Imperialism and Hegemony in Global Finance Along with the concentration of private financial institutions,the Bank of England (BoE)altered the functions of its provincial branches.Ernest Edye,the Principal of Branch Banking for the BoE in the early 1900s,wrote that the 1sn6n L raison d'etre of a Bank is to meet the legitimate requirements of its Customers' and that this legitimate purpose was being violated by the BoE's 'locks up' policy that drained capital from the provinces to the central office without recipro- cal credit extension.32 The combined effect of these private and public changes was a further 'credit crunch'that further isolated LIGs,so that,while output in the financial services sector more than doubled during 1890 to 1915,commenta- tors argued that credit for LIGs had diminished.33 Furthermore,while banking concentration was strongly associated with professionalisation,it now became heavily dependent upon personal relations between the lender and the borrower' through gentlemanly networks.34 In addition to this'credit crunch',LIGs with- drew in increasing numbers from the post office savings bank system,which failed to provide sufficient credit despite favourable rates of interest.35 By 1914, 益 during a 'run on banks',the collapse of savings banks and the inadequacy of gov- ernment guarantees to secure deposits led to open street protests.36 In short,and despite public and private contestation,the English state did little to improve LIGs'access to credit. English tax politics Compared to credit politics,tax politics for LIGs fared better.By the early 1900s direct taxes had increased to 38 per cent of government income,from 19 per cent in the 1870s and 33 per cent in 1900.37 However,a push from the Conservative party to protect its key constituency led to a resurgence of interest in tariff protec- tionism and a move away from direct taxes.This proposed policy shift was sup- ported by financial elites in the City of London,despite their avowals to free trade.38 At the same time,'social liberals'such as John A.Hobson pointed to the potential for positive state intervention to redistribute income from the wealthy -especially rentiers''unearned'and 'excessive'incomes -to LIGs to boost domestic consumption and,in doing so,transform imperialist foreign econo- mic policies.39 Following the 1905 transition to the Liberal government,the propagation of anti-rentier policies by figures such as Prime Minister David Lloyd George received popular support,and were typified in the struggle between the House of Commons and the House of Lords over the 'radical' 'People's Budget'of 1909-10.40 This budget proclaimed the legitimacy of a transformation of the English financial reform nexus in favour of LIGs,but was more bluster than substance as it only marginally enhanced national income while government expenditure actually dropped.As the vast majority of LIGs earned too little to benefit from tax breaks,the only tax relief was to those far above median income.In short,the tax reforms were insufficient to assist the development of a broader social source of English financial power (through savings or consumption)and exacerbated the 'years of frustration'LIGs felt immediately prior to the Great War.2 Such frustrations were expressed in chan- ging economic and social conventions.For example,despite increased real wages and declining property prices,LIGs did not save more but rather consumed 5
Downloaded By: [University of Sydney] At: 02:46 7 August 2007 Along with the concentration of private financial institutions, the Bank of England (BoE) altered the functions of its provincial branches. Ernest Edye, the Principal of Branch Banking for the BoE in the early 1900s, wrote that the ‘raison d’eˆtre of a Bank is to meet the legitimate requirements of its Customers’ and that this legitimate purpose was being violated by the BoE’s ‘locks up’ policy that drained capital from the provinces to the central office without reciprocal credit extension.32 The combined effect of these private and public changes was a further ‘credit crunch’ that further isolated LIGs, so that, while output in the financial services sector more than doubled during 1890 to 1915, commentators argued that credit for LIGs had diminished.33 Furthermore, while banking concentration was strongly associated with professionalisation, it now became ‘heavily dependent upon personal relations between the lender and the borrower’ through gentlemanly networks.34 In addition to this ‘credit crunch’, LIGs withdrew in increasing numbers from the post office savings bank system, which failed to provide sufficient credit despite favourable rates of interest.35 By 1914, during a ‘run on banks’, the collapse of savings banks and the inadequacy of government guarantees to secure deposits led to open street protests.36 In short, and despite public and private contestation, the English state did little to improve LIGs’ access to credit. English tax politics Compared to credit politics, tax politics for LIGs fared better. By the early 1900s direct taxes had increased to 38 per cent of government income, from 19 per cent in the 1870s and 33 per cent in 1900.37 However, a push from the Conservative party to protect its key constituency led to a resurgence of interest in tariff protectionism and a move away from direct taxes. This proposed policy shift was supported by financial elites in the City of London, despite their avowals to free trade.38 At the same time, ‘social liberals’ such as John A. Hobson pointed to the potential for positive state intervention to redistribute income from the wealthy – especially rentiers’ ‘unearned’ and ‘excessive’ incomes – to LIGs to boost domestic consumption and, in doing so, transform imperialist foreign economic policies.39 Following the 1905 transition to the Liberal government, the propagation of anti-rentier policies by figures such as Prime Minister David Lloyd George received popular support, and were typified in the struggle between the House of Commons and the House of Lords over the ‘radical’ ‘People’s Budget’ of 1909– 10.40 This budget proclaimed the legitimacy of a transformation of the English financial reform nexus in favour of LIGs, but was more bluster than substance as it only marginally enhanced national income while government expenditure actually dropped.41As the vast majority of LIGs earned too little to benefit from tax breaks, the only tax relief was to those far above median income. In short, the tax reforms were insufficient to assist the development of a broader social source of English financial power (through savings or consumption) and exacerbated the ‘years of frustration’ LIGs felt immediately prior to the Great War.42 Such frustrations were expressed in changing economic and social conventions. For example, despite increased real wages and declining property prices, LIGs did not save more but rather consumed Imperialism and Hegemony in Global Finance 5
