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Dividends of Development: Securities Markets in the History of U.S. Capitalism, 1866–1922. By Mary A. O'Sullivan. Oxford: Oxford University Press, 2016. x + 384 pp. Figures, tables, bibliography, index. Cloth, $90.00. ISBN: 978-0-19-958444-4.
Mary O'Sullivan's book offers an ambitious, new history of U.S. securities markets, based on hitherto unexploited bank archives, contemporary newspapers, and data. If you are a financial historian, Wall Streeter, or policymaker and you think that your beliefs have a sound historical basis, you should buy this book. Although you will not agree with all of her interpretations, you will be challenged to rethink your views.
The first several chapters criticize historians of U.S. capital markets who have seen them as sophisticated and essential to the rise of American industry. Describing the markets at the outset of World War I, O'Sullivan does not hold back: “far from being the vibrant heart of US capitalism, [they] were an embarrassment to the most powerful economy in the world” (p. 3). In O'Sullivan's view, the first real market for U.S. industrials was not the New York Stock Exchange (NYSE), dominated by railroad securities, but London. Nevertheless, industrials did not take off there because of the poor performance of American companies. O'Sullivan is right to emphasize that the railroads had huge capital demands relative to industrial companies, which could rely on internal finance, but what is left out of this explanation is the role of regulation. American commercial banks played a small part in the capital markets as institutional investors because of limitations...