Geoffrey Ingham

Commercial Capital and British

Development: A Reply to Michael
Barratt Brown

Despite their overtly historical nature, Anderson and Nairns essays on British
development were profoundly theoretical. The identification of British peculiarity or exceptionalism involved a challenge not only to Marx and Engelss
commentaries on the times in which they lived, but also to the general Marxist
theory of capitalist development.1 However, this aspect did not figure explicitly
in the early debates: for example, Thompson attempted to settle the issue by
simply denying the historical validity of Andersons revisions. It was not until a
later sequel that Nairn tried to reconcile historical heterodoxy with traditional
Marxist theory. A generally Marxist model of Britain is sufficient, he wrote,
but it had to be historical and specific. He saw the major deficiency of past
Marxist analyses of Britain as the overabstraction involved in explaining the
functioning of state and society wholly in terms of the internal industrial economy and its relations of production.2 But this was theoretical legerdemain: at
what point, I asked in Capitalism Divided?, does the historically specific model
45

part company with the concept of the capitalist mode of production and
all that this entails in Marxs scheme. Andersons Figures of Descent
contains a different claim for the legitimation of heterodoxy: he believes
he can detect a clear shift in Marx and Engelss understanding of bourgeois power in nineteenth-century Britain. It is suggested that they moved
from believing the industrial bourgeoisie to be in command of Victorian
state and society to a view that this class was subordinate in its actions
and aspirations to the aristocracy.3 This may be a reasonable interpretation of the doubts expressed by Marx and Engels in their occasional
essays as the century progressed, but it is not the substance of the Preface
to a Critique of Political Economy or of Capital.4 And it is these works which
formed the basis for Marxist economics, sociology and history. In short, it
is extremely difficult to reconcile the subordination of the industrial
bourgeoisie during the nineteenth century and beyond with the tenets of
Marxs theory of history. This remains one of the main points of difference between myself and Anderson; details apart, I concur with the substance of his historical account.5
Michael Barratt Browns polemic is ostensibly directed at Figures of
Descent, but most of his ire is reserved for Capitalism Divided?. Away
With All The Great Arches belongs firmly to the older empirical mode of
criticism to which I referred earlier. It is primarily an uncompromising
reassertion of Marxist (and liberal) orthodoxy: that is, of the absolute
centrality of the industrial revolution and industrial capitalism for an
accurate understanding of Britains general development.6 Capitalism
Divided? is vigorously rejected because of alleged factual errors and
rather large conceptual confusions; it is, in Barratt Browns view, very
bad history and consequently cannot threaten traditional Marxism. However, theory is not entirely absent; as we shall see, Barratt Browns history
is informedalbeit implicitlyby an eclectic combination of two opposing strands of orthodox Marxism. Both functionalism and instrumentalism are woven into his narrative.
There appear to be five main elements in Barratt Browns critique. In the
first place, most critical emphasis is placed on my designation of the City
as primarily a centre of commercial capital. This is seen to be conceptually confused and ambiguous. Second, he questions my view of
Britains productive economy and, especially, the analysis of finance
industry relations presented in Capitalism Divided?. Third, the identification of the CityBank of EnglandTreasury relationship as the core
institutional nexus of British society and the means by which the Citys
hegemonic position has been reproduced is alleged to be fatally flawed.
Fourth, my discussion of the links between the City and Empire is
1

See the discussion of Anderson and Nairns essays in Capitalism Divided? The City and Industry in British
Social Development, London 1984, pp. 1526, 3239.
2 Tom Nairn, The Decline of the British State, New Left Review 1012, FebruaryApril 1977.
3 Perry Anderson, Figures of Descent, New Left Review 161, JanuaryFebruary 1987.
4
An equally plausible alternative case can be made; see Capitalism Divided?, Ch. 1.
5
Davis Nicholls (Fractions of Capital: the Aristocracy, the City and Industry in the Development of
British Capitalism, Social History 131, January 1988) observes that Anderson does not acknowledge the
implication of Inghams thesis for Marxist theory. However, he goes too far in suggesting that I see my
work as a refutation of Marxism (p. 76).
6
Michael Barratt Brown, Away with all the Great Arches: Andersons History of British Capitalism,
New Left Review 167, JanuaryFebruary 1988.

46

brusquely dismissed as quite simply nonsense. Finally, these serious

deficiencies are ascribed to my method: the analytical or sociological
history of Capitalism Divided? is described as a great arch from whose
lofty vantage-point I (and Anderson) have failed to observe the major
discontinuities which Barratt Brown detects in Britains development.
Unfortunately, there are also many instances of misunderstanding and
what I can only interpret as misrepresentation in his polemic: much of
Away With All The Great Arches is the dismissal of a caricature.
The City and Commercial Capital

It is arguable that I devoted too much attention to the careful elaboration

of conceptual distinctions between the economic practices of commercial,
banking and productive capitalin fact, almost three chapters. Moreover, the discussion was based on Marxs own analysis of the forms and
circuits of capital. None of this is referred to by Barratt Brown and this
probably explains why he can claim that I present a peculiarly ambiguous definition of commercial activity which includes banking and
insurance and merchanting, but, apparently, also brewing and shipping
and sometimes even all forms of overseas investment.7 The first and least
important objection is to Barratt Browns curious misrepresentation.
Nowhere in the book did I include brewing under the rubric of commercial capital, and in the reference he cites for the quotation above there is
no mention of either shipping or overseas investment. In fact, my whole
enterprise was to move away from the potentially confusing commonsensical definitions of economic activity which Barratt Brown falsely
attributes to me. The passage in the Introduction to Capitalism Divided?
which he cites as the source of his interpretation is as follows: Fundamentally, Londons role in the world system may be seen as the specialization
in and near monopolization of the commercial activities which are based
on the existence of international exchanges. These activities include the
financing of trade, insurance of commodities and transport, foreign
exchange dealing, etc. The City has not simply dealt with Britains
exchanges with other states, but has performed a wide range of functions
for the world system as a whole. The most important aspect of this role
has been the management of the domestic currency as world moneythat
is, as an internationally acceptable means of payment and exchange.
More recently, the largest single share of the transactions in de facto universal money such as Eurodollars has been undertaken in London.8
I also argued that the City is notas most Marxists have maintaineda
special type of finance capital which is externally rather than domestically oriented. Clearly, the City is involved with financial relationships, in
the sense that money capital is provided for different purposes. But the
Citys main role is in the intermediation of these relationshipsthat is to
say, considered as economic practices these activities are commercial. . . .
The roles of the City houses as middlemen or brokers in the provision of
finance overseas (and domestically for that matter) are best viewed as
comprising commercial practices which form part of complex financial
relationships. For example, the Citys profits have not been primarily in
7
8

Barratt Brown, p. 29.

Capitalism Divided?, p. 5.

