Regions, regulation and the “carriers of history”: how financial lock-in transformed the American South twice

This article examines how financial institutions functioned as “carriers of history” in the American South’s economic development through two pivotal transformations. Using an evolutionary economic geography framework, I argue that distinct monetary-financial arrangements created path-dependent trajectories that reshaped the region’s economic landscape. In the antebellum period, state-level banking regulations, unit banking and agricultural credit systems produced a fragmented, undercapitalised financial system that became “locked in” through increasing returns and institutional complementarities. This initial configuration constrained industrial development and urbanisation, reinforcing the South’s peripheral economic status. The second transformation occurred during the post-Depression and post-WWII eras, driven by federal interventions, technological innovation and interstate banking. This shift created a new financial landscape characterised by increased capital availability and emerging regional financial centers — essential conditions for the South’s “economic revolution” in the latter 20th century. The analysis reveals how financial institutions can both constrain and enable regional economic transformation through path-dependent processes.