Mr. Meyers
BoME H-band
London Economics
3-11-04
“London is the epitome of our times, and the Rome of to-day, ”wrote Ralph Waldo Emerson in the 1800’s, and London is still arguably one of the greatest historical cities in the world.[1] London is an ancient city, founded in 43 AD by the Romans as Londinium. Over the years since then, even as London’s name and ruling governments changed, it remained in the forefront and retained its influence. The foundation for its success was first its geographically blessed location, sitting on the substantial water highway of the river Thames as it nears the English Channel with its deep, long, and large harbor. London was also blessed by being on the edge of an island close enough to the continent to allow for easy trade while protected from the constant threat of invasion by natural defenses as an island. London, along with England, was blessed by being directly located on the gulf-stream, providing a temperate climate that kept London’s harbor unfrozen open for shipping activity. In addition, London was blessed by being part of England which had the resources necessary to start important economic trends. England had enough land to support itself agriculturally and had land good for raising livestock and produced enough for export as well. It had coal and ores, providing the resources to develop metal industries for home use and trade and to industrialize. Although London has had its moments of glory and destruction, its location and prominence for shipping and trade always prevailed, making it into the city it is today. London has remained a behemoth of trade and capitalism and has been at the forefront and founding of many economic systems and theories that are modern today, among them, the stock exchange, the bank, the trading company, the capitalist and laissez-faire theory of economy.
London’s potential as a port and hub was recognized by the Romans, and it became a very significant center of commerce and trading in Roman times. In fact, London began as a trading outpost of the Roman Empire. In 43 AD, the Romans located Londinium at the most convenient place to cross the Thames, and soon built a bridge spanning that area. Londinium was a very effective location to load and unload ships. Londinium became the Roman’s northernmost trading center and so London began its economic life as a significant outpost of a large empire and a key port city with its ease of shipping and docking. Londinium was burnt to the ground by Queen Boudicca but soon was rebuilt, and its population then is estimated to have been about 10,000. In 60 AD, the first defensive walls were built around the city. This gave the city a greatly improved degree of protection and was economically beneficial. The walls protected mercantile interests within the city, and the merchants liked this safer Londinium all the more, and it increased in size and activity. Then, in 410 AD, as the Roman Empire began to collapse, Londinium and other outlying outposts were abandoned. Without the Roman military presence, Londinium disappeared.[2]
After a period of destruction, London reappeared as Lundewic, a major hub of commercial activity and influence founded by the Saxons. The Saxons were the next major group to recognize the potential of London and the next major influence on its formation. In the late 6th century, Saxon farmers, from Germany, founded Lundewic slightly west of where the Roman walls of Londinium had been. In 604 AD, Ethelbert of Kent founded St Paul’s, establishing Lundewic with an increase in religious importance and power. Lundewic began to gain influence as a city and, again, to become an important trading hub. In 865, the Vikings invaded and for a time Lundewic was under Danish control, but it was soon retaken by Alfred the Great of Wessex. Alfred was one of the main forces that helped make London the economic and political power that it is today. He moved Lundewic back to where it was originally placed by the Romans and rebuilt the wall that surrounded it. This had the same effect that it had in 200 AD, with the construction of the first wall. By providing protection and a sense of security, the city attracted more merchants and increased its trade. The next major event in Londewic’s history occurred when, in the 11th century, Cnut, King of England, moved the capital from Winchester to Lundewic. This had enormous ramifications for the power and importance of the city. Lundewic became England’s largest and most powerful city, as the seat of government, the trading center of England, and as the immensely important economic link to Europe. At this time, its name shifted to the modern well known one of London. London, in these times, was exporting wool, wood, leather, horn and importing luxury items like silks and spices. As the quantity of trading in London grew, the city increased in power and wealth that, in turn, was a greater draw to merchants and trade.[3]
