Sunday, April 17, 2016

The Second Hundred Years War and the Power of the Bond Market

In a few recent blog posts, I put forward my ideas as to which battles deserve a place on a list of the fifteen most decisive battles in world history. If any one of these battles had gone differently, the entire course of history would have been changed. However, it's important to remember that while history can sometimes be changed in a day, or even an hour, by the seemingly insignificant actions of a single individual, there are also very long arcs in history that have even more power. This is especially true when we try to comprehend the historically misunderstood subject of money. To illustrate this, consider the following story.

Between the ascension of King William III in 1688 until the final defeat of Napoleon at the Battle of Waterloo in 1815, Britain and France went to war with one another with grim regularity. They fought against one another in the War of the Grand Alliance from 1689 until 1697, in the War of the Spanish Succession from 1701 until 1714, the War of Austrian Succession from 1742 until 1748, the Seven Years War from 1756 until 1763, the American Revolutionary War from 1778 until 1783, the French Revolutionary Wars from 1792 until 1802, and the Napoleonic Wars from 1803 until 1815. The wars were waged not only in Europe, but on the high seas, in the Americas, in India, and among assorted islands and colonies across the globe. War between Britain and France during this time period was so common that some historians have taken to calling it the "Second Hundred Years War" and have compared the Franco-British rivalry to that of Rome and Carthage in ancient times.

The Second Hundred Years War began as a conflict over religion, with Catholic France pitted against Protestant Britain, and a struggle to contain the personal ambitions of King Louis XIV, the Sun King. Before too long, however, the struggle had morphed into a larger conflict over trade, empire, and which nation was to emerge as the global superpower. Britain and France fought each other during this time period basically because they were the two toughest kids on the block. Only one could be left standing in the end.

At the beginning of the struggle, intelligent observers probably would have given the more favorable odds to France. It had a larger population, superior resources, and a much more stable government. The mighty French army had been feared across Europe for centuries and it seemed posed to ensure French hegemony over the whole continent. The power of the French king was unchallenged when the Second Hundred Years War began. In the conflict's latter stages, in the person of Napoleon Bonaparte, the French army and state would be led by one of history's most brilliant generals and most effective rulers. Britain, by contrast, was emerging in 1688 from a period of social, religious, and political chaos and a bitter civil war between King and Parliament. It was only in 1707 that England and Scotland united, under dubious circumstances, into the United Kingdom of Great Britain. Subversion by Scottish Jacobites opposed to the Union would continue to be a problem for years, until finally crushed at the Battle of Culloden in 1746.

Nevertheless, when the end came in 1815, it was Britain that had emerged victorious from the Second Hundred Years War and France that lay prostrate in defeat. Britain became the undisputed global superpower for the next century, with an empire on which the sun never set. Today, English rather than French is the global language of business and diplomacy, and innumerable countries use political, economic, and legal systems derived from British rather than French models.

How did Britain do it? How did the weak and divided English, Scots, Welsh, and Irish triumph over the united power of France?

The valor of Britain's soldiers and sailors, as demonstrated in battles such as Blenheim, Quebec, Trafalgar, and Waterloo, certainly had something to do with it. So did the brilliance of statesmen like William Pitt and military leaders like the Duke of Marlborough, Lord Nelson, and the Duke of Wellington. But if you really want to know the answer, the place to look is the London establishment known as Jonathan's Coffee House. It had opened in 1680 and, very soon and without any planning, became England's de facto stock market.

When William III became King of England in 1688, he maintained his other position as Stadtholder of the Dutch Republic, simultaneously ruling both nations. The close relationship between Britain and the Netherlands during the early years of the Second Hundred Years War exposed the British to the revolutionary economic concepts and new financial institutions then emerging among the Dutch. In the 17th Century, the Netherlands had become the first nation to establish a central bank, the first nation to establish a stock market, and one of the first nations to establish a national lottery. The money raised, borrowed, and loaned out by these institutions helped propel tiny little Holland into the ranks of the great powers of Europe.

