Gentlemanly Capitalism and British Imperialism

The New Debate on Empire

Raymond E. Dumett

• Publisher: Routledge
• Year: 2014
• eBook ISBN: 9781317881476
• Topic: History
• Subtopic: Development Economics
• Index: History

The publication by Longman of P J Cain and A.G. Hopkins two-volume study of "British Imperialism" (1688-1914; 1914-1994) caused a sensation amongst historians of European imperialism and economic international history. The theory of `gentlemanly capitalism' - the complex of economic, social and political power centring on the City of London - which they developed to explain Britain's imperial expansion has since been expanded , both in its original theory and its implications. Here now is a purpose-built volume prepared in collaboration with the original authors which reviews the latest state of scholarship in the field and develops it further.

Chapter 1
Gentlemanly capitalism and British economic policy, 1880–1914: the debate over bimetallism and protectionism

E.H.H. GREEN

The period 1880-1914 marked a critical phase in the development of the British economy.¹ In the late nineteenth and early twentieth centuries Britain lost its position as the world's leading industrial nation, being overtaken by the United States and Germany. Furthermore, elements of Britain's manufacturing sector showed signs of fragility in the face of competition both abroad and at home – Britain's share of the world market for manufactured goods fell and import penetration of the British market rose significantly.² At the same time British agriculture, especially the arable sector, suffered difficulties, and Britain's rural population steadily declined.³ However, whilst the visible sector appeared to experience problems, Britain's banking and service sector flourished as never before, and London's position as 'the financial centre of the universe'⁴ was both consolidated and extended.

1 The literature on this period is extensive, but see in particular F. Crouzet, The Victorian Economy (London, 1982); S. Pollard, Britain's Prime and Britain's Decline, 1870-1914 (London, 1988); and the essays on the period 1860-1914 in R. Floud and D.N. McCloskey (eds), The Economic History of Britain Since 1700 (2nd edn, 3 vols, Cambridge, 1994), II.

2 See D. Aldcroft (ed.), British Industry and the Growth of Foreign Competition (London, 1968).

3 See C. O'Grada, 'Agricultural decline, 1860-1914', in Floud and McCloskey (eds), Economic History, II, and F.M.L. Thompson, 'An anatomy of British farming', in B. Holderness and M. Turner (eds), Land, Labour and Agriculture, 1700-1920 (London, 1991).

4 The quotation is from P.J. Grigg, Prejudice and Judgment (London, 1953), p. 258.

It was, and indeed still is, a matter of debate as to whether the developments outlined above indicated that the British economy was in decline. Recent studies of the period have tended to see change rather than decline as the chief characteristic of the British economy at this time.⁵ In particular, Sir John Clapham's idea of a 'great hinge' in British economic and social life which swung wealth, economic activity and population away from the industrial north and Midlands towards the service sector and the south and south-east has been confirmed. The increasing prominence of the service sector has been seen, in particular by neo-classically minded economic historians, as a 'rational' development, insofar as it represented a transfer of resources, both capital and human, to an area in which Britain enjoyed a clear and growing comparative advantage.⁶ However, the work of Peter Cain and Anthony Hopkins offers an alternative explanation. Their studies of 'gentlemanly capitalism' suggest that the growth of the service sector in the late nineteenth and early twentieth centuries, in terms of both its absolute contribution to British GDP and employment and its relative significance vis-à-vis the manufacturing sector, owed more to the British economy's institutional framework and the 'visible hand' of the policy preferences of Britain's governing elite than to the logic of the market. In particular, Cain and Hopkins argue that the adherence of successive governments to the gold standard and free trade strengthened sterling's role as an international currency, reinforced the City's position as a global financial centre, and entrenched Britain as the world's leading shipping, insurance and brokerage market. In Cain and Hopkins's view, Britain's cosmopolitan political economy supported and enhanced the service sector's fortunes, but at the expense of Britain's manufacturers and farmers. Britain's growing invisible earnings demanded that the nation absorb more visible exports in payment for the overseas investment and services provided by its banking and commercial sector.⁷ Any effective support for domestic producers would have required Britain to break the circuit of international finance and trade upon which 'the City' relied, for example through tariff protection, but any proposals for such action were rejected. In this respect the 1880-1914 period is central to Cain and Hopkins's analysis, in that for them this apparent cusp in Britain's economic development confirmed and reinforced the existence of a long-term, structural division of interest between manufacturing and finance in the British economy, and illustrated that 'where a choice had to be made, policy invariably favoured finance over manufacturing' (C&H, I, p. 470). For Cain and Hopkins the particular way in which the British economy developed in the late nineteenth and early twentieth centuries, and the policy framework which sustained that development, provide clear examples of 'gentlemanly capitalism' at work.

5 R. Floud, 'Britain 1860-1914: a survey', in Floud and McCloskey (eds), Economic History, II.

6 See ibid., and also M. Edelstein, British Overseas Investment in the Age of High Imperialism (London, 1979).

7 P.J. Cain and A.G. Hopkins, British Imperialism, Vol. I: Innovation and Expansion, 1688-1914 (London, 1993), passim. Referred to hereafter as C&H, I (see references in text).