47

the form of interest, but a deduction from this in the form of brokerage
fees or commissionthat is, commercial profit from the trading in
various forms of investment capital.9
Eventually, Barratt Brown concedes that my analysis has some contemporary significance: . . . the City today is . . . not the engine of anything
except of the revolving wheels of a casino . . . Today we can indeed begin
to understand what Ingham meant by commercial as opposed to productive activity.10 But he sees this as a very recent departure; in the
nineteenth century, he argues, the Citys main role was in the provision of
investment capital both at home and overseasespecially to the
Empire.11 Barratt Brown utterly rejects my stress on the enduring
clearing-house role of the City in the world system. However, the contrast
is surely overdrawn: today as in the nineteenth century, the funds which
pass through London finance all kinds of activity throughout the world
including production and speculation. But the fundamental point, which
Barratt Brown simply fails to grasp, is that the City itself has never
realized the major part of its own profits from investment in production,
but, rather, from the financial and commercial intermediation which
enabled this to take place.
The Interpretation of Imlah

The main thrust of Barratt Browns polemic hinges on my alleged misuse of

Imlahs statistical work on Britains balance of payments in the nineteenth
century.12 In a formal sense the disputes resolution rests on Barratt Browns
concession that my thesis can be justified only by including shipping
revenues with financial services.13 The reasons given for the exclusion of
shipping display Barratt Browns own conceptual confusion and, it must
be said, either his neglect or his misunderstanding of the theoretical
treatment of commerce in Capitalism Divided?. He continues: Shipping
apparently appears under commerce because it is concerned with foreign
trade; but it is not a financial service and the direct exploitation of labour
by capital could hardly be more apparent than in this industry.14
First, it should be noted that I do not include shipping under the rubric of
financial services; it is, rather, a branch of commercial capital. From a
commonsense standpoint, of course, shipping (like warehousing, for
example) involves the exploitation of labour; however, profits from this
activity are not the direct result of the production of surplus value. In
Marxs scheme, the profits of the carrying trade in the circulation of
surplus value (like those of the merchant or warehouse owner) represent a
deduction from the value created by workers in production and extraction. The latter are exploited in the technical sense used by Marx who
insisted that: However much we twist and turn, the final conclusion
remains the same . . . Circulation or the exchange of commodities creates
no value.15 Barratt Browns objection merely serves to obscure one of
9

Ibid.
Barratt Brown, p. 47.
Ibid, pp. 30; 31; 35; 36; 37.
12 Albert H. Imlah, Economic Elements in the Pax Britannia, New York 1958.
13 Barratt Brown, p. 29.
14 Ibid., p.30.
15 Capital, I, Harmondsworth 1976, p. 331.
10
11

48

49

40
37
36
40
50
52
61
84
124
142
181
238
201
247
239
223
254
294
396
481

4.8
2.1

181520
2125
2630
3135
3640
4145
4650
5155
5660
6165
6670
7175
7680
8185
8690
9195
961900
190105
0611
1113

Growth
18361890
18911913

PRODUCTION
Exports of
UK products

6.8
1.7

11
8
7
8
9
9
11
16
25
46
47
58
57
63
62
61
61
70
90
105

Re-exports

5.2
1.8

10
9
8
9
11
12
14
19
26
34
44
51
54
60
57
57
62
71
89
100

COMMERCE
Shipping
credits

4.2
1.8

9
7
7
8
11
11
13
18
24
33
40
49
47
47
46
45
47
54
67
80

Services

5.3
1.7

30
24
22
25
31
32
38
53
75
113
131
158
158
170
165
163
170
195
246
285

TOTAL
COMMERCE

10.5
2.0

2
4
5
5
8
7
9
12
16
22
31
50
56
65
84
94
100
113
151
188

BANKING/
FINANCE
Interest &
dividends

TABLE 1
GREAT BRITAIN FOREIGN EARNINGS OF BRANCHES OF CAPITAL, 18151913 (m)

6.4
1.8

32
28
27
30
39
39
47
65
91
135
162
208
214
235
249
257
270
308
397
473

TOTAL
FINANCE
&
COMMERCE

Marxs most enduring achievements: the materialist method which

stresses the fundamental importance of deciphering the precise socialstructural conditions by which value is created and different types of
profit are realized.
Within the limitations imposed by the official classification of different
branches of economic activity, I would suggest that the retabulation of
Imlahs data in Table 1 represents the nearest approximation of the relative contributions of productive, commercial and banking/finance capital
to Britains balance of payments during the time in question.16
When tabulated in this way, Imlahs data starkly show the fundamental
weakness of Britains productive economy. From 1815 to 1913, the combined receipts from commerce and banking/finance are virtually the same
as those from the export of British products. Moreover, commercial capitalism grew as quickly as manufacture for exports after 1836; that is, in
the period which saw the most rapid expansion of industrialization. With
regard to shipping credits, there can be few clearer expressions of
Medicks description of Britain as the Makler (middleman/broker) economy than in her disproportionate share of the worlds carrying trade.17
Throughout the nineteenth century, there wasas Anderson puts ita
two-track development of capital. Data for other countries comparable
to those constructed by Imlah are not available; but a brief glance at the
USAs balance-of-payments figures for the period 18401950 (Table 2)
highlights the particular nature of British development and the fundamental importance of the clearing house role.

TABLE 2
UNITED STATES BALANCE OF PAYMENTS, 18401950 ($m)
COMMODITY TRADE
Exports
Imports
1840
1880
1920
1950

124
851
8,481
10,658

100
681
5,384
9,315

Investment
income

Service
income

12
78
476
1,306

15
41
51
352

During the pre-industrial period (18001840), America earned a large

surplus from shipping and other commercial services; but as Harris
points out . . . gradually, however, our net surplus from the sale of services was converted into a deficit.18 As the USA embarked on her rapid and
massive industrialization she relied to some extentas did European
countrieson London to finance, insure and undertake the distribution
of products around the world.
16

The data are exactly the same as those in Barratt Browns tabulation and come from the same sources.
H. Medick, Anfange und Voraussetzungen des organisierten Kapitalismus in Grossbritannien,
18731914, in H.A. Winckler, ed, Organisierter Kapitalismus, Voraussetzungen und Anfange, Gottingen 1974.
18
Seymour E. Harris, American Economic History, New York 1961, pp. 8788.
17

50

If my classification of the different forms of capital is accepted, then,

Imlahs data show quite clearly that Barratt Brown is in error when he
states that earnings of merchanting were never as important as the
earnings either on export of goods or on direct exports of capital.19 It is
the neglect of commercial earnings which led me to argue that, hitherto,
the export of capital has been overstressed in the traditional view of
British development. Furthermore, there are very good reasons for suspecting that the volume of British capital exports has been greatly overestimated. It is surprising that Barratt Brown does not confront the
implications of Platts downward revisions of the scale of capital exports;
to which, of course, I gave emphasis in Capitalism Divided?. About a third
of the capital exports came from abroad. Like other items of the entrepot trade, they were in fact re-exports, and, as such, the source of commercial profits from intermediation.20 Furthermore, Barratt Brown
seems to be unaware of Pollards massively thorough review of the capital
exports debate which endorses Platts findings.21 The revisions have also
been accepted by the foremost authority on the history of merchant
banking and investment groups in this period. Chapman believes that
. . . further downward revisions are imminent. The consequences of this
for an assessment of Britains role in international economic development
can at present be discerned only in outline, but it will inevitably tone
down the stridency of earlier assessments of the role of finance in
imperialism and the maintenance of what Jenks called a rentier governing class . . . Such a revision would harmonize with the more modest economic performances ascribed to them [merchant banks] . . . suggesting
trade credit to be of more far-reaching importance than foreign loans .22
I had a further intention in suggesting that the straightforward quantitative issue of capital exports had been traditionally overstressed. One of
the central themes of Capitalism Divided? was that the Citys separation
from domestic industry was not primarily a matter of financial dissociation at this time. I was at pains to argue that the Citys typical mode of
operation had longer-term consequences. The overriding concern to
stabilize the short-term operations of the entrepot role was transmitted in
various complex ways to the wider domestic financial system. It was this
aspect of nineteenth-century developments which rendered the City and
banking system structurally incapable of direct and continuous engagement with production of the kind that occurred in Germany, the USA,
Japan and elsewhere.23
Commercial Capitalism: Some Recent Reappraisals

