Hostname: page-component-586b7cd67f-2plfb Total loading time: 0 Render date: 2024-11-23T05:45:04.289Z Has data issue: false hasContentIssue false
  • English
  • Français

Money Talks: Finance, War, and Great Power Politics in the Nineteenth Century

Published online by Cambridge University Press:  05 May 2020

Patrick E. Shea
Patrick E. Shea*
Affiliation:
Department of Political Science, University of Houston
*
Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Finance is often considered a constraining or compelling force in war. This article examines an alternative role of finance in war, asserting that investors can inform states about adversarial intentions and resolve under certain conditions. This signaling mechanism can reduce information asymmetry between states and decrease the probability of conflict. In the context of these theoretical expectations, I examine the case of Austria and the Rothschild Bank in the nineteenth century. I find that instead of being a constraining force on Austrian foreign policy, the Rothschilds helped inform Austria and other European powers during interstate crises. The information provided by the Rothschilds helped Europe avert war in several cases during the nineteenth century.

Keywords

warfinancecrisis bargainingsovereign credit
Type
Research Article
Information
Social Science History , Volume 44 , Issue 2 , Summer 2020 , pp. 223 - 249
Copyright
© Social Science History Association, 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson, Sally, and Souva, Mark (2010) “The accountability effects of political institutions and capitalism on interstate conflict.” Journal of Conflict Resolution 54(4): 543–65.CrossRefGoogle Scholar
Barbieri, Katherine (2002) The Liberal Illusion: Does Trade Promote Peace? Ann Arbor: University of Michigan Press.Google Scholar
Boot, Arnoud W. A. (2000) “Relationship banking: What do we know?” Journal of Financial Intermediation (9): 725.Google Scholar
Brady, Henry E., and Collier, David (2010) Rethinking Social Inquiry: Diverse Tools, Shared Standards. New York: Rowman & Littlefield.Google Scholar
Chadefaux, Thomas (2017) “Market anticipations of conflict onsets.” Journal of Peace Research 54(2): 313–27.CrossRefGoogle Scholar
Chemmanur, Thomas, and Fulghieri, Paolo (1994a) “Reputation, renegotiations, and the choice between bank loans and publicly traded debt.” The Review of Financial Studies 7(3): 475–506.CrossRefGoogle Scholar
Chemmanur, Thomas, and Fulghieri, Paolo (1994b) “Investment bank reputation, information production, and financial intermediation.” The Journal of Finance 49(1): 57–79.CrossRefGoogle Scholar
Copeland, Dale C. (2015) Economic Interdependence and War. Princeton, NJ: Princeton University Press.Google Scholar
Corti, Egon C. (1928a) The Reign of the House of Rothschild. New York: Cosmopolitan Book Corporation.Google Scholar
Corti, Egon C. (1928b) Rise of the House of Rothschild. London: Grosset and Dunlap.Google Scholar
Cowles, Virginia (1973) The Rothschilds: A Family of Fortune. New York: Knopf.Google Scholar
Dafoe, Allan (2011) “Statistical critiques of the democratic peace: Caveat emptor.” American Journal of Political Science 55(2): 247–62.CrossRefGoogle Scholar
Dafoe, Allan, and Kelsey, Nina (2014) “Observing the capitalist peace: Examining market-mediated signaling and other mechanisms.” Journal of Peace Research 51(5): 619–33.CrossRefGoogle Scholar
Debs, Alexandre, and Goemans, Hein E. (2010) “Regime type, the fate of leaders, and war.” American Political Science Review 104(03): 430–45.CrossRefGoogle Scholar
DiGiuseppe, Matthew, and Shea, Patrick E. (2015) “Sovereign credit and the fate of leaders: Reassessing the ‘democratic advantage.’” International Studies Quarterly 59(3): 557–70.CrossRefGoogle Scholar
DiGiuseppe, Matthew, and Shea, Patrick E. (2016) “Borrowed time: Sovereign finance, regime type, and leader survival.” Economics & Politics 28(3): 342–67.CrossRefGoogle Scholar
