Books

The House of Rothschild  by Niall Ferguson

A crucial source for understanding financial history is Niall Ferguson’s two-volume study, The House of Rothschild. It effectively made extensive use of the private records of the world’s greatest banking family during the 19th century. It is especially powerful for understanding the Rothschilds’ bond business and why they dominated the mining, canal, railroad, and sovereign loan business of much of the world. It shows the family’s influence on the leading central banks of the time and on war and peace issues. Unfortunately, it neglects their impact on European bill markets, and thus the fluctuations of short-term credit. It never once even mentions financial derivatives, although they were widely used during the Rothschilds’ heyday. Surely they would have used derivative trades to magnify their gains from manipulating other financial markets. Ferguson does not explore this. On Amazon

The Golden Rule by Thomas Ferguson

As I learned most about my perspective on politics from Thomas Ferguson, I recommend any of his many books and articles on the influence of private money on various American elections. In particular, his book, The Golden Rule, serves as the best overview of his work. Ferguson’s analysis of American politics during the Great Depression and the New Deal form the foundation of his research. He classifies business interest blocs much the same way I do, emphasizing business nationalists versus internationalists and tight versus loose credit interests. These later two I most often refer to as bears and bulls. On Amazon

Four Futures: Life after Capitalism by Peter Frase

This engaging short book considers potential future scenarios on the reasonable assumption that within a few generations automation plus artificial intelligence will render most human labor uneconomical and therefore redundant. He also considers whether global warming and resource bottlenecks will constrain production, perhaps severely. What sort of society will exist after the necessity to work is gone? Frase, an editor of the magazine Jacobin, discusses four distinct possibilities based on two dimensions: high or low egalitarianism and high or low resource scarcity based on environmental constraints. His writing is enlivened by frequent references to echoes of each scenario in science fiction, or, as he prefers, social science fiction found in various popular novels, films, and TV series.

The major problem with the book is that it is not linked to systematic thinking about political economy, in other words, to the bases and trends of private power that are my focus. Political economy refers not just to production and distribution, but also the relations of power that are imbedded in property and propaganda relations organic to our current society. What Frase has done instead is create a rough sketch of four Platonic ideal types. These are categories floating in the imagination with only tenuous links to the trajectory of our current capitalist system of political economy. Leaping from here to there is more than an act of faith; it requires a potential direction for progress. The book’s suggestions along these lines, like a universal basic income, are probably less politically viable and economically progressive than alternatives like a universal wealth tax. Furthermore, he completely neglects finance and the possibility of reforming or out-competing private finance using cooperative forms that are both democratic and transparent to deter corruption and crowd-source fraud prevention. I would love to be an optimist, but without a very strong resurgence of organized popular power, we are more likely doomed to slide toward his pessimistic scenarios: rentism or exterminism, the latter enforced more by lack of access to jobs, resources and health care than by outright murder. Despite these omissions, it is a provocative and fascinating book well worth reading to expand your imagination about potential futures and directions to aim activism toward the more benign ones. On Amazon

Banks and Politics in America from the Revolution to the Civil War by Bray Hammond

I have often emphasized the influence of finance on politics. I learned this from several sources, including Ferguson. One of his favored sources is an excellent book by Bray Hammond, Banks and Politics in America from the Revolution to the Civil War. It is essential to understand the relationship between banking and the two-party political system. It contradicts the vast majority of the scholarship on President Andrew Jackson, who is often described as “anti-bank” because of his public diatribes and his opposition to the Bank of the United States, created by Alexander Hamilton. Hammond makes clear that Jackson was not anti-bank per se. Like most real estate speculators, he was a bullish anti-bear. The Bank of the United States was dominated by bearish Philadelphia merchants and investors who regularly raided the inflation-prone easy-credit frontier banks chartered in states like Jackson’s Tennessee. These bullish banks were great for financing land speculation, but an anathema to Eastern bond-holders. On Amazon

A History of Interest Rates by Sidney Homer and Richard Sylla

For those not repulsed by numbers and tables, an extremely valuable source is A History of Interest Rates by Sidney Homer and Richard Sylla. It covers every country for thousands of years, giving an overview of the history and importance of both long-term and short-term credit. There are many lessons in this data that counteract much of the stereotyped myth of economics textbooks. I will mention just two: Until the last century or so, the lowest interest rates were offered not to governments, but to private merchants and bankers, which is why governments, even absolute monarchs, had to cultivate financiers as creditors. Second, contrary to economic theory, short-term interest rates are often above long-term rates. Supposedly rates should be higher if I lend my money for a longer time period, but the economist’s idea of the “time value of money” is a poor explanation of the private power inherent in credit relationships. On Amazon

Economic Interest, Militarism, and Foreign Policy by Eckart Kehr

This book is essential for understanding the business of militarism and the origins of World War I. German historian Eckart Kehr argues compellingly that the origins of the German antagonisms that led to World War I were deeply rooted in conflicting domestic business interests. Some his best essays are collected in Economic Interest, Militarism, and Foreign Policy. Kehr’s specific argument is supported in a more general way by one of the most influential books on international political economy ever written, Rudolf Hilferding’s Finance Capital. It has been hugely influential on the left for more than a century. It is essential for understanding the transformation of capitalism that occurred during the decades before World War I from thousands of small, mostly family-owned firms, to giant corporations and even larger combines, conglomerates, and cartels that dominated by the beginning of the 20th century. Modern economics still imagine “markets” as they ideally existed during the mid-19th century period of so-called “Manchester Liberalism.” At that time, leading industries comprised hundreds if not thousands of firms. Economics today is still fixated on an idealized version of that time, largely ignoring the emergence of concentrated private power that Hilferding details. Kehr explains in detail the German case of why landlord and business interests unified around a program of tariffs and naval expansion that jointly contributed to destroying Bismarck’s diplomatic system and surrounding Germany with enemies before 1914. A major concern of the ruling elite was to deflect the political pressure of Germany’s organized workers away from domestic reform and against foreign enemies instead. On Amazon

Econned by Yves Smith

Regarding the world economic crisis that began a decade ago, I recommend Yves Smith’s Econned. Her book explains the private interests and the specific hustles involved in the exercise of financial power nowadays in prose comprehensible to non-specialists. Also useful is her website. On the critical importance of the private expansion and contraction of credit for the value of assets, especially real estate, I recommend Adair Turner’s Between Debt and the Devil. It shows through history within the major financial powers the power of the credit cycle in terms similar to my own. Turner was the chief banking regulator in Britain during the 2008 crisis. On Amazon