José Luís Cardoso’s Money, Debt and Politics: The Bank of Lisbon and the Portuguese Liberal Revolution of 1820 is not a mere exposition of the formation and operations of the Bank of Lisbon from 1822 to 1828. This work provides us with a glimpse into the monetary history of Portugal and situates the political events that led to the Porto Liberal Revolution and, subsequently, the establishment of a bank tasked with devising the reorganization of the Portuguese monetary circulation. The reorganization efforts had to consider the state’s commitments to private credit, alongside the troublesome situation of its public finances from the last decade of the eighteenth century. In short, while it primarily concentrates on a specific financial institution, Cardoso’s book paints a comprehensive portrait of a particular period in Portuguese monetary and credit history. It also sheds light on the endeavors of numerous Portuguese economists to import the teachings of the rising science of political economy to their homeland.
This ample framework, encompassing economic and monetary history, as well as the diffusion of economic ideas, is delineated in six chapters. After the Introduction, chapter two offers a concise history of Portuguese banking and lending institutions, while chapter three provides a broad overview of Portugal’s political history. Chapter four synthesizes the debates within Portugal concerning circulation and public debt around the turn of the century, followed— chapter five—by a summary of the primary operations of the Bank of Lisbon from 1822 to 1828, situating its shareholders and agents. Chapter six summarizes the dilemmas faced by a private lending institution intertwined with public debt.
Money, Debt and Politics displays Cardoso’s profound expertise in the history of Portuguese banking, and throughout the volume there are several references to the author’s works in the field. Most notably, and what is especially important to non-Portuguese readers, Cardoso’s book situates the formation and performance of the Bank of Lisbon within the peculiar ambience of Portugal’s political and economic history. In this regard, it is imperative to direct special attention to chapters two and three. The 1820 Liberal Revolution not only led Portugal to a new constitutional order but also marked the conclusion of a unique period during which a metropolitan country had been governed from its major colony. This exceptional situation arose due to the royal court’s flight from Lisbon at the end of 1807, following the French invasion. This period of governance persisted from 1808 until 1821, with the prince regent (subsequently the king from 1816) residing in Rio de Janeiro. The prolonged absence upset the metropolitan Portuguese population and mobilized segments of the country’s mercantile elites. The Liberal Revolution represented an outcry against this absence and a liberal plea that ended up in a substantial reorganization of Portuguese governance. Not coincidentally, in 1822, Brazil declared its independence.
The Brazilian experience as a governmental seat had already given rise to other significant events. As analyzed by Cardoso, in as early as 1808, a special bank (Banco do Brazil) was established in Rio de Janeiro. From 1808 to 1810, a series of legal acts were enacted to open the Brazilian economy to the “friendly” nations. In other words, these acts reinforced the connections between Portugal and Brazil with the British economy, effectively dismantling the remains of the exclusive trade. The Brazilian “liberal” experiment was articulated by some leading native economists and ideologues, such as José da Silva Lisboa, as being coherent with Adam Smith’s emphasis on the advantages of free trade and of the priority given to agriculture in a situation of scarcity of capital and of free labor.
Above all, the Portuguese-Brazilian “liberal” experience was in its beginnings conducted by Rodrigo de Souza Coutinho, a prominent Portuguese statesman well versed in political economy. He had played a leading role in previous efforts to stabilize Portugal’s finances. As Cardoso shows, Souza Coutinho had already, in 1797, presented projects envisioning the building of a Portuguese national bank. Despite Portugal’s long experience in international mercantile undertakings, the country had predominantly relied on small-scale financial instruments. Towards the end of the eighteenth century, several proposals aiming to expand credit institutions emerged. These proposals included not only deposit and mortgage banks but also instruments devised to solve the crucial problem of the amortization of internal public debt.
Not surprisingly, the Constitutional Assembly that followed the Liberal Revolution debated public debt and the development of an amortization fund to address the previously unresolved Portuguese public debt. Once again, and as expected, the constitutionalists resorted to the names of renowned economists—Jean-Baptiste Say, for instance—to support their proposals related to controlling public expenditures. Public credit emerged as an indispensable solution for stabilizing the chronic public debt, and the building of an adequate system of paper money was also at stake. The Bank of Lisbon was finally founded as a loan, deposit, and discount bank, which should also lend to the state, enabling the replacement of the old securities that were in circulation as currency.
The Bank of Lisbon was established as a private capital bank devoted to the mission of redeeming the state of the emission of securities that very defectively circulated as paper money. As a side compensation for its public tasks, the bank was granted exemptions from certain taxes. Conversely, the state would accept its banknotes in the payment of obligations. It is no coincidence that during the debates that led to the foundation of the Bank of Lisbon, Portuguese economists mobilized a substantial set of well-known European economists to support their proposals or analyses of the national monetary problems. Cardoso refers to many debaters, with one of them, Ferreira Borges, invoking the names of Heinrich von Storch, Thomas Joplin, David Buchanan, John McCulloch, and David Ricardo, among others, in his arguments. The contrasts with the Bank of England were also at hand, showing that the successful trajectory of the Bank of England in stabilizing the British financial system and the British public debt was a vivid example. Furthermore, one may say that the more than one-century-old debates concerning the adequate quantity of money in circulation were reignited along the banks of the Tagus River, albeit within new settings and constraints.
In the concluding remarks, Cardoso insists on the specificity of the Portuguese case, drawing attention to “the relationship between the banking organisation, the political process and the formation of the public sphere” (p. 99). Beyond merely chronicling the particular financial episode of erecting a bank with a public mission under the impulse of a Constitutional Assembly, Cardoso’s book underscores the importance of contextualizing localized episodes or histories of monetary institutions within their historical and political ambiences. The book also illustrates how the arguments put forth by the fathers of political economy became widely influential, transcending various settings, including a smaller European state like Portugal and its major colony, Brazil. For all these reasons, Money, Debt and Politics can be seen as a valuable exemplar of the possibilities opened by the combination of monetary and political history, coupled with a focus on the dissemination of economic ideas in different national contexts.
