Niall Ferguson at the Institute of Economic Affairs

I went to see the lecture by Niall Ferguson organised by the Institute of Economic Affairs with Victor last month. Owing to huge demand, the meeting was held in a hall belonging to the Church of England, which seemed appropriate, given the topic advertised "Economics, Religion and the End of Europe".

It wasn't about Muslim immigration, as I had expected, but a re-examination of Max Weber's thesis on the Protestant ethic and the spirit of capitalism. His recent review in the Daily Telegraph of Timothy Garton Ash's new book encapsulated his point quite well:

"...in both economic and cultural respects, Americans and Europeans really have grown apart in the past 20 years. The US is still shot through with the Protestant work ethic; it is a God-fearing, workaholic society. Europe has a post-Christian leisure preference; by comparison, it is Godless and work-shy. And Americans are also far more unabashedly patriotic than Europeans."

His thrust was generally that of an economic and cultural conservative, as the Americans would understand it, explaining it in terms of his own upbringing in the traditional Scottish virtues of work and ambition.

He's a skilled lecturer, with an ease and fluency on the lectern that's rare to see. He includes "journalism" among his hobbies in "Who's Who". A key part of his technique, in print and in person, is to startle. A recent article in the Daily Telegraph that compared American policy-makers to sufferers from Asperger's Syndrome was brilliantly stiched together. His speaking tone wavers up and down in a u-pattern familiar from his TV performances.

He's a commentator with plenty to say and many figures to back it up. He cited much of the academic economic literature. However, I'm still not sure if he's really master of the data and the economic theory behind it; he seems to have misquoted two figures, The $45 trillion estimate for implicit US Federal government debt by Smetters, which he has written on elsewhere came out as $75 trillion. Then, he rendered first quarter US GDP growth as 5% instead of 4.4%, as I had commented before.

He interpreted Weber's thesis to mean that the vaguely defined Protestantism made acquisition respectable, but not consumption.

Victor didn't like the title of his previous book - thinking that empire is too much of a concession to the criticism of the left. I would think the same, but the real Achilles heel in my mind is that the "white man's burden" is a heavy cross for America's economy to bear, geared as it is towards exploiting technology and serving consumers, so that the returns to capital are much, much greater at home than abroad, as the evidence of where Americans want to work and macro data showing how high the returns to capital investment are in America shows.

Key statistics underlying his argument included hours worked in the US, which are much greater at about 2000 per year, compared to the European figures showing hours steadily converging on Italy's unvarying 1500 hours. Labour force participation and potential growth, assuming the fuller employment of labour, are also better for the American economy.

As in his book, which I commented on below, he points out that bond issues are now larger in Euros than in Dollars . I guessed at the time that this meant "international" i.e. the Eurobonds and globals traded outside any domestic markets rather than all bonds, and the BIS data seems to indicate that investors outside their home market prefer Dollar debt.

Olivier Blanchard has argued that the productivity per day worked is as high in France as in America. Ferguson's rejoinder is that wars are not fought on relative productivity, but on absolute levels of wealth as the driver of national power and relative strength.

He knows Germany well, having lived there while writing his doctoral thesis, reporting for the Telegraph during that time. He comments that on recent visits (such as that described by Eamonn Fitzgerald) he observes that Germany now suffers from an extraordinary, almost Spenglerian level of cultural pessimism.

He presented the many problems with taking the Weber thesis as fact, both historically and in the present day.

Protestantism is not credibly defined, although Huntingdon's latest book makes a credible case, he says, that the American creed is fundamentally an Anglo-Saxon Protestant one that subsequent waves of immigrants have internalised. Neither is any pattern visilble in comparing the predominantly Catholic and Protestant countries in Europe today.

Nowadays, the Asians work hardest of all nation. Koreans, at 2500 hours per year, top the league. They are not religously homogenous, although evangelical beliefs are increasingly important.

The punchline: American capitalisim isn't about accumulation, but spending. Personal consumption has gone up over the past twenty-five years to account for 75% of US GDP. Spending rather than saving is the order of the day in government too - with 75 billion dollars [sic] excess present value of spending committments on Social Security, Medicaid and Medicare than tax receipts, quoting from Smetters. This leads to the inevitable conclusion that all committments of the Federal Government have to be pared back or the system superceded by privatisation of retirement saving.

On a more personal note, he commented on how locked in a socialist mindset Scotland was. On first travelling to eastern Europe in 1985, Glasgow seemed very similar to Bratislava.

As an aside on his methodology, he cautioned that we shouldn't ignore the religious motivation behind material change. As an example, he related that the exclusion of Irish Catholics in Glasgow led them to create a ruthlessly dominating political machine based on socialist ideas. His own family were largely irreligious as an intellectual rejection of the sectarian blood-letting of Scottish politics. He also mentioned the support of many Jews in Eastern Europe for the communist regiemes installed after the war, presenting Victor Klemperer as one example.

Harvard economist Robert J Barro got a mention also, for his paper on Religion and Economic Growth, showing how fear of hell seems to be correlated with economic growth.