A Financial History of Western Europe

Charles P. Kindleberger

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781136805776
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

This is the first history of finance - broadly defined to include money, banking, capital markets, public and private finance, international transfers etc. - that covers Western Europe (with an occasional glance at the western hemisphere) and half a millennium.

Charles Kindleberger highlights the development of financial institutions to meet emerging needs, and the similarities and contrasts in the handling of financial problems such as transferring resources from one country to another, stimulating investment, or financing war and cleaning up the resulting monetary mess. The first half of the book covers money, banking and finance from 1450 to 1913; the second deals in considerably finer detail with the twentieth century.

This major work casts current issues in historical perspective and throws light on the fascinating, and far from orderly, evolution of financial institutions and the management of financial problems. Comprehensive, critical and cosmopolitan, this book is both an outstanding work of reference and essential reading for all those involved in the study and practice of finance, be they economic historians, financial experts, scholarly bankers or students of money and banking.

This groundbreaking work was first published in 1984.

1

---

Introduction

---

The nations with which economic historians are chiefly concerned organize their economic activities under the form of making and spending money … Cannot economic history be organized most effectively around the evolution of pecuniary institutions? (Mitchell, 1944 [1953], ‘The role of money in economic history,’ p. 67)

It is not clear that there is need to justify a financial history of western Europe. The fact that no such modern history exists is not enough, for none may be needed. There are monetary histories of the world (Vilar, 1969 [1976]; Groseclose, 1934 [1976]; perhaps Galbraith, 1975), and several financial histories of separate countries. The latter miss out on comparison; the former are perhaps too diffuse. Europe, and more particularly western Europe, appeals to me as the ideal subject for specialized history because it constitutes a unit, made up of somewhat but not entirely disparate elements, because it was the breeding ground of modern world economic history, and because it enables us to trace financial evolution as financial pre-eminence moves after the Middle Ages from the Italian city-states to Spain, southern Germany, the Low Countries, France and Britain. Western European connections with the rest of the world cannot be ignored—with the Levant, Far East, Russia, Africa, after 1492 North and South America, and ultimately the Antipodes. But western Europe is a unit that can be disaggregated. Its elements are alike in broad terms, different in detail. As such, it constitutes a good background for ranging economic theories against the facts of history and, if possible, deriving theories from accumulated fact.

Comparative Financial History

My interest is in comparative financial history, or perhaps it would be more accurate to say in comparative historical money, banking and finance. Most of economics today is deductive in character, the construction of mathematical models of beauty and elegance, without in all cases a close approximation to the behavior of man. History can serve as a laboratory to test whether such theories are useful to the political economist, with his interest in policy, and comparative economic history can test for generality, to set aside the theories that fit only the single case. There is a considerable difference between the purposes of the social scientist and the historian in all this. The former is looking for generality, as he seeks to uncover the laws of human society, the latter for an explanation of an individual case. I may make too much of this (see, for example, J. G. Williamson, 1978, p. 788), but comparative historical economics, I contend, is a necessary adjunct of economic theory. In a strong view, moreover, an economic historian contends that economic history develops more facts, better facts, better economic theory, better economic policy and better economists (McCloskey, 1976). Three types of comparative history have been distinguished (Cantor, 1971); the impressionist or romantic that searches for parallels; the quantitative of the sort undertaken by Bairoch, Chenery, Goldsmith, Kuznets, or Maddison; and the sociological or model building that provides criteria for looking from one country to another for general explanations. I aspire to the third, but may fall into the trap of the first.

Finance

So much for history. Why finance? General economic history runs the risk of being unfocused. Economists have a lot to say about partial-equilibrium problems—changing one variable while the rest of the system is assumed to be unchanged or enclosed in the protection of ceteris paribus, other things equal. General-equilibrium analysis in which anything else can be affected by the initial shock or disturbance and reverberate through the system, setting up repercussions and feedbacks, is a much harder task—some think close to impossible. Economic histories are usually organized around some theme, thread, or thesis, whether economic growth, the level of living, technical change, distribution of income, or other. Financial history has a particular interest for those of us who were raised on the subject, and it poses some deep, even imponderable, questions of its own.

In the first place, one may ask whether monetary and financial events and institutions matter. In the Keynesian revolution of the 1930s, it was concluded (briefly) that money did not matter. Antithesis in the monetary counter-revolution took the form that money alone mattered. Synthesis: money matters along with other things. In this context, debate runs between changes in money supply and changes in spending—in technical jargon between shifts in the L–Mcurve (representing the relationship of the money supply to interest rates) and the IS curve (setting out equilibrium positions at which savings equals investment at various interest rates) —as to which dominates changes in national income and prices in such an episode as the Great Depression that began in 1929. In Did Monetary Forces Cause the Great Depression? (1976), Peter Temin has argued against the monetarist views of Milton Friedman and Anna Schwartz (1963), contending that a sharp reduction of spending produced the depression, and brought about the decline in money supply, rather than that an independent reduction in the money supply gave rise to the decline in spending. The debate continues (Brunner, ed., 1981). My own view is that the causes of the 1929 depression were considerably more complex and involved than most of the parties to the debate allow (Kindleberger, 1973, 1979, 1981b).

In an historical context, W. W. Rostow in The World Economy (1978, pp. xlii–xliii) sets out an ultra-Keynesian view:

For some, at least, monetary affairs will appear to have been slighted. In the analysis of the pre-1914 era monetary affairs appear only when I believe they left a significant impact on the course of events, e.g. transmitting the effects of bad harvests in the eighteenth and nineteenth centuries; in helping create the settings for cyclical crises and then (in Britain at least), cushioning their impact; in stimulating, under the gold standard, the inflationary diversion of resources to gold mining. In the post-1918 world of more conscious monetary policies, they emerge on stage in the 1920s with the French devaluation and the British return at the old rate, as well as the fa...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Original Half Title Page
• Original Title Page
• Original Copyright Page
• Dedication
• Contents
• Illustrations
• Tables
• Apologies and Acknowledgements
• 1 Introduction
• Chronologies
• Part One Money
• Part Two Banking
• Part Three Finance
• Part Four The Interwar Period
• Part Five After World War II
• Glossary
• Conversion Tables—Equivalences and Exchange Rates for Specified Coins and Currencies at Specified Dates
• Bibliography
• Index