Please note, due to essential maintenance online transactions will not be possible between 09:00 and 13:00 BST, on Monday 20th January 2020 (04:00-08:00 EDT). We apologise for any inconvenience.
By the mid-1850s the City of London had established itself as the most important financial centre in the world, though it continued to face rivalry from Amsterdam and, especially, Paris. It also remained a very important commercial centre, being the world's largest port, benefiting from Britain's dominant position in international trade. Domestically, the railways and the telegraph permitted those in London to receive and transmit news and orders to and from all parts of the kingdom, facilitating the integration of markets to a degree never before attained. Generally, fundamental forces were working to enhance the importance of the City in the country's external and internal commercial, financial and business affairs. Banking, for example, was increasingly conducted through branches directed from London head offices. Tangible evidence of the impact made by London on the entire British population, rather than those living within its vicinity or the small aristocratic elite who were regular visitors, was the Great Exhibition of 1851. This received a huge number of visitors from across the country, as well as generating vast publicity. Local enterprise and local business did continue to flourish, as with the continuing importance of locally-run banks and stock exchanges, but they were increasingly responsive to a lead from London. In terms of culture this could have a number of repercussions. On the one hand it might generate an admiration for the City as the most powerful and successful commercial and financial centre in the world. On the other hand the growing influence of the City over the nation's well being might stimulate resentment because the loss of local autonomy. Both reactions were possible and so it is important to determine which came to dominate. Conversely, it is possible that neither of these fundamental changes in the City's international and domestic role were responsible for its place in contemporary culture. Instead, it could be events that determined attitudes. In particular, this period saw the spread of joint stock enterprise away from the likes of railways into other types of business, such as mining and manufacturing, in response to the passing of the Limited Liability Acts.
The City of London has been one of the leading financial centres in the world for over 300 years, playing an essential role in the mobilization and distribution of credit and capital. Over that time the business conducted within its confines has generated vast wealth for the British people and provided an essential service for successive British governments through the ability to borrow and tax. For those reasons alone it might be assumed that the City would be regarded as the brightest jewel in the British crown, treasured by all because of the riches it generated. Such a view, though, runs contrary to both the culture of envy, created by the sight of the large fortunes generated in the City, and a fundamental mistrust of money that was made through manipulating money itself rather than productive toil. As the inaugural issue of a magazine devoted to wealth observed in 2008, ‘There is a widespread belief in a distinction between the deserving and the undeserving rich. And it goes far beyond the ancient debate over egalitarianism or socialism. Even for those who are happy to accept capitalism, and the idea that some will be richer than others, there is still a sense that some of the wealthy do not deserve their status’. Among those perceived as the least deserving were bankers who, in the words of a respected BBC journalist in 2008, ‘Were making obscene fortunes for themselves by gambling with other people's money’. This meant that the City of London, as a financial centre, had major barriers to overcome if it was to achieve a favourable status within British society. Compounding this problem of gaining acceptance was the fact that much of the business undertaken in the City was of an international nature and was conducted by people who were seen to be foreign, either because of race or religion. This gave them the status of outsiders, erecting another barrier between those in the City and the rest of society.
In the years before the First World War the City of London reached its peak of global influence. Located in this one small district of the metropolis of London were some of the most important commercial markets in the world, with the most influential financial institutions in the shape of the Bank of England, Lloyds and the London Stock Exchange, and many of the world's largest banking and insurance companies. In addition, it was from the City of London that international trade, finance and shipping was organized, facilitating the global distribution of money and merchandise. However, most of these varied activities, though widely recognized and admired, only dimly impinged upon the public imagination, being conducted in a dull and routine manner and of a highly technical nature. In contrast, it was events on the Stock Exchange that continued to absorb most public interest, with the rise and fall of prices being attributed to the manipulation of insiders, especially in mining and oil companies. The fortunes of individual companies also attracted attention, especially newly promoted ones, as any sudden bankruptcy, bringing ruin to investors, could be laid at the feet of a financial genius or scheming fraudster. Thus, along with the brokers and jobbers who daily bought and sold shares, it was company promoters and their constant stream of offerings that helped identify the City of London in the public mind. The period also witnessed both a speculative mania, centring on rubber plantation companies, and a run on the Birkbeck Bank in 1910 followed by its collapse in 1911. There was even a scandal in 1912 over accusations of insider trading, involving prominent members of the Liberal government, Sir Herbert Samuel and Sir Rufus Isaacs, and the chairman of the Marconi Company, Godfrey Isaacs, who was the brother of Sir Rufus. Above all, the public were especially fascinated by the personification of the City in the shape of certain flamboyant and newsworthy financiers that appeared to thrive in its precincts, with again many of the most prominent being Jewish or foreign or both, such as Barney Barnato, Ernest Cassel, and Saemy Japhet. This raises the question of which was more important in determining the place of the City in British culture.
