EU Competitiveness and 19th Century U.S. Banking Policy

Adam Smith, based on his knowledge of issues originally discussed by Plato (Socrates) and Aristotle, which were related to his own knowledge of how the Tulip Bubble, Mississippi Bubble and South Seas Bubble were created, recognized that problems of economic downturns, inflation and deflation could be directly traced to the economic behavior of three categories of economic decision maker, all of whom were members of the upper income class in an economic state. Adam Smith categorized these three types of economic decision makers as “projectors, imprudent risk takers and prodigals.” Essentially, all three types of economic decision makers in these categories attempted to make profits (money) without the production of any physical good or service. Such individuals attempted to use other people’s money, by leveraging their debt position to obtain bank loans, in order to manipulate the financial titles to physical assets so as to increase the value of the financial asset, irrespective of any increase in the actual underlying value physical asset. Bankers are particularly attracted to such economic decision makers plans because of the possibility of making very quick, short term profits. Any potential long term losses are simply ignored. Following Aristotle’s very advanced understanding of how money use or misuse can positively or negatively impact the macro economy, the goal of projectors, imprudent risk takers and prodigals is not C-M-C’, but M-C-M’ or M-M’. The latter two types of money use are purely speculative in nature. Smith concluded that these categories of individuals should not receive any access to bank loans since the long run results usually led to bank failure with resulting highly negative outcomes and impacts on the macro economy. Smith then contrasts these types of economic agents with individuals he terms the “sober” people. The “sober” people are middle class, small business owners who desire to obtain bank loans in order to expand their existing business and increase their access to needed resources to make and sell more products. These types of individual are using money in the manner, again pointed out by Aristotle, as being C-M-C’, to increase the amount of physical producer and consumer goods they could make in the future. Smith concluded that the great majority of bank credit and loans should be skewed toward these individuals, since this would lead to real economic growth, as opposed to the speculative, purely financial booms and busts engineered by, for instance, projectors such as John Law, Richard Cantillon or Andrew Dexter, Jr. early in the 18th and 19th Centuries. Smith conceived of the central bank as being independent of the private banking industry and the government. It could then enforce a policy of refusing to let private banks make loans to “projectors, imprudent risk takers and prodigals”, while simultaneously encouraging the granting of bank loans to the “sober” people. The contrast between a Mitt Romney type of economy ,where the “projectors, imprudent risk takers and prodigals” are able to get bank financing, which they employ for use as speculative finance (M-M’), is contrasted with a George Romney type of economy dominated by the “sober” people, where they employ the C-M-C’ approach to the creation or real, physical wealth. A nonlinear, coupled, Volterra model will illustrate mathematically precisely where the problems lie and what needs to be done to prevent future speculative collapse in the financial markets based on Adam Smith’s path breaking analysis in the Wealth of Nations in 1776. This will require that the central bank monitor private banks so as to prevent them from issuing credit/bank loans to the Mitt Romney type of speculative, stock market financier - promoter, while requiring them to issue loans/credit to the George Romney type of sober business man or women. A mathematical model is used to illustrate Smith’s view of how banking policy can create economic growth while avoiding the problems of speculative finance that leads to bubbles and crashes, which are the primary cause of the problems of inflation and deflation as banker financed, speculative bubbles are created and then collapse over time.

The article studies the issues of development of gold mining in the Leno-Vitimsky district in the late 19th - early 20th centuries. Monopolization of the fisheries has led to the emergence of large joint stock companies. Bank investments played a crucial role in expanding gold production and developing mining infrastructure. Lending to large gold industry contributed to the growth of the influence of the Irkutsk branch of the state Bank of Russia, increased its role in the economic life of the region. Large Bank investments led to the expansion of gold-bearing areas and contributed to the introduction of new technologies and technical devices in the mines. The article traces specific examples of the investment policy of the state Bank of Russia and the role of its regional branches in Irkutsk and Bodaybo. The constant increase in the cost of developing new mines, supply, hiring workers and purchasing equipment increased competition and helped monopolize the industry. As a result, large Bank loans played a more significant role. The state Bank of Russia not only saved «Lensky Gold Industrial Partnership» from financial collapse, but also contributed to its transformation into the largest gold mining enterprise in Russia with its favorable investment policy. By controlling the activities of «Lenzoto», the state, through Bank investments, not only received significant profits, but also strengthened its influence in the gold mining industry as an important area of the Russian financial system.

