The Great Degeneration: How Institutions Decay and Economies Die

Image of The Great Degeneration: How Institutions Decay and Economies Die
Release Date: 
June 13, 2013
Penguin Press HC
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There are many authorities who take issue with and raise concerns about the current state of our societal institutions. This trend began in the early 1990s with Francis Fukuyama’s work, The End of History and continues to this day with Niall Ferguson’s The Great Degeneration: How Institutions Decay and Economies Die.

Mr. Ferguson’s thesis is couched in terms of the “stationary state” described by Adam Smith in The Wealth of Nations, first published in 1776. Mr. Ferguson’s interpretation of Smith’s original argument referencing the stationary state characterization is that there are two conditions based on this that should resonate with today’s society, i.e. “First wages for the majority of the population are miserably low,” and that “The second hallmark of the stationary state was the ability of a corrupt and monopolistic elite to exploit the system of law and administration to their own advantage.”

Mr. Ferguson then develops his argument relating to institutional degeneration by examining what he refers to as the “four sealed black boxes” of democracy, capitalism, the rule of law, and civil society.

His approach to democracy relates to the distributional aspects of this concept with special reference to what “whether we are witnessing a fundamental breakdown in what Edmund Burke called the partnership between generations.”

The author then segues to his discussion of capitalism by discussing: “What is the right balance to be struck between economic freedom and government regulation”? Here his discussion focuses on whether “excessive regulation has become the disease rather than the cure” for the financial crisis that began in 2007.

He next moves to the rule of law. He favors common law as practiced in the United Kingdom; and to buttress his argument when comparing other systems of law with common law he modifies the concept of the rule of law to compare different codes of law to “what might be called the ‘law of rules’: the way that law itself is made.”

Mr. Ferguson’s final black box concept in describing why we are in a stationary state is that we are currently suffering from a loss of civil society. The signs for this are legion with special reference to the loss of politeness in our daily lives and an absence of decorum in our governing institutions both domestically and internationally.

In this regard Mr. Ferguson’s focus is to ask why this “is no longer true, and how far it is possible for a truly free society to flourish in the absence of the kind of vibrant civil society we used to take for granted.”

The above conceptually approaches taken at face value would probably find generalized agreement between current Western decision makers and thought leaders, but it is in Mr. Ferguson’s approach to presenting his arguments where his contentions diverge from the conventional wisdom for the following reasons:

• There does not seem to be either a conventional or indeed a linear approach as to how he presents his arguments.

• Many of his sources are based upon Enlightenment or post-Enlightenment European and British references that have tremendous value on their own, but are not well explained by the author with respect to the current modern American context.

• Though the author is passionate with respect to expressing his point of view many times he is excessively combative and facile. Let me explain what I mean here with two examples.

With respect to deregulation as a cause of the 2007 financial crisis he states: “Those who believe this crisis was caused by deregulation have misunderstood the problem in more than one way. Not only was misconceived regulation a large part of the cause. There was also the feeling of impunity that came not from deregulation but from non-punishment.” Well-intentioned people can strongly argue here on his approach to the causative impact of deregulation.

The second major area where his passion does not serve him well is in his approach to the importance of public debt. Here Mr. Ferguson states: “I have tried to argue that we are living through a profound crisis of the institutions that were the keys to our previous success—not only economic, but also political and cultural—as a civilization. I have represented the crisis of public debt, the single biggest problem facing Western politics, as a symptom of the betrayal of future generations . . . ”Here there is no doubt regarding the appropriateness of living within our means; many scholars such as Paul Krugman would argue for a need to go beyond the politics of austerity decision making in the government sector.

Finally, taking a cue from others who also want to reinstill the importance of civil society but differ with Mr. Ferguson’s approach, note the following from The Art of Peace by Morihei Ueshiba: “Economy is the basis of society. When the economy is stable, society develops. The ideal economy combines the spiritual and material, and the best commodities to trade in are sincerity and love.”