[This passage has been excerpted from Dale H. Porter, The Thames Embankment: Environment, Technology, and Society in Victorian London. Akron, Ohio: University of Akron Press, 1998, which is reviewed eleswhere in the Victorian Web GPL.]
he average investor in mid-Victorian England had fewer choices than
his twentieth-century counterpart. If he wanted low risk and moderate returns, he could tell his solicitor to put his money into national debt shares
or into real estate rents and mortgages. The debt was made up of a variety
of bond and stock issues supporting specific government projects, together with the 3 percent consolidated bank annuities ("consols") available since 1751. Rents and mortgages in the rapidly expanding London building estates were discounted by small and medium-size builders to obtain capital for further speculative constructions Bills of exchange, first used as negotiable paper and then as credit instruments, were riskier. They were sold along with railway and other construction stock issues at a highly variable discount rate, usually for short terms of less than three months. Returns on domestic railway investments varied enormously but averaged
just under 8 percent in the 1840s, better than most other domestic opporunities. Overseas railways built by British contractors also matched high dividends with high risk, with the exception of the Indian railway system, which was guaranteed by British authorities. Finally, one could speculate on loans to foreign governments, on imported commodities such as tea or cotton, or on gold and other precious metals.
Until 1856, most business investments involved the assumption of unlimited liability by everyone in a company, a condition that tended to restrict the supply of venture capital. A company could incorporate, after 1844, simply by registering at the Board of Trade; in doing so, however, its prospectus was made accountable to government supervision and its operations opened to public scrutiny. Most commercial, industrial, and construction enterprises were still operated as partnerships or sole proprietorships, and, in the case of the Thames Embankment, such contractors often had trouble raising capital for large-scale projects. Nevertheless, the railway boom got the public used to investing and reassured individuals that the failure of a company did not usually mean the loss of one's entire assets. [149-50]
Last modified December 2003