This chapter considers the development of large-scale capital flows in the mid-and late-nineteenth century, comparing it to the development of capital markets from the 1950s onwards. Starting with a review of the evidence on global capital market integration over the last 150 years, the authors show that, in the late nineteenth century, international capital flows were larger in scale than anything seen before or since (the exception being, perhaps, the level of foreign direct investment); prior to the Great War a well integrated capital market had been already developed, both within and between countries. According to the authors, this high level of integration in the nineteenth century can be explained by three correlated factors: a revolution in technology, the development of financial institutions, and a peaceful and stable political period.
