapse of democratization, to the collapse of democratic institutions. And the reason I became doubtful was that I stopped just looking at Germany. And part of the trouble is that most of the textbooks that deal with this period take the German experience and just assume that it's universally applicable.

In fact, Germany is an outlier in the sense that the timing of its democratic failure and the level of social and economic development in Germany are both quite unusual. I did a rather ambitious study of the economic performance and political performance of 29, broadly defined European countries in the interwar period. And the two things were really striking. One was that quite a lot of democracies failed before the Depression. I mean, at least five by 1926 have already gone. and indeed the timing is really evenly spread of democratic failures through the interwar period.

And the other thing that struck me was that when I looked at the trajectories, just in terms of gross national product, of these economies, there was no clear pattern. The ones that survived as democracies often had just as nasty depressions as the ones that didn't. I mean, the Dutch economies fared extremely badly in the interwar period. It's on a par with Germany and doesn't experience anything like the same. economic calamity. Ergo, it's not necessarily a simple causal relationship of the sort that I can remember being

shown by school teachers. Here are the unemployed figures in Germany and here's the Nazi vote. I mean, even that falls apart when you realize that it wasn't the unemployed who were massively voting for the Nazis. They tended to vote communist. And I think we have to look for other explanations rooted in political culture, for example, if we're to try and explain why some democracies do not survive the Depression. Let's face it, the most severe depression after Germany's.

was the American Depression. And, of course, democracy survives triumphantly in the US and the 1930s. What's your take on that, Richard Holmes? I'd broadly agree with that, I think, that it's clear that there were a lot of factors involved in the collapse of Germany's first democracy, the Vymer Republic, at the end of the 1920s, beginning of 1930s. The inflation, which really came to an end in 2024, was only one of them. And I think the more one looks at it, the less important it actually begins to to seem. It made people uncertain

and worry, but it didn't wipe out middle class incomes, for example, and make all the middle classes rabid for Hitler. To get down to specifics, I think, it's quite clear that without the Depression, the Nazi party would not have become the largest and the most

successful party in German elections. It would have not have got 34% of the vote in 1932. It would have remained a party very much on the lunatic fringe. But then, as Neil says, it's not the unemployed on the whole who vote for the Nazis. It's worried middle-class people and people from all different classes. It's a general party of protest with a particular kind of middle-class focus, but drawing votes from the working classes too.

And you then have to explain what it is that the Nazis themselves did, of course. They're fantastic propaganda apparatus, the charismatic appeal of Hitler. And finally, translating those votes into political power was by no means. means a foregone conclusion. It's when the Nazis started losing votes in November 1932 that some conservative politicians thought they were weak enough to kind of bring them in as a legitimation for their own government. When Hitler became chancellor, it was a chancellor of a very small minority of Nazis in a broader conservative coalition. So then you have to explain how he converted that into supreme power in six months. So there's a lot of different

factors there which the economic depression provides the basis. It's the as it were it's a necessary condition but it's not a sufficient one as I think Neil says in the book. Would you agree with that, Jane Huffer? I'm sure that's correct. But we can sometimes learn something from outlier cases though.

So Germany may be unusual in the terms that Neil just said, but it still may be very interesting to see in some acute forms these specific sets of connections. And even in the US, which again did suffer the second word, dose of the recession. In the U.S., it was the increased power following the recession of

trade unions in the United States that then promoted a post-World War to right-wing of the authority. It was a fear of that legacy, which many people think lay behind McCarthyism, for example. So these connections may be very specific in individual and national cases, and they may be perhaps more spread out over time than the simple idea of Neil's schoolteacher who had the unemployed on one side of the blackboard and the votes on the other for the Nazi party. If I understand you rightly, you've said, I'm summarising a bit still,

that the economy is the first point to start analysing historical causes. If that's so, how can you work that into the outbreak of the First World War? Well, this would be another take on our old friend determinism here, economic determinism, that what I would suggest is an appropriate version of determinism is to try and begin with the economic, that that is a suitable entry point into doing historical analysis, doing historical work. And by starting with the economic, we can often tease out more of these parallelograms and difficult processes. Can you just briefly tell us how you would start with economic in relation to the outbreak of the First World War?

