Niall Ferguson: 'What would the left wing do without me?'

He's the media don who makes liberals bristle. Now Niall Ferguson is rewriting economics. He talks to Sean O'Grady about banking in the Third Reich, the failure of Obama and how he's helping Michael Gove

(DAVID SANDISON)

You don't really expect accurate representation in the British press." My interview with the nation's foremost media don isn't off to the nicest of starts. Niall Ferguson's private life has attracted a good deal of unwanted attention (it started when he arrived at a New York party earlier this year with the Somali-born critic of Islam, Ayaan Hirsi Ali; he is divorcing his wife of 16 years, ex-newspaper editor Sue Douglas) and his skirmishes with the left are seemingly interminable, and usually ill-tempered. He seems to think they are out to get him, and from what I've seen, he is probably right. I tread warily.

He was at the Hay Literary Festival a few weeks ago, and is now mildly irritated that a light hearted request from the Education Secretary, Michael Gove, to advise the Government on reforming the history curriculum was taken rather "literally" in some quarters. Cue, obviously, synthetic leftie outrage that this alleged neo-imperialist is about to wage total war on multiculturalism. Operation Barbarossa, you might have thought, was to be launched against a cosy politically correct consensus.

Ferguson says it just isn't true. In his smooth Scottish accent he explains that he is indeed dismayed about the way schools churn out pupils "knowing a lot about a little – Hitler and the US civil rights movement – and not having much of an overview". It is a view shared by Gove, whom he has known for many years.

But Ferguson harbours no ambition to be a "history tsar" (though the Romanovs were quite a successful dynasty), and he will merely "help in any way I can" to make history teaching better – which means prosaic stuff such as more choice, better course materials more co-ordination between GCSE and A level history, and some sort of "overreaching narrative". Like Gove, he is against a prescriptive centralised curriculum that, say, tried to reimpose the old Arthur Bryant/Our Island Story approach. "The whole thrust of my teaching at Harvard is to move away from blimpish national history".

But the history tsar fuss, he says, "made a good story" for those with "nothing better to write about", and Ferguson wonders what "the usual suspects" would do without him. He is not, he stresses, some sort of "nostalgist or apologist for empire".

Wondering why history is so popular on television and in the bookshops but, apart from the Third Reich and Martin Luther King, a lost cause in the classroom, Ferguson suggests that the students might be better off watching and reading Simon Schama's History of Britain. He wants to know why a tiny group of islands off the northwest coast of Europe managed to rule a quarter of the earth's population and territory – and he wants British schoolchildren to be able to answer that question.

History teaching "isn't working" he says, perhaps because "teachers aren't omniscient" and may fall back on the period they tend to know best, the last century.

For an alternative model he suggests the course he teaches in America, a broad global history from the 1400s to the 20th century, which seeks to ask the question: "Why did the West conquer the rest?".

Ferguson says that the "usual suspects wont be able to disparage" his view of world history, which is to be screened on Channel 4 next year, with the hubristic title of Civilisation: the West and the Rest. Following Empire, Colossus and The Ascent of Money, there is a certain imperial grandeur to Ferguson's titles. You can already sense the left's bristling at the prospect, not least that he should seek to emulate or rival Lord (Kenneth) Clark's 1970's landmark series on the rise of Western civilisation.

Ferguson seems to be looking forward to winding up the usual suspects again. But this time there will be a twist. Ferguson insists his perspective will be non-Eurocentric: "if you went on a world tour in the 1420s you would not have bet that the West would come to dominate the globe". How it happened, agrees Ferguson, is not simply a matter of Western triumph or still less triumphalism; Ferguson has spent time in China, India and Latin America to investigate why some other civilisations simply "imploded" of their own accord, while others were indeed overcome by European military prowess, or microbes.