Barratt Brown enlists the support of non-Marxist historians and I would

like to call on reinforcements from the same quarter. Chapman, Tomlinson, Boyce, Mitchie, Crouzet, Cain and Hopkins, and Newton and Porter
have all recently moved to a recognition of the significance of mercantile
19

Barratt Brown, p. 31.

D.C.M. Platt, British Portfolio Investment Overseas before 1870: Some Doubts, Economic History
Review, 2nd ser., xxxiii, 1980.
21 Sidney Pollard, Capital Exports, 18701914: Harmful or Beneficial?, Economic History Review, 2nd. ser.,
xxxviii, 1985.
22 Sidney Chapman, The Rise of Merchant Banking, London 1984, p. 175.
23 Capitalism Divided?, pp. 14250; 16269.
20

51

capitalism in the development of the British economy.24 It is especially

pertinent that Barratt Brown attempts to use Cain and Hopkinss recent
reappraisal to support his own view. Whilst I have serious misgivings
about the conceptual utility of the term gentlemanly capitalism, the
entire tenor of Cain and Hopkinss work is to challenge the very orthodoxy which Barratt Brown seeks to defend. Our aim, they write, is not
to deny what is irrefutable, namely that Britain industrialized, but rather
to suggest that non-industrial, though still capitalist activities were much
more important immediately before, during and after the industrial revolution than standard interpretations of economic and imperial history
allow . . . The service sector occupied a far larger and more independent
place in the economy than has customarily been acknowledged . . . . 25
In other words, the dispute is not merely a matter of perspective: that is,
of panoramic views from great arches or a more down-to-earth inspection
as Barratt Browns frequent metaphors imply. The traditional view not
only has to face revisionist theory, but also recent historical scholarship.
As Cain and Hopkins concluded: . . . despite their many differences
Marxist and non-Marxist historians share a conception of imperialism
which is derived from certain assumptions about the place of the industrial revolution in modern British history . . . We believe that this approach
is seriously at variance with what is now known about British economic
history during this period.26 Any general sociological or historical interpretation (Marxist or otherwise) of capitalist development in Britain can
no longer afford to rely entirelyas does Barratt Brownon the classic
work of Dobb, Clapham, Court, Deane and others.
Sterlings International Roles

Whatever the importance of Londons international commercial activities, it is generally agreed that these were in large part made impossible by
the willingness of the emerging capitalist world order to use sterling for its
transactions. However, Barratt Brown takes this to be proof of the dominance of the productive economy: . . . the overseas role of the pound
depended on the strength of the British economy.27 In short, Barratt
Browns basic criticism is that I deny the existence of a relationship of
direct correspondence between the use of a national currency as world
money and the strength of the host economy. He also raises a subsidiary
objection: The whole of Inghams argument is predicated in any case on
the assumption that a strong pound is guarantee of its successful role.
Rather, he suggests that it is a stable currency that is needed.28 His allegation is simply untrue: throughout Capitalism Divided?, I stressed that
24

Sidney Chapman, op. cit.; B.R. Tomlinson, The Contraction of England: National Decline and the
Loss of Empire, Journal of Imperial and Commonwealth History, xi, 1, October 1982; R.C. Mitchie, Options,
Concessions, Syndicates, and the Provision of Venture Capital, 18801913, Business History, xxiii, 2, 1981;
Franois Crouzet, The Victorian Economy, London 1982, chapters 11 and 12; P.J. Cain and A.G. Hopkins,
Gentlemanly Capitalism and British Expansion Overseas I: The Old Colonial System, 16881850,
Economic History Review, 2nd. ser. xxxix, 4, 1986; II: New Imperialism, 18501945, Economic History Review,
2nd, ser., xl, 1, 1987; Robert W.D. Boyce, British Capitalism at the Crossroads, 19191932, Cambridge 1987;
Scott Newton and Dilwyn Porter, Modernisation Frustrated: The Politics of Industrial Decline in Britain since
1900, London 1988.
25 Cain and Hopkins, I., op. cit., pp. 5034.
26 Ibid., 502.
27 Barratt Brown, p. 34.
28 Ibid., p. 29.

52

Londons commercial and financial roles required a stable and, therefore,

predictable value for sterling.29 Indeed, strong can be construed to
mean stable in the sense of immunity from speculative attack. Strength
in the sense of high value may be the effect of a strong domestic economy,
but anyone with the most rudimentary knowledge of twentieth-century
monetary history will be aware that other factors are also involved. Again
one is forced to wonder just how much care Barratt Brown took in reading my book before launching into his polemic. He seems to think, for
example, that I contradict myself by what he takes to be my reluctant
admission that the global acceptance of sterling could be linked to the
strength of the British economy: Yet on several occasions Ingham refers
to the need for a strong national economy to manage the international
economy and provide the worlds money. He even sometimes recognizes
that this depends on productive capital and exploited labour, though
sometimes arguing otherwise . . . Ingham does in the end recognize this
when he observes that Britain had the strongest economy and thus the
top currency in the nineteenth century.30 Such an interpretation is
bewildering. He contends that I have two separate and contradictory
arguments, yet one of the underlying arguments of Capitalism Divided? is
that the use of a currency as world money does not depend exclusively
and entirely on the strength of the host economy. The opening paragraph
of chapter 5 contains an unambiguous statement of what I take to be the
basis of the Citys position in the nineteenth century: During the nineteenth century Britains manufacturing superiority and share of world
trade helped transform the City into the natural commercial and financial centre of the world system. However, the Citys position was never a
simple reflection of this economic strength. In addition to the productive
base, the following may be seen as the proximate conditions of existence
for the Citys growth: (i) the unprecedented 100 years peace between the
major European powers (18151914)the Pax Britannica; (ii) the commitment to economic liberalism (18201931)in particular free trade;
(iii) the reintroduction and formalization of the domestic gold standard
which, significantly, lasted as long as the peace itself.31
Furthermore, I stressed that the three conditions were mutually sustaining and could not be reduced in their origins or persistence to the exigencies posed by (or functional requirements of) capitalist industrialization,
nor to the explicit demands of the industrial bourgeoisie. In some
respects, this package of conditions was the result of contingencyfor
example, the outcome of the Napoleonic Wars. But, more importantly,
they also had quite independent geo-political and institutional bases.
Indeed, if this were not the case, it would be extremely difficult to provide
a satisfactory account of how and why Britain continued in this commitment to nineteenth-century economic liberalism and the gold standard
long after the economic conditions for their maintenance had disappeared. A central question of Capitalism Divided? is how one is to explain
the persistence and growth of the City in the face of incipient productive
decline. In my lengthy answer I argued that the Citys political conditions
of existence had a marked impact on the structure of the state and the
29

