London: The Commercial Wonder

By, Jonathan Silverman (for other works by this author click here)

Since London’s creation in 43 AD, when the Romans invaded the island, it has been an important commercial city. Although the new town was originally created as a small military depot, it soon grew into a large port. The city was located on the Thames River, at the northern end of the bridge the Romans had built. The Romans greatly favored the city due its ideal location, which was on route to their provincial capital at Colchester in eastern England. By 61 AD the name "Londinium" was widely accepted as the title of the commercial and financial center for Roman Britain.

The importance of trade largely impacted the development and organized nature of London. It consisted of an intricate system of roads, all of which were paved, as well as shops, temples, and a wharf along the river for docking. The city was growing rapidly and by the third century, Londinium was the home to nearly 30,000 people. (1)

The Romans left London in the 5th century and for the next few centuries, Germanic tribes such as the Saxons, Angles, and Jutes fought over the island. London was of great importance to these seafaring groups who placed a lot of emphasis on trade. The wool trade had become increasingly popular, and these groups desired Ludenwic or Ludentown, as it was now called, as an ideal port. It was strategically located between the wool-growing areas located north of London and in East Anglia and the manufacturing towns of the Netherlands.

Even after 1000 years trade was still a very significant part of society in London, although the specific trades changed. Crafts and trade guilds began to develop in the 1100's, each guild representing a group of craftsmen such as bakers, carpenters, goldsmiths, or grocers. These guilds helped primarily to protecting the artisans and regulate trade. These guilds had a large impact London’s development as a city because of the way each group organized themselves into their own specific area in the city. This allowed trade to continue in a more efficient manner. At the time there were two main trade markets, Cheapside, a general produce market, and Eastcheap, a market for fish and meat. The side streets of the markets were named according to the items that were sold there. The names consisted of Milk Street, Iron Lane, and Poultry lane, some of which still exist today.

London soon became a world leader in the international wool trade, which attracted many foreigners to the area including many Danes, Germans, Flemish, and Italians. They established themselves primarily as merchants, while many others became bankers, a profession whose popularity in London was rapidly growing. Between 1485 and 1600 London's population grew to 200,000, and by the end of the 17th century, it shot up to 575,000, which made London the largest city in Europe. (2)

This period of growth was marked by new English developments in trade, colonization, and finance. The first major development was the founding of the Royal Exchange by Sir Thomas Gresham. This is what became the modern day location of the London stock exchange. Gresham also conceived Gresham’s Law, the economic principle that in the circulation of money "bad money drives out good." The extended version states that "when depreciated, mutilated, or debased coinage (or currency) is in concurrent circulation with money of high value in terms of precious metals, the good money is withdrawn from circulation by hoarders." (3)

As time progressed, Eurpoeans extended their influence across the globe, and in order to keep up the Queen chose to follow suit. The English East India Company played a large role in this expansion. It was originally created in 1600 in an effort to catch up to its more dominant European neighbors. The Dutch companies had already established a tight grip on the spice trade from the East Indies, however, and as a result, the East India Company had trouble succeeding. They were forced to reduce themselves to piracy, picking up scraps of trade wherever they could.

The company did not get discouraged, and they sought out other, more prosperous ventures such as trade routes to India, Java, Sumatra and the Middle East. With the increasing importance and power of the aristocracy, luxurious tastes grew popular and demands for new delicacies increased. By the middle of the seventeenth century, the East India Company shipped goods as diverse as cloth from southern India to Sumatra, and coffee from Arabia to India. They would then take these profits and buy the spices greatly desired in London. In this roundabout manner, they managed to work around, and even surpass, the powerful Dutch trading companies. The East India Company even worked its way into the most closed of nations, China, where they obtained popular teas.

One major problem that plagued the British people, besides the notorious Bubonic plague, was widespread poverty. Compared with other European nations, England contained a much larger poor population. New agricultural technologies allowed one farmer to do the job of ten, which forced a large percentage of the working class into unemployment. In an effort solve the "poor problem," Richard Hakluyt, a 16th-century geographer, suggested to Queen Elizabeth that she explore colonization in the New World. He proposed that these colonies would serve two purposes; they would challenge the Spanish domination while serving as a place to discard the poor.

Colonization was a very expensive process, and since Queen Elizabeth didn’t want to risk wasting the royal treasure, she opted for the use of the joint-venture stock company. The joint-venture stock company was the precursor for modern corporations that cover the globe today. In these companies "stock was sold at high net-worth to investors who provided capital and had limited risk."(4) Investing in colonies was different than normal trading organizations, however, because the risks were much higher, and the returns might not come until years later. As a result, people who wanted to go the New World invested in their own expeditions. This was very different from the Spanish and French colonies that were all funded by the king. Despite a late start, the English had great success with their colonies, due in large part to the fact that these early settlers had a true stake in their colonial success.

The creation of the first Bank of England by City merchants in 1694 also had great economic impact on England. This was a perfect example of the economic freedom and organization that existed in London at the time. Merchants could own land, and now they could secure their money in a bank, two privileges were denied the lower classes of other European cities.London’s true prosperity was yet to come, for the turn of the 18th century brought the Industrial Revolution. As an island, England was able to stay isolated from the rest of Europe during the crises of the French Revolution, the Old Regime conflict, and the Napoleonic wars. Instead of fighting, the British chose to invent, and what glorious things they created. The weaving industry is a perfect example. The cotton utilization process was becoming easier and easier with the inventions of the flying shuttle, the spinning Jenny, the water frame, and finally the power loom. The massive increase in cloth productivity can be illustrated by the amount of cotton Britain imported. In 1760 they imported about 1000 tons, and by 1850 they imported well over 222,000 tons of cotton. (5)

So why was London so successful? One major reason was the large risk taking, private sector, rare in all other European cities. The industrial revolution could never have begun if it weren’t for individuals who took risks on new business ventures. The inventions that furthered the revolution, for example, would never have been created if people weren’t constantly searching for new, improved ways of conducting their trade.
Another major factor in the monumental success was the social flexibility in London. Members of the aristocracy involved themselves in industrial endeavors, working alongside people of varying classes. This close relationship between classes has lasted even today. The combination of imagination, growing markets, governmental support, economic organization, and class flexibility made London the commercial and economic center of the world up through the 19th century.

Footnotes:

(1) http://65.107.211.206/history/hist4.html
(2) http://www.greatestcities.com/london/london-8-c.html
(3) http://encyclopedia.com/articles/05419.html
(4) http://www.beyondbooks.com/ush72/2b.asp
(5) http://emayzine.com/lectures/indust~2.htm

Bibliography
1) http://www.greatestcities.com/london/london-8-b.html
2) http://encyclopedia.com/articles/28193History.html
3) http://www.aolsvc.worldbook.aol.com/wbol/wbPage/na/ar/co/329580?op1=&st1=London&op2=&st2=&op3=&st3=
4) http://www.beyondbooks.com/ush72/2b.asp
5) http://65.107.211.206/history/hist4.html
6) http://www.londonstockexchange.com/about/about_05.asp
7) http://www.theeastindiacompany.com/history2.html
8) http://emayzine.com/lectures/indust~2.htm
9) Arnstein, Walter L. & Willcox, William B. The Age Of Aristocracy. Copyright 1983 by D.C. Heath and Company. Published in Canada.
10) Mayhew, Henry. London Labour And The London Poor. Copyright 1968 by Dover Publications Inc. Published in Canada by General Mills Publishing Company.
11) Redford, Arthur. The Economic History Of England. Copyright 1960. Printed in Great Britain by Richard Clay and Company Ltd.