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Information brokers and the making of the Baring crisis, 1857–1890

Published online by Cambridge University Press:  30 January 2019

Paula Vedoveli
Paula Vedoveli*
Affiliation:
Princeton University
*
P. Vedoveli, PhD candidate, Department of History, Princeton University; email: vedoveli@princeton.edu.
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Abstract

This article offers a new interpretation of the Baring crisis, the most dramatic financial collapse of the nineteenth century, by focusing on how information brokerage allowed Barings to abandon its risk-averse practices in the mid 1880s. I argue that the mediators who bridged structural holes (gaps between social clusters) shaped actors’ access to information as well as their expectations regarding its quality. Information brokers who enjoyed philos ties with at least one of the parties connected by the bridging relationships could promote collaborative arrangements more likely to survive an environment of heightened uncertainty. The performance of such brokers in the 1880s enabled cooperation between Baring Brothers & Co. and the Banque de Paris et des Pays Bas and supported the London house's growing association with the Anglo-Argentine firm of S. B. Hale & Co. in the second half of the 1880s. Cooperation gave Barings an illusion of security amid the costs of increasing competition and supported the house's growing engagement in South American affairs. Nevertheless, the strategy proved ineffective at barring the entry of new players. By the late 1880s, ties produced by brokerage connected Barings to the house's former competitors, producing a cohesive social cluster. Barings thereafter had access to redundant information, which hindered the house's ability to assess risk.

Keywords

structural holesinformation brokersphilos tiestrustcollective actionnineteenth-century international capital marketsArgentine sovereign debt

JEL classification

N83: Europe: Pre-1913 D81: Criteria for Decision-Making under Risk and Uncertainty Z13: Economic Sociology • Economic Anthropology • Language • Social and Economic Stratification D83: Search • Learning • Information and Knowledge • Communication • Belief • Unawareness N23: Europe: Pre-1913 D82: Asymmetric and Private Information • Mechanism Design
Type
Articles
Information
Financial History Review , Volume 25 , Issue 3 , December 2018 , pp. 357 - 386
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Copyright
Copyright © European Association for Banking and Financial History e.V. 2019 

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Footnotes

The author would like to thank Jeremy Adelman, Andrew Edwards, Emily Kern, Eduardo Mello, Gabrielle Girard, the editors of Financial History Review, Rui Esteves and Stefano Battilossi, and discussants at the FHR Fast-Track workshop in Turin, Catherine Schenk and Nathan Marcus, for their thoughtful comments on earlier versions of this article. The author also acknowledges the invaluable support of Clara Harrow, archivist at The Baring Archive, Roger Nougaret, director of the archive at BNP Paribas, Viviane Fritz, and Pascal Pénot, director of the Crédit Agricole Archive. Generous funding from the History Department and Program in Latin American Studies at Princeton University, the Princeton Institute for International and Regional Studies, and the History Project at Harvard University made the research for this piece possible. All errors are my own.

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