To buy and house machines, to secure raw materials, to hire labor and management, to transport and market the product, required capital. The capitalist—the provider or manager of capital—was also an ancient phenomenon; but as the demand for capital increased, the men who would take the risk of providing it rose in economic importance and political power. The guilds, still theoretically governing most European industry, resisted the capitalistic reorganization of production and distribution. But the guild system was predicated on handicrafts rather than machines; it was equipped to supply local needs rather than a national, much less an international, market; it could not meet the rising demands of armies, cities, and colonies; it was hampered by fidelity to traditional methods and norms; and it was deteriorating into a coterie of masters exploiting apprentices and journeymen. The capitalist was better able to organize quantity production and distant distribution; he had learned the subtle art of making money breed money; and he was favored by a Parliament eager for industrial capacity to supply far-ranging commerce and wars.
As factories and capitalism spread, the relation of the worker to his work was transformed. He no longer owned the tools of his trade, nor did he fix the hours and conditions of his toil. He had only a minor share in determining the rate of his earnings or the quality of his product. His shop was no longer the vestibule of his home; his industry was no longer a part of his family life. His work was no longer the proud fashioning of an article through all its stages; it became, by the division of labor that would so impress Adam Smith, the impersonal and tedious repetition of some part of a process whose finished product no longer expressed his artistry; he ceased to be an artisan, and became a “hand.” His wages were set by the hunger of men competing for jobs against women and children. As a miner he received, on the average, one shilling sixpence a day; as a building laborer, two shillings; as a plumber, three shillings; these rates varied little between 1700 and 1770.13 A male weaver, toward 1750, was paid six shillings per week; a woman weaver, five shillings sixpence; a child, two shillings sixpence. Women spinners received from two to five shillings per week; girls six to twelve years old earned one shilling to one shilling sixpence.14 Prices, however, were low, and remained stable till 1760.15 Sometimes an allowance was added for bread and beer at work, and most miners received free coal.
Employers contended that their workmen merited no more, being addicted to laziness, drink, unreliability, and irreligion. The only way to make workers temperate and industrious, argued an employer (1739), was to “lay them under the necessity of laboring all the time they can spare from rest and sleep in order to procure the common necessaries of life.”16 “The poor,” said a writer in 1714, “have nothing to stir them up to be serviceable but their wants, which it is prudence to relieve, but folly to cure.”17 Eleven to thirteen hours constituted the normal working day, six days a week; the long stretch was relieved by an hour and a half for meals; but those who lingered unduly over their meals forfeited a quarter of a day’s pay.18 Employers complained that their workmen stopped work to attend fairs, prize fights, hangings, or wakes. To protect themselves against these and other irregularities the employers liked to have a pool of unemployed workers in the neighborhood, upon which they could draw in emergency or in times of quickened demand.19 When times were slack, workers could be laid off and left to live on the credit of the local tradesmen.
Slowly a dependent proletariat formed in the towns. An old law of Edward VI forbade working-class combinations, and this prohibition was renewed by Parliament in 1720. But the journeymen—i.e., day laborers-continued to organize, and appealed to Parliament for better wages; these journeymen’s associations—not the guilds—became the forerunners of the trade-union movement that took form in England at the end of the eighteenth century. In 1756, on an appeal from the textile workers of Gloucestershire, the House of Commons ordered the justices of the peace to maintain the legal minimum wage, and to prevent wage cutting in the industry; but a year later this order was withdrawn, and Parliament adopted the policy of letting the supply and demand of labor fix wages.20 The age of “free enterprise” and laissez-faire had begun.
5. Transport and Trade
The development of the economy depended upon improvements in communication and transport. England had an advantage in her coastline and rivers; half the population lived within reasonable access to the sea, and could use it to carry goods; rivers ran far inland, providing natural waterways. But the condition of England’s roads was a constant sore in English life. Their soil was soft, their ruts were hard and deep in winter, many of them were turned into streams by spring or summer rains, or into sinks of mud so tenacious that carriages had to be exhumed by supplementary teams of horses or oxen, and foot travelers had to take to neighboring fields or woods. Only after Bonnie Prince Charlie had led his rebel Scots as far south as Derby in 1745, because the state of the highways thwarted the royal forces sent against him, did the government undertake, for military purposes, to build a system of turnpikes “proper for the passage of troops, horses, and carriages at all times of the year”21 (1751). Robbers, however, still haunted the roads, and the cost of transport was high.
Those who could afford it traveled on horseback or by private carriage. On long trips they could hire fresh horses at “posts” (i.e., positions) en route; there were such “post houses” all over Western Europe. The word post came to be applied to the transmission of mail because at such points the mail carriers could deliver or pick up mail and change horses; by this system they could cover 120 miles per day. Even so, Chesterfield complained (1749) that “our letters go, at best, so irregularly, and so often miscarry totally.”22 He thought it “uncommon diligence” that a letter from Verona reached London in eight days. Most travel was by stagecoach, drawn by two or four horses with driver and armed guard on the outside, and six passengers swaying within. Coaches left London on a regular schedule two or three mornings a week for the major towns of south England; they averaged seven miles an hour, and took six days between London and Newcastle.
