II. ECONOMIC INTEGRATION AND MONEY AND CAPITAL MARKETS
As in goods, so in money, markets start small and grow in extent. McKinnon and Shaw, writing separately on the importance of wide, deep and efficient money and capital markets in developing countries, have renewed the interest of economic historians in the agglomeration of local and regional into national money and capital markets within countries, as well as international money, banking, lending and investment.
The question was much on the minds of the citizenry of France in the 18th and 19th centuries, with many merchants and intellectuals seeking to spread banking outside the ports, Paris and Lyons to the provincial cities and towns, and calling for regional banks of issue to supplement centralized institutions. Both in Britain an France, the central bank was attacked for working on behalf of the financial centre instead of the country as a whole. It was not unusual to have the Bank of England referred to as the Bank of London, the Bank of France as the Bank of Paris. John Law, Napoleon I, Jacques Laffitte, the Pereire brothers - indeed the entire school of Saint-Somoniens - share what is referred to in the United States as the populist view, according to which Wall Street, the City of London, or the Paris financial community both exploits the rest of the country and ignores their interests.
Sir Thomas Roe, writing in 1960, said with reference to London and the rest of England: “It is no good for a body state to have a fat head, thin guts and lean members”.
Economic development requires and brings about the spread of banking institutions more evenly through a country, more nearly equalizing rates of interest - which had been low in such places as Lyons and Paris, high in intermediate centres such as Dijon or Lille. Domestic trade flourished where provincial borrowers had access to capital at more nearly uniform rates, and could collect their drafts anywhere, and not only in the financial capital (p.77-78).
According to the text:
Item 2 - Historians’ interest in the agglomeration of regional into national capital markets has been renewed by realization of the importance of wide and efficient capital markets in developing countries.
