Business Elites, Political Connections, and Economic Entrenchment: Evidence from Belgium 1858-1909

Abstract

Pre-World War I Belgium was characterized by a strong concentration of power in the hands of a small elite with ties to business, banks, and politics. We find that political and upper class connections were widespread amongst listed firms, especially connections with the ruling political party. Connected firms had higher growth levels and a higher probability of survival. A shift in political power in 1870 significantly affected the value of connected firms. By 1905, it was bank-affiliated firms active in traditional industries, developed prior to 1870, that had more connections and accrued the largest benefits, which suggest economic entrenchment.

Keywords: business elites, political connections, nobility, economic entrenchment, resource dependency, first and second industrial revolution, pre-World War I Belgium

JEL Classification: G21, G28, G38, N23, N83, O16