Britain followed the Dutch example. The Bank of England was established in 1694. By then, scores of companies were trading stock issues at Jonathan's Coffee House and, soon enough, other establishments. Chartered companies enabled an enormous boom in trade with the colonies in North America and the Caribbean, as well as with India and the Far East. Economic development throughout Britain and Ireland became possible on a scale never before imagined and such inventions as James Watt's steam engine and James Hargreaves's spinning wheel came into being due to an extensive system of financing.

This unprecedented economic boom, made possible by the financial institutions the British adapted from the Dutch model, allowed the British government to raise enormous amounts of money through the issuance of government bonds. The Royal Navy grew from a pathetically small force in the late 17th Century into a vast fleet of warships that dominated the globe by the early 19th Century, shattering French naval power at the Battle of Trafalgar in 1805. The British were not only able to field armies on the plains of Germany, in the mountains of Spain, and throughout the overseas colonies, but to subsidize continental allies like Prussia, Austria, and Russia to do their fighting for them. Without the revolutionary financial system that took hold during the 18th Century, none of this would have been possible.

The British did not so much outfight the French as out-finance them.

The French might have matched their British adversaries in financial innovation. The brilliant if roughish Scottish economic John Law immigrated to Paris in the early 18th Century and found himself appointed Controller General of Finances by the French government. He began to implement many of the financial practices which had been developed by the Dutch and were even then being put into practice by the British. But like a figure in a Greek tragedy, Law became arrogant and eventually went too far. In 1720, a Ponzi scheme he had set up surrounding the largely fictitious Mississippi Company came crashing down, instantly ruining the lives of thousands of Frenchmen. Law fled France and died in exile, while the French turned their backs on newfangled financial schemes for nearly a century. One wonders how different history might have been had Law been able to keep his head and bring about the creation of a sound financial infrastructure in France to match that of Britain.

The lesson of the British victory over the French in the Second Hundred Years War is that wars are won on the floors of the bond market no less than they are won on the battlefield. The power of a nation is to be measured not merely by the number of aircraft carriers or nuclear weapons they possess, but by the flexibility and reliability of their financial institutions. In an increasingly globalized and interdependent world, this lesson is one we forget at our peril.

Sunday, April 10, 2016

What If Julius Caesar Had Not Been Assassinated?

The most famous assassination in world history took place on March 15, 44 BC, when a group of senators fatally stabbed Julius Caesar to death. It was an event of world-shaking importance, so fixed in the Western consciousness that it has been the subject of countless plays (including one of Shakespeare's finest productions), operas, paintings, movies, and, for good measure, a highly entertaining HBO mini-series. All educated people know the sinister implications behind the words, "Beware the Ides of March."

Caesar was one of the most fascinating and dramatic personalities in all of history. At the time of his death, he was the most powerful man in the known world. In earlier years, he had steadily worked his way up the cursus honorum, the ladder of public offices of the Roman Republic that all ambitious Romans sought to climb. He had successively been a military tribune, quaestor, praetor, propraetor, and finally, in 59 BC, was elected consul, the highest office in the Republic. Through all of this, Caesar had spent lavishly on bribes and pushed populist policies to win support among the plebian class, despite the fact that he himself came from a patrician (though not especially distinguished) family.

As he had worked his way up the cursus honorum, Caesar had made many enemies among the old aristocracy, largely because he proposed land reform legislation that would have confiscated land from the wealth and distributed it to the poor. To protect himself from them, he formed an unlikely alliance with Marcus Licinius Crassus, the wealthiest and perhaps most unscrupulous man in Rome, and Pompey Magnus, Rome's outstanding military hero and as politically ambitious as Caesar himself. These three men became known as the First Triumvirate, linked together out of pure self-interest rather than any mutually held political ideals. Among the three, Caesar was decidedly the most junior member.

