(^262) THE WEALTH AND POVERTY OF NATIONS
lines of credit, extended in support of real commercial transactions
and covered by discountable commercial paper. But we also have ex-
amples of direct long-term funding and participation in company for-
mation: thus the Paris Rothschilds financed French railways and French
and Belgian coal mines and forges; the Vienna branch of the bank pro-
moted railways and invested in ironworks and coal mines in Habsburg
territory; and the Banque Seillière in Paris joined the merchant house
of Boigues to relaunch the ironworks at Le Creusot in 1836.^3
One should not underestimate the resourcefulness of these old trad-
ing houses. They could fairly smell profit and had built their fortunes
on opportunism and variety. To this we should add a flair for profitable
marital alliances, which could provide both funds and business con-
tacts.^4 Any effort to understand the Industrial Revolution in Europe
before the age of public joint-stock companies and stock exchanges
must take family and personal connections into account.
In good times, short-term and demand loans could turn into long
credit; in bad times, failure to renew such support could push a des-
perate company into liquidation. Much depended on the robustness
and loyalty of one's creditor, but even the most trusting and deter-
mined lender could find his hand forced as other banks began calling
in their loans. That is the trouble with a network system: when it is
strong, it is stronger than the sum of the parts; but when it weakens,
the weakness spreads easily from one link to the next.
This collective danger, and the need for long-term investment, led
to the invention of a new financial intermediary, the joint-stock in-
vestment bank, or as the French came to call it, the crédit mobilier. The
first inspiration for such institutions came from bureaucrats as well as
business interests: even before 1820, officials and merchants in Bavaria
were calling for a special bank to promote industry. The earliest work-
ing examples were quasipublic institutions—the Société Générale in
Brussels and the Seehandlung in Berlin. The new form gained consid-
erably in importance with the coming of the railway—a capital-eater if
ever there was one, both in itself and for the large-scale industrial en-
terprises it encouraged. So it was that in the 1830s the Société
Générale, until then a quiet commercial bank, turned into a develop-
ment bank; and that France spawned a gaggle of caisses—joint-stock
limited partnerships (commandites par actions) created to finance in-
dustry at medium and long term.* Why caisses"? The Bank of France
- French company law distinguished among (1) ordinary partnerships (sociétés en
nom collectif), where all partners had unlimited personal liability for the firm's debts;