A Comment on Ferguson - Pt. 2

After Glasgow-born historian Niall Ferguson's brilliant lecture at the Sydney Opera House in late-May, I couldn't resist discussing Glasgow with him, as well as picking up a book of his, The Great Degeneration. In the midst of end-of-semester and exam preparation, I managed to read the first 50 pages of this beautifully succint book and summarized my initial findings in a blog post. Long overdue, I now managed to finish the book and my sceptical opinion of it was much improved; after all, he started talking about changing cultures and social values and the regulatory State, arguments much more convincing than the shallow idea of 'Institutions' he spend the first few chapters discussing.

To dive right in, Ferguson depicts a story of a slowly-decaying civil society combined with an ever-worsening regulatory burden. These are not exactly novel accusations against our Welfare-States-Gone-Nanny-States, but illuminating nevertheless. He refers to work by fellow-Harvard academic Juan Enriquez, showing for instance how in the U.S. it took sixty-five days for a journalist to obtain official permission to open a lemonade stand, that U.S. is ranked seventy-second in the world in IFCs comparison of 'Ease of paying taxes', or even worse how it's a hundred times (100x!) more expensive than sixty years ago to bring a pharmaceutical product to market (good job, regulators!). In Ferguson's eloquent words:

The specific question I ask is how far very complex regulation has become the disease of which it purports to be the cure, distorting and corrupting both the political and economic process.

This immense burden of regulations have turned the crucial "Rule of Law" into "Rule of Lawyers", as Ferguson so neatly summerizes the problem.

Ferguson also lashes out against the irresponsible and damaging practice of public debts. In his view, it amounts to kicking the can down the road, benefitting current voters at the expense of future voters, who by their nature not yet have a say in the matter. He addresses some of the British historical examples where public debts have been higher, concluding that those instances benefited Great Britain since it acquired assets and grew its economy. What the U.S and most of Western Europe is doing through its unfunded liabilities in Medicare, Social Security or general spending is pure consumption, equivalent to paying groceries with credit cards. To your average leftie's dispair, he also suggests holding public finances to the same standards it regulates the private sector (GAAP), at which point the scandal of public finance would be exposed:

The present system is, to put it bluntly, fraudulent. There are no regularly published and accurate official balance sheets. Huge liabilities are simply hidden from view [...] No legitimate business could possibly carry on in this fashion. The last corporation to publish financial statements this misleading was Enron. (p. 46)

Moreover, he moves on to the decay of civil society as a result of welfare states. He mentions the vast research into friendly societies and voluntary associations that prevailed before the welfare state in much-poorer societies, and depicts how family ties, neighbourhoods or even simple volunteering in the U.K. has fallen so dramatically, such ties may very likely cease to exist. It was not technology, as many people might believe, but the state with its "seductive promise of 'security from the cradle to the grave' that was the real enemy of civil society." (p. 124)

I'd like to mention one final and illuminating play-on-words Ferguson uses, before I quote the brilliant final remarks. In regards to civil rights and (lack-of) Rule of Law, Ferguson mocks the anti-terrorist laws and power-hungry politicians by saying "somehow it is always a choice between habeas corpus and hundreds of corpses." (p. 97). Brilliantly snarky, right down by alley.

Finally, his concluding remarks are, I believe, good enough to retain in full (p. 134):

*'Clear up the beach', refers to his personal experience of buying a house in Wales, and finding that the adjacent beach was filled with garbage. So he started cleaning it, and eventually got his neighbours on board until the littering stopped.*