2 - Phoenix from the Ashes

Summary

Adam Smith died in 1790, just before the French Revolutionary and Napoleonic wars. The long peace of the nineteenth century that followed rested on an implicit geopolitical deal. For decades after the Congress of Vienna of 1815 had established a framework for peace, no one wanted to challenge Britain, in part because they were exhausted from war but also because doing so might upset the balance of power in Europe and strengthen one’s rivals. Furthermore, the world’s leading economies subscribed to the gold standard – fixing their currencies to the price of gold – thereby ensuring a stable international payments system that steadied capitalism. The hope was that trade would now replace military conquest, and that peace and prosperity would be assured. The first half of the twentieth century crushed that hope. It was a time of war and economic catastrophe.