Amsterdam and London as financial centers in the eighteenth century 1 ANN M. CARLOS * and LARRY NEAL ** *University of Colorado at Boulder and University College Dublin, ann.carlos@colorado.edu **University of Illinois at Urbana-Champaign and London School of Economics, L.Neal@lse.ac.uk In the seventeenth century, Amsterdam and London developed distinctive innovations in finance through both banks and markets that facilitated the growth of trade in each city. In the eighteenth century, a symbiotic relation developed that led to bank-oriented finance in Amsterdam cooperating with market-oriented finance in London. The relationship that emerged allowed each to rise to unpre- cedented dominance in Europe, while the respective financial innovations in each city provided the means for the continued expansion of European trade, both within Europe and with the rest of the world. The increasing strains of war finance for the competing European powers over the course of the eighteenth century stimulated fresh financial innovations in each city that initially reinforced the symbiosis of the two centers. The external shocks arising from revolutionary movements in America and France, however, interrupted the relationship long enough to leave London as the supreme financial center. Keywords: Bank of Amsterdam, Bank of England, financial innovations, capital markets, banking, monetary regimes JEL classification: N20, N23 The continued dominance of London as the preeminent global financial center at the start of the twenty-first century remains a puzzle. London’s position of dominance has continued despite Britain’s abstaining from the common currency of the European Union and despite the rise of first New York, then Tokyo, and now Shanghai as major financial centers in much larger economies. Why is it that Frankfurt, the banking and financial center of the largest economy in Europe and now the seat of the European Central Bank, cannot displace London, or for that matter New York? The same question arises for Paris, which combines both central govern- ment functions and an entrenched cosmopolitan elite from government, business and culture. The puzzle of persistent ‘capitals of capital’, as Youssef Cassis () has 1 An early version of this paper was presented at the European Association of Banking History annual meeting in Frankfurt in . In response to extensive and constructive comments by the editor and two referees (we assume one English and one Dutch), extensive revisions and improvements have been made as well as developing an entirely new theme. Omissions and errors remain, of course, our responsibility. 21 Financial History Review . (), pp. –. © European Association for Banking and Financial History e.V.  doi:./S