Niall Ferguson: Why Great Civilizations Rise and Fall

My sense that this is one of the reasons I am an American optimist is that, as with the Soviet Union, more conventional wisdom exaggerates the strength of the Chinese system, is fooled by propaganda, and fails to see the rot within. of my optimism. that the chinese system is in much bigger trouble than most people in the west believe welcome to the american optimist i'm excited to have neil

ferguson

with us today uh neil is a friend and he's also one of the

great

living historians and economists and from From my point of view, you've written over a dozen very popular books and you've taught at Oxford and Harvard and now you're also at Stanford at Hoover and I'm excited to talk to you a little bit about what's going on in the United States and the world today your latest book is called doom the politics of catastrophe this is the american optimist i understand doom is an ironic title yes you don't think we are doomed no we are not doomed but we are a little concerned about doom as a species We love to talk about the end of the world, all the

great

religions have a kind of apocalyptic end and at this moment we have a new millennial movement which is the radical environmental movement that says that the world will end in 10 years.

I think, and the interesting thing is that of course the world doesn't end as often as we predict it will end, in fact it hasn't ended, although we have disasters to deal with and these are the problem because they don't end. They come with a lot of predictability anyway and disasters constantly take us by surp

rise

, that's really what we have to worry about, not the end of the world, in the same way that we have a kind of ambivalent relationship with death, I mean, We know that death is inevitable, but we try not to think about it too much and then when faced with a sudden increase in our risk of death, we go from complacency to panic without really finding a middle ground, which is what the book is about. . it's about the fact that we seem to panic a lot more than usual in recent years compared to almost any other time in history, like why?

It's an interesting question, I mean, I think part of the reason is that we had something pretty sweet. After decades in terms of improvement, we have all become soft. My grandfather's generation fought in the world wars. They had to deal with the great depression. Infectious diseases were a part and parcel of life in the 1950s. So, in comparison, we. they are quite mild and we hope that we almost consider it as a guarantee that we will live to be 80 and we will consider death to be really some kind of terrible scam that has been perpetrated and that we want to blame some, historically people didn't think that at all.

They thought they'd be lucky to be 40, 50, 60 if you read Shakespeare. Death is omnipresent. People frequently die at a young age, whether from violence or misfortune. We are used to a very low risk environment. We have a safety culture. uh that has become ubiquitous in most Western

civilizations

, we have a bureaucracy whose main goal is to minimize risk, so when something is too successful in a company or something, it becomes comfortable and then sometimes you get you surp

rise

, hit and decline and you have this. pattern of history of the rise and

fall

of

civilizations

Have we passed our peak?

Are we weak and declining? Is there another ascending stage at some point? or how do we get there properly? One of the key arguments in Doom is that there really are no story cycles as we would like to find them, I mean it's a constant search to find the story cycle because if we can only find it we will be able to predict the next cycle, unfortunately the story is not at all. it doesn't really work that way, we just project it, but there isn't really a rise and

fall

, well, there are too many random things happening, like the disasters I mentioned above, it's also true that the civilizations you alluded to are very, very complex systems, I mean, if a large corporation is a complex system or a city is a complex system where civilization is a large enterprise, they have a special interest, they can take charge and they can govern things for their own good, but they don't for the good of all. more and that can cause a decline in different metrics, right, yes, except that the decline is reversible, I mean, you go through bad times, but that doesn't mean you're going to expire, what you see is that complex systems are not like We humans.

Yes, we are young, then we reach our prime and then we decline and there's no way around it unless you're Peter Thiel, but the rest of us have to keep in mind that that's not how complex systems work. They last a very long time and seem to be in equilibrium and then a very small disturbance calls them out and causes them to fall apart, so the key to recognize is that the real pattern in history is not a rise to the zenith and then a gradual decline, but rather is quite Unlike that, a complex system can have a bad run, then it can stabilize, it can seem like an equilibrium, and then it can fall apart very suddenly.

That's a completely different way of thinking about things, but I think it's much more accurate. Description of how civilizations have fared. There is no average life expectancy for a civilization, so you had a book called The Great Degeneration. You were talking about how much of our institutional decline or their educational system and you know with other things that are. kind of generation in America and obviously we're talking a lot about the need to build new institutions, so how does that fit into that point of view? Because you're seeing some decline that we need to counteract in some of these areas.

