In order for us to be able to define and to explain the most distinctive features of British capitalism, ever since the time of Industrial Revolution until comparatively times, we will need to refer to the discussed subject matter from not solely economic but also geopolitical and socio-cultural perspective.
If put in a nutshell, the history of British capitalism can be outlined as follows: After Industrial Revolution made it possible to invest in such newly emerged industries as textile producing, railway building and steam-engine engineering, through years 1760-1860 British economy experienced an unprecedented boom.
Nevertheless, from 1860 onwards, the vitality of British economy started to become progressively undermined. This process continued throughout the course of 20th century and had resulted in creation of a situation when, as of today, British financial system is essentially the only self-sustainable sector of country’s economy.
And, there are good reasons to believe that the closer analysis of British capitalism’s evolution, will provide us with the insight on what represented its foremost features, throughout the course of an affiliated historical era. In this paper, we will aim to do just that.
The origins of British capitalism are rooted in the workings of Puritan/Protestant mentality. As it was pointed out by Max Weber, the very essence of Protestantism, as essentially secular religion, created objective preconditions for Industrial Revolution to begin in Britain, as the country that featured a stable government, on one hand, and idealistically minded but utterly industrious population, on another – it is namely the combination these two socio-political factors that drives forward scientific progress.
Thus, it was due to objectively existing laws of historical dialectics that, from 1760 onwards, the value of labor in British economy started to attain independent subtleties – hence, facilitating the process of country’s industrialization.
By the end of 19th century, Britain became the first fully industrialized nation. Nevertheless, what differed Britain from other countries that had undergone industrialization later in history, is that it possessed a vast colonial Empire. This was exactly the reason why in Britain, instead of being invested into developing of new technologies, the bulk of ‘surplus value’, created by an ongoing process of industrialization, was invested into the maintenance of an Empire and into developing the resource-based sectors of economy.
In his book, Rubinstein (1993) states: “British investment increasingly went overseas, especially into developing the primary industries – minerals, rubber, jute, gold and diamonds – of the tropical Empire, or the infrastructure – railways, docks, public works, construction – in the temperate regions of the Empire settled by emigre Britons” (p. 4).
Nevertheless, as we are well aware of, the pace of scientific progress renders the functioning of resource-based commercial enterprises increasingly unfeasible. For example, after the end of WW2, the cost value of a copper in telephone cables accounted for 80%. The telephone cable at the bottom of Atlantic Ocean, which during the course of forties and fifties was connecting America and Europe, was utterly expensive and yet – it allowed making only 138 parallel telephone calls.
Nowadays, despite the fact that the cost value of raw materials in optical fiber cables accounts for only 10%, they can sustain 750.000 parallel telephone conversations, at the time. In other words, the initial vigor of British capitalism was lost, because Britons’ capitalistic industriousness was channeled into improving the living standards for local populations in colonies.
To put it allegorically – the kinetic power of British capitalism was transformed into the heat, which later simply dispersed into the thin air, on the account of colonies having succeeded in liberating themselves from ‘white oppression’. Thus, one of the most distinctive traits of British capitalism was its affiliation with ‘white man’s burden’ of spreading the light of civilization, which sets it apart of from capitalisms of Germany or U.S., for example, strictly concerned with generating a commercial profit.
As it was rightly pointed out by Rubinstein in the same book: “Gentlemanly capitalism, based on land, finance, and commercial services, is the key to understanding the growth of the British Empire” (p. 40). Apparently, British capitalists never ceased being little more than just profit-driven individuals, as it used to be the case with their counterparts from the rest of the world.
Thus, British capitalistic ‘gentriness’ can be partially blamed for the fact that, by 20th century’s twenties and thirties, there were millions of highly skilled but unemployed industrial workers in Britain. And, as time went by, it was becoming increasingly harder for them to find a job, as commercial feasibility of Britain’s industries, associated with extraction and utilization of natural resources (especially of those overseas), started to become progressively undermined.
For example, in 1925, when prices for natural rubber were at all times high, this product accounted for 15% of all British exports. However, since Germans discovered a technology for producing synthetic rubber in 1935, within a matter of two years, the share of natural rubber from colonies in British exports fell down to 3% – selling this product simply ceased being quite as profitable.