Favretto, Katja (2009) “Should peacemakers take sides? Major power mediation, coercion, and bias.” American Political Science Review 103(2): 248–63.CrossRefGoogle Scholar
Fearon, James D. (1995) “Rationalist explanations for war.” International Organization 49(3): 379–414.CrossRefGoogle Scholar
Ferguson, Niall (1998) The House of Rothschild: Money’s Prophets 1798–1848. New York: Viking.Google Scholar
Ferguson, Niall (1999) The House of Rothschild: The World’s Banker 1849–1999. New York: Viking.Google Scholar
Flandreau, Marc, and Flores, Juan H. (2009) “Bonds and brands: Foundations of sovereign debt markets, 1820–1830.” Journal of Economic History 69(3): 464–84.CrossRefGoogle Scholar
Flandreau, Marc, and Flores, Juan H. (2012) “The peaceful conspiracy: Bond markets and international relations during the Pax Britannica.” International Organization 66(2): 211–41.CrossRefGoogle Scholar
Gartzke, Erik (1999) “War is in the error term.” International Organization 53(3): 567–87.CrossRefGoogle Scholar
Gartzke, Erik (2007) “The capitalist peace.” American Journal of Political Science 51(1): 166–91.CrossRefGoogle Scholar
Gartzke, Erik, Li, Quan, and Boehmer, Charles (2001) “Investing in the peace: Economic interdependence and international conflict.” International Organization 55: 391–438.CrossRefGoogle Scholar
Haggard, Stephan, and Kaufman, Robert R (2012) “Inequality and regime change: Democratic transitions and the stability of democratic rule.” American Political Science Review 106(3): 495–516.CrossRefGoogle Scholar
Helmreich, Jonathan (1976) Belgium and Europe: A Study in Small Power Diplomacy. The Hague: Mouton & Co.CrossRefGoogle Scholar
Hirschman, Albert O. (2013) The Passions and the Interests: Political Arguments for Capitalism Before its Triumph. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Kennedy, Paul (1987) The Rise and Fall of the Great Powers. New York: Vintage Books.Google Scholar
Kinne, Brandon J., and Bunte, Jonas (forthcoming) “Guns or money? Defense cooperation and bilateral lending as coevolving networks.” British Journal of Political Science. https://doi.org/10.1017/S0007123418000030.CrossRefGoogle Scholar
Kirshner, Jonathan (2007) Appeasing Bankers: Financial Caution on the Road to War. Princeton, NJ: Princeton University Press.Google Scholar
Levy, Jack S., and Goertz, Gary (2007) Causal Explanation, Necessary Conditions, and Case Studies. New York: Routledge.CrossRefGoogle Scholar
Lottman, Herbert (1995) The French Rothschilds: The Great Banking Dynasty through Two Turbulent Centuries. London: Crown Publishers.Google Scholar
Macfie, Nicholas (2010) “Korea war not the likely scenario, says S&P analyst.” Reuters, December 22.Google Scholar
McDonald, Patrick J. (2009) The Invisible Hand of Peace: Capitalism, the War Machine, and International Relations Theory. New York: Cambridge University Press.CrossRefGoogle Scholar
McGillivray, Fiona, and Smith, Alastair (2008) Punishing the Prince: A Theory of Interstate Relations, Political Institutions, and Leader Change. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Mitchell, B. R. (1975) European Historical Statistics 1750–1970. New York: Columbia University Press.CrossRefGoogle Scholar
Morgan, T. Clifton (1990) “Issue linkages in international crisis bargaining.” American Journal of Political Science 34(2): 311–33.CrossRefGoogle Scholar
Morrison, Kevin M. (2009) “Oil, nontax revenue, and the redistributional foundations of regime stability.” International Organization 63(Winter): 107–38.CrossRefGoogle Scholar
Morrow, James D. (1999) “How could trade affect conflict?” Journal of Peace Research 36(4): 481–89.CrossRefGoogle Scholar
Moul, William (2005) “Counting the seven weeks war: Dyads, disputes and balances of power.” Canadian Journal of Political Science 38(1): 153–74.CrossRefGoogle Scholar
Nichols, Irby C. (2012) The European pentarchy and the congress of Verona, 1822. The Hague, Netherlands: Springer Science & Business Media.Google Scholar
