AI - ChatGPT - Grok: With Basel Committee’s risk weighted bank capital/equity requirements, would the “developed world” have developed?
"The other side of the coin of a credit that was never granted, in order to reduce the vulnerability of the financial system, could very well be the loss of a unique opportunity for growth. In this sense, I put forward the possibility that the developed countries might not have developed as fast, or even at all, had they been regulated by a Basel [Committee]."
Now, decades later, here's artificial intelligence’s opinion on that:
I asked ChatGPT: In 200 words or less please opine on:
"If instead of 1988, one year before the fall of the Berlin Wall, Basel Committee risk weighted bank capital/equity requirements had been imposed 1788, one year before the French Revolution, would what’s known as the developed world, have developed?"
ChatGPT answered:
"Had Basel-style risk-weighted bank capital rules been imposed in 1788, the “developed world” as we know it is unlikely to have developed.
Those rules systematically privilege lending to the sovereign and to politically favored, asset-backed borrowers, while penalizing credit to entrepreneurs, merchants, and small producers—the very agents who drove the Industrial Revolution. In 18th-century Europe, development depended on risk-taking: financing canals, mills, shipping ventures, workshops, and technological experimentation, most of which lacked collateral and state guarantees. Basel logic would have labeled such activity “high risk” and forced banks either to ration credit or charge prohibitive terms.
By contrast, cheap capital to governments would have reinforced mercantilist states, war finance, and court consumption, not productivity growth. Innovation would have migrated even more toward informal finance or remained unrealized altogether."
I said: Thanks!
It replied: You’re very welcome. Glad it was useful.
I asked Grok: In 200 words or less please opine on:
"If instead of 1988, one year before the fall of the Berlin Wall, Basel Committee risk weighted bank capital/equity requirements had been imposed 1788, one year before the French Revolution, would what’s known as the developed world, have developed?"
Grok answered:
"No, the developed world likely wouldn't have developed as rapidly or extensively. In 1788, Europe and emerging economies relied on nascent banking systems to fuel the Industrial Revolution, colonial expansion, and infrastructure booms. Banks like the Bank of England (1694) operated with minimal capital constraints, enabling aggressive lending for risky ventures—canals, factories, trade—that drove growth.
Imposing Basel I-style risk-weighted capital requirements (e.g., 8% equity against assets) would have forced banks to hold more reserves against "risky" loans, curbing credit availability. Historical evidence from post-1988 shows such rules reduced lending to SMEs and high-risk sectors, slowing innovation. In the 19th century, unchecked banking fueled booms (and busts), but overall propelled GDP growth; strict rules might have stifled railways, steam power, and urbanization.
While preventing some crises (e.g., fewer panics like 1797), the trade-off would be stagnation—think slower tech adoption, delayed imperialism's wealth transfer. Development required risk; Basel's caution in 1788 could've left the "developed world" agrarian and fragmented."
I said: Thanks.
It replied: You're welcome! Glad you enjoyed the take.
Note: The answers are copied exactly from those given to me by ChatGPT and Grok.
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