Financial intermediaries and economic development: The Belgian case

Abstract

The role of financial intermediaries in economic development has been highlighted, most recently, by John Gurley and Edward Shaw, who contend that most economists consider only real variables in their analyses of economic development while neglecting those which are strictly financial in nature.¹ To remedy this neglect Gurley and Shaw have constructed a model which stresses the developmental aspects of financial intermediaries. This paper is an application of that model to Belgium in the 1830s. It first presents the model in skeletal form and then briefly describes the state of the Belgian economy during the 1830's. The focal point of the paper is an analysis of the activities of the Société Générale de Belgique and the Banque de Belgique, the first large-scale financial intermediaries to engage in development finance.