The British Empire Library

The Ascent of Money: A Financial History of the World

by Niall Ferguson

Niall Ferguson wrote the book Empire and so has a strong connection to and understanding of imperial history. This particular book was written in the immediate aftermath of the 2008 financial crisis although it has been updated several times since. It is remarkable though just how rapidly that event has passed into history and some of the author's insights and comments on that fairly modern event already seem a little dated. However, it is not the 2008 crisis that interests us here. Rather, it is where the story helps explain the role of finance both in creating and in expanding empires. The book literally does go back to the beginning of money in the ancient world and shows how trade, institutions, financial vehicles were created, evolved and put into operation throughout history. It does feel like a Whiggish march to perfection at times as the title of the book alludes to. However, he does make it clear that although the trend has been consistently upwards there have been enough pits and troughs to take away the predictability and to help lose fortunes for many along finance's journey to modernity. Buyer beware!

As far as imperial connections are concerned, the author explains the creation of a rival Dutch East India concern in considerable detail from such unfavourable forgivings to global monopoly. He contrasts its successes with that of the Portuguese and Spanish Empires. He explains that the growth of the company was fundamental in allowing risk to be shared whilst not totally ruining the participants if the ventures failed. In the case of the Dutch East India Company, a marriage of finance and technology helped carve out monopolies that further enriched those inside the circle whilst viciously going after rivals and protecting their territories and trading relationships ruthlessly. This is contrasted with the English East India Company that appeared to fall by the wayside initially, despite predating the Dutch Company, only for it to rebound when it got into the business of 'government' in India and gained steady income streams that could be used to invest in other ways, including expansion and into modern technology of their own. Time and again though, the too big to fail phenomena seems to have occurred throughout history and private companies that have got themselves into too much trouble - in imperial terms either through war, under-capitalisation or rebellion - have seen governments ride to the rescue and take over the assets and often buy out the remaining concerns and almost invariably at the cost of the taxpayer. In the case of the British East India Company, it was the Indian Mutiny that put the last nail in a long line of nails.

Niall Ferguson does make a compelling case that empire brought finance to parts of the world that simply would never have seen financial investment without the protection of a European imperial power. Simply, investors were willing to risk their money in colonies that they perceived to be fairly administered, under the rule of law and could rely on government intervention if problems occurred. He gives the example of Egypt where a profligate spendthrift regime was replaced by the British in the 1880s and so a commensurate boom in investment despite its previous reputation for wasting money. When the Europeans moved in, money followed. He explains that bonds could be issued from London as it slowly and surely became the centre of World finance in the late 18th and 19th Centuries. Money could be raised to build railways, ports, mines literally on the other side of the world, but investors preferred to invest in established colonies where they perceived the risk to their assets to be much reduced. Indeed, the relative interest rates on loans reflected the fact that investors felt far more secure about contracts and legalities once the imperial powers had taken over a territory. It is an early example of imperialism being an agent of 'globalisation' allowing investors in London or Paris to help fund infrastructure or commercial projects that simply would never have occurred without imperialism. Of course, the entire system came crashing down with the advent of the First World War as these rival European powers turned on one another as the author explains in some detail. However, the role of empires at a key stage of global development is certainly made clear by this book.

The book is far more of a general history of finance and empires only play a part in that story, but it is an important part and so this book is worth reading to help put that role into its full context. Additionally, despite the apparent forbidding economic subject matter, Niall Ferguson has an engaging writing style and he always provides compelling examples to help clarify what could potentially be difficult concepts to grasp. Do not be put off if you are not an economic historian, this book is far more accessible than you might think.

British Empire Book
Niall Ferguson


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by Stephen Luscombe