It was customary to grant a consul a "proconsulship" after their single year as a consul was over. Despite the efforts of his enemies to grant him an inconsequential proconsul office, Caesar was made the governor of Cisalpine Gaul (northern Italy). Using this territory as a staging point, he embarked upon an unauthorized campaign conquest of Gaul, which is today roughly the territory covered by France. Though he had not previously had much military experience, he very quickly demonstrated extraordinary skills as a military commander, which he would continue to exhibit for the remainder of his life. Indeed, whenever I am asked the name the man I consider the greatest military genius of all time, I unhesitatingly name Julius Caesar.

In ten years of tough, ruthless and brilliant campaigning, Caesar completely subjugated the tribes of Gaul, winning battle after battle. He launched expeditions into Britain and across the Rhine into Germany as well, sternly warning those tribes that they would face the full brunt of Roman power if they dared to interfere with the Republic. A final uprising of the Gauls in 52 BC, led by the gallant Vercingetorix, was crushed by Caesar at the Battle of Alesia, after which Gaul was incorporated into the Roman Republic as a conquered province. Through it all, Caesar kept the people of Rome informed of his achievements through writing what amounted to long and lucid press releases, compiled together into Commentarii de Bello Gallico (Commentaries on the Gallic Wars), which make for fantastic reading even today.

Caesar's conquest of Gaul unsettled many of the prominent leaders of the Roman Senate. He had become enormously popular with the people and so rich that he could bribe enough voters to be elected to whatever office he wanted. In the meantime, though, the First Triumvirate had collapsed, with Crassus dying in a misguided campaign against the Parthians in the distant east and Pompey now aligning himself with Caesar's enemies. The moment that Caesar's term as proconsul ended, his legal immunity would be stripped and his enemies would be able to haul him before the courts for crimes going back to the days of his consulship. Caesar was determined not to let that happen.

In 49 BC, in the face of demands from Rome that he lay down his consulship and disband his legions, Caesar crossed the Rubicon River, the boundary between Cisalpine Gaul and Italy, thus launching a civil war. For the next four years, war would rage throughout the Mediterranean world, as Roman fought against Roman in Italy, Spain, Greece, Egypt, North Africa, and elsewhere. When the fighting ended, Caesar had crushed Pompey at the decisive Battle of Pharsalus and destroyed remaining opposition at the Battle of Thapsus in North Africa and the Battle of Munda in Spain, As an added bonus, Caesar had conquered Egypt for the Roman Republic, though by this point it could be fairly asked how much of a "republic" Rome still was.

Caesar returned to Rome in triumph. Now declared dictator for life, he immediately embarked upon a massive system of reform. He conducted a famous reform of the calendar, turning it essentially into the calendar we use today (where do you think "July" comes from?). He reformed the system of grain distribution, while expanding Roman citizenship to new groups of people. He brought in many of his own supporters to replenish the depleted ranks of the Senate, many of whose members had died in the civil war. He laid plans for a fabulous new center of learning in Rome, perhaps in emulation of the Library of Alexandria. He also passed laws restricting excessive luxury in clothing and foodm though he had no intention of obeying these rules himself. He also initiated a colonization program for his veterans, which included the resettlement of Carthage in North Africa.

These reforms were clearly intended to reshape Roman society and government from bottom to top. Fears increased among Caesar's enemies, whom he had pardoned rather than punished, that Caesar intended to declare himself King of Rome. The last king had been expelled from Rome in 509 BC, nearly five centuries before. In the eyes of Caesar's enemies, the survival of the Republic was at stake.

And so it came to pass that dozens of senators conspired to murder Caesar, finally doing him in on March 15, 44 BC, in the chamber of the Senate. Caesar had arrogantly dispensed with any guards, apparently feeling invincible and perhaps believing that his gracious pardons had eliminated any resentment towards his increasingly authoritarian rule. His killers, most famously Brutus and Cassius, left him writhing on the floor with twenty-three stab wounds. The aftermath of the story, told and retold by Shakespeare and others, is well-known. More disorder and civil war followed, until Caesar's grand-nephew and heir Octovian defeated all his rivals and became the first Emperor of Rome under the name Augustus.

But what if Caesar had not been assassinated?

