Banking, Finance, Service Work and the Growth of Victorian Financial Markets

[The following passage comes from the introduction to the author’s The Victorian Novel, Service Work, and the Nineteenth-Century Economy. New York: Palgrave Macmillan, 2015. — George P. Landow]

Decorated initial t

o capture the importance of services to the era more fully, one must turn to histories of Britain’s regional, national, and international economies during the nineteenth century as the British economy’s growth in this period came to depend on the invisible industries of finance, banking, shipping, and insurance. Economic historian C.H. Lee argues that London’s metropolitan economy, based on the integration of services and manufacturing for consumer goods, was ‘the major growth area in the Victorian economy’ and ‘accounted for over half the new jobs created’ between 1841 and 1911 (Lee 449) By the end of the century, Lee notes that the metropolitan service economy had expanded from London into the Home Counties to become the national economy’s ‘principal growth type’ (Lee 443).

Following Lee’s analysis, P.J. Cain and A.G. Hopkins argue that London’s service economy birthed the nineteenth century’s key political and economic class, ‘a new gentlemanly class’ aligned with finance and the City of London (Cain and Hopkins 115) Following William E. Gladstone’s centralization of budget and economic processes in the Treasury and Bank of England, this new class effectively controlled national and imperial economic policy while keeping itself seemingly outside the political sphere (see Cain and Hopkins 135-50). In fact, as John Darwin explains, the period’s financial reorganization was one of the necessary preconditions for the British Empire’s expansion in the 1870s (23-63). Finance is thus the nineteenth century’s most economically and politically important mode of service work, and its rise during the 1860s and 1870s coincides with key works by Marx and Jevons.

However, finance, though crucial to the emergence of the service sector, does not make up its entirety. Indeed, my focus throughout this discussion argues that the era’s shift to services reveals a number of other modes of service, in part as actually existing practices of work but also as cultural and historical potentials. Some of these potentials will become important social, economic, and political factors as the century progresses, but others will remain dormant until well into the twenty-first century, if not beyond. The mid-nineteenth century is a rich era for examining service work’s emergence not only for the presence of a developed financialized economy but also for this surfeit of other potential forms of service work and their refractions in political economy’s conflicting accounts of unproductive labor.

While my readings explore fiction’s role in constructing these potentials of the emerging service sector, I want to explore here the historical, political, and economic context of the service sector’s dominant mode, finance. As Cain and Hopkins note, gentlemanly capitalism took over the work of managing government finances and Empire and displaced the professions’ previously aristocratic self-regard with a more character-based and performative notion of gentlemanliness. Gentlemanliness effectively came to imply broad moral notions of disinterest, trustworthiness, and industry, and these qualities helped to naturalize for gentlemanly capitalism a sense of fitness to rule that had once been limited to the gentry and upper-middle classes who had previously populated the professions (see Best 245-63). It should be no surprise that Samuel Smiles best captures what historian Geoffrey Best calls the ‘moral content’ of the gentlemanly ideal (247). In Self-Help, Smiles uses the gentlemanly’s roots in the gentry as the basis for a character with qualities such as ‘moral worth’, ‘self-respect’, and ‘honor’, as well as ‘truthfulness’, and ‘courage’ (413). Smiles explains that “Riches and rank have no necessary connection with genuine gentlemanly qualities. The poor man may be a true gentleman, —in spirit and in daily life. He may be honest, truthful, upright, polite, temperate, courageous, self-respecting, and self-helping, —that is, be a true gentleman” (415).

One might recognize in this gentlemanliness a further turn of the screw in the problems of masculinity described above. Economic and moral disinterest converge in Smiles’s account as a gendered disinterest in performance itself, or, to use another phrase from Smiles, ‘of heroic self-denial and manly tenderness’ (418). The model of masculinity in Smiles’s gentlemanly aligns nicely with two ideas that helped to establish gentlemanly capitalism’s influence and remove the threat of corruption and vice: the appearance of professional disinterest and adherence to seemingly natural political economic law. The gold standard provided the crucial mechanism to achieve this ideological end. Championed by industry as a curb to the Bank of England’s ability to finance its political allies, the 1844 Bank Charter Act codified the gold standard, setting the ratio of notes issued to gold held by the Bank as well as the pound’s value in terms of gold, and splitting the Bank into separate departments for note issuing and banking (See Cain and Hopkins 137-38). Contemporaries saw the gold standard as central to the success and stability of Britain’s financial system. In particular, the gold standard made the credit system seem less open to manipulation and corruption because it anchored credit to what appeared to be a set of non-ideological laws. As a result, Cain and Hopkins note that ‘a strong sense of self-esteem’ permeated the City’s elite; moreover, they continue, ‘all this, together with the City’s freedom from the class hostility which so reduced the ability of industrialists to appear as credible political leaders and made City advice seem comparatively disinterested, explains why governments in need of counsel turned instinctively to the City rather than to the industrial provinces’ (142). The disinterest that authorized the ascendance of professional financial services illustrates how service work began to valorize itself by emphasizing the distance that its workers held from the things they produce and the requisite skills and knowledge they used to reach trustworthy decisions.

