NATURE HISTORY

We have to under and the h torical transition to a new set of “natural laws of trade”! (Marx)

Liberty as the Seduction of Continuous Credit

The Industrial Revolution began with a radical transformation in the “mode of economic behaviour”. Till then profits were still made by buying cheap and selling at a higher price between geographies.

- Set up in 1694 to finance the Republic’s increasingly frequent wars against France , the Bank of England gave the State loans from its private sector depositor’s gold and silver. In return for these loans, the depositors were issued various government-backed paper assets. By the 1720’s this collaboration proved enormously successful. On the rising strength of its deposits the Bank began issuing its own “paper money unbacked by real goods or services”. Bills of exchange and promissory notes became everyday business currency. By the 1750’s small entrepreneurial banks in the provinces were issuing their own notes to keep up with the appetite for credit. (Deane) By the 1890s on “average at least 50 per cent of actual capital paid up” consisted of loans. (Morris)

A major cr ruck th sy em that was fa overextend g itself 1797, and the government acted to secure the nation’s gold reserves so that Brita ’s war e orts aga Napoleon’s France would not su er: An o cial decree forbade the Bank from mak g payments gold and silver

- British cotton capitalists who risked borrowing to mechanize work, ie, install power looms were able to expand profits at an unprecedented rate from the 1820’s. Their furious activity stimulated “ancillary industries in merchanting, bleaching, dyeing” etc. Soon, capitalists - ie, those who had the right contacts and could take risks with credit - could challenge the political influence of landed/inherited wealth. Suddenly, economic mobility into elite circles was more widely accessible than ever before.

- This happened across the Atlantic as well. Initially North American middle-men sourced cotton from the wealthy landed planters of the South, and sent it to the booming cotton mills of Lancashire. Taking advantage of disruptions in trade across the Atlantic caused by the wars of the French Revolution and 1812, the Northerners created small local manufacturing centers. By the 1860s the Southerners wanted to form a separate Nation State and set their own prices freely with Europe. This led to the American Civil War, during which the Northerners took huge credit risks to increase local manufacturing 12x between 1860 and 1900. (Robinson) *

– Paradoxical e ect: Bank of England credit notes took the place of ‘real money’, l ited only by how fa they could be pr ted.