States and the masters of capital: sovereign lending, old and new

Extract

In States and the masters of capital, Quentin Bruneau provides a lively account of how sovereign lending practices have evolved over the past two centuries. The book's novelty lies in its analysis of a forgotten constituency: the sovereign financiers themselves. Bruneau paints a fascinating portrait of the ‘Old Sovereign Lending’ dominated by status-oriented transnational merchant banking families. Then, the author explains how the ‘New Sovereign Lending’ of statistically-minded joint stock banks superseded the older system in the mid-twentieth century, after a lengthy period of competitive coexistence. In narrating the history of sovereign lending, Bruneau emphasizes the importance of the gradual shift among practitioners, from one ‘form of knowledge’—gentility, as cultivated at public schools and Oxbridge—to another—statistics taught in newly established business schools (p. 23). Thus, sovereign lending transformed from a personalistic enterprise, revolving around politically connected aristocratic families who ‘knew states in person’, while understanding little about their economic performance and repayment capacity (pp. 4 and 6). Instead, it became an impersonal practice involving ‘strictly profit-seeking financial actors continually evaluating’ the creditworthiness of states using detailed statistical indicators (pp. 4 and 6). This dichotomy is perhaps too stark, given that present-day credit rating agencies are political entities shaped by conflicts of interest (see Jess Cornaggia, Kimberly J. Cornaggia and Han Xia's ‘Revolving doors on Wall Street’, Journal of Financial Economics 120: 2, 2016). Nonetheless, Bruneau effectively conveys just how differently the ‘old’ and ‘new’ sovereign financiers understood and performed their vocations.