Capitals of Capital: A History of International Financial Centres, 1780-2005 (review)

The book presents a history of the most influential financial Centers, "the capitals of capital." Youseff Cassis evaluates the significance of these Centers by examining their concentration of financial services, their capacity to process surplus capital, particularly its export, and their role in the intermediation of financial transactions. Their history, from 1780 to the present day, is covered chronologically in six chapters. Each chapter establishes a hierarchy of Centers and reasons for changes in the hierarchy are analyzed as the story unfolds.

Chapter 1 examines the age of private bankers, exemplified by Nathan Rothschild, who built his business, and an international financial network, on lending the British government the money it needed to finance the international coalitions against Napoleon. As a result, the period 1780–1840 witnessed the emergence of London as the dominant Center, with Paris leading a group of secondary Centers, Amsterdam, Brussels, Frankfurt, and Geneva. Chapter 2, "The Concentration of Capital, 1840–1875", illustrates how London's dominance was reinforced by railway construction, which concentrated capital in the banks and the stock exchange, and the export of capital, in which Paris also played an important role. Through its parallel dominance of trade finance, London was able to resist the ambition of Paris, now a major lender to foreign governments, and which went as far as proposing a franc-based international monetary union.

Some justification is given to Cassis's claim in Chapter 3 that a globalized world emerged in the period 1875–1914, by the broader basis of international Centers and their coordination, which created a network including Berlin, replacing Frankfurt post German unification and New York, which imported international capital on a large scale to finance the rapid post-bellum expansion of the US economy. Chapter 4, entitled "Wars and Depression, 1914–1945", explains how the relative influence of the Centers inevitably matched geopolitical shifts in an era of war, and how all faced greater intervention and regulation in the financial instability following 1929. Chapter 5, "Growth and Regulation, 1945–1980", explains the rise of New York as a function of the dominance of the dollar in the postwar international monetary system and shows how its extent was limited by regulation, principally in the US itself, which accounted for the rise of the Eurodollar market in London. Large movements of global capital, "petrodollars," began with the 1973 oil crisis and were fully unleashed by the deregulation of the 1980s, so that London's "big bang" of 1986, was "more like a culmination" than a starting point, as Cassis points out in Chapter 6, "Globalization and Financial Innovations, 1980–2005". A final chapter draws conclusions.

It is difficult to do justice to the scope of the book in this brief review of content. There are many analytical levels in the text; for example, the systematic comparison of financial architecture, and role of acceptances and foreign issues, in New York, London, and Paris in the interwar period. Also, there are many individual case studies featuring individuals, organizations, institutions, and indeed countryspecific events; for example, the relocation from Berlin to Frankfurt after 1945. The challenge of dealing with this multidimensional matrix of reference points through time is considerable and inevitably runs into some problems. In general, the systematic comparison within the chapters is a strong feature, but comparison is more difficult through time, not least due to the major discontinuities imposed by war and financial crisis. Even so, more time-based comparisons might have assisted the book's objectives. For example, the circumstances leading to the regulation of investment banking by the Glass–Steagall Act might have been compared with the Sarbanes–Oxley Act and their respective impacts on New York's international position. Another missing dimension is the role of theory, and the claim in the sleeve notes, suggesting that the book draws on the concepts of financial economics in its analysis of events, is a little too strong. Whereas...