Letter from Lhasa, number 301. National Banking’s Role in U.S. Industrialization, 1850-1900

Letter from Lhasa, number 301. National Banking’s Role in U.S. Industrialization, 1850-1900

by Roberto Abraham Scaruffi

Jaremski, M. S., National Banking’s Role in U.S. Industrialization, 1850-1900, NBER Working Paper No. 18789, February 2013.

(Jaremski 2013).

Matthew S. Jaremski

Development, as well as underdevelopment, is the outcome of various ingredients conveniently combined.

This research underlines the role of the banking system in the U.S. industrialization. After the Civil War, fruitful legislation stabilized the existing banking system and increased the number of banks.

Their concentration in the industrial belt, the Rust Belt, will make the USA, by the 1900, world’s leading producer of industrial commodities. Econometric analysis shows a strong correlation between the diffusion of banks and the adoption of mechanized factories.

Of course, investments require financial concentration, consequently solid banks. What may even be tautological. Where the population is more concentrated, there are more possibilities for banks. There are also near markets.

Consequently, mechanized factories can be more profitably created, since the presence of a solid financial system and of business opportunities. A State/Government guaranteeing markets and regulating the financial system, eventually with additional propulsive functions, is obviously essential.

“The concentration of banks in the Midwest and Northeast helped fuel the nation’s industrialization but it might have been at the expense of growth in frontier states. The high capital requirements slowed financial development in the West and South, and it was not until the 1890s or later that the regions gained a larger number of banks. This financial underdevelopment of other regions thus might be one reason why the Manufacturing Belt was so persistent.” (Jaremski 2013, p. 19).

Since the financial system, as well as other aspects, was centrally regulated, there may be other reasons why populous areas outside the Midwest and Northeast developed later both financially and industrially. Generally, after a bloody civil war, the first concern is to avoid whatever possible hegemony and retaliation of the losing side.   

Jaremski, M. S., National Banking’s Role in U.S. Industrialization, 1850-1900, NBER Working Paper No. 18789, February 2013. 

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Atualizado em: Ter 12 Fev 2013

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