Role of banks in the economic development of the Polish lands from 1870 to 1913

Abstract

The development of the Polish economy in the nineteenth century was influenced by a number of interacting factors: physical capital, human and social capital, the quality of institutions, the policies of the partitioning states, their macroeconomic situation, and the banking system. This study analyses the role of banking institutions in supporting the development of the economy of the Polish lands in the years 1870–1913. Their primary role was to concentrate savings and redirect them to economic entities. Some banks were involved in financing investments and supporting the establishment of new enterprises. The article identifies the directions of the relationship between economic processes and the development of banks: were changes in the economy primary to the development of banking, or did banks initiate processes of change in the real economy? The conclusions of the analysis are that the banking system only began to play a clearer role in supporting the development of the economy from the 1890s onwards. Prior to that, the reach of the financial sector was relatively shallow, the scarcity of capital being one of the barriers to the development of the economy. From the 1890s onwards, banks began to become involved in the process of industrialisation by becoming involved in supporting the establishment of businesses, while some banks began to evolve towards the universal bank model. Credit cooperatives played an important role in the development of the local economy (farms and the small business sector).