The planners of a European monetary union would be well advised to study the reasons the pre-World War I gold standard was a successful monetary regime. --Anna J. Schwartz (1993) The entry of Greece into the eurozone in 2001 was widely expected to mark a transformation in the country's economic destiny. During the decade of the 1980s, and for much of the 1990s, the economy had been saddled with double-digit inflation rates, double-digit fiscal deficits (as a percentage of GDP), large current-account imbalances, very low growth rates, and a series of exchange rate crises. Adoption of the euro--the value of which was underpinned by the monetary policy of the European Central Bank (ECB)--was expected to produce a low-inflation environment, contributing to lower nominal interest rates and longer economic horizons, thereby encouraging private investment and economic growth. The elimination of nominal exchange-rate fluctuations among the former currencies of members of the eurozone was expected to reduce exchange rate uncertainty and risk premia, lowering the costs of servicing the public sector debt, facilitating fiscal adjustment, and freeing resources for other uses. And that is precisely what happened--at least for a while. In the years immediately prior to and immediately after Greece's entry into the eurozone, nominal and real interest rates came down sharply, contributing to high real growth rates. From 2001 through 2008, real GDP rose by an average rate of 3.9 percent per year--the second-highest growth rate (after that of Ireland) in the eurozone. Inflation, which averaged almost 10 percent in the decade prior to eurozone entry, averaged only 3.4 percent over the period 2001-08. Then, beginning in 2009, everything changed as Greece became the center of a major financial crisis. Interest rates on long-term government debt soared from the low single digits prior to the crisis to a peak of 42 percent in early 2012; the country had to resort to two successive adjustment programs (in May 2010 and March 2012) with official international lenders; and the Greek government restructured its debt. Between the end of 2008 and mid-2012, the economy contracted by a cumulative 20 percent (and it continues to contract), and the unemployment rate jumped from less than 8 percent to about 25 percent. Like Odysseus's return trip home from the Trojan War, the road to Ithaca led to a Tartarean hell. What happened? And why did it happen? To answer these questions, we begin by describing the origins of the Greek financial crisis, highlighting the crucial role of growing fiscal and external imbalances. Next, we identify what we believe was a key factor that abetted those imbalances--namely, the absence of an automatic eurozone adjustment mechanism to reduce members' external imbalances. To illustrate our argument, we compare the adjustment mechanism in the eurozone with the adjustment mechanism for the participants of the classical gold-standard regime of the late 19th and early 20th centuries. Are there major differences between the working of the gold-standard adjustment mechanism and that of the eurozone? What are the lessons that can be drawn from a comparison between the gold standard and the eurozone? We address these questions in what follows. [FIGURE 1 OMITTED] The Years of Living Dangerously As mentioned, Greek interest rates came down sharply in the years immediately prior to, and immediately after, the country's entry into the eurozone. Figure 1 shows the monthly interest-rate spread between 10-year Greek and German government bonds for the period 1998-2012. (1) The spread fell steadily, from over 600 basis points in early 1998 to about 100 basis points one year prior to Greece's eurozone entry. By the time Greece entered the eurozone in 2001, the spread had fallen to around 50 basis points; it continued to narrow subsequently, declining to between 10 and 30 basis points from late 2002 until the end of 2007. …

This paper presents the early results of a doctoral thesis entitled World Bank and Educational Policies: highlighting the Multisectoral Project for the Development of Paraná. It raises a discussion on the World Bank (WB) as a political, financial, and intellectual actor referred to in research as an organic intellectual in the face of social and economic, political, and cultural changes in the late 20th and early 21st century. Based on Marxist-Gramscian contributions, the BM is seen as an organic intellectual because it is recognized that this institution generates thought through ideas, restrictions, and efforts to concentrate capitalist interests within developing countries. The paper is organized into two parts: discussion on organic and traditional intellectuals based on Gramsci; and collective intellectuals via BM. Through the interests of central countries, the BM develops and strengthens initiatives aligned with capitalist interests, mainly in educational sector.

