The Cash Nexus: Money and Power in the Modern World, 1700–2000. By Niall Ferguson. New York: Basic Books, 2001. Pp. xix, 552

In this wonderful book, Niall Ferguson takes us back to the origins of marketable national debt at the end of the seventeenth century in Europe, deftly laying out the conditions for its success. These comprise what he calls “the square of power,” which reduces to a parliament (for credible tax backing of the debt), a tax bureaucracy (for collecting the taxes needed to service the debt), a central bank (for maintaining the market value of the debt), and, of course, the national debt itself (for fighting and winning wars). Ferguson then demonstrates the effectiveness of the power emanating from this base, by showing how it won wars for its possessors over the past three centuries. So effective is this combination of institutions, achieved first by Britain in the eighteenth century and then perfected by the United States in the twentieth, that it could have been used even more effectively in winning wars, past and present. Far from imperial “overstretch,” as argued by Paul Kennedy, Ferguson argues that both Britain in the nineteenth century and the United States today suffer from self-inflicted problems of imperial “understretch.” His conclusion will generate a lot of attention, as intended, but his critics will have their work cut out for them.