The making of institutional credit in England, 1600 to 1688

Abstract

In seventeenth-century England, most proposals for new banking institutions focused on addressing contemporary obstacles to creating confidence in the proposed institutions. In proposals for banks of charity in the first half of the century, bank proposers were concerned primarily with usurious pawnbrokers, and with ameliorating the problems they caused. In proposals for Lombard banks that appeared in the 1650s, proposers employed terms such as ‘pawn’, ‘fund’, and ‘security’ rhetorically in emphasizing the security of the envisioned institutions. The struggle for confidence over the course of the century shows that institutional credit neither emerged fully formed nor swept disorder away.

Keywords:

• history of banking
• bank of charity
• Lombard bank
• security
• institutional credit

Acknowledgements

The author would like to thank two anonymous referees for their helpful comments. An earlier version of this paper was presented at the conference of the History of Economic Thought Society of Australia at Macquarie University, July 2005. The research benefited from financial aid from Japan Society for the Promotion of Science.

Notes

 1 For discussion of the scarcity of money resulting from the instability of the monetary system in early seventeenth-century England, see Supple (1957).

 2 See Kerridge (1988) and Muldrew (2001). In an earlier study, Sugiyama (1963) explored pamphlets on land bank projects from the latter half of the seventeenth century, identifying an approach that might be termed ‘land bank mercantilist’, which aligns closely with what Heckscher (1935) calls ‘paper money mercantilist’; both of these approaches were intended as remedies for want of money (Sugiyama 1963: 267).

 3 Moreover, Muldrew argues, ‘money could never be used on a large enough scale in a simple instrumental fashion to alienate economic exchange from social exchanges’ (Muldrew 2001: 98). Or as a writer of the period put it: ‘Experience shews that Trade cann not be liberally maynteyned both at home & abroad but by credite, as well as by mony’ (S.P. Dom., Eliz., vol. 130., no. 32., May 1622, cited in Price 1876: 150).

 4 Kerridge maintains that ‘the Bank was a scaled-up version of the goldsmith-banks’ (Kerridge 1988: 81). Richards also regards the goldsmith bankers as the precursors of the central bank, despite the disturbance caused by the Stop of the Exchequer in 1672. See Richards (1965: 87).

 5 See Muldrew (1998).

 6 See Hont (2005), Hunter (1989), Poovey (1998), Shapin and Schaffer (1985), Shapin (1994), Skinner (1996) and Tuck (1993). It is a questionable undertaking to characterize such a range of historical research as sharing a single theme, but in my view all of these studies in the history of ideas take as their central points stories of scepticism in early modern England. Other studies have also portrayed the transition from the old system to the new, if with less attention to scepticism. For example, Joyce Appleby (1978) depicts the transitional process from moral economy to political economy, and Andrea Finkelstein (2000) describes early modern English economic thought as an emancipation from Aristotelian harmony, in favor of the new political economy of the eighteenth century.

 7 Cf. Julian Hoppit. Hoppit mentions ‘Defoe's ideas on the link between credit and credible behaviour’ and Sir James Steuart's idea of credit as a ‘part of sociability’ (1990: 319).

 8 Muldrew maintains that ‘[i]nstitutional credit has freed people's essential economic well-being from the former pressing need strictly to observe ‘public’ communal standards of behaviour’ (Muldrew, 1993: 183).

 9 P.G M. Dickson describes the process of the ‘Financial Revolution’, which provided the basis for the modern financial market, as a rugged one. See Chapter 20, ‘The Origins of the Stock Exchange’, of Dickson (1993). Concerning the ‘civic humanist’ attack on credit, see Pocock (1975: chap. XIII).

10 See Horsefield (1960) and Rubini (1970).

11 Slack identifies these bank-proposers as promoters of Baconian ‘improvement’ for the ‘public good’. See Slack (1998: chap. 4).

12 See Brenner (1993: 572), ‘Chamberlen, Peter’ in Greaves and Zaller (1982, 1: 133–5), ‘Cook, John’ in Greaves and Zaller (1982, 1: 166–7), and ‘Robinson, Henry’ in Greaves and Zaller (1984, 3: 101–03). McNally sees a close connection between ‘social Baconianism’, the ideas and practices of which were exemplified in Hartlib's circle, and ‘classical republicanism’ in the pre-history of agrarian capitalism in the mid-seventeenth century. See McNally (1988: 35–55).

