Domestic Responses to Capital Market Internationalization Under the Gold Standard,1870-1914 Daniel Verdier The internationalization of finance in recent years has brought the world economy to the level it had reached in 1913.With this has come a political debate about the vices and virtues of globalization and an analytic debate about its causes.This article presents an analysis of the earlier period that highlights the importance of political choices in bringing about the internationalization of finance and stresses the variabil- ity of choice among countries experiencing the same global phenomenon. One can hardly open a news magazine nowadays that does not feature an editorial warning against,or urging some kind of adjustment to,capital market globalization. Underlying this"global talk"are the beliefs that capital market internationalization is inevitable,uniform,and irreversible.The scientific debate shows more nuances, focusing mainly on the respective roles played by political and nonpolitical factors. One group of scholars see capital internationalization originating in changes in tech- nology or the international power system or both.They trace its distortionary impact on existing wealth distribution,with the relative immiseration of unskilled labor in the West and,more generally,of holders of immobile factors of production or sectors using these factors intensively.2 Some of them see internationalization as resulting in a weakening of state bureaucracies.3 Another group of scholars place the emphasis instead on state-borrowing preferences as the primary vehicle for global finance,4 on coordination among states as a facilitating mechanism,5 and on the mediating role of state institutions and resulting divergent policy responses. I am pleased to acknowledge the invaluable research assistance of Elizabeth Paulet.I thank John Odell, Louis Pauly,Jonathan Zeitlin,Peter Gourevitch,David Lake,and two anonymous reviewers for valuable suggestions.The research on which this article is based was financed by a grant from the Research Council of the European University Institute.An earlier draft was presented at the annual meeting of the Interna- tional Studies Association,Toronto,in March 1997,and published as an EUI Working Paper,RSC No.97. 1.See Loriaux 1991;Goodman and Pauly 1993:Andrews 1994;and Frieden and Rogowski 1996. 2.See Bates and Lien 1985;and Frieden and Rogowski 1996. 3. See Strange 1986:Webb 1991:Andrews 1994;and Cerny 1995. 4.Haggard and Maxfield 1996. 5.Helleiner 1994.16. 6.See Garrett and Lange 1995;and Garrett 1995. International Organization 52,1.Winter 1998.pp.1-34 1998 by The IO Foundation and the Massachusetts Institute of TechnologyDomestic Responses to Capital Market Internationalization Under the Gold Standard, 1870–1914 Daniel Verdier The internationalization of Ž nance in recent years has brought the world economy to the level it had reached in 1913. With this has come a political debate about the vices and virtues of globalization and an analytic debate about its causes. This article presents an analysis of the earlier period that highlights the importance of political choices in bringing about the internationalization of Ž nance and stresses the variabil￾ity of choice among countries experiencing the same global phenomenon. One can hardly open a news magazine nowadays that does not feature an editorial warning against, or urging some kind of adjustment to, capital market globalization. Underlying this ‘‘global talk’’ are the beliefs that capital market internationalization is inevitable, uniform, and irreversible. The scientiŽ c debate shows more nuances, focusing mainly on the respective roles played by political and nonpolitical factors. One group of scholars see capital internationalization originating in changes in tech- nology or the international power system or both.1 They trace its distortionary impact on existing wealth distribution, with the relative immiseration of unskilled labor in the West and, more generally, of holders of immobile factors of production or sectors using these factors intensively.2 Some of them see internationalization as resulting in a weakening of state bureaucracies.3 Another group of scholars place the emphasis instead on state-borrowing preferences as the primary vehicle for global Ž nance,4 on coordination among states as a facilitating mechanism,5 and on the mediating role of state institutions and resulting divergent policy responses.6 I am pleased to acknowledge the invaluable research assistance of Elizabeth Paulet. I thank John Odell, Louis Pauly, Jonathan Zeitlin, Peter Gourevitch, David Lake, and two anonymous reviewers for valuable suggestions. The research on which this article is based wasŽ nanced by a grant from the Research Council of the European University Institute. An earlier draft was presented at the annual meeting of the Interna￾tional Studies Association, Toronto, in March 1997, and published as an EUI Working Paper, RSC No. 97. 1. See Loriaux 1991; Goodman and Pauly 1993; Andrews 1994; and Frieden and Rogowski 1996. 2. See Bates and Lien 1985; and Frieden and Rogowski 1996. 3. See Strange 1986; Webb 1991; Andrews 1994; and Cerny 1995. 4. Haggard and MaxŽ eld 1996. 5. Helleiner 1994, 16. 6. See Garrett and Lange 1995; and Garrett 1995. International Organization 52, 1, Winter 1998, pp. 1–34 r 1998 by The IO Foundation and the Massachusetts Institute of Technology