A speculative bubble had been building up in London throughout the early 1890s. The dramatic reduction in external investment opportunities, with the crises in Australia, Argentina and the USA, had driven down British interest rates. This had fuelled a boom in house building and railway construction, as well as the conversion of established businesses into the joint stock form so that their shares could be sold to the public. Allied to the absence of borrowing by the British government the result was a period of low returns for investors and an increased willingness to look for new opportunities. Into this vacuum came the gold discoveries in South Africa and western Australia. Of all the metals in existence gold possessed a quality that no other had. This was its fixed price under the Gold Standard. Numerous currencies including the pound sterling had their value determined by a specific amount of gold for which they could be exchanged. Furthermore, the Bank of England was obliged to buy all gold offered to it at a fixed price. Thus, if gold could be found, mined, refined and then shipped to London it could be sold at a price known in advance. Given the discovery of new and large gold deposits in areas that were becoming accessible because of the railway, it appeared but a simple task of connecting supply and demand and profiting from the difference in price. Presented with such an opportunity investors quickly came to believe that every potential gold discovery offered a path to incalculable wealth. Gold mining appeared to possess the certainty of return that came with railways, because of their provision of a basic service, and the prospects of huge capital gain as the uncertainty of exploration gave way to the certainty of production. With gold there was no risk that the price would fall as output rose, as in the case of other metals and coal, for the demand was infinite and the price guaranteed.
From at least the seventeenth century onwards the City of London was widely regarded as a place where a man and his money were easily parted and usually by the most villainous means imaginable. The place it occupied within contemporary culture was one that varied from amazement, because of its size and population, to distrust as a result of the activities conducted there. Such a view was driven both by the longstanding Christian antipathy towards usury, which inevitably brought any financial centre into disrepute, and the general suspicion of the middleman in any transaction, as the differential price led both buyer and seller to believe they had been cheated. In addition, there were specific events in the City of London that fuelled public hostility. The speculative boom in 1720, with the Mississippi Bubble in Paris and the South Sea Bubble in London, convinced many that there was something rotten associated with the rise and fall of stock and share prices, and the promotion of joint stock companies. Those events continued to colour popular perceptions from then on, and certainly way into the nineteenth century. At the time of another speculative boom in 1864 the British historical novelist, W. H. Ainsworth, thought it worthwhile to write a story based around John Law, the great Scottish financier whose schemes lay at the heart of the events in Paris. However, other aspects of the City's activities did experience a slow rehabilitation during the course of the eighteenth century, which was evident by the beginning of the nineteenth. Increasingly the City merchant was regarded by contemporaries as being an honourable person, having accumulated wealth through legitimate means. The business being conducted by merchants had relevance to most people, as they ranged from retailing through wholesaling to international trade, and so was accepted as necessary. If that business was then conducted in such a way as permitted the slow accumulation of a fortune, without the use of practices that appeared to cheat suppliers and customers, then the successful merchant could command the respect of their peers.
After the speculative boom of the mid-1890s, which had focused the public's attention on the City, the early twentieth century brought in a less eventful period. Though the stock market continued to rise and fall and companies continued to be promoted and to fail, there was nothing akin to the craze for gold that had gripped the nation in 1895. Instead, the City of London continued to build up its position as the most important financial and commercial centre in the world. Turner, writing in 1902, claimed that
London is the chief abode of the great god Money, whose throne, visible to all men, is in the heart of the City. From Queen Street and Guildhall to Gracechurch Street and Bishopsgate, from London Bridge to London Wall, lies a region in which the temples of the god cluster together in thick profusion. From here the greatest and the most numerous of his activities are conducted; for London, in spite of the rivalry of New York and the growing importance of Paris and Berlin as money centres, is still paramount as a headquarters of exchange and banking.
On the commercial front, Beavan, writing in 1901, saw the City as ‘…the Mart of Nations’, with Mincing Lane at its heart. This very range and extent of the City's activities defied easy generalization, beyond such statements about its role as a money market or a commodity market. Similarly, the complexity of the functions performed on behalf of global trade and finance made it difficult for the non-specialist to understand what the City actually did. Many of the familiar landmarks of the past, such as the private banks, had virtually disappeared, leaving the City inhabited by a vast mass of people and businesses carrying out tasks unintelligible to the lay person. Also, there was now little reason to visit the City, beyond St Paul's Cathedral, unless on business, for it had ceased to possess any retail activities apart from those meeting the needs of those who worked there.
From 1870 onwards the City of London was judged by contemporaries more and more on the functions it performed. This meant that its position in British culture increasingly relied upon which of these functions caught the public's imagination at any particular moment rather than the actual range and importance of the activities conducted within its boundaries. During the years after 1870 the City of London consolidated its position as the dominant financial centre in Britain. Domestically, London-based joint stock banks extended their influence throughout England and Wales by opening ever more branches and taking over provincial banks. Provincial banks followed the same route by taking over London banks and then gradually transferring the centre of their operations to the City. The result was a nationwide branch banking system in England and Wales that was capable of withstanding any financial crises or monetary disturbance. Increasingly, all the City's joint stock banks were seen to possess the stability that was once the exclusive privilege of the Bank of England. City-based joint stock banking became a highly disciplined service conducted according to strict principles and careful monitoring. The last collapse of a major British bank in the nineteenth century took place in 1878 and concerned a Scottish bank, the City of Glasgow Bank, rather than one in the City. This was highly symbolic as Scotland had long been home to best practice in banking and possessed a reputation for thrift and prudence. At the same time the railway and the telegraph, with the telephone appearing from 1879, helped to integrate British financial and commercial markets so that all looked instantly to London for prices and conditions. Again, such activities became routine as bankers, brokers and merchants throughout the country were in constant contact with each other. Finally, joint stock enterprise had passed through a learning curve, making it easier for financiers in the City to provide a realistic valuation of the businesses created. It was now evident that joint stock would not sweep all before it but it was also clear that corporate enterprise could make a real contribution in certain areas of the economy, as well as providing a safe and remunerative investment.
