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War and Gold by Kwasi Kwarteng, book review: Searing study of how Spanish conquistadors introduced conflict for the sake of wealth

Why do we go to war? Why, through the centuries, is our story littered with terrible carnage and suffering?

These are not the questions posed directly by Kwasi Kwarteng in War and Gold, but they might as well have been. He chooses, as the title suggests, two subjects that define our history. As he points out, they're inextricably linked: the latter paying for the former; and often being the cause of the war itself.

Kwarteng, better known as the Tory MP for Spelthorne, is an accomplished historian, whose Ghosts of Empire was well-received. Few stones are left unlifted in this study, the sub-title of which gives every clue as to its ambition: "A five-hundred-year history of empires, adventures and debt."

The result is a retelling from a senior, political, financial viewpoint. It's high table or, to give a more modern description, c-suite stuff. All too often, while waging war proves intolerably expensive, the expunction of ordinary lives, military and civilian, is cheap. But they're barely a consideration as successive chancellors and finance ministers set out to balance the books after another bloody campaign.

Frequently, countries find themselves locked in a vicious cycle of boom and bust, where prosperity reigns during peacetime, only to be eroded by growing dispute and tension which spills over into outright conflict.

Kwarteng chooses as his start point the 16th century and the discovery by the Spanish conquistadors of the New World, complete with oodles of gold and silver. Not only did the plunder fund other campaigns but it was frittered away – although not before the Spanish had acquired a taste for wealth and rulers of other nations had noted the bonanza enjoyed by Madrid.

It is a moot argument whether this was when war and gold came together. Of course there had been earlier military ventures which amassed fabulous treasures. What was different, though, was that gold and silver became the object of the exercise, and the economic impact the conquistadors had was far-reaching.

John Maynard Keynes went so far as to cite the Spanish forays as creating the modern world. "The modern age opened … with the accumulation of capital which began in the sixteenth century. I believe … that this was initially due to the rise of prices, and profits to which that led, which resulted from the treasure of gold and silver which Spain brought from the New World into the Old."

The fatal combination of wealth and greed saw countries locked in war. Conquering new territories across the globe was a paramount aim, and if another power got in the way, war was declared. England and France in particular endured a fierce rivalry, battling each other for 29 of the 66 years between 1688 and 1756.

One effect of the prolonged conflict was that someone had to pay for it. This led to the Financial Revolution, and the creation of the Bank of England in 1694. The original aim of the Bank was to raise money for a Government that had been badly discredited when, in 1672, it defaulted on a loan. If Britain was to strike out across the world, it needed ready cash – and the Bank's task was to supply the funds.

So began a curiously symbiotic relationship – of war and finance, both needing each other. Always, in uncertain times, there was gold itself to fall back upon.

To the current period, and there are those who will maintain that our policy in the Middle East resembles those conquistadors, except that securing black gold or oil is now our target. The problem, though, is that our finances are not what they were.

Worse, and hard to imagine given our ferocious past, we are now engaged in more conflicts than ever before. At any one time, there is war somewhere in the world (only 26 days of peace anywhere since 1945) and in our assumed international policeman role the chances are we will somehow be involved.

As they found 300-plus years ago, war has a monetary price. But we're also determined to calm things down economically, to not seek the cycles of boom and bust, to reduce volatility, to bring down our debts. So, as we withdraw from Afghanistan, where we lost more than 450 British lives in combat and ran up a bill in excess of £20bn, we could be nearing the end of the war-waging road.

There will be plenty of people who will say hallelujah to that. But it does bring into sharp focus who we are, and where we belong in the world. In the past, we rarely ran public spending deficits; our books were squared, enabling us to beat our jingoistic drum, and if the opposing side did not retreat, send in the troops and ships.

We even had a phrase for the way we did business: "gunboat diplomacy". This reached its lunatic nadir with dispatch of a Royal Navy squadron to blockade Piraeus because a Jewish merchant from Gibraltar (a British protectorate) had not been compensated by the Greek government after a mob attacked his house in Athens. Imagine the Government today trying to justify that one to Parliament.

But that is where we find ourselves. Far more significant events than the stoning of a home in Greece have been taking place – and still we have not intervened. Russia has bared its teeth at Ukraine and successfully detached Crimea; Syria is an ever-bloodier bloodbath. And our reaction has been to do precious little.

Meanwhile, Iran apparently pushes ahead with its nuclear programme, North Korea tests missiles, and Zimbabwe remains in the grip of monstrous dictatorship. In the past, any or all of these would have seen our army and navy setting forth. Not any more. The US, too, is in a similar condition to our own.

Arguably, as a result, the world is now a more dangerous place now than at any time since the Spaniards gorged on the precious metals of the Incas, and then trussed up their king and garrotted him. Finance too had a wider social purpose of sorts, now long-forgotten amid the 24 hour wheeler-dealing of the City and capital markets.

Looking back to a period when the British budget balanced every year, and if we went to war we could pay for it, elicits a certain nostalgia.

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