The thing is, without a functioning credit system, your investments are limited by your savings (and your savings by available investments, but if you are willing to accept a low enough return simple hoarding of physical goods constitutes an investment, so in practise the constraint is one-sided). In the monetary economy, investments are no longer limited by savings, because you can borrow against future cash flows (thus essentially allowing investment to crowd out consumption). The flip side is that savings no longer automatically create investment, because you can hoard claims over value instead of hoarding value.

So having a financial system is very probably necessary for serious and sustained industrial development. But having a reasonably strong state (capable of intervening both in the financial system and as investor of last resort when desired savings exceed desired real investment) is a prerequisite for having a financial system that is a net gain rather than a net drain.

- Jake

Friends come and go. Enemies accumulate.