Neal (1990) — The Rise of Financial Capitalism

Citation. Neal, Larry. The Rise of Financial Capitalism: International Capital Markets in the Age of Reason. Cambridge University Press, 1990.

Summary

The canonical reconstruction of the development of European financial markets from roughly 1660 to 1815. Neal documents the institutional machinery — funded sovereign debt, secondary markets in government securities, joint-stock companies with traded shares, brokerage and dealing networks, marine insurance markets, the Amsterdam-London-Paris financial axis — that emerged across the early-modern period and that made European capital mobilization possible at scale. The book combines new archival reconstruction (Amsterdam and London price and volume series), comparative analysis across the three principal financial centers, and a long historical narrative that places the South Sea Bubble (1720), the Mississippi Bubble, and the broader long-18th-century cycle in their structural context.

The argument is institutional and infrastructural rather than headline-causal. Neal does not argue that finance caused the Industrial Revolution; he argues that the European financial-capitalist machinery was a necessary institutional achievement without which the IR’s capital-mobilization requirements could not have been met. The framework underwrites the modern finance, credit & banking position in the IR debate.

Key claims

• The Amsterdam-London-Paris financial axis assembled, between roughly 1660 and 1815, an unprecedented institutional infrastructure for sovereign-debt issuance, secondary-market trading, and corporate-share dealing.
• Funded national debt — backed by Parliamentary consent to specific tax revenues, with secondary markets allowing creditors to exit — was a key institutional innovation, with the British case at the technological frontier.
• Marine insurance, brokerage, dealing, and (eventually) formal exchange infrastructure were essential supporting institutions, all of which developed substantially in this period.
• European capital markets achieved a degree of integration by the late 18th century — common pricing of comparable securities across centers, arbitrage networks, capital flows responding to political events — that is recognizably modern in form.
• Bubbles and crises (South Sea 1720; Mississippi 1720; subsequent crises) were not failures but the institutional learning episodes through which modern financial regulation and central-banking practice were constructed.