Abstract
Almost all inquiries into the City’s financial relations with the domestic productive economy have dwelt one sidedly on what may be termed the quantitative aspect. It has been observed that the ‘financial system’ has generally provided a low level of investment capital for industry and, it has been argued, this is largely a result of the high volume of capital exports which Britain has maintained. However, I believe that it is also useful to distinguish a qualitative dimension of the financial separation. I shall argue that those finance —industry relations which do exist in Britain are attenuated in the sense that the financial intermediaries’ interest lies in the short term gains to be made in the trading of productive assets — in particular through take overs and mergers — and not in the long term profitability of those units of industrial capital whose shares are bought and sold.
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Notes and References
See F. Crouzet, ‘La formation du capital en Grand Bretagne pendant la révolution industrielle’, in J.D. Gould, Economic Growth in History (London: Methuen, 1972).
P.L. Cottrell, Industrial Finance 1830–1914: the Finance and Organisation of English Manufacturing Industry (London: Methuen, 1980). At this stage, the capital requirements of industry were relatively small: Boulton and Watt started with £3370 and by 1822 their assets totalled only £35000 of which a mere 10 per cent was fixed capital in buildings and machinery. However, it has been observed that they experienced great difficulty in raising even such a small investment loan and that this is in striking contrast to the rapid over subscription of speculative overseas ventures organised in the metropolis. See A. Francis, ‘Families, Firms and Finance Capital’, Sociology, 14, no.1, February 1980, pp. 1–27.
C.K. Hobson, The Export of Capital (London: Constable, 1913); Jencks, Migration of British Capital;
A.K. Cairncross, Home and Foreign Investment, 1870–1913 (Cambridge University Press, 1953); Imlah, Economic Elements. For a brief discussion of the issues, see Cottrell, British Overseas Investment. For international comparisons,
see H. Feis, Europe the World’s Banker, 1870–1914 (New York: A.M. Kelly, 1974),
and D.K. Fieldhouse, Economics and Empire (London: Weidenfeld & Nicolson, 1973).
See M. Edelstein, ‘Rigidity and Bias in the British Capital Market, 1870–1913’, in D.N McClosky (ed.) Essays on a Mature Economy; Britain after 1840 (London: Methuen, 1971).
John C. Carrington and George Edwards, Financing Industrial Investment (London: Macmillan, 1979).
W.A. Thomas, The Finance of British Industry 1918–1976 (London: Methuen, 1978) p.336. It is, however, interesting to note that Thomas frequently contradicts this position, for example when he refers to the way in which the practices of the London capital market fall far short of what he calls the ‘textbook model’ of a competitive market.
Charles Raw, Slater Walker: An Investigation of a Financial Phenomenon (London: Coronet, 1978) p.404. The opposition between the City and industry was neatly expressed by Slater himself. In what appeared to be a direct response to Harold Wilson’s statement in the 1960s that ‘What is wrong with our society is that those who make money are more regarded than those who earn the money’, Jim Slater announced that ‘There are the thing makers and there are money makers. We are the money makers’ (p.9). For an observation that such a polarity continues to be of great importance, see Sunday Times Business News (15 February 1980).
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© 1984 Geoffrey Ingham
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Ingham, G. (1984). The Financial Separation of the City and Industry. In: Capitalism Divided?. Contemporary Social Theory. Palgrave, London. https://doi.org/10.1007/978-1-349-86082-1_4
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DOI: https://doi.org/10.1007/978-1-349-86082-1_4
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