Berkeley Series in British Studies

The Rise of Mass Investment Culture in Contemporary Britain

Amy Edwards

• Publisher: University of California Press
• Year: 2022
• ISBN:
  9780520385474
• Edition: 1
• Topic: History
• Subtopic: Modern British History
• Index: History

An in-depth history of how finance remade everyday life in Thatcher's Britain. Are We Rich Yet? tells the story of the financialization of British society. During the 1980s and 1990s, financial markets became part of daily life for many Britons as the practice of investing moved away from the offices of the City of London, onto Britain's high streets, and into people's homes. The Conservative Party claimed this shift as evidence that capital ownership was in the process of being democratized. In practice, investing became more institutionalized than ever in late-twentieth-century Britain: inclusion frequently meant tying one's fortunes to the credit, insurance, pension, and mortgage industries to maintain independence from state-run support systems. In tracing the rise of a consumer-oriented mass investment culture, historian Amy Edwards explains how the "financial" became such a central part of British society, not only economically and politically, but socially and culturally, too. She shifts our focus away from the corridors of Whitehall and towards a cast of characters that included brokers, bankers and traders, newspaper editors, goods manufacturers, marketing departments, production companies, and hundreds of thousands of ordinary men and women. Between them, they shaped the terrain upon which political and economic reform occurred. Grappling with the interactions between structural transformation and the rhythms of everyday life, Are We Rich Yet? thus understands the rise of neoliberalism as something other than the inevitable outcome of a carefully orchestrated right-wing political revolution.

CHAPTER 1

“A Wonderful Growth”

Investment Culture from 1840 to 1980

The processes through which financial markets became embedded in modern and contemporary life were long and multifarious. Nonetheless, it is possible to identify a number of key periods—certain historical conjunctures—during which something akin to popular investment emerged and expanded along broadly similar pathways. In the latter decades of the nineteenth century, and again in the years following the Second World War, social, economic, and political developments coalesced to expand public interest in investment. At each moment new groups were pulled into contact with markets and new ideas about who could invest via what channels. Tracing this longer history of popular investment practices highlights recurrent arenas of action, notably: the affordability and availability of shares; the accessibility of knowledge about them; and the number, variety, and influence of institutions willing to service small investors. We will see, for example, the role played by a financial press keen to facilitate the construction of an investing public. Growth in incomes, an abundance of new share issues, and changing forms of social acceptability also invariably drove the expansion of popular investment practices. At the same time, changing technological and legislative environments pushed institutions to compete for control over access to the market.

Contemporaries often viewed these kinds of transformation as fraught with danger. Every time the market appeared to open up to new constituencies, a battle ensued to define what signified legitimate practice and who had the necessary economic and social capital to count as legitimate investors. Politicians and an emerging financial elite worried over the problem of investor ignorance and the suitability of different socioeconomic groups for capital ownership. By the mid-twentieth century these concerns had evolved into an idealized image of the investor-citizen. In many respects this figure was modeled on the supposed moral fortitude, cultural sophistication, and calculating objectivity of the “gentlemanly” financier. Just how many people could or should adopt this role in the context of mass democracy remained unresolved, however.

None of this means to say that investment culture looked identical in the 1840s, 1880s, 1960s, and 1980s. Layered over these seemingly parallel developments were other historically contingent processes. New discursive and institutional formations built upon enduring foundations or the fragmentary remains of decaying systems. Prevailing tropes, networks, and actors reconfigured in new ways, even though the intellectual and cultural resources they drew upon had often been around for a century or more. Situating late twentieth-century investment culture in a longer historical framework thus helps to avoid the potential pitfall of characterizing more recent developments as a direct product of Thatcherism. Neoliberal-inspired political reform attached itself to existing structures. It was, therefore, constrained by some conditions and abetted by others. The phenomena that produced heavily institutionalized forms of financial consumerism in the 1980s and 1990s had their roots in postwar mass affluence, early twentieth-century speculation, and late nineteenth-century “gentlemanly capitalism.” Even elements of Thatcher’s preferred language, such as property-owning democracy and popular capitalism, had histories that stretched back to the 1920s and 1950s respectively.

Over the course of a hundred or so years the lives of a growing number of “ordinary” people slowly but surely became entangled with stock market investment. This chapter looks at the actors, practices, and mechanisms of reform that underpinned the evolution of British investment culture into its mass-market late twentieth-century form. Doing so demonstrates that the broad terrain of popular investment had already been well mapped out by the 1980s. Although the pace and scale of transformation in the closing decades of the twentieth century was exceptional, it was necessarily uneven. It preserved as well as altered aspects of the deeply ingrained investment culture from which it stemmed.

INVESTING IN THE LONG NINETEENTH CENTURY

From the repeal of the Bubble Act in 1825 to the First World War, levels of public investment in stocks and shares in Britain experienced an extended (although inconsistent) period of growth. The rapid expansion of joint-stock companies and the railway mania of the 1840s stand out as obvious causal factors. The latter proved fundamental to the shape of modern financial markets. Shareholdings in British railways grew from £246 million in 1850, to £1,335 million by 1912.¹ Just as the privatizations of the 1980s created well-publicized new issues for people to get their hands on, the railway boom flooded the market (and the investors who inhabited it) with new opportunities. It particularly encouraged smaller investors from across different regions to participate, with some staking as little as £1 each.² While public interest in railway investment receded after its initial boom, similar types of infrastructure companies—gas, water, electricity, telegraphs—established a prominent place on stock exchanges throughout the nineteenth century.³ Thus, from the 1850s onward legal, economic, and social conditions ensured that the “investing public” produced by this original burst of activity remained a permanent feature of British financial capitalism.