Oneal, John, and Russet, Bruce (1999) “Assessing the liberal peace with alternative specifications: Trade still reduces conflict.” Journal of Peace Research 36(4): 423–42.CrossRefGoogle Scholar
Palmer, Glenn, d’Orazio, Vito, Kenwick, Michael, and Lane, Matthew (2015) “The MID4 dataset, 2002–2010: Procedures, coding rules and description.” Conflict Management and Peace Science 32(2): 222–42.CrossRefGoogle Scholar
Poast, Paul (2015) “Central banks at war.” International Organization 69(1): 63–95.CrossRefGoogle Scholar
Polanyi, Karl (1944) Great Transformation. New York: Rinehart & Company.Google Scholar
Powell, Robert (2006) “War as a commitment problem.” International Organization 60(Winter): 169–203.CrossRefGoogle Scholar
Queralt, Didac (2016) The legacy of war on fiscal capacity. Unpublished Manuscript.Google Scholar
Rasler, Karen A., and Thompson, William R. (1983) “Global wars, public debts, and the long cycle.” World Politics 35(4): 489–516.CrossRefGoogle Scholar
Rigobon, Roberto, and Sack, Brian (2005) “The effects of war risk on US financial markets.” Journal of Banking & Finance 29(7): 1769–89.CrossRefGoogle Scholar
Rothschild Archive (2018) www.rothschildarchive.org/.Google Scholar
Schroeder, Paul (1994) The Transformation of European Politics 1763–1848. Oxford: Oxford University Press.Google Scholar
Schultz, Kenneth A. (1999) “Do democratic institutions constrain or inform? Contrasting two institutional perspectives on democracy and war.” International Organization 53(2): 233–66.CrossRefGoogle Scholar
Schultz, Kenneth A. (2001) Democracy and Coercive Diplomacy. New York: Cambridge University Press.CrossRefGoogle Scholar
Schultz, Kenneth A., and Weingast, Barry (2003) “The democratic advantage: Institutional foundations of financial power in international competition.” International Organization 57(4): 3–42.CrossRefGoogle Scholar
Shea, Patrick E. (2014) “Financing victory: Credit, democracy, and war outcomes.” Journal of Conflict Resolution 58(5): 771–95.CrossRefGoogle Scholar
Shea, Patrick E. (2016) “Borrowing trouble: Sovereign credit, military regimes, and conflict.” International Interactions 43(2): 40–42.Google Scholar
Shea, Patrick E., and Poast, Paul (2018) “War and default.” Journal of Conflict Resolution 62(9): 1876–1904.CrossRefGoogle Scholar
Simmons, Beth (2003) “Pax mercatoria and the theory of the state,” in Mansfield, Edward and Pollins, Brian (eds.) Economic Interdependence and International Conflict: New Perspectives on an Enduring Debate. Ann Arbor: University of Michigan Press: 31–43.Google Scholar
Slantchev, Branislav (2011) Military Threats: The Costs of Coercion and the Price of Peace. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Slantchev, Branislav (2012) “Borrowed power: Debt finance and the resort to arms.” American Political Science Review 106(4): 787–809.CrossRefGoogle Scholar
Steefel, Lawrence D. (1936) “The Rothschilds and the Austrian Loan of 1865.” The Journal of Modern History 8(1): 27–39.CrossRefGoogle Scholar
Stern, Fritz (1977) Gold and Iron: Bismarck, Bleichroder, and the Building of the German Empire. New York: Alfred A. Knopf.Google Scholar
Sweet, Paul R. (1941) Friedrich Von Gentz: Defender of the Old Order. Madison: University of Wisconsin Press.Google Scholar
Taylor, Alan John P. (2001) The Course of German History: A Survey of the Development of German History since 1815. New York: Routledge.CrossRefGoogle Scholar
Tomz, Michael (2007) Reputation and International Cooperation: Sovereign Debt across Three Centuries. Princeton, NJ: Princeton University Press.Google Scholar
Tomz, Michael, and Wright, Mark L. (2013) “Empirical research on sovereign debt and default.” Annual Review of Economics 5(1): 247–272.CrossRefGoogle Scholar
Yoon, Frances (2010) “South Korean bonds rise as risk of conflict with north eases.” Bloomberg, December 22.Google Scholar
Zielinski, Rosella C. (2016) How States Pay for Wars. Ithaca, NY: Cornell University Press.CrossRefGoogle Scholar