Niall Ferguson is an extremely well-known and at times extremely controversial historian of finance, money, and imperialism. Born in Scotland, he now operates from a perch at Harvard. He's not afraid to tangle. And he's not afraid to be funny, something you have to concede no matter what you think of his conservative (some would say reactionary) politics.
I'd never seen him in action until yesterday, when at the Milken Institute Global Conference taking place this week in L.A. I caught him participating in a panel with the modest title of "The Future of Capitalism."
Prof. Ferguson outlined three varieties of existing capitalism: the old-school version we all know so well; a very new state-sponsored variation (see: China); and "cheese-eating" capitalism.
Ferguson enjoyed pronouncing those last few words. The cheese-eaters come from where you think they would: Europe. Social democrat-flavored Europe. Your socialist candidate for president of France, François Hollande, is a pretty solid example of Ferguson's cheese-eater. Hollande probably enjoys his cheese, so it's hardly a leap.
Once the yuks had subsided, the panel got more serious, but Ferguson at no point backed off. He definitely seems intrigued by what he sees in China, which he argues is moving away from the popular perception that the state defines all in its capitalist/communist model. China is actually weaning itself off state intervention in markets. Meanwhile, in the West, the trend is toward more state intervention. And that alarms Ferguson.
Other members of the panel were Ana Palacio, Spain's former minister of foreign affairs; Raghuram Rajan of the University of Chicago's B-school; and Peter Passell of the Milken Institute. James McCaughlin, CEO of Principal Global Investors, moderated.
Overall, the discussion partook of the current "How can we put capitalism back together again?" question, but did focus aggressively on emerging markets and the challenges they face. Palacio hit the nail on the head when she stressed that the future of capitalism (and it does have one) is not a question of economics, but of law — of the world requiring strong institutions for capitalism to recover and thrive.
This is where it gets messy. Does capitalism, of the hyperactive, 21st-century sort, want to wait on legal frameworks to develop? There's some value in patience. Certain democratic institutions, such as a free and open press, can assist in making markets work better, in a developing context. Why? Well, as Ferguson noted, a single-party state with limited personal freedom — a.k.a. China — will tend to be rather corrupt. Meanwhile, China's global second-fiddle, democratic India, does a much better job of weeding out corruption because it has a free press.
The bottom line is that capitalism's future seems secure. But it's also likely to be confusing. Big question: Will the cheese-eaters survive?