As with the question of what would have happened had Alexander the Great lived to old age, this is one of the most fascinating alternate history scenarios that comes to us from ancient history. There are any number of ways that Caesar could have escaped his fate. He was apparently warned of the conspiracy several times, but foolishly discounted these reports. According to the accounts of Plutarch and Suetonius, some of his murderers seemed fearful in the moments before the assassination; perhaps if Caesar had had armed guards with him, the attempt would not have been made. More importantly, Caesar was due to depart from Rome a few days after March 15, to begin a military campaign to the east. Had the conspirators failed to kill him on the day that they did, their chance would have been gone.

If Caesar had escaped death, then his dream of a great campaign to the east would have come to pass. According to the ancient historians, Caesar wished first to conquer the kingdom of Dacia (modern day Romania), then attack the mighty Parthian Empire to avenge the defeat the Parthians had inflicted on the Romans a few years earlier. It was to be an enormous undertaking, the likes of which had never been seen before in Roman history. No less than sixteen legions, a much larger force than Caesar had used to conquer Gaul, were being mobilized in the eastern provinces. For the first time, Caesar would have the resources of the entire Roman world at his disposal.

Dacia would probably have been no pushover. Its ruler, King Burebista, was said to be a talented military leader who had already led several successful campaigns. Unlike Gaul, Dacia was not a divided land but was united and well-organized, When the Emperor Trajan launched his campaign against Dacia a hundred-and-fifty years after Caesar, the Dacians proved to be excellent fighters. Still, this is Caesar we're talking about. With so much military might in the hands of such a brilliant strategic mind, it is hard to see the campaign of Dacia turning out as anything other than a victory for Caesar and the incorporation of Dacia into the Roman world a century-and-a-half before this actually happened.

Parthia would be a different matter, though. Excepting only the Carthaginians, the Parthians were the most formidable enemies the Romans ever encountered. Their strength lay in their unconventional maneuver tactics and their use of armored heavy cavalry troops called cataphracts, which were far superior to Roman horsemen. In 53 BC, they had utterly destroyed a Roman army at the Battle of Carrhae, in which Marcus Licinius Crassus had been killed and several legionary standards been carried away as trophies.  After Caesar's assassination, Mark Antony led a war against the Parthians and suffered a humiliating defeat for his pains. Yet the Parthians were far from invincible, as proved by Trajan a century-and-a-half later.

Caesar would have carefully studied the failed campaign of Crassus before embarking on his own invasion of Parthia. Crassus had been overconfident and had not bothered to do much in the way of intelligence gathering. Caesar, by contrast, was a master of military intelligence who also strove to learn everything he could about the enemies he was to fight. Long before the invasion, his mind would have swirled with ideas for how to counter the Parthian cataphracts and maneuver tactics. While nothing in history is inevitable, if I had had to place a bet on such a conflict, I would have put my money on Caesar.

Yet assuming that Caesar defeated the Parthians, what then? Trajan successfully defeated them in the early 2nd Century and so did Septimius Severus almost a hundred years later, but in neither case was Rome able to fully incorporate the conquered territories into its empire. The distances were so great and the desert so unforgiving that creating any kind of provincial administration was basically a logistical impossibility. The most that Caesar could have hoped for was to reduce the Parthian Empire to the level of a client state of Rome, perhaps taking Mesopotamia from it and reducing that portion of Parthia to a Roman province. But a complete conquest of the Iranian plateau is probably beyond Caesar's power.

Fantastic stories are told that Caesar intended to follow up a conquest of Parthia by marching his armies around the Caspian Sea and conquer what is today southern Russia and Germany before returning to Rome. This seems highly unlikely. Caesar always balanced his twin ambitions of wishing to win military glory and to hold supreme power in Rome. Taking himself and his army so far away from Rome, in which any meaningful communications would take several months at least, would allow political foes in the capital to regain control of the city long before he could do anything about it. Besides which, the whole idea of such a campaign is outlandish. No general could have succeeded in such an effort, not even Caesar himself. Caesar certainly had hubris, but he never was a megalomaniac like Alexander the Great.

