The Cash Nexus: Money and Politics in Modern History, 1700-2000

by Niall Ferguson

  97. Sanders, ‘Why the Conservatives Won – Again’. For a sceptical view on expectations in the British context see Alt, ‘Ambiguous Intervention’.

  98. Norpoth, Confidence Regained, table 5.7, p. 80.

  99. Nadeau, Niemi and Amato, ‘Prospective and Comparative’.

  100. Downs, Economic Theory, pp. 39–42; Lewis-Beck, Economics and Elections, esp. pp. 49, 60, 72. However, Conover, Feldman and Knight show that projections about the future are based as much on personal assumptions as on past events: ‘Personal Underpinning of Economic Forecasts’.

  101. Saatchi, ‘Happiness Can’t Buy Money’, p. 13.

  102. Haller and Norpoth, ‘Good Times’.

  103. Alesina and Rosenthal, ‘Partisan Cycles’, p. 393. See also Alesina and Sachs, ‘Political Parties and the Business Cycle’ and Chappel and Keech, ‘Explaining Aggregate Evaluations’.

  104. Saatchi, ‘Happiness Can’t Buy Money’, p. 13.

  105. Ferguson, ‘Introduction’.

  106. Norpoth, ‘Guns and Butter’, table 1, p. 951, and table 3, p. 956.

  107. Sanders, ‘Government Popularity’, and ‘Why the Conservatives Won – Again’; Price and Sanders, ‘Economic Competence’; Sanders, ‘Conservative Incompetence’.

  108. Sanders’s equation for the period 1979–97 is as follows:

  Convote = 6.82 + 0.83 Convotet-1 + 0.09 Aggeconexpt - 0.33 Taxt + 9.2 Falklands May 82 + 5.40 Falklands June82 - 4.91 Currency92 - 1.44 Blair

  where ‘Convote’ is the Conservative vote in the current month, the constant is the base figure for Conservative support, ‘Convotet-1’ is Conservative support in the previous month, ‘Aggeconexpt’ is the balance of positive over negative household financial expectations, ‘Taxt’ is the change in tax index, ‘Falklands May, June 82’ is the increase in Conservative support due to the Falklands War, ‘Currency92’ is the decrease in Conservative support due to the ERM crisis of September 1992 and ‘Blair’ is the impact of Tony Blair’s leadership on voters’ perceptions of Labour.

  109. The argument is developed in Frank, Luxury Fever.

  110. Scitovsky, Joyless Economy, esp. pp. 133–45.

  111. See Erikson and Uusitalo, ‘Scandinavian Approach’, p. 197. See also Sen, ‘Capability and Well-being’, p. 38; Pinker, How the Mind Works, p. 392 f.

  112. Diener et al., ‘Subjective Well-being’, p. 214.

  113. Tobin and Nordhaus, ‘Is Growth Obsolete?’; Eisner, ‘Extended Accounts’.

  114. Franklin, ‘Electoral Participation’, p. 227.

  115. Budge et al., New British Politics, pp. 364 f.

  116. Turnout for European elections in 1999 (1994 figure in brackets):

  117. Webb, ‘Party Organizational Change’, p. 128.

  118. Farrell, ‘Ireland’, p. 216.

  119. King et al, New Labour Triumphs, p. 222.

  120. Mair, ‘Party Systems’, p. 106.

  121. Noelle-Neumann and Köcher (eds), Allensbacher Jahrbuch, pp. 783 f.

  122. Ibid., p. 822.

  123. Ibid., p. 825.

  124. Ibid., p. 889.

  125. Ibid., p. 834.

  126. Le Monde, 18 November 1999.

  127. Speech to the Democratic National Convention, 18 August 1956.

  9. The Silverbridge Syndrome: Electoral Economics

  1. Trollope, Can You Forgive Her?, ch. XII.

  2. Trollope, Phineas Finn, p. 49.

  3. Mullen, Trollope, p. 514.

  4. Hanham, Elections and Party Management, pp. 265 f., 277.

  5. Trollope, The Prime Minister, pp. 285–98, and The Duke’s Children, pp. 84–92.

  6. Guardian, 30 July 1997.

  7. Financial Times, 28 April 1999.

  8. Ibid., 8 July 1999.

  9. Ibid., 14 July 1999.

  10. washingtonpost.com, 15 September 1997.

