A new thesis from a Columbia professor says our banking system would be way better off if we had started off as a French colony. Or if we weren't so populist. Or if we hadn't gotten so peeved over taxes 238 years ago and just stuck with the British Empire for a little longer. Or something.

Since 1790, the United States has suffered 16 banking crises. Canada has experienced zero — not even during the Great Depression….

When it became a British colony, the majority of Canada’s population was of French origin — and the French inhabitants hated the British government.

So to keep the colony firmly within the Empire, British policymakers steered toward a government structure that would limit the power of the French-majority while also giving Canada more and more self-government. The eventual result was a highly-centralized federal government which controlled economic policy making and had built-in buffers for banker interests against populist forces, the paper argues….

Populist democracies like the U.S., on the other hand, tend to create dysfunctional banking systems because a majority of citizens gain control over banking regulation that steers credit to themselves and to their friends at the expense of the citizens that are excluded from the banking system, he said….

“Whether societies have dysfunctional banking systems is really not a technical issue at all. It’s a political issue,” Mr. Calomiris said at the conference, introducing his premise as “we do know how to avoid dysfunctional banking but that we make political choices – you might even say consciously” not to have functional banking systems for most of the modern era in most countries of the world….

Backing up their argument: Only six countries – including Canada — have been crisis-free and at the same time have banking systems that provide abundant credit. Three of these – Singapore, Malta and Hong Kong – are small, island-bound city-states where the homogeneity of the population makes it politically difficult to create losers. The other three – Canada, Australia and New Zealand – all share histories of liberal democracy.

Why Canada Can Avoid Banking Crises and U.S. Can't [WSJ Real Time Economics blog]
The Political Foundations of Scarce and Unstable Credit by Charles W. Calomiris [Atlanta Fed]