The Making of Modern Finance
Liberal Governance and the Gold Standard
By Samuel Knafo
Routledge – 2013 – 218 pages
The Making of Modern Finance is a path-breaking study of the construction of liberal financial governance and demonstrates how complex forms of control by the state profoundly transformed the nature of modern finance.
Challenging dominant theoretical conceptions of liberal financial governance in international political economy, this book argues that liberal economic governance is too often perceived as a passive form of governance. It situates the gold standard in relation to practices of monetary governance which preceded it, tracing the evolution of monetary governance from the late middle Ages to show how the 19th century gold standard transformed the way states relate to finance. More specifically, Knafo demonstrates that the institutions of the gold standard helped to put in place instruments of modern monetary policy that are usually associated with central banking and argues that the gold standard was a prelude to Keynesian policies rather than its antithesis. The author reveals that these state interventions played a vital role in the rise of modern financial techniques which emerged in the late 18th and 19th century and served as the foundation for contemporary financial systems.
This book will be of strong interest to students and scholars of international political economy, economic history and historical sociology. It will appeal to those interested in monetary and financial history, the modern state, liberal governance, and varieties of capitalism.
"Samuel Knafo’s The Making of Modern Finance represents the culmination of many years of research and is a fine piece of scholarship in its own right. It draws the reader into a historical narrative which is at once immaculately researched and compellingly presented. Knafo uses these admirable writing traits to prick the conscience of the IPE community. We all too easily revert to repeating conventional wisdoms of history rather than getting our hands dirty with sustained original historical analysis. This book reveals to us the collective error of our ways in relation to perhaps IPE’s most cherished conventional wisdom: that concerning the nineteenth-century gold standard. Far from being the automatic pilot of IPE folklore, the supreme tool for disembedding finance and providing it with its own autonomous logic, The Making of Modern Finance shows that it was the mechanism which made possible the interventionist techniques of modern central banking. We all have much to learn from this thoughtful analysis, whether our interest is in the nineteenth century, today’s economy or the path that was followed to move from one to the other. Contrary to what so much of the IPE literature now encourages us to think about it, in Knafo’s account the gold standard was used as a means of exerting societal control over free flows of money. I look forward to this account having a major influence on the relevant literature." - Matthew Watson, Professor of Political Economy, University of Warwick, UK
"The common image of the gold standard as a depoliticized monetary regime has long been difficult to square with historical evidence. In this innovative analysis, Samuel Knafo presents a systematic argument for why this image needs to be abandoned: the emergence of the gold standard went hand-in-hand with greater state power over money and finance. This important reinterpretation of monetary and financial history deserves a wide audience." - Eric Helleiner, Faculty of Arts Chair in International Political Economy, University of Waterloo, Canada
"Knafo untangles a myriad of misconceptions and challenges dominant theoretical conceptions pertaining to liberal financial governance, in particular the notion that liberal economic governance implies passivity. His study encompasses monetary practices from before the late Middle Ages to the late-18th and 19th centuries, when the gold standard began shaping modern monetary instruments and policies. For students and scholars of international political economy, economic history, historical sociology, varieties of capitalism, and monetary and financial history." - Book News
Introduction: The Golden Touch of Liberal Financial Governance PART I: Reassessing Liberal Financial Governance 1. The Gold Standard and the Paradox of Liberal Financial Governance 2. The 'Modern' Aspects of English Financial Governance in the 19th century PART II: Lineages of Sound Monetary Policy 3. The Origins of Sound Monetary Policy in England (13th-16th Century) 4. The Financial Revolution and the Bank of England (1600-1696) Part III : The Gold Standard and the Construction of Liberal Financial Governance 5. Gold Monometallism and Modern Banking (1696-1797) 6. The Gold Standard and the Lender of Last Resort (1797-1844) 7. The Internationalisation of the Gold Standard (1844-1914) Conclusion: The Making of Modern Finance and the Politics of Liberal Governance
Samuel Knafo is a Lecturer in Global Political Economy at the University of Sussex, UK.