Medium Cool

At about eight p.m. on Sunday, June 18th, 1815 — still sunlit on that long midsummer evening— the Duke of Wellington stood in his stirrups over his famously cantankerous chestnut, Copenhagen.  He waved his hat above his head.  His army, men he had once called, with respect, “the scum of the earth,” poured over the ridge, chasing the remnants of Napoleon’s Imperial Guard back down the slope.  At the battle-ruined farmhouse called Le Haye Sainte, three battalions of France’s elite soldiery stiffened to a last stand.  Facing a combined charge of infantry and cavalry, they broke, and the rout was on, fleeing French soldiers shouting (in legend) “The Guard retreats! Save yourselves if you can.”

About an hour later, Wellington crossed the battleground to greet Field Marshal Gebhard Leberecht von Blücher, the commander of the Prussian army that had crushed Napoleon’s reserve at a decisive turn in the fight.  There would be a few more skirmishes in the coming days, but this was the end: the long century of conflict between Britain and France was done at the moment those two commanders met, victorious, on the field of Waterloo.

To the last hours of that seemingly endless war, nothing about the British triumph was inevitable.  Battles are decided by those who do the actual fighting, of course.  But it took more than simple courage, or even the mastery of a Wellington, to lift Great Britain past its larger rival.  The Napoleonic wars were national conflicts.  The forces the two sides deployed were vastly larger than any either had previously deployed.  The fleets that met at Trafalgar represented huge capital investments in the most advanced machines of their day.  Ships of the line, red coats, muskets, beer and beef, gunpowder, shot and everything else had its price.  Somehow King George’s government managed to keep on paying for a war that, at times, pitted Britain alone against the wealth of Napoleon’s conquered Europe.

It’s too simple to say that what happened in the banks and markets of Paris and London after 1720 determined the outcome at Waterloo. But it remains true that Britain and France had pursued two very different responses to very similar financial disasters — and that over the long haul, those choices made material differences to Britain’s ability to punch above its weight class.

So, Waterloo might very well had been lost had Wellington been absent.  But it was highly improbable that Britain could have maintained the fight long enough for the Iron Duke’s army to reach that ridge if Britain, like France, had reverted to old habits of public finance after the South Sea crisis.  Over the course of the  eighteenth century, the raw size of the nations at war came to matter less than the ability to mobilize the resources that each state’s economy could produce….

Put another way: The secret weapon that Napoleon could not counter was the successful implementation of a new financial technology.The institutions and techniques that emerged in the three decades after the Bubble made it possible and then desirable for private actors to put their cash at the state’s disposal, in exchange for a share of taxes yet to be collected from the economic activity of generations yet unborn.There was the market in which such bonds were easy to trade, supported by the Treasury’s demonstration over the years government-issued credit was a safe investment. (This, in contrast to the French experience of defaults at intervals throughout the eighteenth century.)That combination of an exchange and an increasingly plausible official guarantee meant that the ultimate legacy of the Bubble for Britain was the emergence of an elastic, expandable pool of credit available for any national purpose.

This was what Defoe had glimpsed long before. Ready access to debt, Defoe noted, was his country’s decisive advantage in the never-ending struggle for power: “Foreigners had been heard to say,” he wrote, “That there was no getting the better of Englandby Battle.”It was not that the inhabitants of that green and sceptered isle possessed greater bravery or martial skill.Rather, Defoe wrote, potential enemies understood “That while we had thus an inexhaustible Storehouse of Money, no superiority in the Field could be a match for this superiority of Treasure.” 

Defoe wrote that at the height of the South Sea spring. This doesn’t mean Defoe understood and anticipated the evolution of Britain’s financial system in the decades to come – he clearly did not.But still, he was an acute enough observer to recognize great change as it unfolded, and what he saw was that Britain’s financial system had experienced a revolution.We can see what Defoe didn’t:that the financial revolution was as transformative as the other upheavals in ideas that convulsed Europe from the late seventeenth century forward. The seventeenth century scientific revolution had not been solely or even mostly a British invention, for all that Isaac Newton has come to symbolize its triumph. The various breakthroughs behind the new forms of money and credit that Britain exploited for its ends weren’t either. But the extent of the cultural changes that flowed from the eruption of natural philosophers’ habits of mind– the way many people came to incorporate the values of empiricism, of experiment and the importance of measurement and calculation – had a profound effect on British civic life. What animated men and events in London more deeply than anywhere else in Europe, that is, was the eagerness, almost the urgency to apply emerging ways of thinking to everyday, human experience.

