Period 5: 1750-1900 - Financial
Reactions to Industrialization
Aim: How did financiers develop and
expand various financial institutions to
facilitate investments at all levels of
industrial production?
Financial Instruments- WHY did these expand?
• Insurance is something
• Stock market is the market
people buy to protect
that people use to trade (=
buy and sell) shares, which
themselves from losing
are like small pieces of the
money. People who buy
company that a person can
insurance pay what is called
own. The value of the share
a premium (monthly) and
depends on how many people
promise to be careful (called
want to buy it and how many
a "duty of care").
people are selling it.
• If many people want to buy a • In exchange for this, if
stock, the price will go up. If
something bad happens to
there are more sellers than
the person or thing that is
buyers, the price will go
insured, the company that
down.
sold the insurance will pay
money back.
Financial Instruments
• A gold standard is a monetary
system in which a unit of money
(such as the dollar) is equal to a
particular amount of gold
• The gold specie standard arose
from the widespread acceptance
of gold as currency. Various
commodities have been used as
money; typically, the one that
loses the least value over time
becomes the accepted form. The
use of gold as money began
thousands of years ago in Asia
Minor. Silver was used until the
British made gold its standard in
1700s.
• A limited liability company
(LLC) is a form of corporate
structures.
• Advantage of an LLC is that
its owners, have "limited
liability", meaning that,
under most circumstances,
they are not personally
liable for the debts and
liabilities of the LLC. For
example, if an LLC is forced
into bankruptcy, then the
members will not be
required to pay the LLC's
debts with their own money
Proliferation of Large-Scale Transnational Businesses
• Example: The United Fruit Company
was an American corporation that
traded in tropical fruit (primarily
bananas) grown on Central and South
American plantations and sold in the
United States and Europe. The company
was formed in 1899 from the merger of
a banana-trading concerns with Boston
Fruit Company. From early to mid-20th
century it came to control vast
territories and transportation networks
in Central America, the Caribbean coast
of Colombia, Ecuador, and the West
Indies
Large-Scale Transnational Businesses –
Example: HSBC
• HSBC - The Hongkong and
Shanghai Banking
Corporation Limited is a
bank established and
based in Hong Kong since
1865, when Hong Kong
was a colony of the British
Empire. The company's
business included all
aspects of global banking.
It is still the largest bank in
Hong Kong, and operates
branches and offices
throughout the Asia Pacific
region, and in other
countries around the
world.
Developments in Transportation and Communication
• Railroads
• Steamships
Developments in Transportation and CommunicationTelegraphs and Canals
• Telegraphs- Where? Effect? • Canals
• Effect?
Assessment
• Pick one of the new financial instruments, transnational
corporations or new transportation and communication
developments and write a multiple choice question.
When done have your neighbor answer your question.
• Stock Market
• Gold Standard
• Limited Liability Company
• Insurance
• Example of transnational corporation (United Fruit Co.
and HSBC)
• Railroads
• Canals
• Telegraphs
• Steamships