The index to Capitalism Divided? contains five separate references to sterlings stability.
Barratt Brown, p. 27.
31
Capitalism Divided?, p. 96.
30

53

composition of the dominant class which, in complex ways, permitted

(but did not simply determine) the reproduction of the Citys roles in the
twentieth century. This, I stressed, occurred in the face of tremendous
economic and political difficulties and, of course, to the disadvantage of
the productive economy. In fact, this involves the clear recognition of a
discontinuity of the kind Barratt Brown argues I am incapable of perceiving from the elevation of my particular great arch. In the nineteenth
century sterling was the strongest and, therefore Top currency and
prime candidate for global use; but this was not its exclusive basis.
During a large part of the twentieth century, it was a Master currency:
that is to say, its use was imposed politically on an Empire, Commonwealth and Sterling Area.32
However, it would be a mistake to view this change as a radical disjuncture in the bases for sterlings global use. In both centuries, sterlings position was the result of a complex interplay of material, political and
symbolic factors. International monetary phenomena have never been as
simple to comprehend as Barratt Browns uncompromising materialism
makes them out to be. To repeat: there appears to be no direct, immediate and objective correspondence between the strength of a national economy and the international uses to which its currency may be put. This is
always mediated by two interrelated factors. First, in the face of uncertainty about a currencys real strength, its trustworthiness is usually
secured by state action to guarantee its formal validity. Any such political
pledge is obviously limited by the currencys substantive validitythat is,
its economic basis. However, the force of such limits can vary very widely
indeed and sterling performed roles between the late nineteenth century
and the 1970s far beyond those which an objective assessment of its economic strength would have warranted. Second, national currencies can
only be used globally if their domestic financial systems possess the
appropriate institutional structure of banks and money markets. As I
argued in Capitalism Divided?, the dollar did not take over sterlings roles
in any way approaching comprehensiveness after 1931. Apart from the
New Deal policies and opposition from industrialists, the USA simply did
not have a sufficiently concentrated and centralized financial system
under the very close control of the central bank and Federal Reserve.33
With regard to nineteenth-century Britain, Tomlinson has recently suggested that after about 1860 the strength of sterling was not necessarily a
reflection of the strength of the rest of the economy. London was not only
the place through which trade and finance were organized, but also the
centre at which the balances of trade were lodged. The strength of sterling
was greatly aided by the flow of short-term capital [and] this was the
result of particular institutional arrangements, rather than a reflection of
any particular strength of the national economy . . . Britain could dominate the world economy and act as a successful imperial power only so
long as other nations chose to use the City of London as the contact point
for their bilateral and multilateral transactions.34 Underlying the choice
to use the only well-developed clearing house in the nineteenth century
was the continued political pledge to maintain the goldsterling standard,
32

These distinctions are taken from Susan Stranges fundamental work: Sterling and British Policy (London
1971) and not Richard Minns as Barratt Brown incorrectly states.
33
Capitalism Divided?, p. 203.
34
Tomlinson, op. cit., p. 64.

54

which was in fact becoming increasingly flimsy in objective economic

terms. If the relationships between, on the one hand, industrial productivity, strength of capital and the industrial economy and, on the other, the
global use of a national currency were as obvious as Barratt Brown avers,
then the history of international monetary relationsand much else
would have been very different.
The City and the British State

Unravelling the inter-relations of what I termed the core institutional

nexus of British society (CityBank of EnglandTreasury) formed the
main part of my explanation of how the City was socially reproduced
during the twentieth century. In fact, the issue can be stated with more
force: in strictly economic terms, conditions were actually antithetical to
the preservation of the Citys international activities as the twentieth century progressed. After 1918, in the 1930s, and from 1945 to the present,
political strategies have assumed paramount importance. Moreover, the
pursuit of trade, fiscal and foreign exchange policies favourable to the
City was not without oppositionhowever muted and sporadic. It seemed
difficult to explain the origins and persistence of these interdependencies
in terms of the prevailing theoretical Marxist orthodoxies of the 1970s.
The institutional connections of the City, Bank and Treasury were clearly
not the outcome of the Citys power as a so-called fraction of capital
(instrumentalist theories). In the light of early nineteenth-century history, it appeared to be even more inappropriate to consider the core
nexus as a functional response to the requirements of capitalist development (for example, as a means of exporting surplus capital and the
exploitation of overseas possessionsthat is, the functionalist theory of
finance-capital imperialism). I argued at length that both theories were
fraught with serious logical and empirical difficulties and stressed, rather,
the interplay between classes and state institutions. I considered the latter
as possessing their own interests in the production exercise of power.35 In
his summary of what is a very condensed conclusion to chapter 6 of Capitalism Divided?, Barratt Brown presents a parody of my arguments. It is
unfortunately necessary, therefore, to set the record straight by quoting at
length from this conclusion.
Although overwhelming manufacturing superiority in the nineteenth
century made Britain the natural commercial centre in objective economic
terms, political factors have had important effects from the earliest times
. . . The monetary and commercial policies which eventually became the
basis of the Citys activities were the products of complex political and economic interests which did not include the industrial bourgeoisie as a major
force . . . , the monetary and fiscal reforms were also aimed at rationalizing
the states finances and dealing with the chronic indebtedness which the
Napoleonic Wars had exacerbated. These measures were intended to
weaken the system of aristocratic parasitism and patronage of old corruption and the states dependence on the money powers. In other words,
. . . the state set itself against a section of the traditional dominant class,
but not at the behest of the emerging industrial bourgeoisie. If the economical reformers had any specific interests in mind, it was those of the new
generation of merchants who had captured much of the Dutch and French
35 For a summary of these arguments see Capitalism Divided? pp. 22932. See also the clear implications
of John Zysmans Governments, Markets and Growth: Financial Systems and the Politics of Industrial Change,
Ithaca 1983.

