------ EH.NET BOOK REVIEW ------
Title: Casualties of Credit: The English Financial Revolution, 1620-1720

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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Geographic Location: Europe
Subject: Financial Markets, Financial Institutions, and Monetary
History, Social and Cultural History, including Race, Ethnicity and
Gender
Time: 17th Century, 18th Century