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Free banking gone awry: the Australian banking crisis of 1893

Published online by Cambridge University Press:  19 February 2003

CHARLES R. HICKSON
Affiliation:
School of Management and Economics, Queen's University Belfast, Belfast, BT7 1NN
JOHN D. TURNER
Affiliation:
School of Management and Economics, Queen's University Belfast, Belfast, BT7 1NN

Abstract

Australia during the second half of the nineteenth century experimented with a free banking system. However, the severe banking crisis experienced in 1893 poses a difficulty for proponents of free banking as they argue that such systems should be free from instability. We suggest that the few regulations that Australian banks faced were either not credible or had minimal impact on bank prudential behaviour. Using data on individual banks and the overall banking system, we go on to suggest that the 1893 banking crisis was the natural outcome of an unregulated environment. We also examine the role played by the colonial governments during the crisis.

Durant la seconde moitié du dix-neuvième siècle, l'Australie fit l'expérience d'un régime de ‘free banking’. Cependant, la crise bancaire très sévère que connut l'Australie en 1893 pose un problème aux tenants du ‘free banking’ qui considèrent que de tels systèmes doivent être dépurvus d'instabilité. Nous estimons que les faibles réglementations auxquelles étaient soumises les banques australiennes ou bien n'étaient pas crédibles ou bien firent peu pour encourager un comportement bancaire prudent. Utilisant des données relatives aux banques individuelles et au système bancaire en général, nous considérons que la crise bancaire de 1893 fut la conséquence naturelle d'un environnement déréglementé. Nous examinons également le comportement des gouvernements coloniaux durant la crise.

In der zweiten Hälfte des neunzehnten Jahrhunderts experimentierte Australien mit einem freien Bankwesen. Aber die schwere Bankenkrise von 1893 bringt diejenigen in Schwierigkeiten, die argumentieren, freie Systeme seien frei von Instabilität. Wir argumentieren, dass die wenigen Regeln, denen sich australische Banken gegenüber sahen, entweder nicht glaubwürdig waren oder eine minimale Bedeutung für das gute kaufmännische Verhalten hatten. Wir untermauern unseren Vorschlag, dass die Bankenkrise von 1893 das natürliche Ergebnis einer unregulierten Umgebung war, anhand von Daten zu einzelnen Banken und dem gesamten Bankwesen. Wir untersuchen auch die Rolle der Kolonialregierung während der Krise.

Australia, durante la segunda mitad del siglo XIX experimentó con un sistema de banca libre. Sin embargo, la severa crisis bancaria experimentada en 1893 supuso una dificultad para los que proponían una banca libre, ya que éstos defendían que tales sistemas debían permanecer libres ante la inestabilidad. Nosotros sugerimos que las pocas regulaciones que los bancos australianos afrontaban, o no eran creibles o tenían un impacto mínimo sobre el comportamiento prudente bancario. Utilizando datos individuales sobre los bancos y sobre el sistema bancario, sugerimos que la crisis bancaria de 1893 fue el resultado natural de un entorno sin reglas. También examinamos el papel que jugaron los gobiernos coloniales durante la crisis.

Type
Research Article
Copyright
© 2002 Cambridge University Press

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