State Intervention and the Origins of Speculative Finance in Nineteenth Century Britain

Samuel Knafo is a lecturer in International Relations at the University of Sussex. He completed a thesis at York University (Toronto) on the rise of modern monetary policy and the gold standard. Abstract: This article discusses the origins of the speculative configuration that has come to characterize English banking. It criticizes Gerschenkron's view that early 19th century English banking developed relatively autonomously from manufacturing. Pointing out that he misunderstood the specific nature of English finance and the reasons that explained the later shift towards speculation, it shows how Gerschenkron and his followers have consistently underestimated the role of the state in shaping the nature of English finance. The main argument of the article is that state intervention was a decisive factor in shaping the nature of English finance. It proved crucial in initiating the divergence between English and continental finance, and contributed to the rise of modern banking in England. Finally, I argue that the speculative configuration of finance often associated with England was a late development of the 19 th century that reflected again changes in the form of financial and monetary regulation.