Internal bank archives are used to examine the nature of English bank/firm relationships during periods of business distress in the decades before 1914. The performance of the banks is examined in the context of theoretical assertions regarding relationship and transaction banking and bank response to the problems of adverse selection and moral hazard. New estimates of bank losses on industrial accounts are made. The results indicate that the banks supported their industrial clients during periods of distress by continuing with existing loans but rarely became deeply involved with clients' business. Effective screening of loan applications, the use of short-term loans and of sample collateral stipulations safeguarded against moral hazard and minimised losses for the banks, even with such high risk accounts.

A short answer is, not very. In contrast to economic growth, where the free market is commonly viewed as a prime mover, mortality in the last two centuries has not been greatly helped by market forces. The classic sources of market failure – information failures, externalities, public goods, principal-agent, and free rider problems – have been pervasive. Nor has economic growth itself been behind the worldwide improvement in life expectancy. In the primitive state of nineteenth century health knowledge, the immense rise in urbanisation engendered by economic growth largely vitiated any positive level-of-living effects by increasing exposure to disease. Instead, public policy initiatives, based on new knowledge of disease and new institutions, have been essential to the improvement of life expectancy, both in urban areas and nationwide.

Sweepings from butchers' stalls, dung, guts, and blood, Drowned puppies, stinking sprats, all drenched in mud, Dead cats, and turnip tops, come tumbling down the flood. – Jonathan Swift, A Description of a City Shower, 1710

Recurring changes in the institutional and ideological structures of Central and Eastern Europe have made it difficult to quantify and interpret its long-term economic development. This article provides the foundations for a unified picture of economic growth in the region since 1870. We construct a consistent time series of GDP per capita for the present day states of Central and Eastern Europe over the period 1870–1989, and then draw on the literature of the ‘new’ growth theory in economics to assess their long-term economic performance in the wider European setting.

In this paper we try to isolate and measure the respective importance of political and economic aspects in two critical episodes of France interwar. We do this by separating expectations of taxation and of devaluation that are implicitly included in the prices of various categories of French and foreign bonds. Concerning the 1924–26 crisis, we show first that there was no expectation of a government default; second that the rise of interest rates in 1925 results from expectations of a capital levy; third that no hyperinflation was ever expected. After stabilisation, we show that the markets expected an appreciation of the franc up to 1931 and a devaluation afterwards.

German-style universal banks are widely believed to improve capital mobilisation and utilisation by stimulating savings, matching savers and investors, and offering business and investment advice to entrepreneurs. Using aggregate and firm-level evidence on deposit taking and branching, banks' liability structure, interlocking directorates between banks and industrial companies, and industrial investment patterns, this article investigates the role of universal banks in two European latecomer economies: Germany and Italy. Comparing the impact of these banks permits some distinction between institutional effects and country-specific effects. The findings suggest that universal banking took on differing forms in Germany and Italy, implying that apparently similar institutions can yield divergent economic outcomes depending on the context in which they develop. For both countries, the results also indicate that the universal banks made a modest impact on capital mobilisation, industrial investment, and economic growth.

The Portuguese Republic of 1910–1926 was characterised by extreme instability in the political and economic spheres. The authoritarian regime that succeeded the Republic claimed legitimacy asserting that democracy naturally implied fiscal and monetary instability. In this article we study the Republican period and the Monarchy that immediately preceded it, in order to test three hypotheses as to the roots of instability during the Republic: exceptionally high public expenditure made necessary by participation in World War I, the Fiscal Hypothesis; expansion of the money supply and increase in its variability, the Monetary Hypothesis; social and political unrest, facilitated by greater freedom in expressing grievances, the Democracy Hypothesis. Using standard econometric techniques we find strong evidence in favour of the Monetary and the Democracy Hypotheses but not in favour of the Fiscal Hypothesis. Moreover, our results support the view that political and monetary instability were mutually reinforcing phenomena. The examination of the two periods, Monarchy and Republic, reveals a strong positive association between political and economic cycles in the later, more democratic period.

The paper investigates the initial phase of the cooperative organisation of agricultural processing firms in Denmark. It argues that the variations observed can be explained within the framework of the theory of industrial organisation. The focus is on the success of cooperative creameries. In 1903, twenty years after the first establishments, the owners of about 80 per cent of all Danish milch cows supplied their product to a cooperative. The success of cooperatives within other fields of production was smaller by comparison. The point is that dairying cooperatives, given the existing technology of gathering information and of preserving and transporting a perishable product, were ideally suited to overcome the problems of potential lock-in and of asymmetric information.

