Table Of ContentMobilizing Money
This book examines the origins of modern corporate finance systems during
the rapid industrialization period leading up to World War I. The study leads
to three sets of conclusions. First, modern financial systems are rooted in the
past, are idiosyncratic to specific countries, and are highly path-dependent.
Therefore, to understand current financial institutions, we must take stock of
the forces at play in the near and distant past: political and regulatory inter-
vention, natural resource endowments, educational institutions, and social
and religious beliefs. Second, financial institutions and markets do not cre-
ate economic growth without significant first steps in industrial development
and supporting institutions. The finance-growth relationship also varies over
time, as financial and economic developments influence one another and cre-
ate a feedback mechanism. Third, and most important from the modern-policy
standpoint, there is no one-size-fits-all solution to financial system design and
industrial development. Having specific types of financial institutions is far less
important than developing a strong, stable, and legally protected financial sys-
tem with a rich diversity of institutions and vibrant markets that can adapt to
changing needs.
Caroline Fohlin has served as research professor of economics at Johns
Hopkins University, Baltimore, Maryland, since 2005. She previously taught
at the California Institute of Technology from 1994 to 2004. Professor Fohlin’s
research has appeared in journals such as the Journal of Finance, Journal of
Economic History, Review of Finance, Business History, Cliometrica, Explorations
in Economic History, and the Economic History Review. She is the author of
Finance Capitalism and Germany’s Rise to Industrial Power (Cambridge
University Press, 2007) and is a research associate at the Center for Japan-U.S.
Business and Economic Studies at the Stern School of Business, New York
University. Professor Fohlin gave the Bundesbank Lectures in Banking and
Finance at the University of Freiburg in 2007 and received the DAAD Prize for
Distinguished Scholarship in German and European Studies in 2005.
Japan-U.S. Center UFJ bank (formerly Sanwa) Monographs
on international Financial Markets
Selection Committees:
Ryuzo Sato, New York University (Ex officio Chairman and Editor)
Akiyoshi Horiuchi, University of Tokyo
Paul Krugman, Princeton University
Robert Merton, Harvard University
Joseph Stiglitz, Columbia University
Marti Subrahmanyam, New York University
The UFJ Bank (formerly Sanwa Bank) has established the UFJ Bank Research
Endowment Fund on International Financial Markets at the Center for Japan-U.S.
Business and Economic Studies of the Stern School of Business, New York University,
to support research on international financial markets. One part of this endowment
is used to offer an award for writing a monograph in this field. The award is made
annually on a competitive basis by the selection committee, and the winning published
titles and proposals are listed below.
1991, Richard C. Marston, University of Pennsylvania. International Financial
Integration: A Study of Interest Differentials Between the Major Industrial
Countries
1992, Willem H. Buiter, University of Cambridge, Giancarlo Corsetti, University of
Bologna, and Paolo A. Pesenti, Federal Reserve Bank of New York. Financial Markets
and European Monetary Cooperation: The Lessons of the 1992–1993 Exchange Rate
Mechanism Crisis
1993, Lance E. Davis, California Institute of Technology, and the late Robert E.
Gallman, University of North Carolina, Chapel Hill. Evolving Financial Markets and
International Capital Flows: Britain, the Americas, and Australia, 1865–1914
1994, Piet Sercu, University of Leuven, and Raman Uppal, London Business School.
Exchange Rate Volatility, Trade, and Capital Flows under Alternative Exchange Rate
Regimes
1995, Robert P. Flood, International Monetary Fund, and Peter M. Garber, Brown
University. Speculative Attacks on Fixed Exchange Rates
1996, Maurice Obstfeld, University of California, Berkeley, and Alan M. Taylor,
University of California, Davis. Global Capital Markets: Integration, Crisis,
and Growth
1997, Pravin Krishna, Johns Hopkins University. Trade Blocs: Economics and Politics
1998, Kose John, New York University. Corporate Governance and Agency Problems:
Theory and Empirical Evidence
(continued after index)
Mobilizing Money
How the World’s Richest Nations Financed
Industrial Growth
Caroline Fohlin
Johns Hopkins University
cambridge university press
Cambridge, New York, Melbourne, Madrid, Cape Town,
Singapore, São Paulo, Delhi, Tokyo, Mexico City
Cambridge University Press
32 Avenue of the Americas, New York, NY 10013-2473, USA
www.cambridge.org
Information on this title: www.cambridge.org/9780521810210
© Caroline Fohlin 2012
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2012
Printed in the United States of America
A catalog record for this publication is available from the British Library.
Library of Congress Cataloging in Publication data
Fohlin, Caroline, 1966–
Mobilizing money : how the world's richest nations financed industrial
growth / Caroline Fohlin.
p. cm. – (Japan-US Center UFJ Bank monographs on international
financial markets)
Includes bibliographical references and index.
ISBN 978-0-521-81021-0
1. Banks and banking – History. 2. Financial institutions – History.
3. Investments – History. I. Title.
HG1551.F64 2012
332.1–dc22 2011015308
ISBN 978-0-521-81021-0 Hardback
Cambridge University Press has no responsibility for the persistence or accuracy of URLs for
external or third-party Internet Web sites referred to in this publication and does not guarantee
that any content on such Web sites is, or will remain, accurate or appropriate.
To Benjamin, Helen, and Theodore
and to John, again, as always
Contents
Figures and Tables page x
Acknowledgments xiii
1. Introduction 1
Part i Five SuCCeSS StorieS
2. Creating Corporate Finance Systems 15
3. Organizing Commercial Banking 48
4. Governing Corporations 84
5. Financing Industrial Investment 112
Part ii the Bigger PiCture
6. Classifying Financial Systems 139
7. What Shapes Financial Structure? 166
8. Does Financial Structure Drive Industrial Growth? 191
9. What Is Important for Long-Term Growth? 222
References 231
Index 257
ix
