Industrializing English Law: Entrepreneurship and Business Organization, 1720-1844

Published by EH.NET (June 2001)

Ron Harris, Industrializing English Law: Entrepreneurship and Business

Organization, 1720-1844. Cambridge: Cambridge University Press, 2000. xvi

+ 331 pp. $59.95 (cloth), ISBN: 0-521-66275-3.

Reviewed for EH.NET by Rande W. Kostal, Faculty of Law, University of Western

Ontario.

This monograph is the most exhaustive historical survey of English business

organization ever published. It is certain to become the standard reference

work for scholars interested both in the legal moulds of English capitalism in

the eighteenth and early nineteenth centuries, and in the interaction of legal

and non-legal dimensions of economic activity in this critical period.

After an appropriately long introduction to themes and legal nomenclature, the

book is divided into three parts. The first pertains to the “not-very-linear”

evolution of the English business corporation to 1720, paying particularly

close attention to the genesis, character and effects of the Bubble Act. The

second and largest part of the book describes the multiplicity of business

structures which co-existed in the eighteenth century, and traces the

“distinct paths” of organizational development in the transport and insurance

sectors. This section also considers (in separate chapters) the use and

evolution of the joint-stock corporation and the persistent viability of

business trusts, partnerships and unincorporated companies. The final part of

the book concerns the market and legal forces which combined to constrain and

then finally to facilitate the widespread implementation of the joint-stock

company. Harris’s book ends with a short statement of general conclusions.

Harris’s subject is large and complex, his analytical tasks ambitious. His

book seeks to get to the bottom of the seeming paradox of modern English

economic history: how and why did a dynamic industrial economy emerge from a

comparatively (vis-a-vis continental Europe) “stagnant” and “restrictive”

legal framework of business organization? This overarching question is seen to

generate a number of important subordinate inquiries. As the nature, type and

scale of capitalist activity changed in the eighteenth century, were business

actors able to impose their will on lawyers and legal forms? Was the law a

functionally positive, negative or neutral force in the rise of modern

industry? A careful historian working on a broad canvass, Harris’s hypotheses

are cautiously, perhaps somewhat pallidly, framed. The author contends that

before 1720 “the interaction between legal and economic developments was

closer to the functional pole of the continuum, whereas between 1721 and the

early nineteenth century, it was closer to the autonomous pole, and

subsequently it again moved closer to the functional pole” (p. 9). What

business wanted from law, and what it actually got, varied between economic

sectors and markets and depending on whether the courts or Parliament was the

source of law.

The greatest virtue of Harris’s book is its willingness to take pains with all

of all these variables, and in an astonishingly large number of specific

contexts. His technique is to describe (relying mainly on secondary sources)

the discrete aims and market contexts of the bewildering array of English

commercial ventures, and then to show why in some sectors (transport, for

example) businessmen went to Parliament for joint-stock incorporation while in

other sectors they continued to implement unincorporated business forms.

Economic historians have often observed that unincorporated business

structures remained the norm during the eighteenth century. Harris

demonstrates how businessmen, with aid of the contractual and trust devices

concocted by their lawyers, were able to make these structures work, if only

passably well. According to Harris, however, the cardinal advantages of the

incorporated joint-stock corporation — separate legal entity, transferability

of shares and limited liability — were more obvious to Georgian-era

businessmen, and more often utilized, than has been previously believed. In

the second half of the century, Harris argues, the “joint-stock sector

increased not only in absolute terms but also in terms of its weight in the

whole English economy” (p. 194). The spinning, mining, bread-baking and

brewing industries all made frequent use of the joint-stock corporation, as

did the still important trading, shipping and mining sectors.

In the last large section of the book, Harris examines the circumstances which

fostered the growth and widespread acceptance of the joint-stock company. An

important factor here was the demise in the early nineteenth century of

corporate monopolies in the banking and marine sectors. This development, in

combination with booms in the railway and other innovative sectors of

industrial economy, gave new impetus to joint-stock business structure. In the

same period, English investors slowly overcame a long-standing suspicion of

stockjobbers and the share markets. By 1844 the railway sector had stimulated

the growth of dynamic share markets in London and the regional capitals. This

is where Harris brings lawyers and judges back into focus. Rapid growth in the

number and uses of the unincorporated company generated novel litigation. From

1825 to 1843, Harris argues, most judges were innocent of the aims and means

of joint stock capitalism and generally hostile to the claims and interests

of unincorporated companies. In the result, the judges had created a

decisional law so convoluted and contradictory that even the best lawyers were

at a loss. It was left to Parliament to reconcile the practice with the law of

business organization.

From 1824 to 1844, a succession of Tory and Whig governments tinkered with

joint-stock company legislation. The repeal of the Bubble Act in 1825 was

followed by a series of tentative statutory initiatives which left the private

joint-stock company in legal limbo. The impasse finally was broken when

Gladstone shepherded the Companies Act, complete with a system of

incorporation by registration, through Parliament in 1844. This pivotal reform

reflected wide acceptance by England’s political elite of the legitimacy and

indispensability of corporate capitalism. The number and kind of private

joint-stock companies quickly proliferated.

This is Harris’s book in brief outline. The principal argument being pressed

here is that the final triumph of the joint-stock business corporation was

“not linear or inevitable.” The corporation was “selected” more as a result of

political and economic accident, than because “it better defined and enforced

property rights, minimized transaction costs, or maximized efficiency in any

other strong sense” (pp. 290-91). By the same token, Harris speculates that

unprecedented growth in the English economy in the eighteenth century would

have been even larger and faster if politicians and judges had not inhibited

the use of the joint-stock company.

Industrializing English Law is a formidable work of synthesizing

scholarship. A vast and disparate body of historical writing has been expertly

leavened by relevant primary sources. The book’s great strength is its

carefully rendered ecology of business forms and economic sectors. At the same

time, however, Harris’s book is much more easily admired than enjoyed. Much of

the book has the layout and feel of a textbook, if a highly analytical one.

The absence of specific human experience, of real businessmen and lawyers

going about their work, is often felt. Readers interested not only in

“industry” and “industrializing” (concepts which, by the way, are not

carefully defined here) but in the corporeal lives, aims and actions of the

industrializ-ers will be largely disappointed. For the most part, Harris’s

book hovers far above the ground level of law and economy.

R.W. Kostal is an Associate Professor of Law at the University of Western

Ontario and author of Law and English Railway Capitalism, 1825-1875

(Oxford University Press, 1995).