Convergence and Divergence of National Financial Systems: Evidence from the Gold Standards, 1871-1971

Published by EH.NET (November 2010)

Patrice Baubeau and Anders ?gren, editors, Convergence and Divergence of National Financial Systems: Evidence from the Gold Standards, 1871-1971, London: Pickering and Chatto, 2010. xiv + 306 pp. $99 (hardcover), ISBN: 978-1-85196-648-6.

Reviewed for EH.Net by Claude Diebolt, French National Centre for Scientific Research (CNRS), University of Strasbourg.

This collective book edited by Patrice Baubeau (Universit? Paris Ouest-Nanterre La D?fense) and Anders ?gren (University of Uppsala) is part of the series ?Financial History? managed by Robert E. Wright. It was made possible thanks to a grant of the French Agence nationale de la recherche (National research agency ? ANR) and it is mainly the result of numerous workshops and conferences. The book conveys one central message, namely that history matters; this concept is enlarged to encompass a discussion of the convergence and divergence processes of national financial systems.

The work comprises four main parts which are gathered into chapters. Following an introduction written as a synthesis by Patrice Baubeau, a first part presents the social mechanisms of financial convergence. The reader will find there a contribution by Patrick Verley devoted to institutions and networks of Parisian brokers in the nineteenth century, followed by an article by Jean-Luc Mastin on the resistance of the Lille marketplace to national convergence.

The second part deals with national convergences and divergences in the long term. David Le Bris?s article presents a correlation analysis in terms of portfolio diversification and market integration between France and the Unites States. Carlo Brambilia focuses his analysis on convergence in European investment banking patterns until 1914. Finally Dirk Drechsel studies the Swiss banking crises during the Gold Standards, 1906-71.

The third part centers on convergence and the study of historical shocks. The short introduction by Patrice Baubeau and Anders ?gren questions the major role played by historical events. From this point of view the contribution of Pablo Martin-Acena, Elena Martine Ruiz and Maria A. Pons represents an original illustration around the financing of the Spanish Civil War, 1936-39. Richard Roberts goes back over the London financial crisis of 1914.

The fourth and last part of the book analyses convergence and monetary constraints. The study by Kalina Dimitrova and Luca Fantacci deals with the establishment of the Gold Standard in Southeast Europe. Antoine Gentier?s chapter focuses on the origins of the Italian banking crises of 1893. And the final contribution, by Jereon Euwe, concentrates on Amsterdam?s role as an international financial center, 1914-31.

Generally speaking this book represents for all those who are interested in historical processes of convergence and divergence of national financial systems a very serious, useful and pleasant to read synthesis effort both from a narrative as well as a quantitative point of view. It also provides a good illustration of contemporary debates on the links between economics and history. The practice of economic history is obviously closely dependent on its institutional setting (frame). Indeed economic history is located at the crossroad between two well established disciplines in the academic context, namely history and economics, but these two disciplines each gained an identity of their own and grew further and further apart. Ab initio both disciplines have aimed in the end at different objectives. When reading this book the historian finds in it an interpretative vision (verstehen) of reality. The economist misses a more mechanical vision (erkl?ren), more closely linked to the literature of the last twenty years in terms of economic growth and convergence. Actually the book tries to reconstruct a sequence of events as precisely as possible through a minute criticism of the sources and finally interprets them (tries to give them a meaning in a more global context) and even determines their causes and consequences. But the authors remain very cautious and their mistrust of this concept of ? at least deterministic ? cause underlies the whole construction. It is easy to identify at first sight the concern for the specificity, the context-dependency and reality of the facts. The authors hope to be able to understand the actors of the past, their values, representations, and culture without anachronism. Their great ambition is to reach a global understanding ? mainly through a systemic analysis ? of the evolution of national financial systems. With this aim they depart from present-day economic research. The quantitative approach is accepted and even assumed and used in order to specifically account however for a context-dependent reality. The verstehen has priority over the erkl?ren, the quantitative approach is meant as an illustration or support of the argument. The analysis is written in a natural language and not the formalized language used by modern economists who support the erkl?ren, the analysis of reality through a mathematical model, in search of pure objectivity, without any reference to non-quantitative information to be integrated into a formal construction which leads in the end mostly to a model expressed by equations. A more cliometric approach might have covered both sides of this epistemological barrier which separates history and economics. It is perfectly possible to call on sophisticated econometric methods to be integrated into a traditional approach of the work of the economic historian (to synthesize and interpret). Calling upon standard economic theory to confirm or invalidate its relevance by confronting it with data from the past to better understand the present and even anticipate the future could have been a central element of this analysis, this collective work, which is obviously incisive, stimulating and promising for future research devoted to national financial systems.

Claude Diebolt, research professor in economics (cliometrics) for the French National Centre for Scientific Research (CNRS) at the University of Strasbourg (France), is the editor of Cliometrica. He can be reached via email at cdiebolt@unistra.fr.

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