------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (November 2006)
Youssef Cassis and �ric Bussi�re, editors, _London and Paris as
International Financial Centres in the Twentieth Century_. Oxford:
Oxford University Press, 2005. xii + 367 pp. $125 (hardcover), ISBN:
0-19-926949-1.
Reviewed for EH.Net by Mira Wilkins, Department of Economics, Florida
International University
This book has a truly exciting set of fifteen chapters (sixteen
contributors). Youssef Cassis starts off with a brief comparison
between London and Paris as international financial centers in the
twentieth century. After his introduction, there are four parts (one
general and three chronological), with alternate chapters on London
and Paris. Part I has the first pair: Ranald Michie and Alain Plessis
deal respectively with London and Paris in a "long-term perspective,
1890-2000." In a splendid essay, Michie insists that London as a
financial center took shape as an addition to (not a substitute for)
its role as a commercial center. London's port, its insurers, its
activities in the distribution of minerals and metals were
complementary to its central position in international finance. Trade
finance, short and long-term investments, and the role of stock
markets are deftly handled by Michie, who emphasizes the dynamics of
the City with its changing and evolving characteristics. World War I
proved a "major blow" to London as an international center, but it
recouped. With nuances, Michie covers the inter-war and World War II
ups and downs in London's position. World War II was another
watershed. With the nationalization of the Bank of England in 1945,
government interventions in financial matters became the norm. Yet,
throughout, London remained cosmopolitan, in time reviving its
position as a major international financial center. In December 1999
the governor of the Bank of England would call London the world's
predominant international financial center. This was perhaps an
exaggeration, underestimating New York. Nonetheless, the rebirth of
the City at the end of the twentieth century was remarkable. Michie
explains why.
Plessis's eleven pages on Paris do not offer as comprehensive an
overview as Michie's but then Paris was not London. Plessis shows the
strengths of Paris as a financial center in the decades before World
War I, its "withdrawal 1914-1926" (including the resales of the best
securities abroad and the collapse of loans to Russia and the Ottoman
Empire, with France moving from creditor to debtor nation in these
years). Plessis's next sub-headings are "The Great Hope, 1918-1930"
(with the stabilized franc and solid current account surpluses), "An
Enduring Eclipse, 1931-1958" (with the accumulation of negative
impacts on Paris as a financial center), and finally "Toward a New
International Role for Paris as a Financial Centre" (beginning with
France's participation in the European common market and the
re-establishing of external convertibility of the currency in 1958,
and then, too rapidly, he rushes through the next two decades, not
really bringing the story to 2000, as Michie had).
Part II is on 1890-1914. Here the first pair of British-French
chapters is not a symmetrical coupling (nor are the subsequent
pairs). Each contribution fills gaps in the overviews. Michie's
summary devoted little attention to empire, to imperialism, in
defining London's role as an international financial center. Niall
Ferguson's controversial, and as is his practice highly stimulating,
presentation re-looks at the older familiar literature on capitalism
and imperialism (on sinister financial interests) and reviews the
range of re-considerations of this equation from the 1960s onward.
Ferguson brings back to the table the significance of formal empire
in London's place as a financial center. Taking on Michael Bordo and
other recent economic historians, Ferguson claims British rule
provided more than the good "housekeeping guarantees" of the gold
standard. Ferguson sees empire as highly germane to understanding the
City before World War I. Many historians have been appalled by
Ferguson's conservatism, his politically incorrect willingness to
maintain that imperialism may not have been such a bad thing after
all. The ideological blinders of these critics should not stop them
from taking Ferguson's arguments seriously. Even if one does not
share all his arguments, he is convincing as he shows that access to
London capital markets for those countries within the empire was
lower cost and easier than for most countries outside the formal
empire. Yet Ferguson never considers the largest single recipient of
British capital in this era, the United States. This omission
provides, perhaps, a flaw in Ferguson's argument, but some may argue
far from a fatal one.
The French contribution to this pair is by Marc Flandreau and
Fran�ois Gallice; it shifts the tone and orientation. In this
important chapter, the authors look at short-term international
capital movements, 1885-1913, using data from the records of the
Banque de Paris et des Pays-Bas (Paribas). Their contribution reveals
the great value of using bank (and more generally) business records.
This essay is as much about London as about Paris as an international
financial center. Their study offers splendid new data and insights
into the characteristics of short-term capital movements; it expands
horizons.
The next twin covers banks and international finance, 1890-1914.
Cassis supplies a snapshot of the specialized, fragmented London
banking institutions along with the financial markets in which they
participated and competed. Samir Saul's approach differs, focusing on
alliances between banks within syndicates, seeking to establish the
managers and participants in underwriting and issue consortia. His
data base consists of 311 issues of foreign governments and
companies, as found in Cr�dit Lyonnais's records, supplemented by
other information.
Part III, entitled "From Global Reach to Regional Withdrawal,
1914-1958," has offerings from P.L. Cottrell on London and Hubert
Bonin on Paris banking and finance. Part IV on the "Road to
Globalization, 1958-1980," contains two sets of papers. Catherine
Schenk offers keen insights into the policy environment of
international banking in the City, while Olivier Feirtag tells of the
"international opening up" of the Paris Bourse. The second pair in
Part IV comprises contributions from Mae Baker and Michael Collins on
"London as an International Banking Centre" and �ric Bussi�re on
"French Banks and the Eurobonds Issue Market during the 1960s." And,
then, completing the chronology (and the volume), in the final part,
Part V, there is a very neat study of the last twenty years of the
twentieth century by Richard Roberts, who playfully asks of London:
"Global Powerhouse or Wimbledon EC2?" -- while Andr� Straus
speculates on the future of the Paris market as an international
financial center from the perspective of European integration.
I missed a chapter on the interaction between London and Paris: how
often were issues listed on both exchanges? How much arbitrage was
there between the centers? How frequently were issues denominated in
both pounds and francs? How often did Frenchmen go through London in
their international transactions? To what extent did British and
French banks have cross connections? We learn of French banks with
outlets in London, but what about vice versa? It would be useful to
think about the Lazards, Rothschilds, and Morgans in the context of
London and Paris as international financial centers. There is so much
to consider vis-a-vis interactions. For example, how did the two
centers interact in the Euro dollar market? What did British entry
into the European community do to the relationships between London
and Paris as international financial centers? Plessis (to a limited
extent) and Flandreau and Gallice do discuss associations between the
French and British central banks, but neither contribution extends
the discussion beyond 1914. How did the two central banks interact
during the entire twentieth century?
While this book tells a tale of two cities, there is a third one that
hovers in the background: New York. A criticism of this book is _not_
that New York is absent in the presented story (it is there, albeit
not in a systematic manner), but there seems to be a lack of
awareness by most of the authors of the relevant _U.S._ literature
(for example on British and French participation in the Eurobond
markets).
These few reservations should not turn the reader from the high value
of this book. This is a well-integrated volume that should be in the
library of every economic historian who deals with international
banking and finance in the late nineteenth and twentieth century. I
read it with great absorption and delight.
Mira Wilkins is professor of economics at Florida International
University. Her most recent book is _The History of Foreign
Investment in the United States, 1914-1945_ (Harvard University
Press, 2004). It is the second volume in her three volume history of
foreign investment in the United States (the first was published in
1989); the third, which will carry the story from 1945 to present, is
in progress. Wilkins covers foreign direct investment and, also, the
entire range of other long-term foreign investments in the United
States.
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