25 Oct 2011 | History

Victorian Finance 

Exploring the Victorian portrayal of money.

We may believe that British attitudes and culture have moved on since the nineteenth century but, in our feelings towards the City of London, we remain steadfastly Victorian. As financial historian Ranald Michie points out in his book, Guilty Money, the Victorians never learnt to love the City. If it made money for them, they congratulated themselves on being canny investors. When financial crisis struck, they railed against greedy, corrupt City profiteers.

Michie’s book looks at the place of the City in British culture between the end of the Napoleonic Wars and the outbreak of the First World War. The Durham University historian did his research largely by reading shelfloads of Victorian and Edwardian novels, both good and bad. The novel, he explains, is both a reflection of the time in which it was written and an influence upon those who read it.

This was a fertile seam, since money is everywhere in Victorian fiction. A typical view of the City and its denizens appears in Anthony Trollope’s The Way We Live Now, published in 1874. Here the mysterious foreign financier, Augustus Melmotte, tries to attract investment for a dubious railway project. His deceptions, prevarications and forgeries culminate in his disgrace and suicide. The novel epitomised the public’s perception of City bigwigs, and the fate it thought they deserved. That the City was overrun with “foreigners” – often a euphemism for “Jews” – merely added to their suspicions. These people produced nothing and fed off others’ money. They appeared from nowhere and became Flash Harrys overnight or were exposed as crooks.

Michie’s research shows that these negative perceptions pervaded Victorian and Edwardian literature and, by extrapolation, society. What actually went on in the Square Mile was rather more than just banking and investment. Its central purpose was trade, with finance there ostensibly to support it, alongside services like shipping, accountancy and law. But for most onlookers it was the money men and speculators who “were” the City, although their specific identities changed over time.

City merchants, who had been objects of envy and scorn before the nineteenth century, had by now been rehabilitated as productive and respectable figures. The next villains of the piece were bankers. “In the mid-nineteenth century people didn’t trust banks and bankers,” Michie says. “Banks collapsed. They issued notes that became worthless. But then banking became more stable, and another category of hate figure emerged – the company promoter.”

Company promoters acquired businesses cheaply and sold the shares to the public at a profit, converting private companies into joint-stock companies. There were bona fide success stories, some of whose names remain familiar – Lever Brothers, Shell and Rio Tinto among them. Many more were poor investments and some – including many mining stocks – were out-and-out frauds.

They found a market because the middle-classes, then as now, worried about how to preserve their capital and earn a decent return on it. Interest rates were falling for much of the last quarter of the century and people were constantly on the lookout for new opportunities. Investing abroad was one, and the first investment trusts appeared around this time for that purpose. Ironically, perhaps, US mortgages were one of their favoured assets.

After the First World War, the world’s financial centre of gravity shifted to New York and the City became a duller, more languid place – this too is reflected in post-War literature. Not until the late-1970s and 1980s, with the lifting of exchange controls and Big Bang, did London start to reclaim its crown as the international capital of finance, albeit managing others’ money rather than its own.

Before 1914, the City may have been despised by the British public but it was the envy of the world. Today, it draws similarly green-eyed glances from abroad while remaining unloved at home. “The only differences between the pre-1914 era and today,” Michie concludes, “are the absence of obvious anti-Semitism and the replacement of the company promoter by the hedge fund manager as the evil perpetrator of financial ruin.”

Author:  Edward Russell-Walling
Edward Russell-Walling writes on financial and economic affairs for the Financial Times, The Banker and New Stateman.