1. Discussion of How Important Historically Were Financial Systems for Growth in the U.K., U.S., Germany, and Japan? Financial Structure and Economic Development Conference, World Bank Philip T. Hoffman, Caltech (pth@hss.caltech.edu)

2. Long run overview of relationship between growth and financial development Examines 4 developed countries banks, securities markets, governments, internal finance, and alternative sources over long run Bottom line Financial development matters But different financial structures Optimal structure may not matter much

3. Most will agree that financial development matters for growth Issue: is there an optimal financial structure and does it matter? Those who say yes would want control for endowments and history of growth Results might then fit trend toward large financial markets and banks But you have to control for political institutions All 4 cases have secure property rights and fairly open entry

4. What about those who, like authors, disagree? There was even more variety than paper suggests particularly in alternative sources of financing (often matching markets) These sources hard to get at but important German and Japanese sections do a good of suggesting as much Japan: coordinators help small joint stock firms raise money from investors

5. Another example of alternative finance: mortgages Left out except in German section But important for growth for infrastructure, housing, life cycle and even initial industrial finance And big too; circa 1900 mortgages 38% GDP US; bank loans only 24% GDP 12-25% or more GDP UK > 55% NNP Germany > 20% GDP France

6. Much mortgage finance came from alternative matching markets Difficult to estimate but circa 1900 Financial institutions hold only 36% of mortgages US Individuals hold 50 to 65% of British mortgages nearly 80% France > 32% Germany Alternative sources big: how do they fit into choice of optimal system?