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Finance and Capital in the United States, 1850–1900

Published online by Cambridge University Press:  03 February 2011

Richard Sylla
Richard Sylla
Affiliation:
Harvard University
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Extract

The connections between financial development and economic growth are drawing increased attention on many fronts. This dissertation studies ways in which the American financial system functioned to aid in the accumulation and mobilization of capital in the second half of the nineteenth century. The evolution of the banking system, by far the dominant nineteenth-century financial intermediary, is emphasized, but the role of Federal government finance is of scarcely less importance. The interrelated actions of the banks and the Treasury did much to set the tone in various financial markets during most of the period. While considerable study has been devoted to these actions and their short-run effects, much less has been written about their long-run implications. A major contention of the work is that financial strains caused by the Civil War and the various responses to these strains were accompanied by significant changes in the banking system—in its structure, the types of assets in which it dealt, and in its relations with the Treasury—all of which increased its potential for satisfying the demands placed upon it by a rapidly expanding economy. These changes helped to make capital, which may well have been the relatively scarce factor in the antebellum era, more abundant in the postwar Gilded Age, and they therefore abetted the rapid industrialization of those decades.

Type
Obstacles to Economic Growth: Papers presented at the Twenty-Seventh Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 27 , Issue 4 , December 1967 , pp. 621 - 624
Copyright
Copyright © The Economic History Association 1967

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References

1 See Temin, Peter, “Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's,” Journal Of Economic History, XXVI (11. 1966), 277–98.CrossRefGoogle Scholar

2 The Merchant's and Banker's Almanac was published annually by the Office of the Bankers' Magazine, New York, beginning in 1851.

3 The Public Credit Act of March, 1869, pledgedthat the government bonds would be paid in coin, but they continued to be quoted in currency. For the decade prior to 1879 the currency prices were therefore adjusted to account for the premium on gold.

4 Macaulay, for example, referred to the Federal securities as “mere mongrels” whose yields “… were not, in the years before the Federal Reserve System, interest rates in any simple and direct sense of the term.” Macaulay, Frederick R., The Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856 (New York: National Bureau of Economic Research, 1938), p. 72. Similarly, Sidney Homer writes, “…market yields on governments must be disregarded altogether from 1863 until 1918 as a guide to American long-term rates.” See hisGoogle ScholarA History of Interest Rates (New Brunswick: Rutgers University Press, 1963), p. 290Google Scholar.

5 The analysis was stimulated by, and is based in part on, data presented by Davis, Lance, “The Investment Market, 1870–1914: The Evolution of a National Market,” Journal Of Economic History, Xxv (11. 1965), 355–99CrossRefGoogle Scholar.

6 An alternative interpretation, that loans of country bankers entailed greater risks, is not particularly germane. Greater risks could explain higher interest rates but not necessarily greater net returns over a long period. For the latter, one would have to adopt unverified assumptions about bankers' risk aversion propensities.