Well, for me, a lot of the discussion of power and the pursuit of power is actually the economic in disguise. So I would want to go back and look carefully at the sources here of economic interests, how those interests played themselves out, particularly in international competition for empire. and what Neil would see as a kind of pursuit of power for its own sake, I think would probably, in my view, turn out to have very important, although somewhat distant economic links. If only that were true. If only that were true, because in fact, when you look at it,

all the theories of imperialism that were devised after the fact by Lenin and others to explain the First World War don't work at all. I mean, the people who had the least interest in a major global conflict in 1914 were the major financial and economic. giants of the world economy. And it's not them that caused the war. They're actually panic-stricken. And all the people who thought about this issue before 1914,

like Norman Angel or Ivan Bloch said, a war would be a catastrophe for international finance, and that's why it probably won't happen. And the only reason it does happen is that the banks and the industrialists and the shipping lines are out of the loop when the decisions are taken in Berlin and Vienna and St. Petersburg, and the decisions are taken by people who are just completely blind to, economic reality. I mean, generals and monarchs and diplomats who are members of the aristocratic

elite. And these guys just don't get it. I mean, they have only the vaguest notion of the economic implications of what they're doing. But Richard Evans, to go back to Jane Humphrey's point, what about, were she to tease out the deep background, to take this idea, we started the program with that economic determinism is, at one stage, it was the dominating idea of how you interpreted, how you thought of history, it's now changed its nature to it's the first point to start analysing historical causes. What about the teasing out of it doesn't seem to me to apply very much to this cataclysm of the First World War? Well, Germany, of course, was the biggest economy in continental Europe.

It was growing fast. It was one of the world's three leading economies along with the British and the American by 1914. And without that headlong, massive growth fueled by the chemical and electrical industries as well as heavy industry and so on, you would not have had German politicians asking for their place in the sun and thinking that Germany deserved a massive world empire like the British had or of going for continental domination. When you look at the program of war aims that the German government drew up in September 1914, you'll find there's a lot of economic aims in there, explicitly economic, annexing

iron ore fields in north-eastern France, for example, establishing a German-dominated economic union in Central Europe, which would include Italy and... many other countries, you find a lot of pressure groups before 1914 are agitating for these things. I mean, all that having been said, I think, you then have to bring in all the kinds of other factors that we've been talking about. There are cultural factors. There's a kind of macho belief in not just the German government that war would be a short thing in which men would show off their bravery, to be kind of dual fought on a large scale. It will all be over pretty quickly.

it would restore heroism to an age that they felt was sorely lacking in it. So there's a lot of cultural factors there as well. It's important to look at the economic factors, but they are, as I've been saying all the way through the program, they're at some distance removed from the actual point of decision-making. I think the economic pretexts are actually invented after the fact, and this is a classic illustration of a point I keep trying to make, that it's very often the political that leads to the big economic change

rather than the other way around. And the decision of July, August 1914 to have a war, and if you look closely at the people taking that decision in the various capitals, has very little to do with imperialism, for example. It's very little to do with the place in the sun argument. It's primarily in Germany based on a fear that they're falling behind the Russian armaments program. It's a decision taken by military technocrats who are terrified of the fact that they can't afford to match Russian armaments increases. Now, that's a financial issue partly. It's partly because they can't raise the taxes from a parliament increasing. dominated by the left. But it's no more than that. And it seems to me the financial consequences

and economic consequences are far greater than the economic causes of the First World War. Once it's begun, then all bets are off for a globalised, integrated liberal economy, and all governments scramble around with entirely new recipes for annexation and the creating of closed economic blocks. And in that sense, the economic consequences are really the interesting thing. But it's war that's the father of this thing and of many other things in the 20th century, rather than being a byproduct of deep economic forces, which I think are so deep in 1914 as to be almost invisible. Well, thanks very much to Jane Humphreys, Richard Evans and Neil Ferguson.

We've been taught on Neil Ferguson's book on The Cash Nexus. We will come back in a fortnight to talk about William Shakespeare. Thanks for listening. We hope you've enjoyed this Radio 4 podcast. You can find hundreds of other programmes about history, science and philosophy at BBC.com.com.com.com.com. Thank you.