Therefore, it is not by a pure accident that it was namely during the course of twenties and thirties, that British trade-unionist movement started to gain a momentum, which in its turn, established socio-political preconditions for the concept of so-called ‘welfare state’ to grow increasingly popular with more and more Britons. Very rapidly, the functioning of British free-market economy was attaining a number of clearly defined Socialist subtleties.
This brings us to discuss another distinctive feature of British capitalism – the fact that it had undergone a rapid transformation being ‘wild’ to becoming essentially ‘semi-socialist’. Despite the fact that, throughout the course of second half of 19th century, British capitalism was strongly associated with merciless exploitation of child labor and with virtual absence of trade-unionist movement, in the first decade of 20th century a number of legislations have been passed by the Parliament, in order to protect workers’ social and economic rights.
For example, Britain was the first country in the world that in 1911 made workers eligible for unemployment insurance. Moreover, as time went by, the government continued to bestow a variety of social benefits upon workers.
In his article, Fulcher (1997) states: “The 1920 National Insurance Act greatly extended the coverage of unemployment benefit and the 1921 Act first provided allowances for the dependants of the unemployed… The 1925 Act established the modern pension system of non-means-tested pensions for those over 65” (p. 515).
In its turn, this explains why, unlike what it used to be the case in other major capitalist countries, such as France, Italy, U.S., Spain and China (with exception of Nazi Germany, of course), British Communists were never popular with British ‘proletarians’, on behalf of which they spoke. According to Wood (1959): “The C.P.G.B. (Communist Party of Great Britan) has always been smaller than any Communist party of a major industrial nation.
Although membership of 10,000 was officially claimed at the time of its foundation, the actual figure seems to have been nearer 2.500” (p. 259). The reason for this is simple – due to Labor Party’s political activities, during the course of thirties, British society was growing increasingly Socialist. And, socialist-minded citizens are much more likely to affiliate themselves with the concept of a ‘welfare state’, as opposed to affiliating themselves with the concept of ‘class struggle’.
Nevertheless, as we know from the lessons of history, while providing various benefits to unprivileged members of society, the implementation of the concept of ‘welfare state’ undermines the effectiveness of economy’s functioning. The economies of ‘welfare states’ are necessarily stagnant, which explains such economies’ insensitivity to free-market challenges.
This was the reason why, unlike what it was the case with America’s capitalism, British capitalism remained largely unaffected by the Great Depression of 1929 – Britain’s depression began in 1921 and it subtly continues until today. As Booth (1982) had put it in his article: “At some time in early 1921 it became clear that the period of prosperity was over.
To all sections of the community, therefore, the outlook was one of unaccustomed bleakness” (p. 208). The fact that this depression was being extended over such long period of time, simply made it less acutely felt. Unlike what it was the case with American depression, British depression was not predetermined by free-market economy’s fluctuations, but by government’s attempts to keep these fluctuations under control.
Despite the fact that Britain came as a winner out of WW2, country’s economic might was greatly diminished by this war and by India’s proclamation of independence in 1947, which initiated the process of Empire’s dismantling. Britain’s financial system, represented by London’s City; nevertheless, remained comparatively strong.
However, despite being semi-independent and privately own financial institution, much like America’s Federal Reserve, the Bank of England had chosen in favor of qualitatively different approach towards increasing the effectiveness of economy’s functioning, as compared to what it was the case with Federal Reserve.
Instead of striving to provide a boost to the economy by increasing the amount of money in domestic circulation – hence, increasing citizens’ buying power, which in its turn, would result in increasing the competitiveness of nation’s industries, it simply embarked upon lending money to foreign governments and financial institutions and also upon ensuing a variety of internationally traded bonds.
In the book from which we have already quoted, Rubinstein states: “The City’s traditional role re-emerged strongly in the late 1950s and early 1960s, with the rise of the Eurocurrency and Eurobond markets… and the beginnings of large-scale investment and borrowings by Third World and Arab countries” (p.73).
Such City’s strategy; however, should not be referred to as conceptually fallacious. After all, country’s peasantry has been ‘burned off’ is the chimney of industrialization in 19th century, which is why, after having been deprived of its colonies, Britain simply could not begin expanding industries on its own soil by the mean of increasing citizens’ buying power – there was simply no ‘human fuel’ left to sustain the process of industrialization once again.
