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A Concise History of International Finance: From Babylon to Bernanke . By Larry Neal . Cambridge, U.K. : Cambridge University Press , 2015. xiv + 361 pp. Tables, figures, references, index. Paper, $29.99. ISBN: 978-1-107-62121-3 .
Book Reviews
Larry Neal's book delivers both more and less than the promise of its title. Why less? Chapter 2, "Distant Beginnings: The First 3,000 Years"--which might be called "From Babylon to Frederick Barbarossa"--is a mere (and sketchy) thirteen pages. I would direct anyone wanting a fuller treatment of those three millennia to William Goetzmann's equally excellent new book, Money Changes Everything: How Finance Made Civilization Possible (2016).
Why more? Once Neal gets to chapter 3, "The Italians Invent Modern Finance," he hits his stride by delivering not only a detailed history of international finance from the Crusades to our most recent crises, but also an original and subtle analysis of why innovative finance usually succeeds but now and then fails to deliver beneficial economic outcomes. Neal thinks most folks, even economists and historians, underappreciate how financial innovations have "increased trade, enabled technical progress, and improved standards of living in general" (p. 2). Amen, says this reviewer--as, most likely, would Goetzmann and other financial historians.
The medieval Italian city-states, little republics in a world of emperors and monarchies, invented modern finance in part by inventing the first modern banks ("bank" derives from the Italian banco). Popes encouraged some banks to become international by using them to collect Church revenues in distant places, transmit them to Rome, and...