  11. Hanham, Elections and Party Management, pp. 249 ff.

  12. Kingdom, Government and Politics, p. 322.

  13. Farrell, ‘Ireland’, pp. 222, 234.

  14. Koole, ‘Vulnerability of the Modern Cadre Party’, p. 297.

  15. Financial Times, 15–16 May 1999; The Economist, 31 July 1999; Prospect, March 2000, p. 37.

  16. Katz, ‘Party Organizations’, pp. 129 f.

  17. Statistical Abstract of the United States 1999, tables 492, 493, 496, 497, 498, 499.

  18. washingtonpost.com, 15 September 1997.

  19. All figures calculated from data in Statistical Abstract for the United States 1999.

  20. Centre for Responsive Politics, www.opensecrets.org.

  21. Butler and Butler, British Political Facts, pp. 132.

  22. Budge et al., New British Politics, p. 385.

  23. Müller, ‘Development of Austrian Party Organizations’, pp. 64 ff.

  24. Bille, ‘Denmark’, p. 137.

  25. Koole, ‘Vulnerability of the Modern Cadre Party’, p. 287.

  26. Svåsand, ‘Norwegian Party Organizations’, pp. 313 f.

  27. Guardian, 23 June 1998.

  28. Pierre and Widfeldt, ‘Party Organizations in Sweden’, p. 341.

  29. Katz, ‘Party Organizations’, p. 114.

  30. Deschouwer, ‘Decline of Consociationalism’, p. 102.

  31. Coxall and Robins, Contemporary British Politics, p. 130.

  32. Müller, ‘Development of Austrian Party Organizations’, pp. 64 ff.

  33. Poguntke, ‘Parties in a Legalistic Culture’, p. 197.

  34. Farrell, ‘Ireland’, pp. 222, 234.

  35. Webb, ‘Party Organizational Change’, p. 117.

  36. Coxall and Robins, Contemporary British Politics, p. 130.

  37. ‘Known company donations to UK political parties’, Labour Research.

  38. Kingdom, Government and Politics, p. 324.

  39. The Times, 13 July 1999; Independent, 16 July 1999, and 24 November 1999.

  40. Kingdom, Government and Politics, p. 325.

  41. Bogdanor, Power and the People, p. 150.

  42. Kingdom, Government and Politics, p. 327.

  43. Coxall and Robins, Contemporary British Politics, p. 117.

  44. Hanham, Elections and Party Management, pp. 369–84.

  45. Centre for Responsive Politics, ‘Money in Politics Alert’, 18 Oct. 1999, www.opensecrets.org/alerts/v5.

  46. The Economist, 31 July 1999.

  47. Gibbon, Decline and Fall of the Roman Empire, vol. i, p. 805.

  48. King et al., New Labour Triumphs, p. 37.

  49. Müller, ‘Development of Austrian Party Organizations’, p.52.

  50. Le Monde, 18 November 1999.

  51. Matthew, Gladstone, pp. 14 n., 135 f., 375 f. Matthew’s figures are not quite consistent.

  52. Cf. Leigh and Vulliamy, Sleaze.

  53. Butler and Butler, British Political Facts, p. 203.

  54. Pollard and Adonis, Class Act, pp. 115 f.

  55. Harding, Leigh and Palliser, The Liar.

  56. Independent on Sunday, 30 November 1997.

  57. Bogdanor, Power and the People, p. 155. See also Pinto-Duschinsky, British Political Finance, pp. 40 f., 55.

  58. Guardian, 8 July 1997, 9 July 1998, 13 July 1998. One of them, ironically, had previously co-written a book with Peter Mandelson in which they denounced as ‘one of the most corrupting principles in public life today … the idea that there is nothing objectionable about a public figure pursuing a dubious private commercial interest as long as it is declared’.

