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Backwardness and the Role of Banking in Nineteenth-Century European Industrialization

Published online by Cambridge University Press:  11 May 2010

David F. Good
David F. Good
Affiliation:
Stockton State College
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Extract

Alexander Gerschenkron's research on industrialization in Europe suggests that both the timing and character of growth may have conditioned the institutional structure of nineteenth-century industrializers. He argues that:

…the more backward a country's economy, the greater was the part played by specialized institutional factors designed to increase the supply of capital to nascent industries and, in addition, to provide them with less decentralized and better informed entrepreneurial guidance; the more backward the country, the more pronounced was the coerciveness and comprehensiveness of those factors.

Type
Notes
Information
The Journal of Economic History , Volume 33 , Issue 4 , December 1973 , pp. 845 - 850
Copyright
Copyright © The Economic History Association 1973

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References

I would like to thank the editor and an anonymous referee for their valuable comments and criticisms on earlier versions of this paper.

1 Gerschenkron, Alexander, Economic Backwardness in Historical Perspective (New York: Praeger, 1965), p. 354.Google Scholar

2 Gerschenkron, Backwardness, p. 14.

3 Barsby, Steven, “Economic Backwardness and the Characteristics of Development,” The Journal of Economic History, XXIX (September 1969), 449–50CrossRefGoogle Scholar. Barsby tested the relationship between the degree of backwardness and these three characteristics of the spurt: the rate of manufacturing growth, the stress on producers' goods, and the rate of growth in agricultural labor productivity.

4 Cameron, Rondo (ed.), Banking and Economic Development (New York: Oxford, 1972), esp. pp. 9–25,Google Scholar and Cameron, Rondo et al., Banking in the Early Stages of Industrialization (New York: Oxford, 1967), esp. pp. 151 and 306.Google Scholar

5 Non-European countries have been excluded in the test: since Gerschenkron conceived his work as “an approach.to European industrialization.” See Gerschenkron, Backwardness, p. 353. Other European countries could have been included in the sample but were not either because the spurt concept did not apply (for example, for Austria see Cameron, Development, p. 16) or because data were very crude (for example, for Scotland see Cameron, Industrialization, pp. 60–5).

6 Gerschenkron, Backwardness, p. 355.

7 The Russian Revolution, of course, interrupted this process and a completely centralized mechanism was eventually introduced in the new Communist state.

8 Barsby, “Characteristics,” pp. 455–57.

9 Barsby, “Characteristics,” p. 452, and Rostow, W. W., The Stages of Economic Growth (New York: Cambridge, 1967), p. 38.Google Scholar Although the spurt arid the take-off are not identical concepts, Barsby's spurt dates are similar enough to Rostow's take-off dates that Rostow's dates are acceptable approximations.

10 For an encyclopedic comparative study of financial structure using this and other measures, see Goldsmith, Raymond, Financial Structure and Development (New Haven: Yale, 1969).Google Scholar

11 Barsby.used the technique of rank correlation to test the relationship between backwardness and three characteristics of the.spurt. The correlation technique is inappropriate here since the functional relationship between backwardness and the role of banks, unlike the relationships tested by Barsby, is not monotonic.

12 The banks should have emerged during the spurt in moderately backward countries and after the spurt (Stage II) in extremely backward countries.

13 Barsby made a similar argument in his discussion of Gerschenkron's proposition on the role of producers' goods industries in the spurt. Rather than borrowing modern technology during the spurt “there appears to have been a gradual assimilation of technology in the form of producers' goods by the later countries before they experienced rapid industrialization.” See Barsby, “Characteristics,” p. 461.

14 The bank asset/GNP ratios in 1913 were as follows—early industrializer: England (.46); moderately backward countries: France (.56), Belgium (.64) and Germany (.42); extremely-backward countries: Denmark (.58), Sweden (.84), Russia (.52) and Italy (.32). From Goldsmith, Structure, Tables D-3, D-6, D-8, D-9, D-10, D-14, D-26, D-29 and E-l.