Britain developed two distinctive banking systems in the eighteenth and early nineteenth centuries, one in Scotland and the other in England and Wales, whose relative merits were debated by contemporaries and are contested by historians. Rondo Cameron, in his comparative analysis of banking and economic development, had no doubt which was the more efficient and conducive to economic growth. Scotland, he claimed, had 'the strongest, most competitive, most efficient banking system of the times', in contrast to England where there was a sorry tale of missed opportunities. 'At almost every point at which banking and monetary policy might have been used constructively to promote economic growth', he complains, 'the authorities either made the wrong decision or took no action at all.'1 The result, if Cameron is to be believed, was that banks assisted the process of rapid industrialization in Scotland, whereas in England and Wales economic growth took place almost despite the banks.
There is a long tradition of criticism of the English banking system for neglecting the needs of industry, which argues that the City of London and the Bank of England were more interested in the needs of overseas lending and public finance. A contrast is often drawn with Germany, where banks were closely involved in the finance of industrial concerns in the later nineteenth century. But there is a danger of reading this criticism of British, and especially English, banks into the past. After all, the needs of industry for fixed capital were much less in the eighteenth and early nineteenth centuries than at later stages of industrialization, and the provision of circulating capital or credit could be much more crucial. British banks had less need to provide fixed capital than German banks; their main function was to meet short-term credit needs, improving the means of remittance and increasing the supply of money through the issue of notes. Consequently, British banks were 'credit banks' rather than industrial banks such as characterized Germany in the later nineteenth century. Arguably, British banks were appropriate to the needs of the economy in general and