The Rise of Financial Capitalism: International Capital Markets in the Age of Reason (Studies in Monetary and Financial History)

289 Pages·1993·7.42 MB·English

by  Larry Neal

The rise of
financial capitalism
Studies in Monetary and Financial History
EDITORS: Michael Bordo and Forrest Capie
Barry Eichengreen, Elusive Stability: Essays in the History of
International Finance, 1919-1939
Larry Neal, The Rise of Financial Capitalism: International Capital
Markets in the Age of Reason
The rise of
financial capitalism
International capital markets
in the Age of Reason
Larry Neal
University of Illinois at Urbana-Cbampaign
CAMBRIDGE
UNIVERSITY PRESS
Published by the Press Syndicate of the University of Cambridge
The Pitt Building, Trumpington Street, Cambridge CB2 1RP
40 West 20th Street, New York, NY 10011-4211, USA
10 Stamford Road, Oakleigh, Melbourne 3166, Australia
© Cambridge University Press 1990
First published 1990
First paperback edition 1993
Library of Congress Cataloging-in-Publication Data available.
A catalogue record for this book is available from the British Library.
ISBN 0-521-38205-X hardback
ISBN 0-521-45738-6 paperback
Transferred to digital printing 2002
To Peg, Kathy,
Liz, and Chris

Contents
Acknowledgments page ix
1 Historical background for the rise of financial
capitalism: commercial revolution, rise of nation-states,
and capital markets i
2 The development of an information network and the
international capital market of London and Amsterdam 20
3 The early capital markets of London and Amsterdam 44
4 The Banque Roy ale and the South Sea Company: how
the bubbles began 62
Appendix: Were the Mississippi and South Sea bubbles
rational? 80
5 The Bank of England and the South Sea Company:
how the bubbles ended 89
6 The English and Dutch East Indies companies: how the
East was won 118
7 The integration of the English and Dutch capital
markets in peace and war 141
8 The English and Dutch capital markets in panics 166
9 The capital markets during revolutions, war, and peace 180
10 A tale of two revolutions: international capital flows,
1792-1815 201
11 The Amsterdam and London stock markets, 1800-25 223
Appendix: End-of-month share prices 2 31
Bibliography 259
Index 271
vn

Acknowledgments
The origins of this book date back to 1975, when Robert Eagly told me of
his data source for a paper on the integration of the London and Amsterdam
capital markets: the then elusive Course of the Exchange, by John Cas-
taing. I acquired my own copy of the microfilm made by the British
Library during a sabbatical leave in 1976. Since then, various research
assistants have toiled at the task of transcription: Barry Stregevsky, Eugene
White, Rick Cheney, Eric Schubert, Xiao-Lei Zuo, David Wheelock, Es-
ther Ogden, Daniel Barbezat, and Alan Dye. Each research assistant has
benefited from the programs and files created by his or her predecessor, but
the major advances have come from the improved computer technology
achieved over the past decade. From a portable Texas Instruments terminal
with an external modem to link with a CYBER mainframe computer using
a series of FORTRAN programs to enter and clean data to an IBM-AT with
VGA monitor using dBase III+ customized screens and programs for entry
and cleaning is a revolution in scholarly technology that has to be experi-
enced to be appreciated. Financial support from the University of Illinois
Research Board and from the Bureau of Economic and Business Research
in the College of Commerce and Business Administration was essential to
get the project under way and to bring it to the productive phase, when it
became funded by the National Science Foundation (grants SES 83-09211
and SES 85-20223).
Several of these chapters have appeared in abbreviated form in various
journals or edited volumes: Chapter 2 as "The Rise of a Financial Press:
London and Amsterdam, 1681-1810," Business History, 3O(April 1988),
pp. 163-78; Chapter 5 as "How the South Sea Bubble Was Blown Up and
Burst," in Eugene White, ed., Financial Panics in Historical Perspective
(New York: Dow-Jones-Irwin, 1990); Chapter 6 as "The Dutch and En-
glish East India Companies Compared: Evidence from the Stock and For-
eign Exchange Markets," in James Tracy, ed., The Rise of Merchant Em-
pires (Cambridge University Press, 1989); Chapter 7 as "The Integration
and Efficiency of the London and Amsterdam Stock Markets in the Eigh-
ix