The reason I wrote the great degeneration is that it can be solved, but we have to recognize the pathologies. If you have an overly interventionist regulatory bureaucratic state, you will end up with suboptimal results if you allow public finances to essentially become transfers to the young generation. for the old that will be dysfunctional too, we are giving our money from the young to the old right now exactly like this, the older generation tried to identify the things that were going wrong in the United States and suggest that they could be fixed because if you think that declinism is just the way it works, you're going to be fatalistic, the truth is that to give another example, the british empire had some very difficult times, you might have thought between yorktown and the battle of yena that the game was over There are years ahead and I think the United States is in a similar position: it may choose to decline and fall by making the wrong decisions, but it is certainly not too late to fix the pathologies of the administrative state or a completely biased, how to do it? do we fix other platforms or new technologies or what are the ways we fix these things.

I think technology is crucial and I'm not just saying that because you're in the technology business when I look around the world and ask for good governance, who is? doing this well, who, for example, handled the covert crisis well, curiously it was the very tech-savvy Taiwanese government, which has its own minister of technology, the incredible Audrey Tang, who was able to figure out very quickly how to do mass testing, had a contact tracing system, they did not. It wasn't even necessary to use it last year because they did a good job containing the virus. I think technology is the way we move away from the bureaucratic system of the 20th century, which I think has now become a real impediment to the stable functioning of the United States. states to something that is much more responsive to the needs of citizens and audrey tang told me the other day on the phone that the key is to use technology to empower citizens, not to empower the state, not to empower, on that I agree I agree that there are a lot of regulatory state processes and bureaucracy and other things that could be codified in technology and become more dynamic and transparent exactly and empower citizens, give them the feeling that, in fact, the government is there to serve them, which Of course, when a bureaucracy takes control it is not like that.

Related to this, going back to things that are functional, when you're in your civilization book you attribute the rise of Western civilization to six killer applications, so things like competition, the scientific method, the rule of law, modern medicine and consumerism and work ethic. I think that's right and, uh, cheating, but I was the only person who could remember. I was cheating, but, you know, if so, I mean, they're those apps that are still killers that are still really key and some of them are broken because of some. Of these things that are breaking things, are there other ways that we can revitalize them?

Part of the point of writing civilization was to show that it's basically open source and yes, any civilization, a lot of people copied ours, basically, it's totally downloadable and once the Chinese realized that they discovered that they downloaded at least four of those killer apps, they didn't really want political competition and they definitely don't want the rule of law because the Chinese communist party can't survive on those things, yes, but the rest is the scientific method and so on, the consumer society was very happy to download and they have work ethic in abundance. Now we still have all six.

I think we have a problem and I think our operating system is looking more and more like it needs to. We have to renew it because we need more. In some areas we have at least much less competition than would be healthy. I think it's a good example. The rule of law is really the rule of lawyers. It is now very expensive to use the American legal system. There is a huge abuse of the law taught, so we don't really have the rule of law in its original common law design and I guess you are also missing out on a scientific method if you can't openly debate and discuss common things. exactly, I mean that science emanates from free thought, freedom of expression, the willingness to use experimental methods to test hypotheses that might seem crazy, all of that has become much more difficult because our educational system has been captured almost from the bottom, from kindergarten through graduate school, by an ideology that is deeply hostile to the scientific method and increasingly views science itself as some kind of manifestation of white supremacy, yes, and I guess the work ethic is quite strong in some parts of our society, I guess if you pay people not to work, that challenges that aspect like Well, yeah, work ethic is pretty crucial. 100 years ago people thought there was some kind of natural monopoly on the work ethic in North America.

Max Weber thought that the Protestant ethic was the key and that turned out to be wrong now that the really hard workers uh, available, are in eastern India, China and other places so they can come here and work just as hard and be very good. You and I work pretty hard most of the time. Well, you know it's not like you can. We don't work hard in the United States, but what we're doing, and it's very unfortunate, is creating a series of poverty traps for people at the bottom end of the income distribution and it looks like the administration is just going to add these systems to them. of rights that actually end up trapping people at the bottom of the coincidence so how, how, how do we fix it, what should they, what should they be doing instead of spending four trillion dollars doing whatever they're doing?

If you were in charge, what? What would you do to restart these applications? Well, I mean, I'll give you an example of emergency spending when you have a pandemic and you've locked down the economy because you screwed up the first two months of the pandemic. do that you don't need to continue that level of spending as the economy is recovering quickly because the pandemic is ending because you have a successful vaccination program so we are already in the business of overheating the economy and if larry summers the sumo priest of secular stagnation thinks that we are overheating the economy we are overheating the economy there is going to be an inflation problem that is already visible so they are unnecessarily creating a problem for themselves by thinking that they have to continue applying this aggressive fiscal stimulus and I think that the The reason they are doing this is that they see the opportunity to expand the federal government to an even larger share of GDP.

