“Reassessing the Financial Revolution” – Final Results

Money, Power and Print

7-9 June 2018

Our event began with opening remarks directed at orienting newcomers to the Money, Power and Print network, and with an explanation of the topic of the conference “Reassessing the Financial Revolution.” The particular angle on conference was to rethink previous understandings of the Financial Revolution, which scholars usually describe and discuss as taking place in England and the British Isles. This conference was designed to consider perspectives coming from the Continent, as well, and we began with proposing three goals. The first was to see if, through this comparison, what took place on the Continent demonstrated or refuted P.G.M. Dickson’s claim that the Financial Revolution took place mainly in Britain. The second goal was to scrutinize whether developments on the Continent shed a new light on the Financial Revolution in the British Isles. The third goal was to try to ascertain whether our conversation has any relevance for the global financial crisis and the present moment. Participants were instructed to take all of these points into consideration over the course of the event.

The Concept of ‘Revolution’

One goal of this conference was to open up the perspective and scrutinize the Financial Revolution from a cross-European perspective. In early papers, discussions revolving around monetary policy/theory in Prussia and the decision-making practices of a Parisian investor took cross-European perspectives into account, but it also brought to the fore the way in which the concept of the Financial Revolution as taking place primarily in England still warrants further inspection.

What exactly is the ontological nature of what Dickinson calls the Financial Revolution? Jan Greitens’s paper showed us that conservative monetary policy in Prussia is easily dismissed as a sign of backwardness in comparison to Britain. However, if we follow that logic, we simplify the picture. If we agree that the Financial Revolution was indeed a revolution, then we need to look at a broader perspective: What are the fundamental changes with respect to mentalities, values, ideas about the community, notions of what constitutes as a nation, etc.? In that scenario, conscious decisions not to create financial institutions such as central banks may also be treated as a crucial part of the so-called revolution, as it exemplifies the way the development in England was not without alternatives, at least for a while.

In that sense, the first few papers allowed for a critical assessment of the fundamental changes, and the question of whether these changes are perceived as contingent or caused by particular agents and actors involved. One way of opening up the discussion is to look at more documentary evidence for the criteria underlying decision-making in the eighteenth century. Prussian civil servants seem to have relied more on a military/pre-industrial complex (to use a slightly anachronistic term) to respond to the manifold changes in eighteenth-century society. Whereas the British financed war through the establishment of a national debt, Prussians devalued their coinage. The question then is not only: Were Graumann and Justi aware of developments in England? But also: Why did they not embrace new/modern ideas about state finance? The questions our conversation brought to the fore include addressing systematic responses to the developments in England.

Greitens affirms that in absolutist Prussia, “there was no financial revolution” in this period. Rather than considering the relationship between an abstract state and investors, such as scholars of Britain do when they refer to credible commitment, Greitens focused on the way Prussian thinkers emphasized “credible witness,” or the preservation of good faith in the currency. With this in mind, widening the perspective may still be of interest for future discussions.

Marlene Kessler’s paper also contributed to this discussion about differences on the Continent, although our discussion mostly focused on the rationality of investment in France. She demonstrates that French investors mainly relied on private letters to get information about how to invest. This might be a big difference to Britain, whose investors were beginning to rely on print and an emergent public sphere. Most of the discussion around this paper focused on the question of economic rationality, which came up in various iterations throughout the course of the event.

Temporal Framework

Our discussion at times revolved around the necessity of extending the temporal framework, both in terms of when the infrastructural changes took place and the relevance of the past to present-day debates and discussions. In order to grasp the nature and structure of the Financial Revolution, it may be helpful to historicize the events of c.1690-1720 and to look at the long-term developments. Participants generally agreed that social and political changes in the seventeenth century all contributed to the Financial Revolution, but that the changes reached a critical mass in around 1690.