55

trade and who would profit by a free trade/gold standard regime . . . The early
monetary and commercial reforms had a critical impact on key institutions in
the modern British state and economy, on the structural development of the
dominant class, and on the financial system as a whole . . . the core institutional nexus of British society (CityBank of EnglandTreasury) became
fixed in the basic form it has retained to this day. The foundation for the
connection between these institutions lies in the mutual interest they have
in the production of stable money forms. This interdependence is not
simply based on the City as a dominant fraction of capital. To be sure, the
pursuit of fiscal and monetary orthodoxy by the Bank and Treasury sustained the gold standard and later sterlings exchange value and, thereby,
the Citys international position. But these policies were also an independent source of power for the Bank and Treasury in their own respective
domainsthat is, in the banking system and the state bureaucracy.36

I also stressed the occurrence of unintended (and frequently ironic) consequences of intended actions in the development of the nexus during the
nineteenth century. For example, the economical reformers wished to
free the state from dependence on the money powers; but their legislation ultimately strengthened the City and via the Bank drew it closer to
the Treasury. The Bank Charter Acts were intended to curtail the Banks
powers by establishing a supposedly self-regulating monetary system; but,
of course, the system was crisis-prone and required discretionary management and, hence, an increase in the Banks autonomous power.
The precise nature of Barratt Browns objections to all this is difficult to
pin down. He questions my arguments concerning the institutional power
of the core nexus as follows: A nexus cannot simply be assumed from
what both Ingham and Anderson describe as an agreement not to intervene.37 I am not at all sure what this is supposed to mean; but there is no
assumption of the nexus on my part. I devoted at least half the book to
establishing, elaborating and substantiating the historical utility of the
concept. However, it is just about possible to discern a general basis for
Barratt Browns critique in his tacit adherence to both Marxist functionalism and instrumentalism. For Barratt Brown, the exigencies posed by
the capitalist mode of production require stabilizing and crisis-avoidance
measures, and this is assured by bourgeois participation in the state.
Thus, on numerous occasions throughout his article, he insists that the
Citys primary function was to channel investment into production
overseas; but as we have seen, this is a very one-sidedly exaggerated
account. The City just cannot be seen only as the conduit through which
surplus capital flowed and as the handmaiden of finance-capital imperialism. On the other hand, he argues that the Bank Charter Acts cannot
have had the significance for the City that I assign to them because:
. . . there could scarcely be imagined a clearer example of an industrial
bourgeois incumbent of high office than Sir Robert Peel, son of a Lancashire millowner and twice Prime Minister.38 Presumably this line of
reasoning accounts also for Barratt Browns jibe that none of the three
parties (City, Bank and Treasury) knew what they were doing until clever
fellows like Ingham and Anderson came along and showed us.39
36

Capitalism Divided?, pp. 68.

Barratt Brown, p. 36.
38 Ibid., p. 34.
39 Ibid., p. 36.
37

56

However, I made frequent reference to the collusion of the metropolitan

elite in the three institutions and devoted special attention to the deft and
almost conspiratorial nature of the handling of the Baring crisis. More
importantly, Barratt Brown displays a strange unwillingness to acknowledge that intended actions have unintended consequences. Thus, because
he seems so sure that Huskisson was thinking about the export of goods,
he infers that the commercial legislation of the 1820s which removed barriers to the re-export trade cannot have had the effect of stimulating the
Citys entrepot activities.40 Knowing the class origin of historical agents,
what they were thinking and what they intended to achieve can never provide
us with a full explanation of long-term patterns of development.
Finally, there are two further irritating instances of misrepresentation:
The crux of Inghams case, writes Barratt Brown, is that the Treasury
linked together the landowning interest and the financial oligarchy at the
expense of industry.41 This could hardly be a crux of my thesis because
nowhere in Capitalism Divided? do I present such a clumsy historical interpretation. Second, I am accused of making the strange assumption that
conflicts did not arise among the Treasury, City and Bank. However, in
an astonishing contradiction only four lines later, Barratt Brown corrects
himself and accurately cites my book as evidence for such struggles and
disagreements.42
It is precisely the Citys impact on the British state which has been taken
up by several recent authors. Scott Newton and Dilwyn Porter endorse
my account of the core institutional nexus and use it to organize their
Modernisation Frustrated: The Politics of Industrial Decline in Britain since 1900.
Robert Boyces detailed monograph, British Capitalism at the Crossroads,
19191932, takes a similar line and also recognizes the fundamentally mercantile character of the City as a centre of international markets, dependent only slightly upon the nations economic performance.43 Boyce, like
Alan Booth in his recent paper, also supports my view that many policies
which have favoured the Citymost notably the return to gold in
1925were also welcomed by the Treasury and the Bank of England as
they helped to re-establish their independent institutional power in their
respective domains of public finance and the banking system.44 In his
otherwise very favourable review in this journal, Colin Leys also
expressed doubts about my insistence that state institutions must be seen
as possessing their own power and interests. Leys accepts that the Treasury had a vested interest in the restoration of the gold standard; it
offered a prospect of restoring its preeminence in Whitehall that the war
had eroded. But it is equally true that the Board of Trade had a vested
interest in launching a long-term, state-led project for industrial modernization at the end of the Second World War. It is hard to explain why the
40

Ibid. It should be noted that Barratt Brown omits the last part of a quotation from Huskisson (p. 35),
which I cited in Capitalism Divided?, and changes the meaning considerably. Huskisson was complaining
that the maintenance of the gold standard was enriching the money dealers, but that the deflation and
frequent crises meant that the wages of labour have been too low and the profits of fructifying or
productive capital less than they ought to be. Capitalism Divided? p. 110.
41
Barratt Brown, p. 38.
42
Ibid., p. 36.
43
Boyce, p. 19.
44
Ibid., pp. 3031; Alan Booth, Britain in the 1930s: a Managed Economy, Economic History Review, 2nd
ser., xl, 4, 1987.

57

former interest prevailed, and the latter was defeated, without recourse to
the balance of class power.45 Whilst not denying the significance of class
power, it is quite a simple matter to answer Leyss question. The Treasurys power over second-rate state agencies, such as the Board of Trade,
derived from several sourcesboth internal and external to the state.
With respect to the former, the Treasury had the power of the public
purse and, with the Bank, control over Britains exchange rate and currency policy. Second, by the 1920s its domination of the state bureaucracy
had assumedafter nearly a centurys strugglea constitutional legitimacy. Similar points can be made about the Treasurys clashes with the
Department of Economic Affairs in the 1960s. The extent of the Treasurys
autonomous power is also apparent in the 1930s, when what may be crudely
seen as the Citys class power was at its lowest ebb. The Treasury pursued its objectives as before; maintaining the fiction of balanced budgets,
deflecting mounting criticism and so on, until the exigencies of wartime
production led to its political demotion in the state apparatus.46
A serious distortion is insinuated throughout Away with All The Great
Arches. Barratt Brown implies and at times explicitly states that Capitalism Divided? argues (or can be used to substantiate the view) that there
was no real industrial revolution in Britain and that British capitalism
was rooted in commercial and not industrial capital accumulation.47 It
is, for example, a gross misrepresentation to imply that my book could
have fostered such nonsense as: The revolutionary industrial innovators
in textiles and railway-buildingArkwright, Watt, Hargreaves, Boulton,
Paul, Darby and Brindley in the eighteenth century, Brassey, Stevenson,
Brunel, Wilkinson, Faraday in the nineteenthare reduced to some sort
of commercial intermediaries. . . 48 The titleCapitalism Divided?was
chosen with some care for the content of the book. I intended to convey
my concern with the relationships between the three types of capital and,
especially, that between commerce and banking, on the one hand, and
productive capital on the other. In general terms I questioned the axiom
that productive capital was completely dominant (both economically and
politically) at all times, in all places, and under all circumstances. In this
respect, any tolerably careful reading should disclose that my intention
was to explain why the efforts of the industrial modernizers were so
enfeebled from the late nineteenth century onwards. Second, as Anderson
and Leys correctly emphasize, the separation of the City and industry was
ultimately based on the existence of a world economic space segmented
into independent units which permitted the emergence of a major clearing
house of universal scope: that is, a centre of commercial capitalism which
was not directly and exclusively dependent on the productive capitalism of
the host nation.49 Neither argument could be remotely construed as suggesting that capitalist industrialization never took place in Britain!
45