They talk about infrastructure. I am very skeptical that investments like these will significantly increase the productive output, the capital of. The United States may indeed be a wash, we could end up investing in some technologies when in fact we could have let the shale gas revolution provide an equally good if not better outcome,for productivity, so I think the list The number of errors is Long Joe, but you asked me what they should be me and I think the answer is relatively simple. This is what I try to argue in the great degeneration: that an attack on the regulatory State is necessary, which is a deeply dysfunctional entity.

A large number of government agencies there is no control over it, none at all, and in fact we see them failing at the job they are supposed to do. The public health bureaucracy failed under Kovitz. Do you think everyone realized how badly the regulators failed? In the last year, maybe it's more popular energy around how sad it is that we haven't realized that time and time again, in crisis after crisis, since 9/11, this big bureaucracy with all its different agencies it has failed. in the case of the financial crisis it failed covertly and it's not for lack of planning, they have a lot of regulations and pandemic preparedness plans and bank capital adequacy regulations, it's just that they don't work, so we must be much more skeptical about it.

The claims of big government and we must work hard to replace this outdated way of doing things with something more technological, more efficient and less expensive. Unfortunately, the goal should still be to reduce government in the crisis of the last year and I fear half of that argument has been decisively lost. There are other things that are actually easier fruits. We have a pathologically dysfunctional education system, especially in public schools, because the power of teachers unions is too great. It is a vested interest. It is especially harming our children. poorer kids, that's the kind of thing that a truly reform administration would assume, of course, is not going to happen, giving poor kids basically exact options and we know that's really popular with the kind of families that are stuck in schools terrible public policies, but it is precisely what is not being fulfilled and unfortunately neither party has really addressed this seriously.

In all the time I've been in the United States, which is now two decades, it's interesting that so many of my friends are talking about these. problems now and yet hopefully they are coming to the surface, the point at which you can fight for them, well Lennon said the worse the better, we certainly have it worse, the question is whether that will lead to any improvement in at some point and I think it will only be when we reconsider, and this applies particularly to Republicans, that we reconsider our criticism of the administrative state because at this point I think we almost have to go back to first principles, first principles when it comes to education, the first principles when it comes to legal reform and criminal justice reform, yes, and first principles, especially, when it comes to governance and how we deliver public services.

Well, going back to first principles, let's talk about the first principles of money. A lot of what we're talking about here is that you have some This big thing centralized from the top in the middle of the country in a very Soviet way is running things and breaking things and we're trying to make things distributed from the bottom up, you know, let them people decide independently, that's what cryptocurrency is all about. of people are very excited about this decentralized finance and taking power away from the Federal Reserve, taking power away from governments and finance. What is your opinion on cryptocurrencies?

He wrote the incentive money and talked a lot about this: cryptocurrencies, what's next to get money? in the coming decades cryptocurrency is not money yet right now it's a lot of digital assets uh and I think it's an extremely healthy sign that we still have the capacity to achieve financial evolution, it's obvious that the fiat system is reaching some kind of critical threshold um, it seems like they're speeding it up with what they're trying to do now: enormously rapid monetary growth, explicit financing of government deficits running into trillions of dollars every year, as far as the eye can see, it feels like the system the existing system is going to reach a breaking point and it's fortunate that some kind of alternative ecosystem is evolving and I'll give you a historical analogy, joe, that's how it was in the days of the Habsburg empire that I wanted to base, uh coinage this was the great inflation of the 16th and 17th centuries what appears to be really useful in the realm of trade what did merchants do in the early modern period use bills of exchange now bills of exchange to finance trade were pieces of paper authenticated by merchants' signatures It was a decentralized financial system the state was not involved and it was the key to the first phase of government there was a lot of fraud from people who are doing it right of course the problem with any new system is that it is volatile because it is experimental and has gaps of security that will obviously make it stable enough to function, ultimately bills of exchange became the basis of international trade financing throughout the 18th, 19th and early 20th centuries. and people forget when they say there is something new about decentralized finance.

No, the original decentralized finance was the foundation of the expansion of global trade that was absolutely crucial to the industrial revolution, so in some ways I think about bitcoin in particular, but cryptocurrencies and decentralized finance in general. as a new technologically enabled version of that stateless monetary system that evolved to finance trade. You see, you remind me that if you're talking about 17th, 18th and 19th century finance, you've written a lot about the Rothschilds, I think you have access to their records and you wrote some really interesting things, you know, I guess a couple of questions , one is: is there something similar happening with wealth concentration now?

