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Book Reviews
Reviewed by Robert Windorf
Click here to purchase "A History of Credit and Power in the Western World" directly from Amazon.com Amidst the numerous concerns and questions about the state and direction of today's global economy, author and KWR International Advisor editor and analyst Scott B. MacDonald and Professor Albert Gastmann's timely book presents a very fine historical analysis of the often forgotten relationship between credit and power. While eminent historians such as Simon Schama and Fernand Braudel's numerous volumes on economic history cover much of the same material presented in the early sections of this book, MacDonald and Gastmann concisely and effectively tell the story of the importance of credit from its documented origin found within the Code of Hammurabi (1726 B.C.) continuing with its development and usages throughout the ages all the way to today's global financial and trade centers. Without credit, they insist, power would not exist. In their detailed analysis, the authors argue that six major themes exist at the core of the relationship between the nation-state and credit surrounding the issue of power and how it continues to evolve over time. Those themes are: 1) Wealth represented by credit augments political power; 2) Different kinds of political power promote different kinds of economic behavior; 3) Throughout much of credit's development, certain societal groups were able to embrace the dynamics of the relationship between credit and trade in a much more holistic way than others (especially seen in the historical economic successes of the Jews, Italians, Dutch, English, and Americans); 4) The Western credit system evolved in tandem with the development of the nation-state; 5) The development of the global credit system occurred with considerable volatility; and, 6) Over time, the spread of credit, originally the privilege of the wealthy and the powerful, has become available to vast numbers of North Americans, Japanese, and Europeans. (While the final theme ignores the fact that other global regions' citizens now also enjoy credit access, it is believed the authors meant to emphasize that the nationalities mentioned far outpace others in that respect.) The authors present numerous historical examples of the relationship between credit and power, concentrating initially on the rise and fall of early empires and their trading prowess via the development of and their access to credit sources. Naturally, credit influenced numerous monarchs' legitimacies and fueled Europe's industrial development and trade and later led to the exploration of the new world. Throughout trade history, city-states (original models for the later day nation-states) rose to fame as centers of credit, trade, and power. They subsequently fell, replaced by those that became even stronger, often following military conflicts, while other times as new trade routes became more prominent. Rome gave way to Milan, which was overtaken by Amsterdam that led to the rise of London and the eventual succession of New York as the center of global trade and finance. However, today, some may speculate that with the rising prominence of the European Union, Frankfurt could eventually assume New York's global credit role. Also included in MacDonald and Gastmann's analysis is a detailed view of how the omnipotent culture of modern consumerism (originally a phenomenon in the U.S.) created a steady demand for credit and ultimately stimulated financial innovation leading to the formation of today's global financial industry and its myriad of retail and wholesale investment products. The founders of the Dutch East India Trading Company could have never imagined that a future Hong Kong housewife would be able to obtain a credit card from the Vancouver office of a Mexican bank! After a long historical journey, the authors bring the reader up to the present day with a powerful concluding chapter that focuses on the role of credit and power amidst the growing presence of globalization. They correctly argue that the nation-state, once a key force in the development of the global credit system and the provider of the rule of law inspiring confidence in the free flow of credit, has seen its power eroded in two major ways. As viewed over the past few years, it is becoming exceedingly challenging for nation-states and regulatory institutions to control global capital flows; and, such a phenomena that gave rise to the information technology economy has now consequently empowered forces that increasingly diminish the role of the nation-state. Additionally, the tragic events of last September chillingly remind us of the 'power' that terrorist organizations today may hold as financed by their rather easy access to credit within the international credit and funds transfer system. MacDonald
and Gastmann's very fine book could not have come at a better
time to explain the important historical symbiotic relationship
between power and credit. It would be invaluable to anyone who
seeks a better understanding of the financial markets' reactions
to historical and current global political and economic events.
