Alf Young: Self-indulgence broke social contract

NIALL Ferguson lets his love of scoring cheap points lead him into an economic wasteland in his Reith Lecture, writes Alf Young

THE formidable historian Niall Ferguson is an instinctive contrarian with a sharp eye for telling soundbites and catchy headlines. Glasgow-born, this year’s BBC Reith lecturer once kicked up a storm by describing his native land as “the Belarus of the West”. That earned him the soubriquet “academic lager lout”.

He later laughed his comment off as a joke, penned on a flight to South Africa, when he was feeling frivolous. But the howls of outrage which greeted it, he told me in 2008, suggested it was at least half true. The national superiority complex he had warmed to as a schoolboy at Glasgow Academy in the 1970s had given way, he concluded, to a mood in Scotland of brooding inferiority.

Ferguson doesn’t take prisoners, as his recent radio encounter, on Andrew Marr’s Start the Week programme, on BBC Radio 4, graphically demonstrated. Appearing with fellow historians Sir Max Hastings and Anthony Beevor, he airily dismissed their approach to researching their books on war as pandering to popular titillation. It was, he charged, a kind of “warnography”. I fancied I could hear Marr scraping Hastings off the studio ceiling.

It was reminiscent of Ferguson’s bruising 2009 encounter in New York with Nobel laureate economist Paul Krugman, billionaire investor and philanthropist George Soros, and the other American economist they call Dr Doom, Nouriel Roubini. Ferguson has no time for what he calls the “rather sterile debate between austerity and stimulus”, one in which all of them have invested considerable intellectual capital.

As he told his audience that day, “There’s some medicine in your drugs cabinet at home that has passed its sell-by date. And I rather fear that it says 1936 on the bottle of Dr Keynes’s medicine.” Krugman and Soros groaned out loud. The audience booed. The moderator stepped in to calm things down.

Krugman later suggested Ferguson was a “poseur” with little understanding of even the basics of economics, someone who relied on “snide comments and surface cleverness to convey the impression of wisdom”.

Ferguson, in a piece for the Financial Times, hit back, suggesting that, like the Bourbons, some latter-day Keynesians “forgot nothing and learned nothing”.

Ouch! When these superstars of the global commentariat clash, it’s clearly no holds barred. So, when I listened to the first of Ferguson’s four Reith Lectures this week, delivered to an audience at the London School of Economics, I was prepared for anything. However, for me, the Harvard professor’s central argument turned out to be compelling, one that’s capable of spanning some of the great thought divides of our time.

Professor Ferguson is not the first to suggest that what gave the West its economic and political dominance in recent centuries was the strength and power of the institutions its constituent nation states created and deployed. He dates that process from the Glorious Revolution of 1688.

However, Ferguson now thinks that something is deeply amiss with our political institutions. The most obvious symptom is the vast debts many countries have managed to accumulate in recent times, the debts that lie at the heart of the current economic malaise gripping the eurozone, the UK and America, a malaise showing signs of spreading to some of the emerging global powerhouses like India, Brazil and even China.

He hasn’t lost his contempt for those, like Krugman, who argue for even more spending by western governments on stimulus programmes in response. But he urges us to look beyond these arguments to a more profound malfunction.

“At the very heart of the matter,” he suggests, “is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn.”

In 1790, in his Reflections on the Revolution in France, the Irish-born philosopher Edmund Burke formulated his version of the social contract that binds peoples together, rejecting Rousseau’s earlier formulation. “Society,” wrote Burke, “is indeed a contract. The state is a partnership not only between those who are living, but between those who are living, those who are dead and those who are to be born.”

Ferguson is arguing that that Burkian social contract between the generations is now in grave danger. “I want to suggest that the biggest challenge facing mature democracies is how to restore the social contract between the generations,” he told his Reith audience.

So far, I’m with him. I’ve been expressing my fears for years about how those of us in the baby boomer generation and those who profited mightily from the years of plenty now risk testing the principle of inter-generational equity to destruction.

But then that instinct for scoring cheap points kicks in again. Ferguson goes and spoils it all. The biggest culprits, in his view, are recipients of public sector pay and pensions and recipients of government benefits. In America, where he now spends most of his time, look at the unfunded liabilities of Medicare, Medicaid and Social Security, he cautions. “If young Americans knew what was good for them, they would all be in the Tea Party,” he tells his LSE audience triumphantly.

Surely the assault on Burke’s broken contract is much more widely-based than Ferguson allows. I too find it curious that the only issue doctors across the UK have felt compelled to take industrial action on over the past 40 years is in defence of pensions way beyond the reach of the vast majority of their patients.

But what of millionaire stand-up comedians and recipients of Royal gongs who think aggressive tax avoidance is fine, some even clinging to their what-do-I-owe-society? views, even in the face of public ridicule?

What about the bosses of publicly-quoted companies who never seem to think another million in their own pay package is enough, even when their shareholders and their workers are being squeezed?

What about bankers who think their talents in such short supply they too cling to their bonus culture?

In place of any collective sense of a binding social contract between the generations, a reckless culture of instant self-gratification seems to define so much of life these days. The bill facing those who are young or yet to be born isn’t just the cost of public sector pensions of even of the free perks showered on my generation, in part because we are more likely to vote.

It will include a degraded planet, climate challenges, housing beyond reach and a dearth of enriching occupational opportunities, despite the expansion of higher education or even tuition-free jurisdictions.

Niall Ferguson is right that this may be the biggest challenge we face. He is also right to doubt the capacity of today’s politicians to confront it effectively.

But he is just plain wrong to think the only answer lies in entirely neo-conservative economic prescriptions about governments taxing less and spending less. The rot has spread too far. Far from being us all in this together, too many of us in my generation have our snouts firmly stuck in troughs, public and private, and are refusing to budge an inch from our all-consuming self-indulgence.