Addressing how modern nations have found themselves, as President George W. Bush saw it, 'stuck with these miserable choices' when it comes to resolving financial crises, is at the centre of Larry Neal's concise history of international finance. Neal's book is in fact the latest in a long list of works which have sought to explain to men like Bush, and the wider readership at large, exactly how current financial frameworks came to be. Where A Concise History of International Finance: From Babylon to Bernanke seeks to be different, however, is that where Neal has identified most studies to date as having provided 'detailed indictments of the apparent perpetrators of the crisis' (that is whatever financial crisis happens to be under discussion at the time), be that politicians, regulators, or financiers, his work, rather than vilify individuals or institutions, takes both an international view and a 'very long historical background' (pp. 1-2). For Neal, his approach is intended to provide a 'broader and deeper perspective on the financial innovations that accompany economic expansion' (p. 2). Yet, Neal's aim is not simply to provide a history of financial crises, but instead intends that, through recognising the common elements and causes of financial crises, solutions to such problems might be identified. The 'ultimate goal' of this work is detailed by Neal as being to provide solutions to the problems being experienced by the billions of stakeholders who had been created by the years of global prosperity prior to 2008; presenting them with a way to 'both preserve the gains already achieved and also mitigate the dangers of future crises' (p. 3). Indeed, this is no small feat. Beginning with stone tablets used to record financial transactions in the ancient Mesopotamian city of Uruk, through to the first use of coins, minted from electrum in the Grecian kingdom of Lydia, as currency, and on to the importance of Roman sovereign debt in prompting the first embryonic shifts of the character of debt from the personal to the impersonal, Neal's coverage of the 'first 3,000 years' is indeed brief; amounting to less than 13 pages in total. Arguably this concise history may have been better subtitled From Pope Gregory VII to Bernanke; admittedly it does not have the same ring to it, but it is really with the beginnings of the papal revolution in 1077 that Neal's financial history begins to take shape. It was this moment, when Pope Gregory proclaimed his spiritual authority over the Holy Roman Emperor, Henry IV, that has been identified as launching 'the legal tradition that has guided Western politics, philosophy, and economics ever since' (p. 4). From here, Neal charts the impact of Italian financial innovation-bills of exchange, the practice of 'change-rechange'-on intra-European trade during the high middle-ages, and on to the establishment of the Casa di san Giorgio in Genoa in 1408. This organisation-a joint-stock company whose shareholders held
Larry Neal, How it all began: the monetary and financial architecture of Europe during the first global capital markets, 1648–1815The Treaty of Westphalia created the modern nation-state system of Europe and set the stage for the long-term success of financial capitalism. The new sovereign states experimented with competing monetary regimes during their wars over the next century and two-thirds while they extended and perfected the financial innovations in war finance developed during the Thirty Years War. The Dutch maintained fixed exchange rates, the French insisted on exercising monetary independence, while the English placed priority on free movement of international capital. In struggling with the trilemma of choosing among the goals of maintaining fixed exchange rates, monetary independence and free movement of capital, the governments of early modern Europe learned many valuable lessons. By the time of the Napoleonic wars, the innovations that emphasised reliance on financial markets rather than on financial institutions proved their superiority.
In the seventeenth century, Amsterdam and London developed distinctive innovations in finance through both banks and markets that facilitated the growth of trade in each city. In the eighteenth century, a symbiotic relation developed that led to bank-oriented finance in Amsterdam cooperating with market-oriented finance in London. The relationship that emerged allowed each to rise to unprecedented dominance in Europe, while the respective financial innovations in each city provided the means for the continued expansion of European trade, both within Europe and with the rest of the world. The increasing strains of war finance for the competing European powers over the course of the eighteenth century stimulated fresh financial innovations in each city that initially reinforced the symbiosis of the two centers. The external shocks arising from revolutionary movements in America and France, however, interrupted the relationship long enough to leave London as the supreme financial center.
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