Colin Leys, The Formation of British Capital, New Left Review 160, NovemberDecember 1986, p. 117.
Capitalism Divided? passim. Barratt Brown displays a symptomatic misunderstanding when he cites
the penetration of the Cabinet and the Treasury by industrial representatives during World War II as
evidence of industrial capitals general power. The Treasury temporarily lost power during the war in
order that a national productive economy could be organized and this is precisely why industrial capital
attained a brief ascendancy.
47
Barratt Brown, p. 23.
48
Ibid., p. 25.
49
Anderson, p. 53.
46

58

Nevertheless, there is mounting evidence to suggest that the traditional

conception of the industrial revolution, which Barratt Brown staunchly
defends, has been overdrawn. His own version of orthodoxy lacks any
real substance. On the one hand, he merely refers to the heroic deeds of
the entrepreneursArkwright, the mills and canals etc. On the other
hand, in extolling the performance of the economy, he offers the limp
assertion that British productivity held up remarkably well until the First
World War.50 However, any such judgement must be comparative and,
as Barratt Brown concedes, the USA and Germany outperformed Britain
from the onset of their own industrialization. The hyperbole of the traditional conception is evident after consulting such recent works as Maddisons Phases of Capitalist Development and Lees The British Economy since
1700.51 According to Maddison, Britains growth between 1820 and 1979
was the slowest of twelve advanced countries. Most of the increase in British
GNP and GDP per head was generated in the twentieth century, especially
since 1950. More significantly with regard to Barratt Browns arguments, Lee
questions the orthodox conceptualization of a radical discontinuity in British economic growth associated with the so-called industrial revolution.52
Finance and Industry

The insistence that the City was involved in financing production to a far
greater extent than I recognize is scattered throughout Barratt Browns
essay and is, of course, a tacit reassertion of finance-capital theory. No new
data are presented in support of this claim, nor can they be. The chronically
low level of investment in British production since the eighteenth century
is an established fact and a unique feature of British development.53
My alleged failure to mention the mid-nineteenth-century Company Acts
which permitted limited liability is presented as evidence of a one-sided
distortion of Britains economic development. Barratt Brown considers
this legislation to be equally significant as the Bank Charter Acts and the
means by which investment in industry at home occurred.54 But, the
index to Capitalism Divided? contains five entries under limited liability.
My discussion was based on Paynes work, which is widely accepted as
the standard account of nineteenth-century business structure. The implication of Barratt Browns commentsthat it was enacted to serve the
interests of the industrial bourgeoisieis simply not borne out by the
evidence. Limited liability was adopted in 1855 after twenty years of parliamentary enquiry and the initial impetus came from middle-class
philanthropists who wished to create safer investment opportunities for
the working and lower middle classesnot from the industrialists
50

Barratt Brown, p. 27.

A. Maddison, Phases of Capitalist Development, Oxford 1982; C.H. Lee, The British Economy Since 1700: A
Macro-economic Perspective, Cambridge 1986.
52 Lee, p. 23. All the quantitative indices show a slow but accelerating rate of growth, balanced growth
encompassing most sectors of the economy and a very modest, if continuous rate of structural change.
Increased growth in the early nineteenth century and small reduction in growth rates in the later part of
the century require explanation, but their dimensions hardly warrant labels like industrial revolution or
great depression.
53 Ibid., p. 51. It was one of the unique aspects of British development. Home investment throughout the
eighteenth and nineteenth centuries was exceptionally low in relation to GDP, for most of the time less
than half that of the investment ratio in other developing countries . . . Indeed, this level of investment
was similar to that enjoyed in more recent times by such countries as Paraguay, Malaysia and El Salvador.
54 Barratt Brown, p. 26.
51

59

themselves, whose voices were seldom heard in the discussions. Moreover, it was not until very late in the nineteenth century that the joint
Stock Companies Acts had any impact on industrial finance and, even
then, this was small in comparison with developments in continental
Europe.55 The implied case for the existence of an embryonic financecapital in mid-nineteenth century Britain has no historical basis whatsoever. Indeed, Barratt Brown concedes as much in his somewhat contradictory admission that nineteenth-century industry was self-financed. But
by the early twentieth century this had changed, he argues, and quotes a
passage from Capitalism Divided? which shows the rapid increase in the
number of domestic companies quoted on the London Stock Exchange.
However, it is all too easy to fit the occurrence of this first merger boom
in British industry into a crude and misleading theory of capitalist development which was originally generalized from the German case. This
approach misses a number of very pertinent aspects of the singular
British experience. First, the movement towards concentration in industry was far less marked here than in comparable economies; and, second,
the London Stock Exchanges role was very limited and the clearing
banks involvement was negligible.56 The contemporary industrial and
political concern at Britains increasingly archaic industrial structure, its
technological underdevelopment, and its separation from the financial
system is firmly established and has recently received further elaboration
in Newton and Porters Modernisation Frustrated. Davenport-Hiness biography of Dudley Docker not only shows just how some of the successful
mergers were financed, but also follows Dockers increasing exasperation
with the Citys reluctance to become involved with domestic industry. To
counter this deficiency, Docker set up the British Stockholders Trust
(1918) to raise finance for the rationalization of industry along German
lines. This provoked hostility from the City establishment, which threatened to deny access to the Stock Exchange to any provincial brokers who
held shares in the Trust.57
The arguments that Barratt Brown adduces for close financeindustry
relations since 1945 are equally flimsy, and also methodologically flawed.
Simply reporting from his own research that merchant bankers sat on the
boards of half the top 120 home industrial companies is not very compelling. The closeness of financeindustry relationseven when measured in
this mannercan only be assessed comparatively. The last ten years have
seen a massive proliferation of research on interlocking directorships in
all the major advanced countries and it shows far lower financeindustry
relations in Britain as measured by banker participation.58 However,
even these extensive and sophisticated studies based on network analysis have quite clear limitations. Knowing that banks and industrial
55

P.L. Payne, British Entrepreneurship in the Nineteenth Century, London 1974, p. 19. See also Crouzet. It
must be noted that limited liability was not an invention [which] must surely rank with those of the
industrial revolution (Barratt Brown, pp. 25 and 26). Restrictions had been imposed on joint stock
companies by the Bubble Act (1720) and such financial organization was prevalent in France, New York
State and elsewhere in the eighteenth century.
56 Payne, op. cit., Lee, chapter 3.
57 R.P.T. Davenport-Hines, Dudley Docker: The Life and Times of a Trade Warrior, Cambridge 1984. The
significance of this work lies in the fact that despite its overtly empiricist method, the Cityindustry
opposition is captured through the experiences of one of Britains leading industrialists.
58 For the most recent survey see John Scott, Capitalist Property and Financial Power: A Comparative Study of
Britain, the United States and Japan, Brighton 1986.