  59. Daily Telegraph, 17 November 1997; The Times, 14 November 1997; Independent, 27 November 1997.

  60. See e.g. the ‘Seven Principles of Public Life’ enunciated by the Nolan Committee.

  61. Johnston and Pattie, ‘Great Britain’, pp. 139–40.

  62. Pinto-Duschinsky, British Political Finance, pp. 248–9.

  63. Ewing, Money, Politics and Law, pp. 69–81.

  64. Ibid, pp. 107–16.

  65. Katz and Kolodny, ‘Party Organization as an Empty Vessel’, pp. 32 ff.

 
; 66. Herrnson, ‘High Finance of American Politics’, pp. 17–40.

  67. Mair, ‘Party Organizations’, p. 10.

  68. Webb, ‘Party Organizational Change in Britain’, p. 123.

  69. Ewing, Funding of Political Parties in Britain, pp. 73–4.

  70. Mutch, ‘Evolution of Campaign Finance Regulation’, pp. 61–8; Gunlicks (ed.), Campaign and Party Finance, p. 6.

  71. Farrell, ‘Ireland’, p. 235.

  72. Koole, ‘Vulnerability of the Modern Cadre Party’, p. 289.

  73. Poguntke, ‘Parties in a Legalistic Culture’, p. 194.

  74. Drysch, ‘New French System’.

  75. Bille, ‘Denmark’, p. 146.

  76. Müller, ‘Development of Austrian Party Organizations’, p. 55.

  77. Bardi and Morlino, ‘Italy’, p. 259.

  78. Svåsand, ‘Change and Adaptation’, p. 321.

  79. The Economist, 31 July 1999.

  80. Bardi and Morlino, ‘Italy’, p. 260.

  81. Independent, 9 December 1999. See also The Economist, 29 January 2000.

  82. Giddens, Runaway World, p. 77.

  83. Prospect, April 2000, p. 53.

  84. Vincent, Formation of the British Liberal Party.

  10. Masters and Plankton: Financial Globalization

  1. Wolfe, Bonfire of the Vanities, p. 12.

  2. Financial Times, 4 February 1998.

  3. That is, by 0.35 per cent (one percentage point = 100 basis points).

  4. Financial Times, 4 February 1998. Cf. Roberts, Inside International Finance, p. 36.

  5. See Lewis, Liar’s Poker.

  6. The Economist, 17 January 1998, p. 115.

  7. Bank for International Settlements, Annual Report 1999, table VI. 5.

  8. Ibid., table VII.2.

  9. Ibid., table VI.3.

  10. Ibid., table VII.5.

  11. All figures from Federal Reserve Bank of St Louis.

  12. See for example Friedman, Lexus, passim.

  13. Wharburton, Debt and Delusion, pp. 142–59, esp. p. 159.

  14. See Girault, Emprunts russes.

  15. Kynaston, City of London, vol. ii, pp. 271 f.

  16. Warburg, Aufzeichnungen, p. 19.

  17. Drazen, ‘Towards a Political-Economic Theory’.

  18. Körner, ‘Public Credit’, pp. 507–21; Ormrod, ‘West European Monarchies’, pp. 123 f.

  19. Goldsmith, Premodern Financial Systems, pp. 157 ff., 167 ff.

  20. Neal, Rise of Financial Capitalism, pp. 1–43.

  21. Muto, ‘Spanish System’, pp. 246–9.

  22. Goldsmith, Premodern Financial Systems, p. 194.

  23. Neal, Rise of Financial Capitalism, pp. 62–88.

  24. Ibid., pp. 147 f., 211; Wright, ‘Contribution’, pp. 658, 667. The figure for 3 per cent consols was as high as 20 per cent.

