6 - The rise and spread of financial capitalism, 1720–1789

Summary

The century covered in these chapters starts with the aftermath of the collapses of the Mississippi and South Sea bubbles in 1720 and ends with the legacy of Napoleonic war finance in 1830. The financial innovations in France, England, and the Netherlands after 1720 had international repercussions that proved important for the outcomes of the successive wars and revolutions that followed, right up to the Treaty of Vienna in 1815. They also created a number of financial crises, all minor in comparison to the famous bubbles of 1720, but instructive in showing both the benefits and risks of the new financial architecture that was taking shape. In the background of the political and military events that shaped the history of the eighteenth century in Europe were the ever-growing influences of international finance that accompanied both expanding foreign trade and more expensive warfare among competing powers. At the heart of the financial developments was the emerging symbiosis of the two financial centers of Europe after 1720 – Amsterdam and London. The merchant bankers of the other trading cities of Europe were important participants as well, especially along the historic Lotharingian axis stretching from the Low Countries into the Mediterranean ports of Italy, while new centers of finance were emerging on the other side of the Atlantic.

From 1720 right through 1815, a “cosmopolitan bourgeoisie” emerged who regarded Europe as their base but the entire world as their theater of operation (Jones 1988). These individuals made the best of the chaotic times of political upheavals and ever-wider military conflicts by taking advantage of the new financial instruments that had appeared in the aftermath of the collapse of the Mississippi and South Sea bubbles. In their historic ascent, they expanded trade to cover the entire globe for the first time in history, but they financed it increasingly from the new financial centers of Amsterdam and London while the merchant bankers of France looked on in envy. The logistics required to supply the ever-larger armies and fleets that the British and French periodically launched at each other (see Box 6.1, p. 109) also created larger-scale opportunities for the cosmopolitan bourgeoisie to provide the necessary finance for their personal profit (Hancock 1995).