THE LONG WAR IS OVER, PROTESTANTS WON:

The British economist Walter Bagehot replied at the time that there would probably be two competing world currencies, which he termed Latin and Teutonic. By Teutonic, Bagehot seemed to mean the Protestant world: the United States, recovering from the Civil War, Germany, and Britain. He had no doubt about which vision would win out: "Yearly one nation after another would drop into the union which best suited it; and looking to the commercial activity of the Teutonic races, and the comparative torpor of the Latin races, no doubt the Teutonic money would be most frequently preferred."

The modern tendency to regard economic differences in terms of religion was stimulated by Max Weber's reflections on the Protestant work ethic. But that interpretation is clearly unsatisfactory, and cannot account for the dynamism of the deeply Catholic world of Renaissance Italy and Flanders.

A better way to understand economic differences is to view them as a reflection of alternative institutional and constitutional arrangements. In Europe, that difference stems from two revolutions, one peaceful and wealth-enhancing (1688 in England), and the other violent and destructive (1789 in France).

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