  25. Ferguson, World’s Banker, ch. 1.

  26. Körner, ‘Public Credit’, pp. 533 f.

  27. Kennedy, Rise and Fall of the Great Powers, p. 127.

  28. Bonney, ‘Struggle for Great Power Status’, p. 382.

  29. Ibid., pp. 364 f.

  30. Neal, Rise of Financial Capitalism, pp. 180–90.

  31. Ibid., pp. 190–222.

  32. Ferguson, World’s Banker, p. 104.

  33. Sylla, ‘US Financial System’, pp. 259 ff.

  34. Bosher, French Finances, p. 316.

  35. Bonney, ‘Struggle for Great Power Status’, pp. 364 f.

  36. Ibid., pp. 351 ff.

  37. Chapman, ‘Establishment of the Rothschilds’.

  38. For details see Ferguson, World’s Banker, pp. 131–4.

  39. Rothschild Archive, London, XI/109/10/3/4, undated documents relating to Prussian loan proposal, c. Dec. 1817.

  40. This may have been because parliamentary institutions, and therefore their guarantees, were perceived as less ephemeral than monarchs or dynasties, though that was only ever true in the British case. I am grateful to William Goetzmann for this point.

  41. Klein, ‘30-Million-Anleihe’, p. 582.

  42. Thielen, Hardenberg, p. 358.

  43. Quoted in Ferguson, World’s Banker, p. 133.

  44. Disraeli, Coningsby, pp. 213 f.

  45. Quoted in Ferguson, World’s Banker, p. 226.

  46. Prawer, Heine’s Jewish Comedy, pp. 146 f.

  47. Dawson, First Latin American Debt Crisis. It was nineteenth-century practice to quote prices in percentages, rather than yields.

  48. Bordo and Eichengreen, ‘International Economic Environment’, p. 4.

  49. Lewis, Liar’s Poker, p. 59.

  50. Jardin and Tudesq, Restoration, pp. 68 f.

  51. Bordo and White, ‘A Tale of Two Currencies’.

  52. The data are drawn from the weekly London Economist, first published in 1843. Yields are unadjusted, calculated by dividing the coupon by the quoted price, which takes no account of (a) the tendency for prices to fluctuate depending on the imminence of the quarterly or half-yearly interest payment and (b) the differing maturities of bonds. For perpetual debt instruments like French rentes this is a legitimate procedure; for more or less perpetual bonds like consols, this only leads to a distortion in the period after 1888, when yields were inflated by the possibility that consols would be redeemed (see Harley, ‘Goschen’s Conversion’; Klovland, ‘Pitfalls’). The distortion for long-term bonds like the Austrian Metalliques and Russian 1822s does not prevent accurate computation of yield fluctuations within each series, though calculations of spreads between the different bonds would be affected.

  53. Ferguson, World’s Banker, p. 491.

  54. Flandreau, ‘The Bank, the States and the Market’, p. 29.

  55. Rothschild Archive, London, XI/109J/J/30, James and Salomon, Paris, to Nathan, London, 10 October 1830.

  56. Rothschild Archive, London, XI/109J/J/30, James, Paris, to Salomon, Vienna, 24 November 1830. The French convention was to specify the annual rente due on a bond but not its nominal capital.

  57. Rothschild Archive, London, XI/109J/J/30, James and Salomon, Paris, to Nathan, London, 9 August 1830.

  58. Rothschild Archive, London, XI/109/71/4, Nat, Paris, to his brothers, London, undated, c. April 1849.

  59. Castellane, Journal, vol. v, p. 240.

  60. In fact, James’s bearish prognosis proved erroneous until the outbreak of war with Germany, as Figure 26 shows.

  61. Royal Archives, Windsor Castle, Y67/6, Leopold, Wiesbaden, to Victoria, 19 September 1840.

  62. Monypenny and Buckle, Disraeli, vol. iv, p. 225.

  63. Roberts, Salisbury, p. 53.

  64. Taylor, Struggle, p. 156.

  65. Pflanze, Bismarck, vol. ii, p. 81.

  66. Stern, Gold and Iron, p. 311 n.

  67. Einaudi, ‘Money and Politics’, pp. 50, 52.

  68. Feis, Europe.

  69. Edelstein, Overseas Investment, pp. 24 ff., 48, 313 ff. Cf. Financial Times, 6 May 1997: gross direct plus portfolio investment in the period 1990–5 was just under 12 per cent of GDP.