As a result of the success of commerce in London and the rise and growth of the merchant class in the city, London entered a very important phase in its evolution. The merchant population was able to challenge the kings, who had ruled and taxed London, and to establish a self-government. During the Medieval period, the merchant class had begun to gain strength and wealth. The merchants developed power in the realm of politics, and eventually succeeded at achieving greater self-governance and influence. The government and economy of London became significantly more independent from the king. As Henry I vied for control of England, he formed an alliance with London’s merchants to guarantee his ascension to power, and in return he gave the city merchants the right to levy taxes and elect a sheriff. The merchants of London were developing their own power. In 1191 Richard I granted London the right of self-government, and during the next year, the first mayor was elected. Again the merchants had a role in political dealings, and in 1461 they supported Edward IV in his attempt at the throne, and in return many of these merchants were knighted. London was governed by the Mayor and a council elected from the ranks of the merchant guilds who ran the city and also controlled commerce. As the mercantile and bourgeois interests began to gain power and influence politics, they started achieving their own rewards. “Merchants grew more influential as members of the House of Commons or through the pressure they could exert from outside. Consequently industrial and commercial policy, which before the Civil War ‘had been a policy imposed by the government on business interests… became to an increasing degree a policy imposed by business interests on the government.’”[4]
London’s businessmen made significant innovations in commerce that were imitated all over the world. The International Exchange was founded in 1566 by Thomas Gresham to compete with Amsterdam for financial dominance, and in 1560, it became the Royal Exchange. London’s mercantile population continued to be a driving force and a power in the far-reaching trade that was prevalent at these times. For these reasons, London’s harbor was further developed, and through this push by the merchants, new shipping routes were opened into the Baltic and Mediterranean seas. With this advancement, companies such as the East India Company were founded in 1600. Eventually, these companies, with their outposts in foreign countries, set the foundation for the British Empire, and the ambitious trade that the merchants were pushing helped to establish London as one of the most important ports and trade hubs in the world. London became larger as the amount of goods that passed through it became greater, and the wealth that was gleaned increased. London was flooded with spices, wine, silk tobacco and companies, such as the Levant Company, made enormous amounts of money selling woolen cloth to Spain and Turkey. The wool and textiles industry was “the richest and most valuable manufacture in the world” (Defoe),[5] worth more to England than were the mines of America to the King of Spain.” London also established superiority in shipbuilding as much of its trade depended on this and many became highly skilled at this trade. In 1688 Edward Lloyd founded a café on Tower Street which evolved into the world famous Lloyds insurance business. Hudson Bay was incorporated in 1670. London in the 17th and 18th century was becoming a giant of trade. It “handled nearly three-fourths of cloth shipments; in 1700, it dispatched four-fifths of all exports and owned two fifths of the country’s merchant tonnage; in 1750, 75 per cent of the shipping entering British ports anchored in the Thames, and over two-thirds of it bringing goods from the outports. … London was therefore ‘capital, metropolis, port and entrepot, all in one.’”[6]
Given the vast flow of money in commerce, it is logical that the merchants of this trading hub would develop financial institutions to handle the transactions. The Bank of England was founded in 1694 as an economic aid to the King against the French in the War of the Grand Alliance. It also increased loans and money lending for traders and thus helped increase growth in trade and mercantilism. In 1773 the London Stock Exchange officially opened, the concept having originally developed in the coffee houses of London. This concept and then the realization of it made London the first city to have a stock exchange, and it is a concept and practice that is now part of economic life for the entire world.
Since London’s
founding in 43 AD as a Roman trading outpost, London has been important, and by
the 1700’s and 1800’s it became one of the world’s most powerful cities. In
fact, during much of its history, London was the foremost capital of arguably
the most powerful country in the world. London contributed to the economic
power and leadership of England through its enormous success and formidable
ability to create economic systems that often kept it a step ahead of other
countries giving it a significant economic advantage. These innovations were
then imitated in other countries making it clear that the forethought and
influence of London was profound on the rest of the world. London has been the
home and creator of the joint venture stock company, stock market, capitalism
and then laissez-faire capitalism, industrialization. London led the world and
in many cases defined what was new and modern. Through London’s favorable
geographic location on a deep and protected river with shipping that could
easily reach most of Europe, London had lots of blessings that supported it’s
economic development. But it was the English who with their openness to coming
up with new ways of doing things, with their economic and industrial inventions
who took advantage of these blessings and produced one of the greatest cities
of all times.
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Emerson, Ralph Waldo. English Traits—Result. [online] http://www.bartleby.com/5/218.html
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