William Rubinstein
Capitalism, Culture, and Decline in Britain

All of these statistics appear to confiem what the economist Colin Clark termed 'Petty's Law'—after the seventeenth-century mathematician and scholar Sir William Petty, who in the 1670s observed that economies seem inevitably to move from those with primary production as their base to manufacturing to 'merchandise'—what we totally term the tertiary or service section since—in Petty's blunt words—'there is much more to be gained' in each new phase of the progression. The accuracy of this remarkable insight is fundamental, in my view, to understanding the evolution of the British economy and the inferences we ought to draw from its growth and change. Nevertheless, the British economy did exhibit some sui generis features. It clearly did not progress from largely agricultural to a manufacturing to a service economy in any simple or straightforward sense. Britain probably ceased to be a chiefly agricultural economy as early as the eighteenth century. By the mid-eighteenth century it was essentially a highly prosperous commercial economy, with an equally efficient (and unique) agricultural sector based upon primogeniture and the 'triple division' of land tenure, and totally lacking a peasantry in the continental sense. It had already acquired a world-wide Empire whose importance for Britain's economy was probably far greater than the importance of its second Empire during the late Victorian and Edwardian era. Its standard of living and per capita income were already then uniquely high for a European society and already as high as that enjoyed by a stable developing country experiencing industrialisation. Into this relatively satisfactory situation there appeared the twin hurricanes of industrialisation and unprecedented population growth, such that Britain's rate of economic expansion would be obliged to rise continuously and strongly merely to keep pace with its demographic explosion. But as we have seen, at no time did heavy industry and manufacturing actually become the predominant sectors of the economy: taking the very long-term view, Britain appears to have passed (very early) from an agricultural economy to a commercial one without as pronounced an industrial interval as many believe, although the evidence suggests that from the early nineteenth century until about 1860 manufacturing was certainly rising in importance at a disproportionate rate. For some, and certainly for many new men and families who entered the new manufacturing industries and processes, there was indeed 'much more to be gained' from them, although at no time was this the case collectively for the economy as a whole; similarly, for the vast new population produced by Britain's unprecedented demographic growth, there was more to be gained by working in a factory or a coal mine than by the alternatives—declining pre-industrial trades, emigration, or the workhouse.

Nevertheless, the most sophisticated and relevant recent research appears to show clearly that Britain's was never an industrial economy, but, since the early modern period, was always essentially a commercial or commercial/financial economy with a brief interruption of factory capitalism in the first half of the nineteenth century, whose importance has probably been exaggerated by the fact that it had the world's first modern factories, by the fact that it is highly visible, obvious, and unpleasant, and by the importance given to it by Marxism.

The third general point which might usefully be made about the divisions within British capitalism is the more qualitative one about the continuing prosperity and importance of the City and commercial/financial capitalism vis-a-vis manufacturing industry. Unlike British manufacturing industry—whose decline, at least before the 1970s, is in any case arguable—Britain's role as a financial centre experienced no equivalent decline, or one which was evidently due solely to the rise of rival centres. 'Since World War Two, the City has been able to overcome the decline of the British economy,' as Youssef Cassis, one of the leading historians of the City's banking elite, has put it. In 1860, Lancashire and the West Riding together constituted the pre-eminent industrial and manufacturing region in the world. By 1910, Lancashire and the West Riding (together with Glasgow and the West Midlands) clearly and unarguably had to share this distinction with the industrialised areas of the United States, centring on the Great Lakes, and with the Ruhr region in Germany. By 1990, manufacturing industry centred, in descending order of prominence, on the rim of east Asia, second in the industrial heartland of the continental EC, especially in Germany, and third in the older and newer manufacturing centres of the United States. Britain in general and Lancashire in particular were far back in the pack, although perhaps not so far back as some have suggested. In direct contrast to this progressive decline, while in 1860 the City of London was the pre-eminent financial centre of the world, and while in 1910 New York and, conceivably but not certainly, Berlin were second-running rivals to London's continuing pre-eminence, in 1990 London was still unarguably one of the three great financial centres of the world, along with New York and Tokyo. This role reflected both the failure of Britain's manufacturing and political declines to shake London's pre-eminence in a fundamental way and the successful entrepreneurial response, by the City, to the openings provided by European unity and the failure by New York to build on the lead it perhaps might have enjoyed following the Second World War. By 1981 it was estimated by one study that financial institutions situated in the City of London had 'at their disposal, the massive treasury of some £562 billion,' over which 'they exercise the power to dispose of as they please.' Banks accounted for £332 billion of this sum; insurance companies, building societies, pension funds, and trusts for the rest.

  The World was all before them, where to choose
Their place of rest, and Providence their guide:
They, hand in hand, with wand'ring steps and slow,

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Through Eden took their solitary way.