60

companies have directors in common does not in itself tell us what kind
of role the interlocks play in corporate banking and industrial strategy.
To generalize, on the basis of his own limited data, that British merchant
bankers on industrial boards performed the same coordinating function
as the big banks in Germany and the zaibatsu in Japan is not only wild,
but also mistaken speculation.59
The relationships between finance and industry (and the state) are primarily the result of the more fundamental structural means by which
credit and finance are created, distributed and controlled. Zysmans work
remains the essential starting point in unravelling these complexities.
Even orthodox economists now make distinctions between bank-based
and market-based financial systems in a similar way to Zysman and
myself.60 Bank credit-based systems such as Japans and Germanys
exhibit two characteristics not found to any marked degree in Britain: a
high level of external funding and long-term direct involvement of banks
in corporate organization and strategy. The structure of the German and
Japanese financial systems is such that the banks become involved to
ensure a rate of return on their direct investments. Most City representatives on industrial boards are there as information receptors and/or
organizers of take-overs, dawn raids etc, or the defence against such
events. Their activities are structured by the market-based financial system which, in the absence of bank domination of industrial finance, permits the speculative short-term practices for which the British system is
renowned. Commercial profits are realized in this kind of financial
intermediation and must be distinguished from the returns on investment
typical of the bank-based type of finance capital.61
Finally, Barratt Browns attempt to demonstrate the contemporary
involvement of the City in industry is based on a methodological error:
Contrary to what Ingham says about the finance of industry . . . the top
116 largest UK companies took 90 per cent of the new capital issued on
the stock exchange.62 Recent research shows that over 90 per cent of corporate finance came from retentions over the period 19491977, only 7.7
per cent from the issue of securities, and a little over 2 per cent from bank
credit. The contrast with Japan, Germany, France and even the market-based
American financial system is a significant one and is the only way to evaluate the kind of claims made by Barratt Brown. The top 116 companies may
have taken over 90 per cent of the new issues; but it was 90 per cent of very little
in comparative terms and merely serves to illustrate what Barratt Brown
deniesthe persistent disengagement of the City and industry.63
The City and Empire

The aims of my brief treatment of the connections between the City and
Empire were very limited in scope: I questioned the view that the Citys
pre-eminence derived from a position as the nerve-centre of Britains
59

Barratt Brown, p. 46.

Colin Mayer, Financial Systems and Corporate Investment, Oxford Review of Economic Policy, 3/4, 1986.
61 In the 1970s, the Big Three German banks owned 35 per cent of the shares of the top 74 German
enterprises. (E. Smith, The West German Economy, London 1983.) The comparable figure for Britain is less
than one per cent. See Wilson Report, London 1980, p. 500.
62 Barratt Brown, p. 62.
63 Sec Colin Mayer; and Capitalism Divided?, chapter 3, which Barratt Brown completely ignores.
60

61

finance-capital imperialism, and I made some suggestions concerning

the relationships between the Empire and the Citys commercial hegemony. In its simplest form, the old Lenin/Hobson orthodoxy is untenable
on empirical grounds.64 In the first place, there was no clear and direct
connection between British trade and the growth of Empire in the nineteenth century. Almost two and a half million square miles were added in
the late nineteenth centurymainly desert and underdeveloped land, as
Crouzet points out; but trade with the Empire remained static and remarkably smallaround 25 per cent of Britains total trade.65 Second, the very
same point can be made with respect to investment: most capital went to nonImperial destinations. As Barratt Brown concedes: The City was interested
in investing funds all over the world and did not wish to be limited to the
Empire large as it was.66 Furthermore, as we have seen, the amount of
British capital channelled through the City has been overestimated.
Nevertheless, Barratt Brown reiterates the old highly questionable view
that the pressures of British industrial capital behind this expansion can
hardly be denied.67 Many industrialists did have a vision of Empire
which Lenin, Hobson and others thought was a reality, but the defeat of
their strategy was brought about, at least in part, by those very same
interests who did not wish to have their commercial and financial intermediation restricted to anything less than the whole world.68 Of course,
in the 1930s the Empire was put to the kinds of uses which Barratt Brown
argues were the primary motives in the late nineteenth century. With the
1931 sterling crisis and the world depression, the City was forced to retreat
to the security of the Empire (and even flirt temporarily with the finance
of domestic industry).69 As I suggested in Capitalism Divided?: . . . it has
been all too readily assumed that the intentional uses to which the Empire
was put in the twentieth century can neatly explain its origins.70 Once
again, Barratt Brown does not seem to realize that the demonstration of
functional economic links at any particular point in time does not necessarily imply a causal connection. I offered the hypothesis that the growth
of formal Empire in the late nineteenth century was, in part, the ironic
unplanned consequence of attempting to maintain the Pax Britannica
and, thereby, the economic dominance of which commercial hegemony
was such an important part. Britains leading competitors were becoming
increasingly impatient with this regime and wished to challenge it with
64

Cain and Hopkins; Eric Hobsbawm, The Age of Empire, London 1987; Capitalism Divided?, pp. 11727.
Crouzet, p. 356.
Barratt Brown, p. 33.
67 Ibid., p. 32.
68 Newton and Porter, Chapter 1. They cite the views of George Byng, chairman of GEC, who made due
distinction between industry and commerce, between manufacturing and trading, between production
and exchange. Free trade, he argued, had made merchant bankers into merchant princes. It is interesting
to note that a very early critic of the capital exports thesis anticipated the present debate (and the nature
of Platts revisions) by almost eighty years. Rozenraad (President of the Foreign Chambers of Commerce
in London) commented on Paishs paper on overseas investment (delivered to the Royal Statistical Society
in 1909) as follows: Great Britain acts only as an intermediary, as honest broker working in all parts of
the world, taking overto a greater extent with the money of her customersthe loans of other nations
. . . In a word, although the investment power of Britain is very great, London is the principal intermediary between Europe and other parts of the world for the placing of foreign securities issues here.
Quoted in Tomlinson, pp. 6364.
69 Capitalism Divided?, pp. 19599. Lee: By the 1930s, the internationalist trade and financial policies of
Victorian Britain had been abandoned, and British trade followed by British investment became increasingly oriented towards the Empire. Thus there emerged the sterling area. Op. cit., pp. 1745.
70 Capitalism Divided?, p. 117.
65
66