The purpose of the study is to investigate the priorities of the credit and banking policy of the Zemstvo liberal movement at the stage of the 70s-80s of the 19th century. Methodology of the work. In the preparation of scientific research, a general scientific (methods of synthesis and analysis, deduction and induction, generalization) and a special historical (critical, problem-chronological methods, method of content analysis) research methodology was used, which generally ensured the achievement of the tasks set in the publication. The scientific novelty of the work lies in the fact that for the first time in Ukrainian historical science, on the basis of primary sources, some of which are being introduced into international scientific circulation for the first time, the main imperatives of the credit and banking policy of the Zemstvo liberal party of Ukraine in the period of the 70s-80s of the 19th century are highlighted. Conclusions. The author came to the conclusion that credit and banking policy was a significant, integral and organic part of the economic program of the zemstvo liberal movement in the north of Left-Bank Ukraine in the 70s-80s of the 19th century. Analysis of historical sources convincingly indicates that the main imperatives of the economic program of the opposition aristocratic front of northern Ukraine reflected the ideological principles of Western liberalism of that time and were aimed at financial support, social protection and economic development of the largest class of the population of the Northern Left-Bank - the peasantry. In general, the credit and banking policy of the zemstvo liberal party of northern Ukraine performed a fundamentally important function of servicing the system of economic activity in the region and contributed to the progress of capitalist relations in the life of the country's society.

Landmarks in the Evolution of the Main Types of Banking Operations of Albina in Sibiu 1872-1946. II

The article is devoted to the attempt to revise the dominant idea in historiography that the right-wing movement of the early twentieth century is part of Russian conservatism on the basis of the infamous work «Protocols of the Elders of Zion» analysis. After attributing this text as the first comprehensive work reflecting the views and discourse of the future Black Hundreders, it can be said that the focus of the ideas of the «Right» was the concept of «conspiracy» of the world «international government» against traditional statehood («empire»), and it was from that «basis» that their political, economic, social and cultural views, including criticism of the banking policy of the Russian state at the turn of the 19th – 20th centuries, associated with the name of the Finance Minister S.Yu. Witte, and the «Jewish question». At the same time, Russian conservatism of the same historical period did not have such «conspiratorial» concept in its framework, operating with rational arguments, modern in essence.

Tobacco control in the 21st century: searching for answers in a sea of change.

H. Clark Johnson develops a narrative of the events that led to the major economic catastrophe of the 20th century. He identifies the undervaluation and consequent shortage of world gold reserves after World War I as the underlying cause of a sustained international price deflation that brought the Great Depression. And, he argues, the reserve-hoarding policies of central banks - particularly the Bank of France - were its proximate cause. The book presents a detailed history of the events that culminated in the depression, highlighting the role of specific economic events, national policies, and individuals. Johnson's analysis of how French domestic politics, diplomacy, economic ideology, and monetary policy contributed to the international deflation is new in the literature. He reaches conclusions about the functioning of the pre-1914 gold standard, the spectacular postwar movement of old to India, the return of sterling to prewar parity in 1925, the German reparations controversy, the stock market crash of 1929, the Smoot-Hawley tariff of 1930, the central European banking crisis of 1931, and the end of sterling convertibility in 1931. The book also provides a picture of Keynes during the years before his General theory and deals at length with the history of economic thought in order to explain the failures of recent scholarship to adequately account for the Great Depression.