This essay will examine Cain and Hopkins's thesis through a study of three policy controversies – the debate over empire in the era of the 'new imperialism', and the campaigns for bimetallism in the 1880s and 1890s and for tariff reform in 1903-14. These controversies are of particular significance in the context of 'gentlemanly capitalism'. For Cain and Hopkins the main economic engine of Britain's imperial growth was not the export interests of Britain's manufacturers but the investment, commercial and carrying interests of the service sector (C&H, I, pp. 1-51). In their schema the political economy of empire was shaped by metropolitan banking, insurance and shipping elites and not by provincial industrialists. The British Empire figures in their work as an institutional mechanism supporting and sustaining the ascendancy of Britain's financial and commercial sector, and hence an examination of British imperial policy in the late nineteenth and early twentieth centuries provides a 'test issue' for the gentlemanly capitalism model. The bimetallic and tariff campaigns are crucial because they challenged, respectively, the gold standard and free trade, the instruments that were defined by Cain and Hopkins as the main ties binding Britain to the international economy. Consequently the alignments of interest and opinion that shaped and informed the bimetallic and tariff debates not only illustrate important aspects of the contemporary response to developments in the British economy, but also offer insights into the influences and constraints on policy-making in the late nineteenth and early twentieth centuries. Given that there must be politics before there is policy, the politics of the bimetallic and tariff debates are crucial to understanding the policy outcomes which saw Britain retain the gold standard and remain almost uniquely loyal to free trade in a protectionist world. The genesis, development and ultimate fate of the bimetallic and tariff reform campaigns can thus shed a great deal of light on whether the structures and requirements of 'gentlemanly capitalism' were the key influence in sustaining Britain's internationalist economic stance.

British Industrial Production and Late Nineteenth-Century Imperial Expansion

When in 1883 J.R. Seeley famously declared that Britain had 'conquered and peopled half the world in a fit of absence of mind' he was drawing attention to the fact that it was difficult to detect a conscious, guiding imperialist strategy behind the expansion of Great Britain's imperial realm in the nineteenth century. Whatever the merits or demerits of Seeley's argument about the absence of an imperial policy, he was certainly correct insofar as the empire's economic function had rarely been at the centre of public debate. Over the next 30 years, however, the situation changed dramatically. Britain's participation in the 'Scramble for Africa' and other theatres of the 'new imperialism', and the campaigns for empire federation and imperial trade preference, saw the imperial economy become one of the central issues in British politics.

It is not my intention here to explore at length all the factors that led Britain to become a participant in the 'new imperialism'. My primary concern will be to offer a brief discussion of the domestic economic considerations and pressures that helped to shape imperial policy in this period. Of these perhaps the most important was what has been termed the 'fear of the closing door'. The resurgence of protectionism in the late 1870s ensured that territorial expansion carried the threat of the closure by tariffs of areas annexed by protectionist powers. This provoked alarm among British manufacturers, who were concerned at the loss of potential markets and pressed successive governments to avoid this through pre-emptive British annexations.⁸ The Royal Commission on the Depression of Trade and Industry, established by Lord Salisbury's short-lived Conservative administration of 1885, expressed a common demand of chambers of commerce when it noted that 'we must display greater activity in the search for new markets';⁹ and the Manchester, Glasgow, Birmingham and London chambers were particularly active in the late 1880s in advocating the opening up of 'new countries under the British flag' as a means of relieving the related problems of over-production and the closure of traditional markets and territories colonized by protectionist powers.¹⁰ Given the administrative and military costs attendant upon imperial ventures, and the growing budgetary problems that marked the 1880s and 1890s, governments were in many respects 'reluctant imperialists' in the late nineteenth century: balancing the budgetary (and therefore tax) implications of imperial activity with the potential political cost of appearing 'neglectful' of business opinion was a difficult matter. The possible connections between the perceived needs of British industry and the 'new imperialism' 1890-1914 tend to be minimized by Cain and Hopkins. In fact, it was politically difficult for any government to ignore the demands emanating from Britain's manufacturing centres, and it is not possible to understand late Victorian British imperial expansion without reference to this factor.

8 See in particular W.G. Hynes, The Economics of Empire (London, 1978), passim.

9 Royal Commission on the Depression of Trade and Industry, Final Report, Cmnd. [4893],

10 See Hynes, Economics, and E.H.H. Green, The Crisis of Conservatism (London, 1995), pp. 35-41.

That manufacturers demonstrated a clear interest in imperial expansion, and found governments responsive to that interest, seems at first glance to contradict a core element of the gentlemanly capitalist thesis. Moreover, the fact that the London chamber of commerce, which contained many representatives of the service sector, allied itself on the question of empire with Manchester, Liverpool, Glasgow, Birmingham and other chambers in industrial areas, seems to weaken the notion, repeated throughout British Imperialism, that there was a gulf between manufacturing and 'City' interests. The domestic forces providing the push for imperial expansion in the late nineteenth century appear to have been drawn from across the spectrum of economic activity.

But although there may have been a consensus on the expediency of preserving and even extending Britain's imperial domain, there were divisions of opinion and interest over the empire's economic function. These differences became very apparent in the difficulti...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of tables
• List of figures
• Notes on contributors
• Map
• Introduction: Exploring the Cain/Hopkins paradigm: issues for debate; critique and topics for new research
• 1 Gentlemanly capitalism and British economic policy, 1880-1914: the debate over bimetallism and protectionism
• 2 Profit and power: informal empire, the navy and Latin America
• 3 The late nineteenth-century British imperialist: specification, quantification and controlled conjectures
• 4 Economic power at the periphery: Canada, Australia and South Africa, 1850-1914
• 5 British financial imperialism after the First World War
• 6 British informal empire in East Asia, 1880-1939: a Japanese perspective
• 7 Gentlemanly capitalism and the Raj: British policy in India between the world wars
• 8 Gentlemanly capitalism and empire in the twentieth century: the forgotten case of Malaya, 1914-1965
• Afterword: The theory and practice of British imperialism
• A short bibliography
• Index