Finance and Slow Growth during the Industrial Revolution

Peter Temin and Hans-Joachim Voth

in Prometheus Shackled

Published in print January 2013 | ISBN: 9780199944279
Published online January 2013 | e-ISBN: 9780199980789 | DOI:
Finance and Slow Growth during the Industrial Revolution

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This chapter reviews recent research on Britain's Industrial revolution, showing that the presumed rate of economic growth during this economic watershed has been reduced progressively by several authors working with different methods. How can the evidence of widespread technological progress around the start of the nineteenth century be reconciled with the slow rate of national growth? Data from several goldsmith banks let us examine one hypothesis: that the British government's demand for resources to fight Napoleon crowded out demand from the private economy for investment. Previous historians have proposed crowding out but have had trouble identifying its effects. The usury rate meant that scarcity of bank loans showed up in credit rationing rather than higher interest rates. We show that loans from Hoare's Bank and other lenders decreased when the British government borrowed, and the rate of growth of the economy slowed at these times.

Keywords: Industrial Revolution; industrialization; technical change; crowding out; credit rationing; usury laws; slow growth; Napoleonic Wars

Chapter.  9874 words.  Illustrated.

Subjects: Economic History

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