Hampered by roads, internal trade remained picturesquely primitive. The wholesale merchant usually accompanied the pack horses that carried his goods from town to town; and peddlers hawked their wares from house to house. Shops were distinguished from dwellings chiefly by colorful signs; goods were kept inside, and ordinarily there was no window display. Almost every store was a general store; a “haberdasher” sold clothing, drugs, and ironware; the grocer was so called because he sold in gross; the “grocer” Henry Coward sold everything from sugar to nails. Each town had a market day, when, the skies permitting, merchants would expose samples of their wares. But the great centers of domestic commerce were the annual fairs held in London, Lynn, Boston, Gainsborough, Beverley, and, above all, Stourbridge. There, every August and September, a veritable city took form, with its own administration, police, and courts; nearly all products of English industry could be found there, and manufacturers from all over the island met to compare prices, qualities, and woes.
Foreign commerce was expanding, for Britain ruled the waves. Exports more than doubled in value and quantity in the first half of the century; tonnage of vessels leaving English ports rose from 317,000 in 1700 to 661,000 in 1751 to 1,405,000 in 1787.23 Liverpool doubled its size and docks every twenty years. Imports came from a hundred lands to tickle the fancies or stomachs of the rich, or to adorn milady’s dressing table with captivating toiletries. The East India Company made such profits by buying cheap in India and selling dear in Europe that it lured fifteen dukes or earls, twelve countesses, eighty-two knights, and twenty-six clergymen and physicians into the roster of its shareholders.24 The aristocracy did not in England turn up its nose at commerce as it did in France, but helped to finance it, and shared in its prosperity. Middle-class Voltaire was delighted to find English nobles taking an active interest in trade. “It is only because the English have taken to trade,” he told France in 1734, “that London has outgrown Paris both as to size a
nd as to the number of its inhabitants, and that England can have two hundred men-of-war and subsidize allied kings.”25
The great merchants were now rivaling the old landowning aristocracy in riches and power, determining foreign relations, fomenting and financing wars for markets, resources, and trade routes. The merchants who managed the English trade in sugar, tobacco, and slaves controlled the life of Bristol; the shippers ruled Liverpool, the coal owners dominated Newcastle. The wealth of the merchant Sir Josiah Child, who held £50,000 of stock in the East India Company, equaled that of many lords; his gardens at Wanstead were among the famous sights of England. “In most countries of Europe,” wrote Hume in 1748, “family—i.e., hereditary—riches, marked with titles and symbols from the sovereign, are the chief source of distinction. In England more regard is paid to present opulence.”26 A considerable osmosis went on between the upper and middle classes: the daughters of rich merchants married the sons of the landed nobility, the sons of merchants bought estates from impoverished aristocrats, the gentry went into trade and law and administration. Aristocracy was passing into plutocracy; money was replacing birth as a title to power.
6. Money
European bankers were now providing nearly all financial services. They received deposits, protected these from fire and theft, arranged payments between depositors by merely transferring from the account of one to that of another, and issued bank notes redeemable in gold or silver on demand. Since not all noteholders were expected to ask for such redemption at the same time, the banks could issue notes up to five or ten times the value of their mutual reserves. The circulation of money, so multiplied, provided additional capital for business enterprise, and shared in expanding the European economy. Bankers stimulated industry by lending money on the security of land, buildings, materials, or simply on trust in a person’s responsibility. Commerce was eased with letters of exchange or credit, which enabled capital to travel by mere transfer of bank paper, even across hostile frontiers.
Joint-stock companies were formed in England, as in Holland, Italy, and France. Promoters—then called “projecters”—organized industrial or commercial associations, issued shares, and promised dividends; stock or share certificates could be transferred from one person to another; and for that purpose a stock exchange had been established in London in 1698. The early eighteenth century saw a brisk development of speculation in company shares, with “stock jobbers” who manipulated the rise and fall of market values. Defoe in 1719 described such a manipulator:
If Sir Josiah Child had a mind to buy, the first thing he did was to commission his brokers to look sour, shake their heads, suggest bad news from India; … and perhaps they would actually sell for ten, perhaps twenty, thousand pound. Immediately the Exchange … was full of sellers; nobody would buy a shilling, till perhaps the stock would fall six, seven, eight, ten per cent, sometimes more. Then the cunning jobber had another set of them employed … to buy, but with privacy and caution, till by selling ten thousand pound at four or five per cent loss, he would buy a hundred thousand pound stock at ten or twelve per cent under price; and in a few weeks, by just the contrary method, set them all a-buying, and then sell them their own stock again at ten or twelve per cent profit.27
Almost as soon as stock exchanges opened, the eagerness of the public for unearned increment raised waves of speculation and deflation. The inflation and collapse of the “South Sea Bubble” in England followed in unusual concord the rise and fall of John Law’s “Mississippi Bubble” in France. Sensitive to complaints by Bolingbroke, Swift, and others that the national debt—£52,000,000 in 1714—laid upon the state a ruinous annual charge of £ 3,-500,000 interest, the government conceived a plan to transfer £31,000,000 of the debt to the South Sea Company. This had been formed in 1711 with a grant of monopoly in English trade with Spanish colonies in America and the Pacific isles. The holders of government notes were invited to exchange them for stock in the company. King George I became its governor and every effort was made to spread the belief that its monopoly charter promised high profits. The apparent success of Law’s “System” in contemporary France infected England with a similar fever of speculation. Within six days of the company’s offer to accept government notes in payment for shares, two thirds of the noteholders accepted the proposal. Many others bought shares, which in a month rose from £77 to £123.5 (1719). To ensure continued governmental co-operation, the company directors voted large gifts of stock to members of the ministry, and to two mistresses of the King.28 Robert Walpole, not yet minister, warned the House of Commons against the scheme as “pernicious … stockjobbing”; the project, he said, was “to raise artificially the value of the stock, by exciting and keeping up a general infatuation, and by promising dividends out of funds which would not be adequate to the purpose.” He predicted, with remarkable accuracy, that the project would fail, and that if it were allowed to involve the general public its failure would entail a general and dangerous discontent.29 He argued that at least some limit should be placed upon the rise of the company’s stock. The House refused to heed his warning. On April 7, 1720, both houses of Parliament approved the proposals of the company.