  70. Kindleberger, Financial History, p. 225.

  71. O’Rourke and Williamson, Globalization and History, p. 208.

  72. Pollard, ‘Capital Exports’, pp. 491 f.

  73. Edelstein, Overseas Investment, pp. 24 ff., 48, 313 ff.

  74. O’Rourke and Williamson, Globalization and History, p. 230.

  75. Edelstein, Overseas Investment.

  76. O’Rourke and Williamson, Globalization and History, p. 227. Cf. Davis and Huttenback, Mammon and the Pursuit of Empire, pp. 81–117; Pollard, ‘Capital Exports’, p. 507.

  77. O’Rourke and Williamson, Globalization and History, p. 231.

  78. Davis and Huttenback, Mammon and the Pursuit of Empire, p. 107.

  79. Crafts, ‘Globalization and Growth’, p. 28. Cf. Bordo, Eichengreen and Irwin, ‘Globalization Today’, p. 30.

  80. Nash, Fenn’s Compendium, p. 5.

  81. See Shaw, ‘Ottoman Expenditures’, pp. 374 ff.; Issawi, Economic History of the Middle E
ast, pp. 94–106; Hershlas, Introduction to the Modern Economic History, pp. 53–66; Owen, Middle East, p. 106.

  82. See Crouchley, Economic Development, pp. 274–8; Issawi, Economic History of the Middle East, pp. 439–45; Hershlas, Introduction to the Modern Economic History, pp. 99–122.

  83. For details see Ferguson, World’s Banker, ch. 25.

  84. Crouchley, Economic Development, p. 276.

  85. Hershlas, Introduction to the Modern Economic History, pp. 104 f.

  86. Issawi, Economic History of the Middle East, pp. 439–45; Hershlas, Introduction to the Modern Economic History, pp. 113–22.

  87. Crouchley, Economic Development, pp. 274 ff.

  88. Lindert and Morton, ‘How Sovereign Debt Has Worked’.

  89. Rothschild, ‘You Have It, Madam’, pp. 46, 49. Unfortunately, it was not until 1979 that the British government sold the shares, by which time they had fallen in value to £22 million – in real terms rather less than their original purchase price.

  90. Blake, Disraeli, p. 586.

  91. Shaw, ‘Ottoman Expenditures’, pp. 374 ff.

  92. Homer and Sylla, Interest Rates, pp. 216–73, 291 f., 312–17.

  93. Bayoumi, ‘Saving-Investment Correlations’; Zevin, ‘World Financial Markets’; Taylor, ‘International Capital Mobility’. Cf. O’Rourke and Williamson, Globalization and History, pp. 215 f.

  94. Neal, ‘Integration of International Capital Markets’.

  95. Michie, ‘Invisible Stabilizer’, pp. 10–14.

  96. O’Rourke and Williamson, Globalization and History, p. 220.

  97. Flandreau, Le Cacheux and Zumer, ‘Stability without a Pact’, pp. 128, 145.

  98. Ibid., p. 147 n.

  99. Flandreau, ‘Caveat Emptor’, pp. 23–31, fig. 4.

  100. Correlation coefficients of bond yields against fiscal indicators, 1880–1913:

  Source: Batley and Ferguson, ‘Event Risk’.

  101. The following table gives comparable British statistics since 1980:

  Source: The Economist.

  102. By 1913 Russia was by far the biggest gross external debtor in the world, accounting for something in the region of a third of the world total of foreign public debt: Lindert and Morton, ‘How Sovereign Debt Has Worked’, table 1.

  103. Flandreau, ‘Caveat Emptor’, fig. 5.

  104. Bordo and Rockoff, ‘Good Housekeeping’, p. 337.