Development and Underdevelopment in the History of Economic Thought

Evolution of views on financial development

Sheptun Alla, Financial University under the Russian Federation Government

Human societies have passed the long historical way of economic development from the closed subsistence economy to a modern global financial economy. The increasing role of money and monetary institutions was an underlying factor in this process. (Ferguson, N. The Ascent of Money. 2008) This tendency had become obvious in the 19 century since money, credit and banks became a crucial factor in the industrial development of many countries. Russian economist N. Bunge in his “Theory of credit” (1852) had formulated three types of exchange, corresponding to the stages of its development: 1) direct commodity exchange, 2) money exchange, and 3) credit exchange. He noted that credit transactions are a necessary supplement to money circulation and form a precondition for the further development of social economy. His thinking was similar to that of German economist Bruno Hildebrand, who published a paper under the title "Natural economy, money economy and credit economy" (1864) and formulated the concept of “a credit economy” as the most advanced form of economic life. Karl Marx investigated the historical process of the gradual transformation of commodity production into money economy, which inevitably led to the emergence of a capitalist economy based on the circulation of capital, that was generating money income. (Capital. Vol.1, 1867). Rudolf Hilferding in his work “Finance Capital”(1910) showed that the faster finance capital was growing, the greater influence it exerted on the development of capitalist economy. Harold G. Moulton described the radical changes that were making the financial organization of society as a whole (The Financial Organization of Society. 1921). How to measure the impact of financial sector on the economy and society? R.W. Goldsmith suggested the indicators of financial structure and development.(R.W.Goldsmith. Financial Structure and Development, 1969) This paper will examine the evolution of views on the financial development of society.


Keywords: money, credit, financial sector, financial development

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