A born banker who has held senior positions in government and financial institutions, Ghosh is a writer known for his incisive and in-depth analysis. In this book, he tries to capture the trends and relations between business and polity over (hold your breath!) two and a half millennia. There is no attempt to strait-jacket the connections, which are set in a non-Marxian, institutional mode.
The relationship between the two spheres has always been shrouded in mystery or peppered with stories about lobbies, scandals, and pork barrels. But there is a deeper and more abiding bondage between them that is often ignored by the advocates of “free market.”
The bonds between the two have varied over time and over millennia. If scholars dig deep, as Ghosh has done, it would suggest patterns: patterns which marked various civilisations; patterns which helped business and the polity to flourish and reach higher levels; and patterns which led to decay.
Business creates wealth and the state needs wealth — for maintenance of control (law and order!); for the welfare of the people; for waging wars with neighbours; and for expansion.
There has to be a right balance. Even as the state appropriates revenues from trade, it should create conditions necessary for wealth creation. Where societies succeeded in striking the balance, they enjoyed years of growth, glory and prosperity. The test is distributive justice and avoidance of excesses like inequalities, exploitation, and exclusion.
The Roman Empire had its centuries of glory; but crumbled under the weight of oligarchic excesses. It lacked the ability to regenerate itself. The rise of the Arabs described as ‘The Arab Miracle' was non-religious, with Islam providing a new ideology of equality. China had its dynasties ruling for centuries and revealed an ability to raise resources, to transform agriculture and industry with technologies time and again. Unlike the Romans, the Chinese had the secret to regenerate and rise from the ashes.
It was with the rise of European states like Portugal, Spain, the Netherlands and, later, the United Kingdom, that the pattern became more complicated with the entry of foreign trade and colonial ambitions. Wars and weaponry to wage them altered the pattern beyond recognition. It saw the rise of a new generation of financiers in Florence, London, and Amsterdam. As Ghosh explains, “When the focus sharpened on the need for attaining economic power, the ruling regimes started looking for ways to create an environment in which the trading community would be enabled to generate a continuously rising surplus.” They were ever ready to fund the campaigns of Popes, Emperors and Archdukes.
On the rise of Pax Britannica, Ghosh argues that the empire was not an “act of absentmindedness,” but was built brick by brick in constant collaboration with business.
He offers an unusual insight into the origin of the opium wars. With the drying up of Mexican silver, Britain had to pay for its import of tea. There was no demand for European goods in China to generate the needed revenues and the British were in a fix. It led to their pushing the sale of opium in China. When the Chinese resisted, they went to war to open up their market. Ghosh sums up thus: “England's economic successes were not achieved simply because of its industrial revolution or its superior position in the world of free trade, but by the government's continued capacity to set the terms of exchange, politically and economically.”
Gold standard was one of the pillars of British hegemony in global trade. When that pillar began to collapse after World War I, the U.K. and the European countries mounted a valiant effort to hold on to it or wreck it. The treatment of the collapse of the gold standard is masterly, testifying to Ghosh's grasp over the underlying factors.
The “snapping of the gold thread” was inevitable with the sunset of the empire. This would automatically “change the U.S. from a passive observer of the slow collapse of the classical order to an active leader to reconstitute it.”
Rise of multinationals
In a brief and somewhat hurried treatment of the U.S.'s role, Ghosh captures the rise of American multinationals, especially the financial conglomerates. The U.S. agenda is no doubt carried out by the government in cahoots with the corporations. They exploit all the international agencies like the WTO and the World Bank to set standards and promote codes of conduct to foster U.S. interests. These are embedded in themes like globalisation, and the Washington consensus.
The lesson Ghosh draws from his study of the U.S. hegemony is grim: The U.S. is no longer in a position to offer ‘public good' to global economy as it used to, mainly “through its failure to manage the global financial centre as a stable and responsible distributor of global liquidity.”
It is difficult to do justice to many of the themes touched upon in the book. There are cameos and flashes of historical insight. The work is a scholarly addition to our understanding of economic history.