These assertions of disinterest, however, coincide with the aggressive growth of London’s credit markets in the 1860s following the relaxing of limited liability laws. The historian WTC King notes that financial joint stock companies blossomed during the 1860s following the 1862 Companies Act (217). Discount companies formed in waves in 1856, 1862, and 1863, and King notes that 40 new banks and discount firms appeared in 1862 alone (230). George Robb offers additional numbers that support this account: 108 banks and finance companies incorporated between 1862 and 1866 (69). City of London historian David Kynaston writes that 700 new limited liability companies—albeit not all in finance—were created in 1863 (220). The expansion of limited liability that authorized this wave of discount companies also allowed the formation of larger banks—and the use of branch banking—which helped shift London’s credit market from domestic to international bills (Quinn 164). With the decline in domestic bill circulation beginning in 1857, investment in foreign securities became increasingly important, most especially in foreign government loans, and in joint-stock banks that arose to facilitate them (King 267-71). Richard Roberts describes the period between the 1860s and ‘80s as ‘the internationalization of the discount market’ (159), and economic historian Stephen Quinn’s estimate that during the period from 1855-1870 trade in foreign securities rose fivefold helps justify that claim (173). In 1870, foreign banks began to open London branches due to Britain’s lack of military conflict (Kynaston 226). Quinn notes, ‘by 1877, foreign bank deposits were £107 million or one-fifth the size of all deposits in British commercial banks, and London was even being used to finance trade that never passed through Britain’ (148). Thus although British finance was centered physically in London, its influence extended over an increasingly broad swathe of the world.

Poor Management, Swindles, and the Collapse of Financial Service Firms

As finance expanded, the façade of disinterest occasionally slipped. … A more striking institutional case from the period is the City’s oldest bill-brokering firm, Overend, Gurney, and Company, which failed in May 1866. Founded by Quakers, Overends was initially known for its honest dealings, and financial historians have attributed their collapse in part to the waning of Quaker morals in the second generation of the firm’s management (see King 246-47). However, the collapse largely illustrates how established firms began to act more aggressively to assert their interests in the increasingly competitive environment of 1860s finance, which saw an increase in speculative and questionable activity by new firms. Overend’s had benefited from the Bank of England’s decision to give City bill-brokers sole access to their discounting facilities following the 1825 financial crisis, leading them to pioneer a system of call and short term loans that effectively made them the ‘custodians of a large part of the reserves of bankers throughout the country’ (King 117). After the 1857 financial crisis—in which this system of call loans nearly destroyed the financial system—the Bank rescinded Overend’s access, as well as that of all other bill-brokers, to their discount window. The firm was so incensed by this move that it attempted a run on the Bank’s reserves, withdrawing £1.65 million in £1000 notes over the course of single day (see King 213). According to Kynaston, only the threat of a parliamentary inquiry stopped them (201). Strangely, the following period nonetheless saw an expansion in the number of discount firms, including the first joint-stock bill broker, the National Discount Company (King 218). No longer the dominant firm in the market, Overend’s had expanded its investments in undertakings like Greek shipping, and the majority of these quickly went bad. Strapped for cash, the firm used the new limited liability laws to incorporate and recapitalize in 1865, drawing investors based on the firm’s reputation and a soon-to-be-discovered falsified prospectus. However, the firm was overextended, and collapsed the next year when it reached the limit of its available credit (for extended discussion, see Gooch, “Black Friday”).

