Abstract

"From Repression to Regulation: French Police as Securities Market Authorities, 1850-1885"

Charlotte Robertson, Harvard Business School (crobertson@hbs.edu)

This paper examines how the French police actively managed the capital and securities markets during the “first financialization” of the second half of the nineteenth century. In so doing, it offers an account of de facto financial market regulation before the institution of dedicated regulatory bodies in the twentieth century. In the 1850-60s, the French Emperor, Napoleon III, focused his efforts on economic development, and enlisted the public securities markets, rather than taxation, to achieve his program. In this context, the securities markets became an object of active surveillance, administration, and intervention. France’s powerful police apparatus was deployed into the financial sphere and Prefects of Police were recruited for their financial literacy, which they applied to the supervision of corporate chartering, the regulation of market practices, the protection of investors, the monitoring of the illegal curb market, and the surveillance of electric telegraph dispatches. The police also served a crucial reconnaissance and knowledge-generating role for the government, “reading” the markets as a continuous plebiscite on the regime and shaping its financial policy accordingly. However, as the French state’s interventions in the financial markets backfired, it ultimately gravitated away from this discretionary approach toward the embrace of free incorporation in 1867, which set into motion the adoption of similar legislation across the Continent. Through this act, the French state extricated itself from the active role it had formerly assumed in guiding capital formation, by removing the long-standing requirement of government authorization to establish a limited liability corporation. While this rules-based order was a boon to entrepreneurs, the subsequent proliferation of corporations ignited new problems for police oversight and market stability, seeing that many of these newly formed corporations were banks. Like interventionism, standardization also produced unintended market instability.