Specifically, the South Sea scheme itself was no deeply reasoned application of mathematical insight.It was, rather, born of specific historical circumstances, the immediate pressures of governance and the urgency of war, power and strife.But it emerged within an intellectual and political world in which the apparatus of calculation and the willingness to accept abstractions from material reality — replacing jangling coins with the elusive and elastic notion of “credit,” for example — fed a public culture in which a vast experiment in the manipulation of money could seem plausible, even the obvious thing to try.

Yes, that experiment failed. But the longer view captures companion truths:the nation’s debt was indeed transformed, and in place of its prior tangle of unmanageable obligations, Britain gained the ability to conjure up money more or less at will out of nothing more than trust in the future.Though it would be foolish to say that London’s bankers and exchange secured the final victory in the wars of the long eighteenth century, the fact remains: a war against a French Empire that could, at times, command the resources of most of Europe, could not have been fought without them.

So there’s a taste of the book. There’s lots and lots more between the covers, including plenty of exemplary madness of the sort Hogarth’s cartoon above depicts. It’s easy to enjoy disasters that have the kindness to remain at sufficient historical distance, isn’t it?

I’ll be hanging out in the comments.  Ask me about the book, the process of bringing it forth, my experience of the publishing carousel, my preferred gin:vermouth ratio…which is to say, anything.

*****

“Does a stock market crash and a plague sound somehow familiar? Thomas Levenson’s new book is proof—very cleverly told—of how enlightening history can be. There is no excuse not to learn from the past.”—Andrea Wulf, author of The Invention of Nature

“Superb, fascinating, and totally timely, Money for Nothing is a gripping history of the South Sea Bubble by a scholar who makes complicated and subtle matters not just accessible but fun—the story of a world crisis with a flashy cast of grifters, scientists, politicians, and charlatans that Levenson makes utterly relevant to the 2008 financial crisis and 2020 pandemic. . . . Essential reading.”—Simon Sebag Montefiore, author of Jerusalem and The Romanovs

“A brilliant history of the South Sea Bubble, an astounding episode from the early days of financial markets that to this day continues to intrigue and perplex historians. Deeply researched and featuring a colorful cast of characters out of 18^th century England—mathematical geniuses, unscrupulous financiers, greedy aristocrats, venal politicians—Money for Nothing is narrative history at its best, lively and fresh with new insights.”—Liaquat Ahamed, Pulitzer Prize-winning author of Lords of Finance

“Levenson is a brilliant synthesizer with a grand view of history. Here is the birth of modern finance amid catastrophe and fraud—a gripping story of scientists and swindlers, all too pertinent to our modern world.”—James Gleick, author of Time Travel: A History

“Inspired by Isaac Newton’s example, clever schemers sought to conquer the chaos of human affairs by abstracting financial value from tangible goods. Their calculations unleashed the notorious South Sea Bubble, which destroyed fortunes and roiled nations. Thoroughly researched and vibrantly written, Money for Nothing captures those heady, heartbreaking times, which still hold lessons for today.”—David Kaiser, author of Quantum Legacies: Dispatches from an Uncertain World

“Mr. Levenson, a professor of science writing at the Massachusetts Institute of Technology, interweaves the story of the rise of mathematics and astronomy with the rise of bankers and actuaries and stock promoters. He traces the evolution of the idea of money to the habits of mind that brought us calculus and the art of surveying and the theories of gravity and optics. And he frames this vivid narrative around the century-long wars between France and Britain that culminated in the Battle of Waterloo in 1815.”—Wall St. Journal

“The story of government debt finance, which sounds boring but definitely isn’t . . . an enthralling account of an economic revolution that emerged from a scandal.”—Kirkus Reviews (starred review)

Medium Cool will return tomorrow (Wednesday, 8/19) at its regular time.