62

their own spheres of influence. Other factors were clearly involved, but
Britains response to her rivals ambitions created a politically autonomous process of pre-emptive annexation which was interwoven with the
pursuit of economic interest.
None of this requires us to suppose, as Barratt Brown mischievously
avers, that there had been in the Empire no sugar and cotton plantations,
no tea and rubber estates . . . or mills or factories.71 Apart from the conflation of the plantation slavery of the old colonial system with the
imperial activities of the late nineteenth century, the stress on Britains
direct involvement or investment in factory production overseas is mistaken. In the mid-nineteenth century, less than one per cent of British
portfolio investment overseas went into manufacturing; by 1913 this had
risen to just under 5 per cent.72 Barratt Brown argues as if any concession
to my notions about Empire and the Citys commercial capitalism
necessarily involves a criticism of the traditional view. But this is not so;
the respective approaches are not logically exclusive. It is, rather, the
factual basis of the traditional view which is difficult to uphold.
My most blatant misconception concerns the role played by India.73
Sauls standard account has established that during the late nineteenth
century Britain had large trade deficits with many of the advanced countries (e.g. 50m with the USA and 45m with continental Europe by 1910)
and surpluses with underdeveloped onesespecially India (60m by
1910). Thus, India occupied a key position in Britains balance of payments and, thereby, in the whole system of multinational payments
which had become centred on London.74 From the late nineteenth century onwards, as Tomlinson and I have argued, this system was based
largely on the existence of the Citys institutions, the willingness and the
ability to maintain the goldsterling standard. The stability and trustworthiness of the currency were absolutely essential for the maintenance of
international liquidity and, in this respect, the Indian surplus was crucial.
It ensured, as Crouzet argues, that the City was truly the economic heart
of the world.75 Barratt Brown will have none of this: The Indian surplus
was transferred to investment elsewhere, as I have shown at length in
Economics of Imperialism.76 There is, of course, no way of showing that the
Indian surplus was literally transferred into investment; Economics of
Imperialism merely quotes Sauls original inference that it would have been
impossible to indulge so heavily in overseas investment had not British
71

Barratt Brown, p. 31.

Pollard, p. 490. Recent research has shown that British investment groups abroad had a more
modern form of organization than domestic firms and equalled them in size, but the groups still performed the mercantile function in the sense that they were the local experts with capital and supporting
services in the countries or sectors of the world in which they specialized. Stanley Chapman, BritishBased Investment Groups before 1914, paper delivered at the Institute of Commonwealth Studies, 11
October 1985. Mira Wilkins (The Free Standing Company, 18701914: an Important Type of British
Foreign Direct Investment, Economic History Review, 2nd ser., xli, 2, 1988) contrasts British direct investment with that of the USA: . . . thousands of companies [which] unlike the American model, did not
grow out of the domestic operations of existing enterprises that had their headquarters in Britain. They
were little more than a brass nameplate some place in the City and, therefore, often failed to meet the
challenge of other countries successfully managed overseas operations (p. 264). See also Charles Jones,
International Business in the 19th Century, Brighton 1987.
73 Barratt Brown, p. 31.
74 S.B. Saul, Studies in British Overseas Trade, 18701914, Liverpool 1960.
75 Crouzet, p. 370.
76 Barratt Brown, p. 31.
72

63

exports found a wide open market in India during the last few years
before the outbreak of war. . . 77 Obviously, anything which led to a
balance-of-payments surplus facilitated the export of capital; but, within
limits, this is not incompatible with the Indian surpluss role in stabilizing the currency on the exchanges. Moreover, de Cecco detects a conscious intent to this end on the part of the British monetary authorities.78
At the very least, the traditional view must consider the following revisions. First, the growth of the formal Empire in the late nineteenth century cannot be explained adequately by the functional necessity for the
export of surplus goods or capital. The causes and function of overseas
expansion have been hopelessly confused in the Hobson/Lenin tradition.
Second, even if one adheres to this view, there are no logical or empirical
grounds for denying that the Empire also had a role in maintaining Londons commercial capitalism.
Conclusions

Unfortunately, this necessarily protracted defence of my arguments prevents any thorough treatment of Barratt Browns comments on the Citys
present role in the world system and the emergence of what Susan Strange
has termed casino capitalism. Barratt Brown suggests, and then rejects,
the possibility that these developments may be a vindication of my general thesis. Recent events in the City are a new phenomenon and there is
nothing particularly English about it.79 To be sure, the volume of financial speculation has increased immensely and has been facilitated by
Londons link-up with Tokyo and New York, and the emergence of
twenty-four-hour trading; but again Barratt Brown jumps to hasty illconsidered conclusions about the degree of discontinuity that this represents. First, as Perry Anderson correctly observed in Figures of Descent,
London remains pre-eminent in its traditional roles in commercial insurance, foreign exchange dealing, commodity broking etc. Even with the
abolition of exchange controls, the foreign earnings of pension funds are
only about half those of commodity trading and brokerage.80 The Stock
Exchange may provide the most newsworthy copy and capture Barratt
Browns imagination, but is not co-extensive with the City. Second, Barratt Browns explanation of the expansion of speculation is too simplistic.
It is, he insists, yet another general crisis of capitalism which arises when
world competition grows and profit rates decline.81 However, such a
starkly materialist approach is unable fully to grasp these developments,
and especially Londons part in the anarchy. As with sterling and the
productive economy, the relationship between declining rates of profit
and speculation is not direct and unmediated. Financial speculation of
the recent kind can only occur if the casinos exist. As in Monte Carlo,
Las Vegas and elsewhere, the ability to remain in business requires a
77

Michael Barratt Brown, Economics of Imperialism, Harmondsworth 1974, p. 195.

M. de Cecco, Money and Empire, Oxford 1974. He sees India as the main stabilizing element in the
international payments system whose surplus was deposited in London. In this way the City could
maintain its leading position and until 1914 remained the main source of international liquidity. See
especially chapter 4, Indian Monetary Vicissitudes.
79 Barratt Brown, p. 48.
80 William M. Clarke, How the City of London Works, London 1986, p. 124; Anthony Hilton, City within a
State, London 1987.
81 Barratt Brown, p. 48. The same line is taken by Alex Callinicos, Exception or Symptom? The British
Crisis and the World System, New Left Review 169.
78

64

politically generated freedom to operate. Ten years ago, in their evidence

to the Wilson Committee, the Bankers Association insisted that the Citys
greatest asset remained the absence from regulationa continuity which
only two world wars have disrupted. Just how does Barratt Brown propose to explain the existence of the supposedly new role? How did a
rapidly declining productive economy come to be the hub of the new
global financial (dis)intermediation? Why not Frankfurt? Furthermore,
the emphasis Barratt Brown places on the ownership of the City is largely
misplaced. On the one hand, it has always been a foreign enclave to some
degree. In the early nineteenth century, the family firms which migrated
to the City usually became permanent residents, unlike their modern
counterpartsthe employees of corporate banks. On the other hand, the
very existence and control of the assets in the various markets are more
significant than mere legal ownership in their impact on British society.82
If the explanation of the Citys current activities is as simple as Barratt
Brown insists, then I wasted much time and effort in uncovering its
historical roots and political strengths. And we are asked to consider that
this new role will disappearjust as quickly as it emergedwith continued declining rates of profit and international working-class solidarity.
I have my doubts.
82

In addition to Capitalism Divided?, see Jerry Coakley and Laurence Harris, The City of Capital, Oxford
1983, chapter 3.

65