It is argued that the study of the development of the living standard of large segments of the European population between 1500 and 1800 should make use of the available evidence on prices and wages. On the basis of wage data for about twenty European cities and regions, the geographical patterns in silver and grain wages and their development over time are studied. This leads to the conclusion that there is no clear relationship between economic development (measured for example by the urbanisation ratio) and changes in the standard of living in Europe in this period. This also has implications for the hypothesis that an ‘industrious revolution’ occurred in Western Europe during this period. Alternative explanations for the fact that the per capita consumption of certain market goods increased in this period (such as changes in relative prices and an increase in labour effort as a result of falling real wages) are suggested.

This article examines the bank amalgamation movement in England between 1870 and 1914. I assemble data on all publicly traded English bank equities and use a simple finance model to estimate the effects of concentration. Holding returns on English bank stocks declined steadily over the period, which I attribute to a negative demand shock resulting from banks' declining importance relative to other financial intermediaries. Once this decline is accounted for, increased concentration appears to have bolstered bank returns. This suggests that increased concentration may have rendered English banks less efficient as allocators of capital and may have contributed to Britain's industrial decline.

[The amalgamation] movement appears to have by no means reached its limits, and it is neither safe nor easy to predict with any confidence the eventual outcome of a movement of which the development is incomplete. Whether or not … in the course of a few more years all banking business in this country will be monopolised by some half dozen powerful institutions, there seems little reason to doubt that many of the old inducements to amalgamation still operate, and that the closing years of the century will witness a further reduction in the number of existing banks. In any event, conjecture as to the ultimate outcome of the tendency must be mainly based on past experience, and in light of that experience the question of whether the movement is likely on the whole to be a beneficial one must be discussed.1

Did the relatively high level of literacy in Sweden prior to 1850 play any role in agrarian change and economic growth? According to influential scholars, such as Carlo Cipolla and Lars Sandberg, this was not the case. In this article, however, the authors put forward literacy as a transaction technology. Freeholders in the agrarian economy that expanded during the early nineteenth century used it as such and empirical evidence is presented for its significance during the enclosure movement and in the expansion of the rural credit market. The authors also discuss the use of literacy as a proxy-variable for ‘human capital’ or ‘knowledge’ in growth accounting and stress the existence of different literacy cultures. They maintain that the functional literacy of the Swedish freeholders – reading and writing – can be used as a proxy-variable for human capital. That is not necessarily the case with the mere reading ability more typical for women, tenants on manorial land, and the lower agrarian classes. The Swedish example indicates that the literacy variables used in international comparisons actually mirror very different kinds of literacy.

This article compares the effects of weather shocks on agricultural production in Britain, France and Germany during the late nineteenth century. Using semi-parametric models to estimate the non-linear agro-weather relationship we find that weather shocks explain between one third to two thirds of variations in agricultural production. Given the large size of the agricultural sector during this period, the high variance of agricultural production and the cyclical nature of weather shocks, the agro-weather relationship transmitted large effects on macroeconomic fluctuations over much of the period.

The Ricardian model that inspires the conventional account of pre-industrial economic history assumes that productive opportunities are fully exploited, and that economic growth and fluctuations reflect the interaction of technological improvement, diminishing returns to labour and capital, and homeostatic demographic responses to changes in per capita income. This article argues that the long swings in output and productivity were the consequence of endogenous variation in trading costs affecting the profitability of undertaking specialised investment in market production. Because its markets were often ‘thin’, the pre-industrial economy possessed latent reserves of productivity that were not fully exploited. A search-equilibrium model is developed to demonstrate how such an economy could experience swings in output and productivity in the absence of technological or other ‘fundamental’ changes. The argument is supported by evidence indicating that the level of output in the second century may have approached that of the early eighteenth century.

‘For those who care for the overmastering pattern, the elements are evidently there for a heroically simplified version of English history before the nineteenth century in which long-term movements in prices, in income distribution, in investment, in real wages, and in migration are dominated by changes in the growth of population’. – H. J. Habakkuk (1958).

‘We may say broadly that while the part which nature plays in production shows a tendency to diminishing return, the part which man plays shows a tendency to increasing return’. – Alfred Marshall.

Economic historians have always assigned a large role to infrastructure in the process of economic growth. For instance, it is commonly agreed that infrastructure endowments made the Netherlands the economic superpower in the pre-industrial era, but depressed economic growth in the first half of the nineteenth century, and then again enabled modern economic growth in the second half of the nineteenth century. However, this hypothesis has never been tested quantitatively, mainly because of the lack of reliable data. A new database on infrastructural investments allows us to confirm the hypothesis for the second half of the nineteenth century. Our main conclusion is that the investments in new infrastructure (mainly railways and waterways), clearly paid off. However, these positive effects lasted only temporarily; the Dutch economy did not switch to a permanently higher growth path. Also, it was some time before entrepreneurs fully reaped the potential benefits of a better infrastructure.