Published by EH.Net (March 2012)

Carl Wennerlind, Casualties of Credit: The English Financial Revolution, 1620-1720. Cambridge MA: Harvard University Press, 2011. x + 348 pp. $40 (hardcover), ISBN: 978-0-674-04738-9.

Reviewed for EH.Net by Bruce G. Carruthers, Department of Sociology, Northwestern University.

Talk about credit!! No seriously, this is a book about talk about credit. And in the period surrounding the Financial Revolution of late seventeenth and early eighteenth-century England, there was in fact a great deal of talk, debate, commentary, rhetoric, prognostication, discourse and fulmination on the topics of money and credit. The South Sea Bubble, it turns out, was preceded by a discursive bubble. It was not simply that early modern capital markets evolved, that financial systems developed, or that English economic institutions changed. These critical transformations were accompanied and even shaped by the analyses offered by people who witnessed the events of the time. Two considerations make the book?s focus on ideas especially plausible. First, a period of revolutionary change is necessarily also a time of true Knightian uncertainty, and people used their available cognitive resources to make sense of what was going on. Some of these cognitive frameworks were rooted deeply within the Western canon (e.g., neo-Aristotelian ideas about money), while others will look to modern readers like crazy wishful thinking (e.g., alchemical fantasies about turning base metal into gold). But whatever the source, these ideas helped their adherents to manage the uncertainties they faced. Second, ideas were used to shape collective expectations, and expectations were at the heart of credit. Creditors decide how much they can trust debtors based on their expectations about a debtor?s promises. People accept money in part because they expect others will too. Public credit, for example, depended on whether people believed that sovereign rulers could make credible commitments. The giant debt-for-equity swap that constituted the establishment of the South Sea Company rested on investors? expectations about the commercial prospects of the company. Thus to study ideas is more than an exercise in intellectual history; it is also to discern some of the key ideological influences on economic and social change.?

Carl Wennerlind?s fascinating new book nicely complements previous work on the English Financial Revolution. Whereas others have focused on the trajectory of capital market development, the fiscal aspects of Britain?s national debt, and the political conflicts and institutional innovations that underpinned financial change, Wennerlind considers the intellectual side. These changes didn?t simply occur, for they were theorized and interpreted by a changing cast of analysts who drew on a variety of intellectual traditions to organize their arguments and legitimize their interpretations.? The book is structured around three big connections: between alchemy and credit, the death penalty and credit, and finally, slavery and credit. These connections are also ordered chronologically, with the first covering the pre-restoration period, the second unfolding from 1660 to 1700, and the last from 1700 until 1720, fully a century of ideas. Some of the evidence comes from familiar sources (e.g., prolific commentators like Daniel Defoe and Jonathan Swift), but much of the material will be new to readers. And some of the connections Wennerlind unearths are truly wonderful. Sir Isaac Newton, for example, proves to be a usefully synecdochal figure in that as a mathematician and physicist with a serious interest in alchemy, who also happened to run the Royal Mint, he linked science and alchemy with money.

The analysis begins with the chronic shortage of currency in seventeenth-century England. This problem prompted a consideration of the nature and purpose of money, how to remedy the situation, and whether anything could serve as an effective substitute. One group of thinkers drew on Aristotle?s analysis to stress money?s essential role as a measure of value and vehicle for commensuration in exchange. For them, credit was no substitute for money, although fully negotiable debt instruments could help to remedy the shortage of money (p. 40). This neo-Aristotelian approach was rejected by members of the Hartlib Circle, a leading social reform and scientific group that included Sir William Petty and Robert Boyle. The Hartlibians embraced both science and alchemy in arguing that human intervention could create continuous progress. The shortage of coin, for example, could be rectified by turning lead into gold (p. 63). If that measure didn?t work (and evidently it did not), Hartlibians proposed other financial and banking reforms that would allow credit to augment specie and support enough money for the growing English economy.

The Hartlibian formulation also underscored the importance of trust for money and credit. Without trust, credit instruments and bank notes couldn?t be used as media of exchange. In recognizing gradations of trustworthiness, reformers were influenced by early formulations of probability theory, but their focus on trust led them to insist that government action was necessary to ensure the adequate trustworthiness of money. To this end, various credit institutions were proposed but the two major policy outcomes were the recoinage of the 1690s, to counteract debasement of silver coins, and the status of counterfeiting as a capital crime. The philosopher John Locke played an influential role in supporting the recoinage policy (p. 130), and Isaac Newton proved to be a vigilant and even unforgiving enforcer of the laws against coin clipping and counterfeiting (p. 150).

The fiscal pressures of near-continuous war with France in the early eighteenth-century ensured that public credit remained a problem. Wennerlind closes by examining the ?loss of the city? and Robert Harley?s establishment of the South Sea Company. Harley and his propagandists endeavored to shape opinions within the investing community, and among the public at large, and to inspire confidence in the financial prospects of the South Sea Company. The linchpin was the Assiento contract, which granted the right to import slaves from Africa to various Spanish ports in the New World. While the importance of this contract cannot be denied, using it as a lens both to peer into English beliefs about slavery and also to say something about credit fetishism (credit?s general capacity to obfuscate its own social reality) is a stretch and strikes me as the weakest part of Wennerlind?s otherwise interesting and well-grounded argument (p. 199).

Bruce G. Carruthers is the John D. and Catherine T. MacArthur Professor of sociology at Northwestern University, and recently co-authored an article on credit for poor people in early twentieth-century America.?

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