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  • Capitals of Capital: A History of International Financial Centres, 1780-2005
  • Robert E. Wright
Capitals of Capital: A History of International Financial Centres, 1780–2005.By Youssef Cassis (New York, Cambridge University Press, 2006) 385 pp. $40.00

In six long chapters and a short introduction and conclusion, Cassis details the history of international financial centers since the late eighteenth century. London, Paris, and New York rightfully receive the most notice, but significant attention is also paid to smaller financial capitals, including Amsterdam, Chicago, Frankfurt, Geneva, and Zurich, as well as to Asian upstarts like Hong Kong, Tokyo, and Singapore. Cassis even gives the occasional nod to also-rans like Antwerp, Berlin, Brussels, Hamburg, Philadelphia, and Toronto, and to offshore havens like Luxembourg and the Cayman Islands. Throughout the book, Cassis pays meticulous attention to historical context, wars, depressions, ill-conceived regulations and taxes, and other negative shocks that decimated some centers (Paris and Berlin) while invigorating others (New York and Zurich). He also carefully attends to the effects of positive shocks like telecommunications improvements (telegraph, telephone, and the Internet), both waves of globalization (late nineteenth-century and late twentieth-century), and various episodes of deregulation, including London's famous "Big Bang."

A narrative in the sense of being chronological and descriptive, the book makes no predictions or big overarching claims. The methodology is one of nuanced historical judgment by an established expert rather than brute number crunching or documentary cherry picking to establish a preconceived hypothesis. The author's passion for comparative financial history shines through on every page, begging readers to engage the facts rather than to wolf down preconceptions about how to measure the relative importance of international financial centers. To create his rankings, Cassis carefully weighs a number of important characteristics, including the location of central bank headquarters, the role of the domestic currency in international trade, the size of the money and foreign-exchange markets, the sophistication of the sovereign-debt markets as well as the markets for foreign corporate bonds and equities, the number and importance of foreign banks domestically, and domestic banks with branches in foreign countries.

When possible, Cassis examines the number of deals in addition to the dollar (or sterling) value of assets. He also looks for the headquarters of big banks, insurance companies, and asset-management firms, especially internationally active ones, and tracks the number of people employed in the financial-services sector in each city. Finally, he examines the role of the capitals of capital in summoning forth financial innovations like junk bonds, hedge funds, derivatives markets, variablerate loans, negotiable certificates of deposit, and various Euromarkets. In short, Cassis delicately balances telling quantitative information with qualitative judgments forged by perusing a list of key secondary sources almost twenty pages long. [End Page 97]

Unfortunately, due to the book's unusual backstory—it began life as a history commissioned by a Swiss bank—Cassis wrote the bulk of the text several years ago. Hence, he did not have the opportunity to integrate several important recent contributions, including William Silber, When Washington Shut Down Wall Street (Princeton, 2006), which shows, using exchange-rate movements (a type of data that Cassis ignores) that World War I led to New York's ascendance over London more quickly than Cassis argues. He also missed Wright, The First Wall Street (Chicago, 2005), which would have strengthened his thin discussion of the early U.S. financial system.

The book's genesis also explains the writing, which, though competent, is hardly a paragon of style, much apparently having been lost in translation from the original French. The book also suffers because it is almost entirely devoid of people, of memorable characters doing and saying interesting things. As befitting a scholarly tome, the analysis is kept a safe distance from any inkling of human involvement, though certain key economic constructs, like the "impossible trinity" or monetary system "trilemma," are curiously underutilized.

But mere quibbles are these. Anyone interested in the historical background of the world's most important international financial centers will prize this book enormously.

Robert E. Wright
Stern School of Business
New York University

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