In our discussion for the “Reassessing the Financial Revolution” session, we compared the works of P.G.M. Dickson and Joseph Vogl. Both define and use the term ‘Financial Revolution.’ Both tell a story about public credit. Both have transnational perspective but focus on England. And both make a connection between our heuristic terms: money, power, and print. Whereas Dickson uses history for the purpose of understanding the present, however, Vogl attempts to account for present through past structures, namely accounting for the economization of government, a zone of interdeterminacy between sovereign statehood and commercial practice, and the interlocking of government structures and markets. In our discussion, historians had reservations about Vogl’s method of cherry-picking certain details of financial structures (perhaps too obviously in accordance with his political views), but at the same time there seemed to be a consensus that a lot of the problems today can indeed be traced back to the structural changes at the time of the Financial Revolution.

At the same time, looking at the legacy of the Financial Revolution in the eighteenth and nineteenth centuries may facilitate our understanding why certain transformations in the Financial Revolution lingered beyond the period Dickson identifies as being important, especially with regard to the American picture. Katherine Smoak’s paper, addressing how ingeniously American separatists made use of counterfeiting in the nineteenth century, sheds light on the way that financial instruments were used as political weapons, undermining and paradoxically also reinforcing what took place earlier in Britain.

Rationality, Trust, and Risk

The question of whether financial actors operate rationally or irrationally is a long-standing one, and it emerged in several contexts over the course of the two days. This point may be tied to the more general question of what constitutes a revolution proper. Kessler’s paper suggests that agents like Vercour ultimately took recourse to a notion of ‘rationality’ in their decision- making, but she also argues that the classical distinction between ‘rational’ and ‘irrational’ investing is unhelpful for understanding the behaviour of contemporary investors. She therefore takes the perspective of a particular investor as her case study, as it reveals a network of relationships and a chain of decisions. In the discussion, we highlighted the difference between risk and uncertainty, but this discussion also brought to the fore that the line between risk and uncertainty is often blurred, and that agents may think that are assessing risks when in fact they are dealing with uncertainties. The discussion also highlighted that the focus has shifted from rationality to behaviour, and that we either need to historicize the notion of ‘rationality’ or use the neutral, descriptive concept of behaviour.

Anne Murphy examined the way that women investors were represented during the South Sea Bubble. One of the explanations given in the crisis was that there were too many hysterical women in the market. Many male commentators reveal disquiet at the increasing involvement of women on the market, and some were seen to be manipulators. The paper thus opens insights into the social and behavioural aspects of finance. Murphy uses this case to suggest the absurdity of trying to analyse what went wrong retrospectively. This has important implications for defining what is rational. The discussion of Murphy’s paper presented a new angle on the topic of rationality and risk, as risk preferences change after a crisis.

The concept of ‘crisis’ might be a good one for reassessing the Financial Revolution. There is value at risk, which is calculable; but there is also uncertainty, which is not. But the financial system behaves as is everything is calculable. This might be further topic for the network to pursue.

Rafael Streib argues that imagination also plays an important role in re-assessing the rational, as his paper discussed the way that investors were led to invest through a notion that far-away places were empty, and thus places for speculation. And indeed, ignorance – and not rational knowledge – played a key role in the Financial Revolution. We may thus wish to engage more fully with debates about reason, imagination, fancy and folly in order to understand what contemporaries thought about rationality. Instead, we should acknowledge that rationality is very much a contested idea in the period, and yet emerges – in the way that we predominantly use it still today – during the Financial Revolution.

Adrian Leonard’s paper convincingly brought to the fore the way that insurance companies emerged according to the same logic that underpinned joint stock companies. In the wake of the Bubble Act, marine insurance was in keeping with the goals of joint stock companies, as the formation of insurance was in the interest of these companies. First, insurance paid meant that these companies were sitting on capital. Second, most insurers were ship-owners themselves, simultaneously investors and consumers. Risk management then became a profitable endeavour with those involved often playing the market, not unlike stockjobbers. What is new with regard to marine insurance is that a new joint stock company had the capacity to have control over charter companies. They were initially launched without government interest involved. Only later did the insurance companies receive Parliamentary backing. The launch of marine insurance was profit-motivated rather than politically motivated, but the actors had to work with the political system. This brings to light the relationship between trust and rationality: one of the paradoxes is that if one has to manage and influence other agents, one does not necessarily trust them from the outset.