Bernard Lewis, What Went Wrong?: Western Impact and Middle Eastern Response (New York: Oxford University Press, 2002). 180 pages
Despite the hopes of policy-makers in Washington and elsewhere the Middle East has not faded away as a global point of concern. If anything, the Middle East has loomed even larger over the rest of the world since the events of 9/11. For many Americans, the fact that many in the Arab and Islamic world don't like the United States and that there was a vocal wing of public sentiment that cheered the destruction of the twin towers came as a rude shock. Part of the reason for that was the rather inward-focused nature of the U.S. public, supplemented by poor international media coverage. Another part of the reason is U.S. support for Israel. However, another more complicated factor is the ongoing identity crisis within the Muslim and, in particular, the Arab world. It is this question of identity that Bernard Lewis touches upon in his most recent book, What Went Wrong?: Western Impact and Middle Eastern Response. Bernard Lewis is one of the grand old men of Middle Eastern studies, with an impressive list of books and articles behind his name. The Cleveland A. Dodge Professor of Near Eastern Studies Emeritus at Princeton University, his track record includes such widely-read books as The Arabs in History, The Emergence of Modern Turkey, The Political Language of Islam, The Muslim Discovery of Europe, and The Middle East: A Brief History of the Last 2000 Years. His most recent work, What Went Wrong?, is a re-worked compilation of older pieces, which have been given a central theme of discovering why the Middle East fell behind the West, a historical development that plagues the present and no doubt will complicate the future. Indeed, according to Lewis, "...the question and answers that it evokes, there is no mistaking the growing anguish, the mounting urgency, and of late the seething anger with which both questions and answers are expressed." Lewis begins by pointing out that: "For many centuries the world of Islam was in the forefront of human civilization and achievement. In the Muslims' own perception, Islam itself was indeed coterminous with civilization, and beyond its borders there were only barbarians and infidels." Unfortunately, those same barbarians and infidels in the West developed better technology, especially in the area of weapons, and by-passed the world of Islam. Europe experienced the Renaissance and the Reformation, while "the technological revolution passed virtually unnoticed in the lands of Islam, where they were still inclined to dismiss the denizens of the lands beyond the Western frontier as benighted barbarians, much inferior even to the more sophisticated Asian infidels to the east." What all this boiled down to was that as the West leaped forward technologically, organizationally and militarily, the Muslim regions remained stuck looking at past glories and looking down at the West. When confronted by an aggressive Europe that eventually came to dominate the Muslim world, there was a quest to find out what went wrong that allowed this situation to transpire. The Muslim is still wrestling with this problem today. One school of thought holds that the decline was caused by falling away from the good old ways. The solution was a return to them. As Lewis notes: "This diagnosis and prescription still command wide acceptance in the Middle East." Certainly it fits the world-view of Osama bin Laden and other radical Islamists. At the same time, others within the Muslim world asked what do we need to do to catch up? In this we see that various efforts of reformers in the Middle East, who sought to modernize their polities, societies, economies and militaries. Of course, the rub was that modernization carried many of the same things as Westernization, which raised the issue of secular government and the place of Islam in society and its relationship with government. The track record, especially in the 20th century and carrying into today, has been disappointing. Economically, the Middle East is highly dependent on the export of hydrocarbons, with its primary usage being from the West, while the rise of new technologies threatens the importance of oil and gas in the future. The political front has been highly disappointing. As Lewis states: "Worst of all is the political result: the long quest for freedom has left a string of shabby tyrannies, ranging from traditional autocracies to new-style dictatorships, modern only in their apparatus of repression and indoctrination." Lewis does hold out some hope that the debate in the Middle East is turning from one of "Who did this to us?" to one of "How do we put this right?". He adds, however, that: "If the peoples of the Middle East continue on their present path, the suicide bomber may become a metaphor for the whole region, and there will be no escape from a downward spiral of hate and spite, rage and self-pity, poverty and oppression, culminating sooner or later in yet another alien domination; perhaps from a new Europe reverting back to old ways, perhaps from a resurgent Russia, perhaps from some new, expanding power in the East." For anyone looking for a good, sobering and thoughtful read about how the past has shaped the present in the Middle East, What Went Wrong is worth reading.
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Editor: Dr. Scott B. MacDonald, Sr. Consultant Deputy Editor: Dr. Jonathan Lemco, Director and Sr. Consultant Associate Editors: Robert Windorf, Darin Feldman Publisher: Keith W. Rabin, President Web Design: Michael Feldman, Sr. Consultant Contributing Writers to this Edition: Scott B. MacDonald, Keith W. Rabin, Uwe Bott, Jonathan Lemco, Jim Johnson, Andrew Novo, Joe Moroney, Russell Smith, and Jon Hartzell
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