#23

Notes on Polanyi, The Great Transformation (1944)

"...even the fiercest of nineteenth century conflagrations, the Franco-Prussian War of 1870-71, ended after less than a year's duration with the defeated nation being able to pay over an unprecedented sum as an indemnity without any disturbance of the currencies concerned."

Franco-Prussian war: what's the meaning of defeat, and the function of national defense, when a war can be ended with nothing more than a transfer of funds from one bank account to another?

Interesting to think through Kant's perpetual peace argument -- also needs to be routed back through Hobbesian state theory etc:

"Haute finance, an institution sui generis, peculiar to the last third of the nineteenth and the first third of the twentieth century, functioned as the main link between the political and the economic organization of the world in this period. It supplied the instruments for an international peace system, which was worked with the help of the Powers, but which the Powers themselves could neither have established nor maintained. While the Concert of Europe acted only at intervals, haute finance functioned as a permanent agency of the most elastic kind. Independent of single governments, even of the most powerful, it was in touch with all; independent of the central banks, even of the Bank of England, it was closely connected with them. There was intimate contact between finance and diplomacy; neither would consider any long-range plan, whether peaceful or warlike, without making sure of the other's good will. Yet the secret of the successful maintenance of general peace lay undoubtedly in the position, organization, and techniques of international finance."

"Trade had become linked with peace. In the past the organization of trade had been military and warlike; it was an adjunct of the pirate, the rover, the armed caravan, the hunter and trapper, the sword-bearing merchant, the armed burgesses of the towns, the adventurers and explorers, the planters and conquistadores, the manhunters and slave traders, the colonial armies of the chartered companies. Now all this was forgotten. Trade was now dependent upon an international monetary system which could not function in a general war. It demanded peace, and the Great Powers were striving to maintain it. But the balance-of-power system, as we have seen, could not by itself ensure peace. This was done by international finance, the very existence of which embodied the principle of the new dependence of trade upon peace"

"It must be clear by this time that the peace organization rested upon economic organization. Yet the two were of very different consistency. Only in the widest sense of the term was it possible to speak of a political peace organization of the world, for the Concert of Europe was essentially not a system of peace but merely of independent sovereignties protected by the mechanism of war. The contrary is true of the economic organization of the world. Unless we defer to the uncritical practice of restricting the term "organization" to centrally directed bodies acting through functionaries of their own, we must concede that nothing could be more definite than the universally accepted principles upon which this organization rested and nothing more concrete than its factual elements. Budgets and armaments, foreign trade and raw material supplies, national independence and sovereignty were now the functions of currency and credit. By the fourth quarter of the nineteenth century, world commodity prices were the central reality in the lives of millions of Continental peasants; the repercussions of the London money market were daily noted by businessmen all over the world; and governments discussed plans for the future in light of the situation on the world capital markets. Only a madman would have doubted that the international economic system was the axis of the material existence of the race. Because this system needed peace in order to function, the balance of power was made to serve it. Take this economic system away and the peace interest would disappear from politics. Apart from it, there was neither sufficient cause for such an interest, nor a possibility of safeguarding it, in so far as it existed. The success of the Concert of Europe sprang from the needs of the new international organization of economy, and would inevitably end with its dissolution."

"First among the statesmen of the time, Woodrow Wilson appears to have realized the interdependence of peace and trade, not only as a guarantee of trade, but also of peace. No wonder that the League persistently strove to reconstruct the international currency and credit organization as the only possible safeguard of peace among sovereign states, and that the world relied as never before on haute finance. J. P. Morgan had replaced N. M. Rothschild as the demiurge of a rejuvenated nineteenth century."