The importance of the failure is two-fold. First, Overend’s failed after applying to the Bank of England for assistance; the Bank refused to intercede, and, indeed, would not support a failing bank until the 1890 Barings crisis. The Bank’s actions during the 1866 crisis, however, led Walter Bagehot to pen his influential book Lombard Street, in which he excoriated the Bank’s refusal to lend assistance to other financial institutions during a credit crisis and called for the Bank to accept its role as lender of last resort in these crises. As a result, Overend’s failure reveals a growing awareness of finance—through central banking—as an explicit mechanism for controlling the economic environment to particular ends, that is, maintaining the stability of the credit market. Second, Overend’s falsified prospectus provided incensed shareholders with the means of bringing a civil suit against the board of directors. A judge dismissed the case in December 1867 as an act of negligence, not criminal intent, effectively shoring up the legal protections newly available to limited liability companies after the Companies Act (see King 253-56). These two aspects of the crisis reveal the effectiveness of gentlemanly capitalism’s use of the disinterested and impersonal to support its construction of a particular form of professional work. While individuals or firms may act out of self-interest, the financial environment—whether in terms of institutional practices, explicit policies, or state laws—fostered a view of this work as disinterested. Moreover, the creation of self-imposed limits on interested actions resonates with Victorian codes of proper conduct to further counteract the threats posed by such seemingly rogue agents. That these agents were in fact rogues was immaterial: their attention to the needs of others gives them a seemingly impersonal relation to dependence even as their work reveals a consistent leading role in the economy. Skills, dependence, and impersonality cohere in this construction of gentlemanliness.

Finance’s importance to understanding this period should not suggest the service sector to be homogenous. … As the economist Thomas Piketty reminds us, ‘the diversity of services is so extreme that the very notion of a service sector makes little sense’ (90). One might say that this conceptual diversity is a continuing legacy of unproductive labor’s conceptual incoherence.

Related material


Bhabha, Homi K. The Location of Culture. London: Routledge, 1994.

Best, Geoffrey. Mid-Victorian Britain 1851-1875. London: Weidenfeld and Nicolson, 1971.

Cain, P.J., and A.G. Hopkins. British Imperialism: Innovation and Expansion, 1688-1914. New York: Longman, 1993.

Darwin, John. The Empire Project: The Rise and Fall of the British World-System 1830-1970. Cambridge: Cambridge University Press, 2009.

Feurer, Rosemary. ‘The Meaning of ‘Sisterhood’: The British Women’s Movement and Protective Labor Legislation, 1870-1900,’ Victorian Studies 33.2 (1988), 233-60.

Gleadle, Kathryn. British Women in the Nineteenth Century. New York: Palgrave Macmillan, 2001.

Joshua Gooch, ‘On ‘Black Friday,’ 11 May 1866,’ BRANCH: Britain, Representation and Nineteenth-Century History, ed. Dino Franco Felluga, Extension of Romanticism and Victorianism on the Net. Web. 16 December 2014.

Holloway, Gerry. Women and Work in Britain Since 1840. London: Routledge, 2005.

King, W.T.C.. History of the London Discount Market. London: Frank Cass, 1935.

Kynaston, David. The City of London, Vol. 1: A World of Its Own, 1815-1890. London: Chatto, 1994.

Lee, C.H. ‘Regional Growth and Structural Change in Victorian Britain.’ The Economic History Review 34(3) (1981): 438-52.

---. ‘The Service Industries.’ The Economic History of Britain Since 1700: 1860-1939. 2nd Edition. Ed. Roderick Floud and Deirdre N. McCloskey. Cambridge: Cambridge University Press, 1994: 117-44.

Lockwood, David. The Blackcoated Worker: A Case Study in Class Consciousness, 2nd Ed. Oxford: Oxford University Press, 1989.

Piketty, Thomas. Capital in the Twenty-First Century. Trans. Arthur Goldhammer. Cambridge, Mass.: Belknap Press, 2014.

Quinn, Stephen. ‘Money, Finance, and Capital Markets.’ The Cambridge Economic History of Modern Britain. Volume 1: Industrialisation, 1700-1860. Cambridge: Cambridge University Press, 2004: 147-74.

Robb, George. White-Collar Crime in Modern England: Financial Fraud and Business Morality, 1845-1929. Cambridge: Cambridge University Press, 1992.

Roberts, Richard. ‘The Bank of England and the City.’ The Bank of England: Money, Power and Influence 1694-1994. Ed. Richard Roberts and David Kynaston. Oxford: Clarendon Press, 1995: 152-84.

Said, Edward. Culture and Imperialism. New York: Vintage, 1994.

Nenadic, Stana. ‘Middle-Rank Consumers and Domestic Culture in Edinburgh and Glasgow 1720-1840,’ Past and Present 145 (1994): 122-54.

Walby, Sylvia. Patriarchy at Work: Patriarchal Capitalist Relations in Employment. Cambridge: Cambridge University Press, 1986.

Last modified 4 January 2020