THE GREAT DEGENERATION: HOW INSTITUTIONS DECAY AND ECONOMIES DIE
By Niall Ferguson
Penguin Press, $26.95, 153 pages
Niall Ferguson is an acclaimed economic historian. He has authored a number of well-received books. One, “The Ascent of Money,” became the basis for an award-winning PBS series. Mr. Ferguson is also a professor at Harvard and a senior research fellow at Oxford’s Jesus College and Stanford University’s Hoover Institution.
In “The Great Degeneration,” Mr. Ferguson has produced a succinct and insightful book about the major political and economic issues confronting our country today. He provides not only a perceptive analysis of our society’s past successes, but also a sobering diagnosis of our present and future. He skillfully musters support from the likes of Adam Smith, Edmund Burke, Alexis de Tocqueville and Charles Dickens, in addition to a host of more contemporary figures. Although his principal focus is the United States, on which as a Scot he offers observations unhindered by political partisanship, his assessments can be applied to all Western democracies.
Mr. Ferguson explains lucidly that even as we are distracted by “the slanging match that passes for political debate in the United States today,” our country has entered a new era of decline. We have become what Adam Smith called a “stationary state”: a “formerly wealthy country” that has “ceased to grow,” and displays the hallmarks of relatively low and stagnant wages for the masses, coupled with “the ability of a corrupt and monopolistic elite to exploit the system of law and administration for their own advantage.”
The author’s theme is that our past successes — and current predicament — have not been driven by climate, resources, culture or religion, but rather by “laws and institutions.” In assessing “what exactly has gone wrong in the Western world in our time,” Mr. Ferguson focuses on four “key components of our civilization” — democracy or representative government, capitalism or free markets, the rule of law, and “civil society.” Within these “political, economic, legal and social black boxes are highly complex sets of interlocking institutions,” which he undertakes to examine in search of defects or degeneration.
Mr. Ferguson recognizes the virtues of representative government, but details with dismay the huge debts amassed by the Western democracies in recent decades. The author views the “enormous inter-generational transfers” required by current policies as a “shocking breach” of what Edmund Burke called the “partnership” between the generations. Even so, the young now support policies that will “ultimately make matters even worse for them.” Restoration of the social contract is further complicated because of “well-organized opposition” to reform by “recipients of public sector pay and recipients of government benefits.”
Considering capitalism, Mr. Ferguson turns to the recent financial crisis for his teaching example. He places blame for the crisis not on “deregulation,” but on “over-complex regulation” that “inadvertently helped to inflate a real estate bubble.” The problem Mr. Ferguson illuminates is not a lack of regulation, but rather a failure “to apply the law.” He notes that the list of individuals jailed for their roles in the housing bubble is “risibly short.” After a shock that could have caused “mass extinctions,” moreover, “dinosaurs still roam the financial world.” To make a complex financial environment “less fragile” requires “simplicity of regulation and strength of enforcement.”
Turning to the law, the author catalogs “the ways in which the rule of law, broadly defined, has degenerated in Western societies.” The rule of law has “many enemies,” Mr. Ferguson notes, and he counts “among its most dangerous foes the authors of very long and convoluted laws.” By various international measures, such as “the ease of setting up new businesses” and “effective and predictable regulations,” the United States is “manifestly slipping behind” a number of economic rivals. This is “a remarkable phenomenon in itself,” and the author finds it “even more remarkable that it is happening almost unnoticed by Americans.” Once we had the rule of law, and now “what we see is the rule of lawyers.”
Mr. Ferguson also notes the decline in citizen engagement, as reflected in lower participation in private associations of all types. This is not caused by social media but rather by the state’s promise of cradle-to-grave security, which the author sees as “the real enemy of civil society.” We need “more private initiative and less dependence on the state,” a view once “considered the essence of true liberalism.”
In conclusion, Mr. Ferguson observes that countries reach Adam Smith’s “stationary state” when their laws and institutions “degenerate to the point that elite rent-seeking dominates the economic and political process.” Regulation has become “dysfunctional,” lawyers evolve from “revolutionaries” into “parasites,” and civil society “withers into a mere no man’s land between corporate interests and big government.” This is the “Great Degeneration.”
This is a powerful and persuasive book. I heartily recommend it.
Ray V. Hartwell III, a Washington lawyer, is a senior fellow of the Alabama Policy Institute.