ABSTRACT
This chapter’s basic premise is that the 19th-century international financial order rested on two principles. The first was the notion that moral hazard was a formidable evil. That concern was a consequence of the Western principle of laissez-faire, which flourished and expanded during that century. The permissive and inefficient Leviathan had been replaced by an open society which was based on individual responsibility. In its positive form, the fear of moral hazard was rooted in the Darwinian belief that only the fittest could survive, that the weakest did not deserve support, and that appropriate reforms and policies, not a helping hand, were what was needed. In its religious version, it came along with the notion that sinners had to suffer to earn their redemption.