The issue of money and establishing interest rates are the main activities of central banks. Through this, the banks immediately influence the behaviour of households, companies, financial markets and the state with the impact on real outcome, employment and prices. When monitoring the issue of money, it is necessary to focus not only on its volume, but also on the attributes and functions carried by money. Among the first economists who considered the quality monetary aspect were J. Locke, D. Hume, D. Ricardo and others. The founders of modern monetarism of the 20th century were I. Fisher and M. Friedman. Fisher was the first to define the equation of monetary equilibrium in the present-day form. The objective of the paper is to point out different approaches to the equation and its modifications and different meanings of its variables. As regards the monetary aggregate M – Money – the paper also deals with the denomination of the aggregate to its various elements, which is significant for fulfilling monetary policy targets. This approach is very important especially at present in the time of crisis when central banks are performing their policy considering contradictory targets of price stability and economic growth. DOI: 10.5901/mjss.2015.v4n1s1p143

This article is devoted to the study of the economic justification and actions to opening a branch of the State Bank in the town of Kineshma in the early 20th century. This process was quite specific, since it was not just extended in time, which allows us to speak of its periodisation, but it also differed in the professional affiliation of the initiators of the opening. If at the first stage, these were representatives of the business community – at the second stage, these included the manager of Ivanovo-Voznesensk branch of the State Bank. About 10 years had passed between these events, Russia passed the stage of revolutionary upheavals, and its economy began to develop actively again. The regional policy of the State Bank had also changed. Increasing attention has been paid to its presence in developing economic regions through the opening of the branches of the Bank in them. Moreover, as a result of the development of the commercial banking system, competition in the lending market has intensified, which also justified the need to expand the sphere of influence on the part of the State Bank. In fact, these actions carried out the credit and banking registration of Ivanovo-Kineshma industrial region, which arose in the 1910s. This article has been prepared on the basis of documents from the Russian State Historical Archive, which have been introduced into scientific circulation for the first time. It makes it possible to strengthen the understanding of the role of the branches of the State Bank in the development of regional industry intended for researchers of its history during the imperial period.

TECHNOLOGY AND CULTURE Book Reviews 851 screw companies. Before the 1920s automatic lathes were limited almost exclusively to the production ofscrews or other products that could be machined from wire or metal rods. In the sewing machine industry, where automated, multifunction turret lathes received their widest use, they accounted for only one-sixth of all machines. This hardly amounts to automated “mass production,” as distin­ guished by David Hounshell from the American system. Ruby does not discuss such distinctions, however. Instead he dedicates an entire chapter to the definition of what we mean when we say “machine tool” as opposed to “automatic machine tool.” Here his conclusions seem soft. Unlike Hounshell, who pointed to international debates about the “American system” in the 19th century and about “mass production” in the 20th, Ruby’s definitions seem useful only as de­ scriptive terms of historiographical debates: “In the 1880s,” Ruby tells us, “the theme of automation was not yet discussed” (p. 135). Thus even if various industries were finding a few specialized pur­ poses for automation, engineers and workers did not yet conceive their daily work in the terms Ruby puts forth. The book is no less valuable, however, for Ruby is honest about making his distinctions: this is not “Whig” history. And he is right to uncover neglected precedents in mass production. His lathes are older than and at least as important as, say, the Chicago pork pro­ cessing plants—whose technology was quite a bit farther removed from assembly line tools than the machines that Ruby richly de­ scribes. Michael Allen Dr. Allen teaches in the School ofHistory, Technology, and Society at the Georgia Institute of Technology. Regulation and the Revolution in United States Farm Productivity. By Sally H. Clarke. New York: Cambridge University Press, 1994. Pp. xiv+310; illustrations, maps, figures, tables, appendices, notes, index. $59.95 (hardcover). The question ofwhy people adopt technological innovations, and why they do not, has had a sturdy but unresolved life among histori­ ans of technology. It has never been easy to explain the ultimate success or failure of technologies without sounding either Whiggish or overly deterministic. For many economists, the acceptance or re­ jection of technology can be accounted for by invoking the behavior ofrational actors and market forces. This sort ofexplanation, unfor­ tunately, often sounds flat and unpersuasive to historians: surely the explanation is more complex, more ambiguous, than mere bottom lines would suggest. In the field of agricultural history, however, eco­ nomic explanations are abundant and in fact dominate the entire 852 Book Reviews TECHNOLOGY AND CULTURE discourse of adoption. Somehow, scholars in agricultural history are themselves satisfied with such accounts. Sally Clarke is an economic historian who chafes at the economic reductionism so often encountered in histories of technology and agriculture, and in this book she tries to provoke some new ways of looking at innovation. Her questions are these: why did midwestern farmers adopt technologies in the 1930s but not in the 1920s, despite evidence that adoption in the 1920s would have made economic sense? And what role did New Deal regulation play in their calculus? Clarke looks closely at three new technologies: the tractor, the me­ chanical corn picker, and hybrid corn. The tractor, she argues, was the most important technology avail­ able to farmers in the 1920s and promised a good return on invest­ ment. Most economists would argue that a farmer would certainly have purchased a new tractor because it would have increased pro­ duction and thus the farmer’s profit. Yet very few midwestern farm­ ers bought a tractor before the mid-1930s. Why? Clarke suggests sev­ eral reasons, all having to do with a poor “investment climate,” which is an amalgam of rational and irrational factors that shaped farmers’ reasoning. First, tractors required a big cash outlay, which, while not important to economists studying aggregates, was very im­ portant to individual farmers struggling with the post-World War I market downturn. Second, farmers were worried about market prices for their commodities over the short term. And third, the lending policies of banks during this period were neither generous nor flexible. Thus, farmers came up with a production strategy that made sense overall, even...