So we are about to see and hear a great deal more about Ferguson, and I suspect he relishes that. Whether the camera loves him is something you can judge from the photograph here; but I came away feeling that Ferguson might be just a touch vain, though he seems to have plenty to be vain about. He enjoys getting on the telly, writing for the press, being interviewed, and getting himself involved in intellectual arguments about economics with the likes of Paul Krugman, a Nobel prize winner. From The Pity of War's revision of the First World War to his imperial odysseys he has become a professional iconoclast, smashing historical myths and beating up cosy nostrums. His "counterfactual" history – what would have happened if say, Edward VIII hadn't abdicated, or America had sat out the First World War – is pretty much designed to stir things up. But is Ferguson more media than don or don than media?

Ferguson is in London to promote his new book, a life of the banker Siegmund Warburg, and to start a year-long stay at the London School of Economics, on leave from Harvard. It is a book that proves his credentials as a "proper" historian, were proof needed. He writes entertainingly – the Warburg story is a gripping one finely told and exhaustively researched.

His next project is a life of Henry Kissinger, which has involved trawling 53 separate archives and, so far, mastering a million pages of documentation on this undeniably colossal figure. Kissinger approached Ferguson, rather than the other way round, proof perhaps that the mountain can sometimes come to Muhammad, and he has full access to Kissinger's personal papers and the architect of détente/mass murderer (you choose) himself. Ferguson, it is a safe bet, will not be making the case for arraigning old Henry for war crimes in Cambodia or Vietnam.

Oddly both these biographical subjects, Warburg and Kissinger, have an obvious link to the current obsession of British history students, having gotten out of the Third Reich before the worst happened. Ferguson acknowledges the fascination the Hitler era exerts, and the mystery of how he went from civilisation to barbarism when others did not.

It was something that confronted Warburg vitally. Warburg's diaries had been excised with a scalpel by "an unknown hand" says Ferguson, but sufficiently survived to see how someone in Warburg's position – a highly intelligent, wealthy and well-connected member of the German Jewish elite – might also find it difficult to credit that their advanced, cultured nation was about to be turn the clock back.

Having listened to Hitler's first radio broadcast as chancellor in 1933, Warburg wrote in his dairy: "Perhaps the coming man is now precisely this type among both Aryan and Jewish Germans – a Jewish German of this type can therefore rightly say that he would be a Nazi if it weren't; for the Nazis' anti-Semitism. And at the same time he is almost thankful for this anti-Semitism, because it purges those around him of pride, frivolity and equivocation, it creates what we need more than anything else – dynamism among those people who have had enough of played-out problems and exhausted strength."

For Warburg, as Ferguson points out then, the "national revolution" in Germany in 1933 seemed like an opportunity for the "socially critical, socially revolutionary, energetic and idealistic individuals among German Jews to distance themselves from the "bourgeois, liberal opportunists" who seemed to predominate in their community". Warburg hoped that anti-Semitism was an epiphenomenon of Nazism, whereas racial hatred lay at its dark heart.

And, in a brief foray into the counterfactual, Ferguson believes that Hitler was the only personality who could have mounted a successful campaign against Weimar Germany, and anti-Semitism was central to his being. After a brief conversation with the German foreign minister, von Neurath, a neighbour of Warburg's parents, Siegmund was disabused of his illusions, went home and told his wife to pack her bags.

Ferguson explains: "It is not right for us to study the 1933-45 period without as it were, the other side. Warburg can say to himself I will go to London and within just a few years he has started from scratch a new business and made a new life for himself and his family. He embraced British values and became a major contributor to post-war British recovery. You cannot understand the malfunctioning of Germany without seeing why other societies didn't sacrifice human rights and the rule of law". Why did America get Roosevelt instead of Hitler? And Britain Baldwin?