13 Menning's principal argument is that, in the case of Florence, the monte di pietà‘had become an integral part of the finances of the medicean state’ (1993: 2).

14 See Appleby (1978: chap. 3). Slack suggests that this period was characterized not only by ‘moral economy’, but also by ‘the political economy of absolutism’ (1998: 64).

15 Benbrigge himself presented this moral code as ‘distributive Justice’ (1646: 19–20).

16 See Brenner (1993).

17 See Wilson (1925).

18 Concerning pawnbrokers and images of their cruelty, see Richards (1965: 11–13). Hindle describes the significant role of pawning in enabling the poor to survive. He shows also that this ‘cheap credit’ tended to be ‘neighbours’ credit’, which ‘reinforced the bond of friendship and trust’ (Hindle 2004: 81).

19 See Finkelstein (2000: 50).

20 See also Sainsbury (1880: no. 266).

21 Women were deeply involved in local credit networks. ‘Neighbourhood women’, as Beverly Lemire (1998: 122) describes it, ‘act[ed] as petty pawnbrokers themselves’.

22 Concerning this ‘statute’, see The Journals of the House of Commons, vol. I. (Great Britain 1803: 579, 611 and 631). ‘Brokers’ and ‘Brokage’ had already been mentioned as vices along with usury in 1614 and 1621, in House of Commons. See Great Britain (1803: 503–4 and. 611).

23 Also see Pincus (1996). Concerning the Anglo-Dutch rivalry in the latter half of the seventeenth century, see Ormrod (2003).

24 Horsefield points out that the schemes for ‘Lumbard[s]’ were ‘the lineal descendants of the ‘Banks of Piety or Charity’ of Benbrigge and others. But the emphasis now was on providing working-capital for traders’ (Horsefield 1960: 95).

25 Elsewhere, Robinson proposed ‘a Bancke’ in the form of an ‘Office of Exchanges’. See Robinson (n.d.). He did not describe the other kind of banks as Lumbard banks or banks of charity, but rather defined ‘bank’ as follows: ‘A Bancke is nothinge else then a greate quantity of Money continually att Comand, and who soever will erect a Bancke must cast aboute, ffirst how he may bringe soe much money into one Channell; And Secondly, how such moneyes may ever after remayne in such Channell w^thout issueinge out faster then it comes in’ (Robinson n.d.: fo. 219).

26 Concerning the date of authorship, Hull suggests that ‘internal evidence points to its completion not earlier than 1676.’ (Petty, 1899/1690: 235).

27 One of the abuses with which the author of A Scheme for the Erection was concerned was the forfeiture of pawned goods. See Anonymous (n.d.: fo. 24).

28 Such accusations of pawnbrokers taking stolen goods as pawn continued to be leveled into the eighteenth century. See Lemire (1991).

29 J.G. Harris observes that ‘[t]he association of usury with “canker” is so commonplace in early modern English writing that it can be found even in defenses of usury’ (2004: 83). Harris also argues that the term ‘the Jew’ was used less in its ethnic sense than as a symbolic expression of ‘transnational fluidity’ (2004: 61).

30 Concerning the ‘Stop of the Exchequer’, see Richards (1965) and Horsefield (1982). Horsefield argues that the effects of the Stop were much more serious and wider than Richards concluded.

31 See Lambe ([1658]: 12–13).

32 According to Horsefield, A Description of the Office of Credit was written by H. Chamberlen. See Horsefield (1960: 104). However, Horsefield strangely does not mention that quite a few passages of this pamphlet were transferred to Several Objections, the author of which author is said to be H. Chamberlen.

33 The author of The Broken Merchant's Complaints lamented the lack of ‘the Cash of the Nation on good Security’ (Anonymous 1683b: 1).

34 Concerning the interest controversy of 1668 to 1674, see Kelly (1991: 7–12 and 47–55); and Appleby (1978: 87–93).

35 Lewis argued in A Large Model that ‘[s]uch a transferable Bill is as valuable as Mony, so far as it is known’ (Lewis 1678a: 1).

36 Concerning this controversy, see Garnier (1908[1892–93], vol. II) and Hoppit (2003).

37 This procedure conforms to the process of making truth delineated by Shapin (1994), although according to Veall (1970: chap. I), witnesses in the law courts were not necessarily reliable.