ABSTRACTThe growth of shadow money, since the 1980s, has implications for both central bank policy and the theorization of money. However, modern shadow money has a historical analogue in the private bill market of 19th century England This article explores the relevance of Marx’s logical and historical analysis of the evolution of the forms and functions of money in capitalist economies, and his concrete analysis of the bill market in order to understand shadow money today.

Historiquement, les caisses d’épargne et les banques coopératives ont joué un rôle important dans les systèmes financiers de presque tous les pays européens. Toutefois, la vague de déréglementation, libéralisation et privatisation à la fin du xx e siècle a modifié leurs rôles et leurs structures institutionnelles dans la plupart des pays européens. Afin d’évaluer ces changements, nous commençons par définir les caisses d’épargne et les banques coopératives en mettant l’accent sur leurs caractéristiques d’origine. Ensuite, nous décrivons leur récente évolution dans différents pays européens et leurs performances avant et après la crise financière. Comme nous l’avançons, l’Allemagne est un cas unique dans la mesure où les caisses d’épargne et les banques coopératives y ont conservé la plupart de leurs caractéristiques initiales. Ensuite, nous examinons les changements notables dans les autres pays européens. L’article se conclut par un plaidoyer en faveur d’une réorientation de la politique bancaire de l’UE dans une direction qui permette la survie et même le renforcement de la diversité des structures institutionnelles des banques. Classification JEL : G21, N24.

During the 20th century, the institution called central bank was diffused globally. However, central banking practices differed significantly between European market-based economies and developing economies. This paper traces the ideas and norms that shaped and legitimized central banking practices in the two areas. The paper argues that during the period from the 1940s to the 1970s two central banking policy norms existed: the liberal norm, which emerged in Europe, and the developmental central banking norm, which emerged in Latin America and diffused to East Asia. The paper seeks to trace the life cycles of the two norms: to specify the ideational content of each norm and to identify the actors and networks that produced, promoted and diffused them. The paper makes two contributions. First, theoretically, on the basis of Finnemore and Sikkink’s theory of international norms’ dynamics, it introduces a mechanism that explains the emergence and internationalization of an alternative international norm in the periphery that challenges the standard international norm. Second, it contributes to the literature on comparative re- gionalism by historicizing the liberal/European standard of central banking practices and by identifying the existence of an alternative standard for central banking practices in developing countries. The paper covers the period from the 1940s to the 1970s.