In 44 BC, Caesar was 55-years-old and in reasonable health. The ancient historians indicated that he planned on being away from Rome for the campaigns against Dacia and Parthia for three years. Perhaps it would have taken a few years more, but most likely Caesar would have been successful and returned to Rome with Dacia conquered and Parthia stripped of its western territories and reduced to the status of a client state. Of course, it's entirely possible that Caesar would have been struck down by an enemy arrow or sword in either campaign, for he was not the kind of general to command from the rear. When one reads the story of Caesar's life, one never gets the feeling that this is a man who is supposed to die peacefully in his bed of old age.

And what of Rome itself? In the aftermath of Caesar's assassination, his adopted son Octavian and his chief lieutenant Mark Antony joined forces to defeat Brutus and Cassius, the chief leaders of the conspirators, and then divided the territory of Rome between themselves. Inevitably, war broke out between the two men and Octavian emerged supreme following the Battle of Actium in 31 BC. With that victory, Octavian brought an end to the long cycle of civil wars and, in doing so, brought an end to the Roman Republic itself. In 27 BC, he was granted the title of Augustus and became the first Emperor of the Roman Empire. The Republic was sadly cast into the ash heap of history.

Had Caesar lived, would the outcome have been any different? Some would say no, thinking that had the assassins not killed Caesar, he would have eventually full and formal power for himself. Perhaps he would even have assumed the hated title of King, which Augustus was wise enough to avoid. In that case, history might not have been all that different, except that we'd refer to Caesar as the first emperor rather than Augustus and Shakespeare would have had to write a somewhat different play (not that Shakespeare would have ever been born thanks to the butterfly effect, but that's another topic).

It is possible that the conspirators were horribly wrong and that Caesar, rather than seize power for himself, intended only to put the Republic in order and then retire, rather like Sulla had tried to do three decades earlier? Caesar was undoubtedly a man of enormous ambition and obsessed with his own dignitas, but was he a seeker of glory alone, or glory and power both? At the distance of more than two thousand years, it's impossible to know. On the one hand, he was constantly striving to increase his own control over Rome. On the other, he was always reaching out towards his enemies in the spirit of conciliation, asking for their help in governing the Republic. We will never know what really went through the man's mind and perhaps he himself did not ever flesh out his full intentions even to himself.

There is another thing to consider. Caesar was a brilliant politician, to be sure. But even his brilliance utterly pales before the sheer political genius of his grand-nephew and adopted son Octavian, who was, simply put, the most successful politician in the history of the human race. Octavian completely outwitted all his enemies, deftly transformed potential enemies into friends and (having learned from his great-uncle's mistakes) ruthlessly slaughtering those who remained obstinately opposed, and took a disorderly Republic that had been torn by a century of civil strife and recreated it as an Empire. He left a unified state that would see general peace for more than two centuries and would last, in some form or other, until 1453. Could Caesar have achieved a similar feat? For all his undoubted gifts, one seriously doubts it. Today, only serious students of history know much about the Gracchi brothers, Marius, Sulla, and other men who momentarily gained power in the Republic. Had Caesar not been assassinated, perhaps his efforts would have faltered anyway and he would be no better known than those men. What would have happened in the aftermath of his death or, more likely, his fall from power, is anyone's guess.

On the other hand, it can't be denied that the manner of Caesar's death set the stage for the rise of his grand-nephew. Had Caesar not been killed in such a public manner, Octavian would never have been able to rally his followers around his banner and adroitly used that support to defeat his rivals. Put simply, had Caesar not been killed, Octavian could never have become Augustus. Ironically, then, Brutus and Cassius might have simply made certain the very thing that they were trying to prevent: the consolidation of the Roman state under one-man rule.

The story of the fall of the Roman Republic in the 1st Century BC is one of the most fascinating and enthralling dramas in history and one that has some disturbing warnings for our own time. How different would the story have been had Caesar not fallen under the daggers of his assassins? While we will never know, there can be little doubt that the future history of the world would have born very little resemblance to that with which we are familiar.