On April 12 the company issued new stock at £ 300 a share; this was subscribed for at once. On April 21, flush with the government’s payment of interest on the government notes now held by the company, it announced that it would pay a summer dividend of ten per cent. It took advantage of the enthusiasm aroused by this announcement to float a further issue of shares at £400 (April 23); this was taken up in a few hours. The rush to purchase shares raised their price to £550 on May 28, and to £890 on June 2; in July a new issue was sold at £ 1,000 a share. The whole fashionable world came to subscribe: dukes, clergymen, politicians, musicians, poets; Exchange Alley became the scene of such excited competition in buying as could be found only in the Rue Quincampoix in Paris at almost the same time; the nature of man revealed itself across frontiers. Shares were bargained for in taverns, coffeehouses, and milliners’ shops; each night men and women calculated how rich they had become, and how much richer they might be if they had bought sooner or more.
Public money was so eager for speculation that eighty-six minor issues were floated. Stock was sold in companies formed to transmute metals into silver, to erect hospitals for bastard children, to extract oil from radishes, to create perpetual motion, to import jackasses from Spain. One promoter announced “a company for carrying on an undertaking of great advantage, but nobody to know what it is” until later; he received a thousand subscriptions of £ 2 each by midday, and disappeared in the afternoon.30
The excesses of these smaller “bubbles” (for so the time called them) began the reaction against the South Sea enterprise. Walpole and others renewed their warnings and sold their shares. On June 11 the King outlawed all stock issues except by companies licensed by Parliament. Most of the lesser ventures soon collapsed, and their failure cooled the fever of speculation. Word spread that the Spanish government was severely restricting the trade of the company in the American settlements. In July news came that Law’s “Mississippi Bubble” had burst in Paris. Sir John Blount and other directors of the South Sea Company secretly sold their shares at great profit. During all of August the stock declined, until on September 2 it was quoted at £700.
The rush to sell now became a stampede; the approaches to Exchange Alley were crowded to suffocation. The shares fell to £570, to £400, to £150, to £135 (September 29). Hundreds of English families lost their savings in the crash. Stories of ruin and suicide ran the rounds.31 Banks that had lent money on the security of the South Sea Company share certificates went into bankruptcy. Public meetings throughout England demanded the punishment of the directors, but absolved the public of vanity and greed. The King hurried back from Hanover, and summoned Parliament. The treasurer of the company fled to France, taking with him many of the records that would have incriminated the directors. In January, 1721, a parliamentary committee, examining t
he books of the company, found “a scene of iniquity and corruption” 32 startling even in that age when legislation by corruption of Parliament seemed part of the constitution of England. Apparently the directors had spent £574,000 in bribing leaders of the government.
Some members of Parliament called for drastic penalties; one proposed that the guilty directors should be sewn in a sack and thrown alive into the Thames.33 The debate rose to such warmth that members challenged one another to duels; one member suffered a hypertension crisis, and died the next day. Directors and government ministers were summoned to trial before the House. John Aislabie, chancellor of the exchequer, was sentenced to the Tower; the estates of the directors—including Edward Gibbon, grandfather of the historian—were confiscated, leaving them some ten per cent of their fortunes. It was noted that Sir John Blount, who had been a prime organizer of the company, and among the first to sell his shares, was a man “of a most religious deportment,” who had “constantly declaimed against the thievery and corruption of the age” and the avarice of the rich.34
Robert Walpole, whose predictions had been justified by the event, counseled moderation in the vengefulness of the reaction, and mitigated the collapse of the company by persuading the Bank of England and the East India Company to absorb some £18,000,000 of the troubled stock. Sufficient reserves were found in the South Sea Company to allow an early payment of thirty-three per cent to its shareholders. Shorn of its privileges and its glamour, but making money on the sale of slaves, the company continued to exist, in waning vitality, till 1853.