State Formation and Financial Development in India and the United StatesAbhishek Chatterjee
Rulers and Capital in Historical Perspective explains why modern banking and credit systems emerged in the nineteenth century only in certain countries that subsequently became industrialized and then developed.
Tracing the contemporaneous cases of India and the United States over time, Abhishek Chatterjee begins by identifying the factors that were crucial to the development and regulation of a modern banking and credit system in the United States during the first third of the nineteenth century. He then contrasts these circumstances with those in India, where the state, never having formally incorporated a sophisticated private credit system, relegated it to the sphere of the informal economy.
Chatterjee identifies certain features of both societies, often—though not always—associated with colonialism, that tended to restrict the formation of modern institutionalized money and credit markets. Rulers and Capital in Historical Perspective demonstrates that—the many other differences between the North American colonies prior to independence and India notwithstanding—in both colonial societies, the same facets of their relationships with Great Britain hindered the emergence of a modern banking system.
"Rulers and Capital in Historical Perspective is theoretically, thematically, and empirically worthwhile. Chatterjee asks important questions to explain the divergent financial institutional development in the United States and India. His comparative analysis is a particular virtue. Chatterjee embarks on a relatively understudied but crucially important aspect of institutionalism, making an unconventional comparison among two big, important countries. His book helps reorient discussion regarding financial institutions—and institutions more generally—to understand why some polities adopted successful institutions while others did not."
—Ryan Saylor, Associate Professor of Political Science at the University of Tulsa and author of State Building in Boom Times: Commodities and Coalitions in Latin America and Africa
"Chatterjee uses divergent paths followed by 18th-century India and the US to advance an argument that relative bargaining power relationships between rulers and capital holders determined how financial institutions developed.... The argument offers some intriguing insights.... This volume will interest political scientists and others interested in comparative economic development....Summing Up: Recommended."
"(A) concise and elegantly written volume....The book as a whole is a creative and daring exercise. Its emphasis is not so much on unearthing new facts as it is on providing an uncompromising coalition-politics-based explanation of historical evolution." —Economic History Review
"(A)n innovative contribution.... (Chatterjee's) arguments are supported by an assortment of secondary sources in eloquent prose and are certainly thought-provoking.... Chatterjee’s creative scholarship will now inform the debate on this divergence between India and the United States and will hopefully stimulate more interest in comparative studies on financial development across more regions of the world." — Business History Review