Cash or Account? A Plea for a Comparative History of European Financial Systems

Abstract

A number of recent events have shown that finance still has an important part to play in the modern economy: banks may take excessive risks; accounting and supervisory systems may prove inadequate; stock-market prices may collapse and leave rash undertakings perilously over-indebted. The stagnation of the Japanese economy from 1990 onwards is a stark reminder that such events may have a real impact. Can a knowledge of financial history help to make them better understood? The plethora of recent works in the field at least gives some background against which to measure the rapid changes now occurring. In this article I shall attempt an overview of the field, with particular attention to the recent works listed above. First I shall trace the evolution of the notion of ‘financial systems’ as a coherent and stable set of financial relationships and organisations, as it has emerged from cross-fertilisation of work by economists and historians. One difficulty about analysing such systems is that they can be long-lived (often forty years or more) and so change only slowly and in a way that can be hard to grasp. As a result, many historians tend to neglect the striking differences between countries, whereas economists like to compare snapshots of systems in different countries at a given moment. My object in this article is to alert the reader to the risk that recent advances in the study of the American financial system may become a stumbling block to the study of very different European models. On the other hand, some directions in the study of eighteenth- and nineteenth-century European history may throw fresh light both on contemporary European financial systems and on some dark corners in the financial history of the United States.