Behind every major historical phenomenon and every great civilisation lies a financial secret. Such is the starting point of Niall Ferguson’s wonderfully accessible new book, a perfectly timed primer for the many seeking enlightenment on economic history during these difficult times.
The rise of ancient Babylon was intimately tied to the evolution of credit and debt; without banks and the bond markets, the splendours of the Italian Renaissance would never have materialised; corporate finance was the foundation of the Dutch and later British empires; the ultra-sophisticated Wall Street financial engineering which has now come crashing down is intractably linked with America’s global primacy. And now, of course, the new-found geopolitical power of many emerging economies, such as China, comes from their embrace of modern finance and creation of huge sovereign wealth funds.
Especially fascinating is Ferguson’s discussion of the rush of intellectual innovation, beginning in the 1660s, that created the theoretical basis for life insurance, one of the most important financial inventions of all time. First, probability theory was invented, with the great French mathematician Blaise Pascal attributing the founding insight to