On the other hand, since the era of post-industrialism has not began yet, City also could not invest into developing of informational technologies and into setting up industrial production lines in the countries of Third World, which would have turned Britain into ‘manufacturer of intellect’, as it is the case with today’s Germany, Japan and U.S.
This was one of the reasons why the capitalist realities in Britain, through 1945-1955, closely reminded the Communist realities in Soviet Union, around the same time – people standing in lineups to buy basic food, the system of products’ rationing, and the high extent of governmental corruption. Such was the unsightly face of British capitalism in post-war years.
Throughout the course of sixties and seventies, the essence of British capitalism’s functioning can be outlined within the following framework: every time, citizens felt that their economic well-being was starting to improve, they would vote for Labor, and after that, their standards of living would take a steep dive again.
And, so it went on and on, until Margaret Thatcher was appointed a Prime Minister in 1979. After that, British capitalism started to remind capitalism proper, for a change – the government allowed the privatization of many state-owned companies, it cut back on investing into public sector and reformed country’s taxation policies.
Within a matter of few years, British economy began to regain its former vitality. Unfortunately, British capitalistic revival did not last for too long. After winning the elections of 2001, New Labor proceeded with its old agenda of building a ‘welfare state’.
As a result, up until most recent elections, Britain was nothing short of a classical Socialist state – the whole armies of uneducated immigrants from Third World were instantly made eligible for generous welfare payments, on the account of their ‘cultural uniqueness’, the quality standards in country’s health care and educational systems were drastically lowered, the medium-sized commercial enterprises were heavily taxed, which had brought many of them on the threshold of bankruptcy, the proper functioning of Britain’s energy sector was brought to a halt, etc.
Nevertheless, as it was shown by the outcome of political elections of 2010, it is much too early to bury British capitalism, as the concept synonymous to the concept of properly functioning free-market economy.
Booth, A 1982, ‘Corporatism, capitalism and depression in twentieth-century Britain’, The British Journal of Sociology, vol. 33, no. 2, pp. 200-223.
Feenberg, A 1990, ‘Post-industrial discourses’, Theory and Society, vol. 19, no. 6, pp. 709-737.
Fulcher, J 1997, ‘Did British society change character in the 1920s or the 1980s’, The British Journal of Sociology, vol. 48, no. 3, pp. 514-521.
Lisle-Williams, M 1984, ‘Beyond the market: The survival of family capitalism in the English merchant banks’, The British Journal of Sociology, vol. 35, no. 2, pp. 241-271.
Martin, C 2004, ‘Reinventing welfare regimes: Employers and the implementation of active social policy’, World Politics, vol. 57, no. 1, pp. 39-69.
Rubinstein, WD 1993, Capitalism, culture, and decline in Britain, 1750-1990, Taylor & Francis Routledge, London/New York.
Solo, R 1954, ‘Research and development in the synthetic rubber industry’, The Quarterly Journal of Economics, vol. 68, no. 1, pp. 61-82.
Weber, M 2001, The protestant ethic and the spirit of capitalism. New Translation and Introduction by Stephen Kalberg, Roxbury Publishing, Los Angeles.
Wood, N 1959, ‘The empirical proletarians: A note on British Communism’, Political Science Quarterly, vol. 74, no. 2, pp. 256-272.
- M. Weber 2001, The protestant ethic and the spirit of capitalism, Roxbury Publishing, Los Angeles, p. 15.
- A. Feenberg 1990, ‘Post-industrial discourses’, Theory and Society, vol. 19, no. 6, p. 720.
- R. Solo 1954, ‘Research and development in the synthetic rubber industry’, The Quarterly Journal of Economics, vol. 68, no. 1, p. 63.
- M. Lisle-Williams 1984, ‘Beyond the market: The survival of family capitalism in the English merchant banks’, The British Journal of Sociology, vol. 35, no. 2, p. 250.
- C. Martin 2004, ‘Reinventing welfare regimes: Employers and the implementation of active social policy’, World Politics, vol. 57, no. 1, p. 45.