The proposed doctoral dissertation research is a comparative-historical study of the relationship between banking system structure and economic growth. The basic theory underlying the research is that if bankers possess a shared institutional preference for lending to commercial borrowers, then society's allocation of economic resources is shifted towards investment rather than consumption, leading to accelerated economic development. In particular, it is hypothesized that the impetus for the industrial revolution in Britain and America can be traced to social, rather than economic, factors. The direct relationship between bankers' lending practices and the early industrial revolution will be explored through the analysis of loan agreements, business correspondence, and committee meeting minutes from 18th century bank archives in Scotland, England and New York. Preliminary results suggest that differences in banking system structure may account for as much as 25% of the cross-national variance in growth rates. Data is lacking, however, for those countries that do not have commercial banking systems, among which are most of the poorest countries in the world. To the extent that conditions in those countries resemble pre-industrial conditions in the now-industrialized countries, an understanding of how early financial systems first fostered development during the Industrial Revolution will shed light on the prospects for economic development through banking reform in poor countries today.