Anything we saw back then and are there any lessons we can learn from the Rothschilds and How do I think you know how they worked in those times? It's interesting because, although the income distribution has clearly widened to the point reminiscent of the wealth distribution of the 1920s, it hasn't made us as unequal as it was in the 19th century, I still think there are things that we can learn, so the 19th century is much more, yes, I mean, because there really is a very large proportion of people with nothing at all, that is, with extreme poverty that we can barely imagine, so we have moved to a different world. in which significant amounts of redistribution are taking place but also people have some capital at a much lower level of distribution, but what's interesting when you look back to the 19th century is the role that was played by this extraordinarily wealthy family who made their money out of nowhere.

They started in the Frankfurt ghetto in the late 18th century, once they became what they were, which was really the guardians of the international bond market, they weren't content with mere wealth and I'm fascinated, it was one of the things that I was motivated to write the book by the extraordinarily creative way in which the Rothschilds became involved in philanthropy. They did a great deal to advance the cause of Jewish emancipation. They considered themselves to be a kind of Jewish royal family, yes, and this was an enormously important achievement at a time when Jews had very, very limited rights and were subject to all kinds of.

They did a lot of work to help Jews get more rights in different countries. That's true, but they also did a lot of philanthropic work that was general and therefore available. to the non-Jewish community, so I think the lesson when I look back on that book is, first of all, that they are part of a massive financial network that is absolutely crucial to making a global economy possible and spreading industrial technology to everyone. the world. world, their information networks back then were quite impressive, it was absolutely one of the keys to their success, but their real historical importance is not only that they made a lot of money, but the fact that once they did it they made a very good sense. powerful. of social responsibility and vision, they had a vision of a society in which Jews were no longer a despised minority, but full members of society who could take their seats in the house of commons in london, who could enjoy true civil rights.

People sometimes forget that Jews had to fight for civil rights. You think the Rothschild key in England continues to make Jews more egalitarian. They are absolutely successful. I mean, this was an amazing achievement considering the Jews had been completely expelled. In England in the Middle Ages, in the mid-19th century, Lionel de Rothschil is able to take his seat as a Member of Parliament in the House of Commons and is able to insist that he not take the oath as a Member of Parliament. in the new testament it's the same guy who also had the zebras pulling his character, no, that's a later member of the list, okay, they also went into zoology, but actually, the next generation of Rothschilds there is a Rothschild in the House of Lords, this is a really important story that we sometimes forget, I mean, one notices these days of hostility towards Jews and a tendency to treat users if at no time were they discriminated against a minority.

As you read my list history, it will remind you how long the road is. it was from the frankfurt ghetto, yes, having been raised jewish, you still remember some of the history and put christians in your update, there is still a bit of pain, yes, yes, as indeed there should be in douma, I point out that in The Great Pandemic of the mid-14th century, the attacks of the Black Death against Jewish communities were one of the ways in which popular panic manifested itself. I mean, are Jews really in danger of this again or will it be different different groups that people attack?

If there are difficult problems, I am concerned about the manifestations of anti-Semitism that I see in the United States, in Europe and in the rest of the world, it is something that for me, as a historian, is deeply alarming. I am not Jewish, but I have spent much of my career as a historian thinking about the fate of the Jews of Europe, who remember that after the time of the Rothschilds, after that extraordinary achievement of emancipation, they became victims of the worst more systematically. organized genocide in history the achievement of what appeared to be a highly sophisticated society, namely the German Empire, so no one should trivialize anti-Semitism, no one should assume that it has somehow disappeared or is being overtaken by other issues of Let's say, racial inequality, the problem. of anti-Semitism is persistent throughout history and can never be dismissed lightly.

It's ironic that there's a pandemic and then this is happening again right now. There seems to be a pattern there that is pattern recognition and in fact there is some very interesting research showing that the sites where there were anti-Semitic attacks in the 1340s were also sites centuries later of support for National Socialism during the rise of Hitler, so There are some really surprising patterns in the historical data on this topic, so maybe I'm going around in circles. Back up a little bit because it's called the American optimist. I want to hear a little more from you about what's going to happen in the next 20 or 30 years.

Are you optimistic? In 2050 we will have a totally different set of problems than we have. I have now or some of these trends things that we are going to deal with for quite some time. I am optimistic in the sense that I chose to come to the United States. Not only was I born here and I still think that prospects are brighter here than most Native Americans realize. America has a lot of secret sauces. It has a politically unique operating system that, despite those who predicted Weimar, the United States withstood the upheavals of recent years just as the founders intended.

