'Colonialism' and the emergence of financial institutions

What is it about?

This article seeks to explain the lack of the development of contemporaneously ‘modern’ money and credit markets in the 18th to 19th century economy of India. It demonstrates that the emergence of ‘modern’, and state-connected money and credit markets was the result of a certain kind of power relationship between rulers and financial capital holders where the two were forced to mutually cooperate; financial systems represented the institutionalization of this mutual cooperation. Specific kinds of ‘colonialism’ represent just one special case of a relationship where the latter did not obtain. The article thus proposes a mechanism though which the spread of European capital could have retarded financial market formation in now-developing areas with otherwise considerable concentration of ‘native’ mercantile capital.

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Why is it important?

The article shows that institutions, especially those that are taken to promote economic growth, cannot be assumed to be causally independent of the power relationships that explain their provenance. Argument relating 'good' institutions to growth thus need to be rethought.