The Disintegration and Re-integration of International Capital Markets in the 19th Century

ends of the earth. In response, trade flows grew enormously as did international movements of labor and capital. The prospect of a global marketplace for goods, labor, and capital that appeared was dashed by the disruptions of World War I. In its aftermath, the peace treaties created a series of new nation-states intent on attaining, or maintaining, a distinctive role within well-defined trade blocs. The division of Europe after World War II permitted the gradual breaking down of the trade blocs of the 1930s for the Western countries, but left Eastern Europe and the Soviet Union out of the new trading networks that emerged. The collapse of the centrally planned economies of Eastern Europe and the Soviet Union in 1989 has raised again the possibility of a truly global economy, at the very least for capital markets. In sum, it is clear that for most of the twentieth century institutional developments have effectively thwarted the appearance of the global marketplace that the technology of the nineteenth century created. What is not so clear is the relative importance of technological and institutional changes over the course of the nineteenth century in creating the global capital markets of 1914. These were the century-long result of recovery from a serious, nearly fatal, disruption of the integrated capital markets in Europe that had occurred at the beginning of the nineteenth century. The French Revolutionary and Napoleonic Wars (1789-1815) broke for a quarter of a century the personal and pecuniary links that had tied together a network of sophisticated capital markets existing throughout he eighteenth century. These had arisen to meet the credit needs of merchants participating in the commercial revolution that had culminated in the seventeenth century. Governments responsive to the political pressures of the cosmopolitan bourgeoisie had proven that the profits of merchants were compatible with the exercise of military and naval power [2, 6]. In short, the progress of the nineteenth century towards globalization was not merely a case of