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Crash Course
November 2008

What's in a metaphor? At the end of his new book, The Ascent of Money, Niall Ferguson adds a slightly defensive comment about his choice of title. He notes that some of his friends have accused him of sounding bullishly optimistic, at a time when the credibility of our monetary institutions is dropping like a stone. He could say, of course, that bubbles and hot-air balloons also ascend. But instead he sticks to his guns. The title was chosen, he explains, as a tribute to Jacob Bronowski's The Ascent of Man; Bronowski's story was about the progress of the human mind in making sense of the world, and Ferguson's story - about the development of money, banks, and financial institutions - is also a history of progress.

The changes he describes have contributed hugely to the unlocking of human potential, and are essential to the world in which we live.

At the same time, though, he observes that Bronowski's title was a response to Darwin's The Descent of Man, and adds that his own book could have been called The Descent of Money, because it also tells an evolutionary story. Just as complex organisms have evolved out of simple ones, with various false starts and dead ends along the way, so too the elementary banking methods of Italian Renaissance merchants have evolved, over the centuries, into the complex practices of credit swaps, derivatives and collateral debt obligations.

New institutions have arisen, sometimes gobbling up the previous ones, and from time to time there have been mass extinctions - roughly 10,000 US banks, for example, in the four years after 1929. Of the 1912 list of the world's top 100 companies, 77 had gone bust, or been taken over, by the end of the century. In the world of finance and business, the "survival of the fittest" is more than just a slogan. "Evolution", Ferguson concludes, "certainly offers a better model for understanding financial change than any other we have."

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