Ferguson characterises Warburg as a "complex, ambivalent, Thomas Mann-ish figure" who would have little sympathy with the way the world financial system developed after he died in 1982. He was a banker who retained some sense of morality, and believed in relationships rather than just deals. The dominance of mathematical, so-called "quantitative" techniques in investment is, suggests Ferguson, one of the reasons why the world so "mispriced risk" during the boom. It was a classic failure to recognise the distinction between risk and uncertainty, a simple but powerful idea developed by John Maynard Keynes in the 1930s, and long forgotten by the go-go 2000s. Even now, Ferguson says business have not learned their lesson, and "valuing risk is no substitute for historically informed judgement." A passion for financial history – and conviction that it could help tomorrow's financiers avoid the errors of the past – is something Ferguson shares with Lord Skidelsky and Mervyn King, so he's in distinguished company.

As for the mistakes of the present, he tells me that "President Obama's biggest weakness is weakness". Iran, says Ferguson, is treating the US like a "soft touch". That makes it crucial that the Americans respond in the right way to what he seems to think is an increasingly likely Israeli attack on Iran's nuclear capabilities.

"There's a reasonable probability that there will be military action, because sanctions won't work, the Iranians won't stop and the Israelis will be so disillusioned with Obama that they will contemplate unilateral action".

In such an event, he foresees the US navy having to keep the starts of Hormuz open to prevent oil hitting $230 a barrel, and all that that might entail for the world's economy. Alternatively they could "just ask the Navy" to set Iran's nuclear programme by years, if not decades. Yet America is still contained, he believes by her "three deficits" – "a manpower deficit, a financial deficit and an attention deficit"; "the foundations of US power are fragile".

Ferguson also fears the "lack of resolve" on the part of the Americans about their current commitments, partly down to fiscal pressures, which again leaves them unable or unwilling to do what would otherwise be in their interest in Iran. As an imperial historian he senses that the greatest time of danger is a time of imperial weakness and at the moment Iran senses its chance in the Gulf region.

As a former adviser to John McCain's presidential campaign, he claims that McCain's greatest tactical error was to "tell the truth" to the American people that they might have to be involved in Iraq for 100 years. He left the McCain campaign the day they drafted in Sarah Palin – "a last and desperate measure". I ask him what a McCain presidency would have been like. He smiles: "counterfactuals have to be plausible to be worth exploring" he says, and adds that the economy was the McCain campaign's "Achilles heel". No Republican had much chance in 2008, and "not even Ronald Reagan could have got elected". Nonetheless, McCain would have been "far more resolute" about Iran and supported the green revolution there more energetically.

Towards the end of our interview, Ferguson asks: "What is imperialism?". Fortunately I don't have to marshal what little historical knowledge I possess as if were suddenly plunged into some nightmare tutorial. "Essentially", he says, "it is the idea that you are better off owning the commodity-producing territories than acquiring those commodities in markets, because you don't like that strategic vulnerability to market prices".

The Chinese, he says, experienced just such a decisive moment of vulnerability during the commodities boom in 2008, and that, he suspects, is what has sent them on a shopping spree round the world and the determination to make friends with everyone from Sudan to Chavez of Venezuela. Imperialism, then, is hardly a thing of the past.

And certainly not from the Ferguson empire. Like the British Empire, it seems to cover a quarter of the earth's surface. It stretches across the Atlantic, and comprises books, television series, journalism, a glamorous and controversial new partner, a glittering academic reputation, prestigious biographies, international speaking gigs and a few other smaller realms and possessions. He has established a protectorate over neo-con thinking and is installed as a suzerain of the right. No less than the Mughals, the Spanish, the Mayans, the British, the Ottomans or the Soviets at their peaks he is setting his bounds wider still and wider. Will the sun ever set upon Niall?

On Tuesday 6 July at 7pm, Niall Ferguson gives a talk at St Paul's Cathedral, London. Doors open 6.30pm. The event is free and unticketed and all are welcome

"High Financier: The Lives and Time of Siegmund Warburg" is published by Allen Lane, priced £30 To order a copy for the special price of £27 (free P&P) call Independent Books Direct on 08430 600 030, or visit www.independentbooksdirect.co.uk