Leonard Seabrooke more.Given that institutional arrangements did not permit access to credit,and despite marginal improvement on tax burdens,LIGs prioritised short-term 1sn6n rewards as compensation for unmet expectations about how the economy should work.43 S6.20 English property politics If credit politics were frustrating,and tax politics disappointing,then property politics were infuriating for LIGs in England.Winston Churchill,as a 'young man in a hurry'Liberal social reformer,reflected changing expectations among LIGs when stating in 1908 that 'under the old system people had dear food, under the present system they had dear houses'.4During the late Victorian and Edwardian period there had been an increase in demand for property that was not satisfied (and not addressed until the 1930s and 1940s),45 with property own- ership considered the 'last remnant of feudalism'46 Despite minor advances on 益 taxation,the Liberal government did not positively intervene on behalf of LIGs butnsed,provided tax concessions to agrarian landholders and urban As with tax and credit politics,LIGs occasionally organised collectively to express their contestation of government legitimacy claims on access to property. In 1908,the Liverpool-based Financial Reform Association campaigned to 'force the middle and industrious classes to understand how they have been cheated, robbed,and bamboozled upon the subject of taxation'.4 This target for this advo- cacy group was landlords,who were identified as on the receiving end of unfairly redistributed 'unearned income'.To make matters worse,within England at the time the dominant view among the wealthy and financial institutions -and a view the government did little to alter -was that providing mortgages for LIGs was a dangerous business.9 Where credit was available it was usually at usurious rates.Instead,popular investments were in sectors associated with imperial power, such as mining and shipping.The state was unable to alter the positional premium'that rentiers and the landed classes attached to property as an explicit expression of wealth that was 'traded above its economic value'.50 As such,and faced with no serious challenge from the state,English international financial capacity became increasingly dependent on rentier interests. The international rentier economy I suggest that the imperial character of English influence on the international finan- cial order reflected the shaky domestic legitimation of its domestic financial reform nexus.Indeed,the state's treatment of the Gold Standard,international financial regulation and encouragement of types of investment reflect domestic choices.First,the key characteristic of the English management of the Gold Stan- dard was its 'hands-off approach.Sir John Clapham argued that before 1918 the 'Bank was amazingly detached from international affairs;heard from no one;saw no one;only watched the gold and took the necessary steps automatically'5 Second,the character of creditworthiness assessment at home also informed rentier-like behaviour in the international financial order.While banking 6
Downloaded By: [University of Sydney] At: 02:46 7 August 2007 more. Given that institutional arrangements did not permit access to credit, and despite marginal improvement on tax burdens, LIGs prioritised short-term rewards as compensation for unmet expectations about how the economy should work.43 English property politics If credit politics were frustrating, and tax politics disappointing, then property politics were infuriating for LIGs in England. Winston Churchill, as a ‘young man in a hurry’ Liberal social reformer, reflected changing expectations among LIGs when stating in 1908 that ‘under the old system people had dear food, under the present system they had dear houses’.44 During the late Victorian and Edwardian period there had been an increase in demand for property that was not satisfied (and not addressed until the 1930s and 1940s),45 with property ownership considered the ‘last remnant of feudalism’.46 Despite minor advances on taxation, the Liberal government did not positively intervene on behalf of LIGs but, instead, provided tax concessions to agrarian landholders and urban landlords.47 As with tax and credit politics, LIGs occasionally organised collectively to express their contestation of government legitimacy claims on access to property. In 1908, the Liverpool-based Financial Reform Association campaigned to ‘force the middle and industrious classes to understand how they have been cheated, robbed, and bamboozled upon the subject of taxation’.48 This target for this advocacy group was landlords, who were identified as on the receiving end of unfairly redistributed ‘unearned income’. To make matters worse, within England at the time the dominant view among the wealthy and financial institutions – and a view the government did little to alter – was that providing mortgages for LIGs was a dangerous business.49 Where credit was available it was usually at usurious rates. Instead, popular investments were in sectors associated with imperial power, such as mining and shipping. The state was unable to alter the ‘positional premium’ that rentiers and the landed classes attached to property as an explicit expression of wealth that was ‘traded above its economic value’.50 As such, and faced with no serious challenge from the state, English international financial capacity became increasingly dependent on rentier interests. The international rentier economy I suggest that the imperial character of English influence on the international financial order reflected the shaky domestic legitimation of its domestic financial reform nexus. Indeed, the state’s treatment of the Gold Standard, international financial regulation and encouragement of types of investment reflect domestic choices. First, the key characteristic of the English management of the Gold Standard was its ‘hands-off’ approach. Sir John Clapham argued that before 1918 the ‘Bank was amazingly detached from international affairs; heard from no one; saw no one; only watched the gold and took the necessary steps automatically’.51 Second, the character of creditworthiness assessment at home also informed rentier-like behaviour in the international financial order. While banking Leonard Seabrooke 6