I'm optimistic that the political system will continue to work we're 30 times richer than we were 200 years ago for the media in person it's going to be like that again it's a completely different future 100 200 years from now and potentially positive and brighter I mean, remember there are all sorts of things we have yet to exploit in the realm of technology and particularly biotechnology, if mRNA vaccines are the key to defeating the covert ones, which I think they were, there is a lot more to it than that. Technology still has to do My feeling is that there are still many more extraordinary advances to come and those who say no, no, we have reached a plateau, it will probably be the beginning of the decline, it will be a stagnation, our grandchildren will be worse off. that we, I think they're getting it wrong, and of course people were saying exactly those things in the early 19th century, vastly underestimating the impact of technological change across the board, because remember that changeTechnology changes everything, it changes the food supply, it changes health care.

It doesn't just produce cheap shirts or cheap wide-screen televisions, so I remain optimistic that we still have a lot more, maybe a little more low-hanging fruit, but a lot more fruit to harvest from science and the application of science. to the problems that We face if you think there will be competition in government inside and outside the US because you know a lot of people are moving for the first time from California to New York, obviously people have always done this, but Recently there has been a huge wave in recent years and people are going to go to charter cities and free cities, there are new countries that are going to evolve, things like that are likely to happen in the next few years or is it so stupid, I think the federal system he will continue to do what he says give people options I think that outside the United States it is much more difficult than some of my more radical libertarian friends imagine to create a new state small states are very vulnerable that is one of the lessons of the history it's the big empires that call fragments and you will only be a viable city-state as long as the big empires are happy for you to be one, ask Singapore, so my feeling is that the most important political competition is actually between a centralized system like the United States, that's what That's what with our sister institute we are working in eight states to pass laws right now, that's my bias, in addition to fixing the different states, it's one of the keys to the superiority of the American system over the more centralized states that we see in the rest of the world, especially in China, which although we are told over and over again that it is the power of the future, the rising power suffers from the chronic pathologies of excessive centralization and the lack of accountability through a free press and the rule of law.

This is one of the reasons I am an American optimist because, just like the Soviet Union, most conventional wisdom exaggerates the strength of the Chinese system, gets fooled by propaganda and doesn't see the rot within my optimism, he tells me. that the Chinese system is in much bigger trouble than most people in the West believe and the reason for this is that it is inherently impossible for one man at the head of a party to lead such a large proportion of humanity with the ideology of Marxism-Leninism, even if it is tempered by is not really Marxist is he is he is not he? some kind of fascist capitalist well i actually think marxism leninism is much more important to xi jinping than most western observers realize i mean they are still reading marx and engels in the politburo standing committee i had and which was recently explained to me by the party's head of research in Beijing and she is much more ideological than I think is perceived in the West because people listen to her speeches to Western audiences at the time of divorce, but they don't actually listen to what she says. she is saying in chinese to each of the communist party and and when you look closely, in fact, xi jinping has turned back the clock ideologically and is reducing the room for maneuver of the market elements in the chinese system and if you don't believe me, ask jack ma how life is going.

I think I heard there are like 70 billionaires who have disappeared or something in the last decade. Is it true that there are many powerful and successful people who are eliminated if they don't agree? I couldn't give you an exact number, but there is no doubt that the party is extremely ruthless in asserting its power over the new power, the new China that has emerged particularly in the world of technology, so this again is not transparent, We don't really see clearly what's going on. but my feeling is that we exaggerate how capitalist the Chinese system is, we forget that in the end it is a one-party state and the state-owned enterprises really dominate the system and if you try to challenge that like Jack Ma did soon, no, I mean.

Although of course there is a lot of destruction that was part of the goal of the martial revolution, it was not very creative and they destroyed their traditional culture in the cultural revolution, people in the West don't realize that that left a void that has really only may be covered by the pursuit of wealth, but chronic party corruption, which has only been partially addressed by Xi Jinping, remains a core problem and the reason I believe this system will ultimately lose legitimacy, especially as the growth rate increases. We are going to achieve this day of free countries.

We are not necessarily going to be surpassed by the Chinese system. The end of civilization. I said that the main threat to Western civilization is not from outside, it is not from China, it is from within. and if we choose in our schools and universities to relentlessly attack our civilization and its values, then we will only have ourselves to blame, if we basically achieve this, embrace the core values ​​of our civilization and the killer apps, then maybe we will. We'll still be pretty good, they can absolutely save even this generation from itself. Awesome, thank you very much, thank you.