Marine insurance also decisively shaped conceptions of risk management. Risk assessment and risk management rely on factoring in what actors know and what they do not know, and it is also (in the eighteenth century) increasingly based on mathematical models and statistics. So one way of looking at the Financial Revolution is to see it as a latecomer to a general mathematization that took hold of natural philosophy in the seventeenth century. As Michael McKeon pointed out in his contribution, it is important to note that risk management evolved in a culture that was becoming increasingly mathematical (in the sciences) while at the same time embracing fictional accounts and virtual realities (in the arts).

Print and the Public Sphere

One idea that was at the centre of a lot of discussions was the transition from credit based on personal trust to credit based on the ‘worth’ of impersonal institutions, and often these institutions are evaluated or discussed in print. Streib’s and Leonard’s papers both brought this to the fore, but the final section focused on the print angle even more fully, considering the relationship between the so-called public sphere, readers, and the role certain forms and rhetorical gestures played.

Jacob Sider Jost’s paper examines Shaftesbury’s political stance, often conceptualized in terms of “politeness” which was in turn part of a broadly Whiggish political agenda and a defense of the 1688 revolutionary settlement. Tracking Shaftesbury through his votes and speeches in Parliament, his estate accounts, and his correspondence, he argues, one finds a fascinating case study in the novel configurations taken by both power and money during the period between the Glorious Revolution and the Hanoverian Succession. In particular, Shaftesbury’s print texts shed new light on party politics in the wake of the ‘Financial Revolution.’ Shaftesbury’s idea that one’s personal interest could be transformed to party interests, which then could engage with other non-personal party interests, showed that the Financial Revolution was embedded in a politico-philosophical debate about sympathy, trust, and disinterestedness as much as it was about risk-taking and rational thinking. This important eighteenth-century philosopher and commentator brought to light another angle on our topic, albeit from a very different sphere of print texts than examined by other participants.

One point that repeatedly came up in discussion was that rhetorical strategies need to be considered more carefully. This was a point raised by Mark Longaker and Rodney Herring in their paper on why modern commentators often focus on John Law. How do strategies like the ‘plain style’ underpin the impression that perspectives on financial institutions and instruments are free from personal interest and cater for the ‘common weale’? Longaker and Herring also addressed the question whether a particular “rhetoric of the market” was instrumental in shaping consensus – with theoria rather than practice at its core and abstractions, tables, statistics, etc. as devices to underpin that ‘plain style’. One of the interesting discussions that came out of this paper was on the question of the difference between economic theory and economic pamphleteering or projecting. This could be pursued in further discussions within the network.

Michael McKeon, whose paper provided an overview of the way the virtual as a concept helps us to contextualize what took place in finance, brought together many of the angles discussed over the course of the two days, as he discussed a general transformation from the tangible to the virtual, or a physical disembodiment of previously embodied relationships. He lists a variety of realms where this takes place: from religion, to science, to the market. The market, he emphasizes, goes from being a particular place to a ‘place’ that is nowhere and everywhere at the same time. The ‘public sphere’ is a new notion of the public that is seen as an extension of the state: people are not directly involved in government, but they influence it through public opinion. This can also be related to the rise of aesthetic value, whose centre is the imagination. Credit money also relies on an imaginary along the lines of the ‘virtual’ that McKeon proposes. One might suggest that modern money, power and print can be related together through the way they virtualize previously tangible relationships, and they perhaps even require each other do to that.

Final Discussion and Planning

The event ended with a planning meeting, and the group decided that – owing to the disparate nature of the papers collected for the aim of a unique conversation – we would not publish our results in a collective volume. A second reason for this decision is that several of the papers had already been committed elsewhere.

We discussed the possibility of using the internet more effectively, improving the network’s website, etc. The group decided that the website is sufficient as is.

As many of the participants expressed a desire to continue the conversation, the group decided that there would be another call for papers for a meeting in two years, which will likely take place in Dublin. Charles Larkin will take over the organization, with Natalie Roxburgh and Anne Murphy assisting.