- New Directions in Modern Economics series
Edited by John Grahl
Chapter 2: International Finance
Trevor Evans INTRODUCTION Finance has long had a strongly international dimension. Modern European banking emerged in the Italian city states in the twelfth to the fourteenth century and was linked to the financing of trade with the East and the great European fairs in medieval France. As the centre of commercial capitalism shifted to northern Europe in the sixteenth century, the Italian banks lent large sums to the new financial institutions which developed in Amsterdam and they, in turn, played a key role in providing both bankers and finance for the growth of banking in Britain in the years immediately after the so-called ‘Glorious Revolution’ of 1688–9. In the eighteenth century, as Britain superseded the Netherlands as the leading capitalist nation, London emerged as Europe’s most important financial centre, characterized from the outset by a strong international orientation. Since the expansion of industrial capitalism in the nineteenth century, it is possible to identify four main periods in the development of international finance: ● ● ● ● The international gold standard (1870–1914) Breakdown and fragmentation (1914–45) The Bretton Woods system (1945–71) The re-emergence of private international finance (since the 1970s). This chapter will briefly summarize the main features of the first three periods, and then examine the period since the 1970s in more detail. THE INTERNATIONAL GOLD STANDARD The classic period of the international gold standard is usually dated from around 1870 up to the outbreak of the First World War in 1914. Britain had in fact adopted a gold-based monetary...
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