The City of London grew, flourished and changed throughout the Victorian and Edwardian periods. It lost its residential population to other parts of London and the suburbs, and ceased to be a manufacturing centre as those activities relocated to areas where land and labour was cheaper. This did not mean that the City became an exclusively financial district by the First World War, for commercial and shipping business not only remained but experienced absolute growth, as did the vast range of ancillary services such as accountancy and law along with new ones like consulting engineers, loss adjusters and advertising agents. Though contemporaries were aware of the continuing presence of so many diverse groups and activities within the City of London, the nature of the work that most did, and the lack of contact, meant that they increasingly passed unnoticed. The result was to focus public attention on those aspects of the City that did make an impact on the public. Even here, change was taking place. Whereas in the mid-nineteenth century banking crises and insurance company collapses continued to occur, these had both become something of a rarity by the end. In each case both banking and insurance had become dominated by large and well-capitalized joint stock companies that delivered regular returns to their shareholders while safeguarding deposits and paying out on their policies. This had the effect of reducing their activities to ones that the public took for granted and so did not require comment. As a consequence, the public's awareness of the City became increasingly confined to a very narrow range of its overall activities. This awareness was continuously enhanced by growing literacy and ease of communication. It became possible to know, at a glance, the current state of the stock market or the latest speculative fad, rather than such information being confined to a small elite located in London. Anything associated with speculation on the Stock Exchange and the promotion of joint stock companies generated public interest because of the constant fluctuations in prices and the making and losing of fortunes. Inevitably, it was the most spectacular of these that attracted the greatest interest.
By the late 1880s the City was no longer seen as a place where swindlers could operate without redress, where violent fluctuations in the stock market could ruin investors overnight, or where sudden banking collapses could wipe out a person's entire savings. Though the City remained a place viewed with suspicion by many because of its connection with speculation and the world of money dealing, it did appear to have assumed an air of respectability and reliability among the population at large. However, that reputation was to be severely tested in the early 1890s in a series of financial and banking collapses at home and abroad. The most notable event that originated domestically was the collapse of the Liberator Building Society. This was a bank that had expanded rapidly through the strategy of continuously revaluing its portfolio of mortgaged property so as to justify ever more ambitious lending, and by paying generous rates of interest to small savers. Eventually the whole edifice collapsed in 1892 exposing massive fraud undertaken by its chairman, Jabez Balfour, who then fled abroad so as to escape prosecution. Important as the case of the Liberator Building Society was, in terms of the adverse publicity it created for the City, much more significant were events that took place abroad, such was the global reach of the City of London and the worldwide interests of British investors. Numbered among the most spectacular of these was the Baring Crisis of 1890. This crisis centred on the inability of borrowers in Argentina to service their debts, after a period of rapid expansion financed by selling securities in London to British investors through Barings, one of the City's largest and oldest merchant banks. Not only was Barings responsible for paying interest on these securities, as agent for the borrowers in Argentina, but it also had substantial holdings on its own account. The temporary suspension of interest payments on Argentinian debt and the near collapse of Barings bank helped to undermine confidence in all Latin American securities.
This book is the product of obsession and rejection and its writing has been akin to an exorcism! The obsession has been to try and discover, over the course of the last twenty-five years, how the City of London was seen by those who lived before 1914. The rejection was the hostility this faced from funding bodies, publishers and fellow academics. On quite a number of occasions I was tempted to abandon the task, given the other demands on my time, but I did not. Conversation with non-academics convinced me that there was a genuine interest in the results of my research. The project thus grew and grew until it became a book-length monograph. It is for that reason I am so grateful to Pickering and Chatto, and Robert Wright, the editor of their series on Financial History, for their advice and making my findings available. I am also grateful to all those who have suggested novels and novelists I might read, in the hope that they might deal with the City of London. In this I would single out the bookseller Richard Beaton for his suggestions. Many valuable finds resulted, and even when none were made, the voyage of discovery has been an enjoyable one. The depth and diversity of the culture of the Victorian and Edwardian eras has been an astonishment to me, and all I have been able to do is skim the surface. I would also like to thank Francis Pritchard and Paul Lee for help they provided during the final production stages of this book.
How my book will be received remains an unknown as it is unlike anything I have ever produced before. Though its theme is the City of London as a financial and commercial centre, it is not a factual account. Though it relies heavily on novels it is not an exercise in literary criticism. Though it attempts to identify ideas and images it is not a cultural history.
Email your librarian or administrator to recommend adding this to your organisation's collection.