
Contents
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The Schumpeterian Hypothesis in English Perspective The Schumpeterian Hypothesis in English Perspective
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Was There ‘No Shortage of Capital’? Was There ‘No Shortage of Capital’?
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From Factor Prices to Collateral From Factor Prices to Collateral
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The Precarious Evolution of the Banking System The Precarious Evolution of the Banking System
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The Development of Mortgage Activity The Development of Mortgage Activity
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Conclusion: Challenging the Conventional Wisdom Conclusion: Challenging the Conventional Wisdom
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5 Finance and Industrialization
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Published:September 2023
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Abstract
This chapter highlights the role of finance and financial institutions in the British Industrial Revolution. It explains that conventional wisdom refers to the finance for industrial development provided by savings or by borrowing from family and friends and that financial institutions otherwise play a secondary role. The seventeenth and eighteenth centuries saw expanding British trade and colonization alongside many expensive and risky overseas ventures that required long-term finance. The role of finance is crucial because it no longer limits the funding of innovation and economic growth to the flows of savings and profits. According to the Schumpeterian hypothesis, the development of capitalism is both empowered and constrained by finance.
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