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This study of financial institutions and processes highlights changes in the policies and practices of investors, governments and international bodies that would accelerate industrial development of Central America. There are three principal conclusions:1. Commercial banks and related institutions need more flexibility in their operations under the law and administrative procedures. Among these conditions would be adaptations of credit instruments and interest rates to the requirements of a changing economic structure and market conditions. These would increase the number and range of alternatives open to domestic savers and investors and enable financial institutions to undertake operations of longer terms and greater risks.

Most of the schools built in the United States, as well as many public facilities, must be financed by borrowing in the capital markets. Until recently, when strongly competing capital demands have interfered, the privilege of tax exemption has made state and local government borrowing relatively easy. Dr. Robinson has made an extensive study of the changing market value of tax exemption and of its effect on the yield of various securities. His analysis, which shows that the lessened value of tax exemption may well encourage administrative and financial reform in state and local governments, is of importance to finance authorities, institutional investors, and security analysts. Originally published in 1960. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Our subject concerns the dialogue held between English financiers and Canadian politicians and the response of Lombard Street to the calls of the Province of Canada over the last ten or fifteen years of its existence. Its scope is limited because of the limited array of materials surveyed. The intention is to review some of the correspondence between the financial agents in London and the Canadian ministers or other officials entrusted with English money through the agents. The materials comprise some two hundred letters, a few duplicates of which can be found in the Baring collection at the Public Archives in Ottawa, which the author was fortunate enough to peruse at Glyn, Mills & Co., Lombard Street, London.These fragmentary materials have been marshalled back into the conventional framework of Canadian economic history, where in the author's estimation they belong, in order that they might shed some more light on matters already known. The role of the agents in money matters exerted a remarkable influence on Canada's political affairs, to the extent that the presence of the English investor implied some kind of participation in the decision-making process of the Province of Canada. The English press may have exerted a similar influence, since it reflected the attitude of those financially interested in Canada, whether directly or indirectly.Not all of the difficulties that the Province had been through in the last decade of its existence can be traced back, however, to its financial connection with the English money market. Indeed, several problems arose from its commercial structure, its precarious trade pattern upon which the neighbouring states exerted a continuous pull, the deflated expectations of Canadian traders as regards the western trade, and the over-all modification of trade channels which accompanied the cotton revolution. Yet we have chosen here to single out one factor—the opinion of Lombard Street—by way of suggesting the importance of market forces in the shaping of Canadian economic policies.

In this paper I propose to examine the placement policies of Canadian life insurance companies, and the campanies' place in the Canadian capital market, during the period of rapid agricultural and industrial development which preceded the First World War. It is no longer possible to maintain, as Buckley could maintain in his study of capital formation, that before the War Canada had a very undeveloped domestic capital market. McIvor's recent work has increased our knowledge of Canadian financial history, a subject strangely neglected since the work of Shortt and Breckenridge some sixty years ago. Kilbourn's study of the Steel Company of Canada has provided valuable evidence on the early stirrings of our capital market. I have argued elsewhere that these stirrings were both vigorous and significant for Canadian economic development before 1914, and that particularly in the field of government finance they cannot sensibly be ignored. The following pages discuss selected aspects of the financial history of this most interesting period. I shall try to show not only what the life insurance companies were doing with their funds but why they were doing what they did. The paper concludes with some reflections on the social rationality of their investment policies.First, some description of the Canadian life insurance companies themselves. By 1895 they already bulked large on the domestic scene, though not so large as the chartered banks. Their assets were valued at $32,000,000 in 1895, and their annual premium income then amounted to $5,703,000 from domestic business and $595,000 from foreign business. By 1914 the companies' assets were worth $257,800,000, their annual domestic premium income was $26,047,000, and their foreign premium income was $12,680,000. Throughout this period they faced vigorous competition from British and especially from American firms, which collected 45 per cent of the total Canadian life insurance premia in 1895 and 40 per cent in 1914.

Britain and the United States have long taken an intense mutual interest in the methods by which they arrive at a defense policy and the two countries have frequently borrowed from each other's experience. In the last few years the British scene has been worthy of special attention because Britain has faced, in a peculiarly acute form, the universal military problem of limited resources and extensive commitments. Recently Conservative governments have tried to resolve this dilemma by plunging heavily for certain strategies and weapons: as a Minister of Defence told the Commons, "We have to pick the winners out of the stable."To set a crude financial ceiling and leave the selection of strategy and design of forces wholly to bargaining among the services is frequently regarded as an invitation to aimlessness. An obvious and tempting remedy is to compel the services to conform to a single, coherent and supposedly economical strategic doctrine. This solution carries its own risks of neglecting important aspects of the total problem and of discouraging flexible response to experience. Such a risk is especially serious in a field, such as military policy in peacetime, where there can rarely be conclusive practical tests of policy. Thus the more one searches for comprehensive strategic answers, the more important it is to enquire whether strategic ideas are debated in a market wide and open enough to offer every possible assurance of conceiving and evaluating alternatives. The recent course of British policy is of interest in this respect.

I. The interdecennial fluctuations of the Antwerp economy and their impact on Brabant and Flanders (1356–1619) -- I: The real significance of the dominance of Flanders and the difficulties of monetary recovery (1356–1405) -- II: The last flowering of the medieval economy (1406–1437) -- III: The failure of the medieval economy and the slow emergence of modern conditions (1438–1477) -- IV: Political chaos (1477–1492) -- V: Antwerp's emergence as the metropolis of Western Europe (c. 1493–1520) -- VI: The decisive years (1521–c. 1550) -- VII: The slowing down of commercial expansion offset by industrial growth (c. 1551–1572) -- VIII: Crisis in the Netherlands and the final phase of Antwerp's decline (1572–1587) -- Epilogue: The slow but courageous recovery (1588–1619) -- II. Secular trends and structural changes -- I: Agricultural trends in Brabant -- II: Trends in the trade of the Southern Netherlands and Europe -- III: Trends in financial development -- IV: Tendencies in industrial and social structure -- V: Typology of the crises and secular expansion -- VI: The significance of the price trends -- Conclusion.

The world is still a closed economy, but its regions and countries are becoming increasingly open. The trend, which has been manifested in both freer movement of goods and increased mobility of capital, has been stimulated by the dismantling of trade and exchange controls in Europe, the gradual erosion of the real burden of tariff protection, and the stability, unparalleled since 1914, of the exchange rates. The international economic climate has changed in the direction of financial integration and this has important implications for economic policy.My paper concerns the theoretical and practical implications of the increased mobility of capital. In order to present my conclusions in the simplest possible way, and to bring the implications for policy into sharpest relief, I assume the extreme degree of mobility that prevails when a country cannot maintain an interest rate different from the general level prevailing abroad. This assumption will overstate the case but it has the merit of posing a stereotype towards which international financial relations seem to be heading. At the same time it might be argued that the assumption is not far from the truth in those financial centres, of which Zurich, Amsterdam, and Brussels may be taken as examples, where the authorities already recognize their lessening ability to dominate money market conditions and insulate them from foreign influences. It should also have a high degree of relevance to a country like Canada whose financial markets are dominated to a great degree by the vast New York market.