The investment bank of the Credit Mobilier type circumvented several bottlenecks simultaneously

The investment bank of the Credit Mobilier type circumvented several bottlenecks simultaneously. Above all, it succeeded in mobilizing large amounts of capital for industrial development in a form acceptable to French savers. Second, it overcame the shortage of creative entrepreneurs, by undertaking the entrepreneurial functions itself and reducing many of the actual managers of industrial firms to executors of policies. Third, it introduced a method of mobilizing investment which fitted smoothly into the prevailing patterns of economic organization in France: it permitted the persons who were supplying capital for, the financing of industrial development to perform rentier roles to which they were accustomed. Fourth, it maintained the symbol of financial supremacy over the growing power of industrial entrepreneurship by placing a credit institution in the position of industrial planner and developer and reducing the industrialists to a rank of secondary importance. Finally, it filled a painfully felt vacuum which had developed since the fall of Napoleon by performing a function which before had been performed by government. In doing all this it came into harsh conflict with the representatives of “old wealth,” the Rothschilds and the Lafittes, who had followed on the whole the traditional financial policies of being bankers to the government and profiting from the financing of commercial and exchange transactions. Although, as Gerschenkron points out, this conflict probably caused the ultimate downfall of the Credit Mobilier, the victory for the representatives of “old wealth” was worse than Pyrrhic. They gained because they became converted and adopted the methods of industrial investment financing which the Credit Mobilier had introduced.

Quelle / Link: Entrepreneurship and Capital Formation in France and Britain since 1700

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