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- "A period when the system worked adaptably and flexibly to meet society’s needs."
Assess the validity of this judgement, as applied to the banking system in the years 1700-90.
Introduction
Banks were important to British society – made capital and credit available
- “Capital could be said to be all the items designed by society to further the creation of wealth”
(Geographical dictionary definition)
Capital- 3 types:
- Fixed - (machinery, land, buildings). Made money simply by being there
- Circulating (labour, raw materials, food and fuel). To be resold at a profit as a finished product
- Financial - Actual money and notes, needed for production
Capital was in demand for an industrialising Britain, where companies were setting up.
In 1700, nascent banking system was taking shape- 1st bank had been formed 1694.
To be said to be flexible & adaptable, we must establish whether banks responded to changes- i.e. industrialisation. Were the banks flexible and adaptable enough to support Britain’s industrial growth, or were they restrictive?
The role of banks was to make capital available.
Why was capital needed?
By small businesses, to:
- purchase raw materials
- pay wages
- set up machinery
How important was capital?
Of course money was needed for these areas, but Flinn argued existing money could be better used, and Speed suggested not much initial capital was required.
Other means of obtaining capital
- the stock exchange
- diverting money away from conspicuous consumption (i.e. building stately homes)
Assuming banks did play an important rule in providing capital; was there a national system?
3 different ‘tiers’ of banking
- Bank of England
- Rose to prominence
- Controlled national debt
- Became associated with national pride
- Provincial banks
- Formed to assist regional farmers & industrialists
- London private banks
- 30 by 1750 (had been 40 a century earlier, but now sophisticated)
- Catered for well-to-do gentry; goldsmiths
What was the relationship between the types of bank?
- No ‘formal’ relationship- evolved rather than designed
How effective were each of these and the network of sorts that they formed?
- Weaknesses existed (demonstrated by Napoleonic War when branches crashed)
- Served a purpose- evolved out of need
- But system was never planned and each bank therefore pursued slightly different interests to one another.
Other considerations
Much of the evolution of banking took place after 1825
- joint stock banking
- complete dominance of Bank of England
- development of specialist, foreign trade banks
Conclusion
1700-90 did not see England's banking system at its zenith.
- Inaccurate to say system worked adaptably- there was no pre-considered system; and needs of society created demands on it which it tried to respond to rather than the banks pre-empting needs.
- Evolution of provincial & London banks, and sophistication of London private banks, is evidence of system responding to needs; crashes in Napoleonic War are evidence of banks failing to adapt.
So system more functioned than thrived, and improved considerably in following decades.
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