Doctoral Dissertation Research: The Formation of Money and the Banking System in Italy and the United States, 1860-1920

University Of Pennsylvania, Philadelphia PA

Investigators

Abstract

Randall Collins Simone Polillo University of Pennsylvania Historically, modern states have tried to monopolize the issue and control of money: under what conditions and to what extent did they succeed? To what extent has increasing intervention of the state in the market and the economy translated into more stability, or is the presence of the state, on the contrary, a pre-condition for speculative uses of finance? From a sociology-of-money perspective, this project examines the formation of a banking and financial system in Italy and the United States between the 1860s and the post-First-World-War period. These two cases are different on many accounts (such as size, natural resource endowment, level of industrialization). Unexpectedly, however, they share striking similarities in terms of banking and financial development, and political decentralization. They were both late political developers, facing enormous difficulties in centralizing political power against the pull of peripheral forces; they both created a central bank late, and brought the currency under the monopoly of the state in the face of great political opposition. Moreover, both countries experienced drawn-out political debates on how money and the economy in general should be organized, the United States tending towards populism, Italy embracing instead a nationalist frame. By using this comparison strategically, this project uses mixed methods: first, it analyzes quantitatively the balance-sheet activities of the various banking actors involved in the construction of a national economy in both cases. By investigating how different kinds of monies and financial relationships were formed and put to use, the project strives to show whether the proliferation of state-originating monies (such as government stock and Treasury bills) "crowded out" private investment, as in the neo-classical economy story, or in fact allowed for the constitution of destabilizing and speculative financial interests. If that is the case, how did such interests come to benefit materially and symbolically by the guarantee offered by a collaboration with the state? Second, by examining qualitatively the negotiations between private bankers, public bankers and state officials through their private correspondence, public pronouncements and legal investigations over the 1860-1920 period, this project examines whether, and how money and the economy were culturally constructed in different ways in Italy and the United States, and whether that such constructions affected the ways in which money was institutionalized. Broader Impact. This project focuses on the existence and effects of "national culture" on financial policy, thus entering an important debate in social science. By showing in what ways money contributes to the institutionalization of particular ways of thinking and acting in the economy, this research will critically engage the idea that national "traditions" matter by showing how in fact they are created. This is especially important in the face of globalization pressures on the state to conform to world-cultural models, irrespective of society-specific assets and advantages. Second, as states are attempting to devise new ways of organizing their economies, and as these are increasingly being managed by technocrats, attention to the sociological underpinnings of institutions seems to be more crucial than ever. Changing monetary instruments (such as the substitution of the Euro for European currencies) might not be an effective policy s without a political reconfiguration of power, and the creation of political institutions which can "domesticate" emerging financial elites, that is, bind new financial actors to "appropriate" uses of money. By focusing on a historical period which is analytically similar to the current international situation of free trade and mobile international capital, this project recasts the debate on markets and states as one of stability and speculation, and can thus contribute to the discovery of institutional settings that promote the former and minimize the latter.