National Banking’s Role in US Industrialization

MATTHEW JAREMSKI
THE JOURNAL OF ECONOMIC HISTORY 74.1 (2014): 109-140

The author has presented a very challenging goal for himself: To determine the effect of the National Banking Acts on American Industrialization and geographic distribution along what has been called by historians, The Manufacturing Belt. To achieve this end he has taken measures of various outputs in capital production from the 1850s through the 1860s and then attempted to differentiate growth rates before and after the passage of the acts. The effort to establish financial deepening as the particular and peculiar result of National Banking regulation itself is an interesting idea, but one that we do not think the data can support simply from the nature of historical materials. His geographic argument, on the other hand is firmly established and succeeds for the same reason: Again, the nature of historical data.

That loanable funds were concentrated in particular areas, that such concentration was furthered by the acts in question, and that national banks were the immediate source by which manufactures had recourse to funds, is without doubt. But that industrial growth itself was specifically enhanced by a more regulated financial market, that financial deepening could not have evolved under different circumstances but for more regulation, this is quite something else. The author does not always clarify if he means to argue how things were in fact, or if he wants to say something about how things had to be in order to effect the outcome of America as “the world’s leading producer of manufacturing goods.” These are very different questions, and they underscore the problem of doing economic history. Economic theory ultimately reasons to the unintended and unseen consequences of human action. Historians are more interested in the intentional and observable–the concrete. When applying their analyses to creating models of economic development, though, economic historians will often blur the distinctions…