Economic Backwardness in Security Perspective
AbstractModern political economies are distinguished from each other by the institutions that mediate actors’ interactions, falling somewhere along a spectrum between pure market and non-market mechanisms. But how did these institutions originally emerge? With regard to the financial sector, I argue that higher levels of national security threats in combination with economic backwardness lead to a financial system more dominated by banking relationships. To evaluate the argument, I conduct a focused comparison of Japan and Germany before WWII since they had similar political and legal institutions and were both ‘backward’, but differed with regard to the security threats they faced. Germany confronted more menacing threats from neighboring great powers as well as greater domestic unrest following unification in 1871, which led the government to direct lending to sectors vital to the nation’s security via banks. Japan, by contrast, did not face the same level of threats to its security, and consequently securities markets were more dominant.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3279.
Date of creation: Oct 2004
Date of revision:
Economic History; Germany; Japan; Government; War; Finance; Financial Institutions;
Find related papers by JEL classification:
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
- N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
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