Of course, the base ingredient for Britain’s nascent culture of popular investment was individual or familial access to capital. Rising real incomes and the expansion of salaried, white-collar, and professional employment in the late nineteenth century spurred practices of saving and investment among new sections of the population. A higher proportion of disposable incomes meant a wider potential pool of investors.⁴ This included significant numbers of women who featured as shareowners in both public and private companies across the nineteenth century. Spinsters and widows were legally entitled to hold shares with equal rights to men, while the Married Women’s Property Acts of 1870 and 1882 further enabled women of different kinds to participate in financial markets as rentiers, speculators, and members of family companies. Consequently, it was not unusual for between 20–30 percent of a company’s stock to be held by women in certain sectors. Indeed, women were able to vote at company annual general meetings (AGMs) long before they gained the right to cast their votes in national political elections.⁵

But it was not only domestic economic and social developments that created the conditions for the advent of an investing public. Britain’s imperial exploits in this period underpinned the creation of a rentier class.⁶ As British enterprises extracted wealth from different areas of the globe, new networks of capital evolved to facilitate them. This included a London-based financial service sector that raised billions of pounds for British companies operating in the colonies. The class of elite financiers at the heart of this emergent financial center significantly shaped political and social developments. Between them they drove an orthodox free-trade cosmopolitanism that rested upon their “invisible empire” of finance.⁷ However, Britain’s “invisible empire” consisted of more than a metropolitan elite of gentlemanly capitalists. It was also fueled by the creation of a copiously investing middle class whose savings funded the expansion of railway networks, industrialization, and resource extraction abroad. The mining booms of South America, India, and Australia, for example, led to a spate of opportunities for the aspiring speculator: between 1886 and 1887, five hundred new companies were formed in just Australia.⁸

The expansion of public share ownership was not only driven by the number of investing opportunities, however. They also needed to be the right kind. New investors were enticed by “safer” options as much as they were the promise of spectacular wealth. From the mid-nineteenth century onward, shares became cheaper, at the same time as financiers designed new types of lower-risk securities like preference shares, debenture stocks, government-issued consolidated annuities, and investment trusts.⁹ These investment vehicles, reflected the kind of risk aversion one might expect amongst those with more limited disposable wealth. Changing legal conditions further reduced the risk of investing for small investors. Particularly notable on this front was the Limited Liability Act of 1855 and Companies Acts of 1856 and 1862. These Acts overturned legislation that had previously set the minimum shares value at £10, a prohibitive amount for the vast majority of people. More significantly, limited liability meant that investors were no longer accountable for a company’s potential losses to the point of their own bankruptcy. The only loss suffered was the value of the original investment and associated fees.¹⁰ This made investing less hazardous and more economically viable for greater numbers of people.

The mere capability to invest described above cannot entirely account for the willingness of large numbers of people from geographically and socially diverse backgrounds to actually do so. Of course, the potential for personal economic gain was a component, but the popularity of investment has always relied upon its social acceptability and desirability. It is significant, therefore, that late-nineteenth-century brokers, financiers, and journalists articulated the virtues of investment for a public audience. In many ways this was a self-serving exercise, designed to secure the legitimacy of investment as a profession. It nonetheless connected the practice of investment to social status. Novelists, too, popularized the market by making booms, busts, and speculation the backdrop of many works of literature. Although not always positive, such works contemplated the possible social and moral benefits, as well as pitfalls, of widespread participation in financial markets.¹¹ Taken together this corpus constructed an elite, masculine, and patriotic agent as the driving force of British financial capitalism. This was someone with an active disposition and characterized by consideration and attentiveness. Through them, investing was portrayed as a means to care for the well-being of one’s family, for men to fulfil their desires, to secure the national economic interest, and as vehicle for class harmony.¹²

Adopting a paternalistic position, social reformers of the period likewise argued that the removal of unlimited liability would expand Britain’s shareholding constituency and transform working men into “tranquil and conservative citizen[s].”¹³ Debates about limited liability thus marked the emergence of a political belief in the power of share ownership to produce dutiful investor-citizens: people well informed about and with a direct stake in the financial capitalist system. Ownership in this understanding obliged individuals to reform themselves in the image of the gentlemanly financier with his clear moral judgment and wise investments in British business.

In reality, however, the difference between “amateur” investors and “professionals” continued to be drawn along lines of wealth rather than proven expertise.¹⁴ Accordingly, the arrival of limited liability did not presage a complete shift in attitudes toward investors of “moderate means.” Instead, debates about the likely impact of the 1855 Act rehearsed class-based anxieties that would become a mainstay of British investment culture right through to the twenty-first century. Public and political concern particularly centered on the diminishing “quality” of shareholder constituencies as their quantity expanded. In the mid-1800s, banks and politicians felt reassured that only very wealthy and influential figures would be willing to take on unlimited liability. They expressed a clear preference for the assumed social and cultural capital of the upper-class gentlemanly financier, and remained wholly unconvinced about the capabilities of a broader investing public. To cite just one example, an 1854 Royal Commission expressed the belief that the ownership of capital necessitated skills that working-class men simply did not have.¹⁵

Critics of widespread participation in financial markets also often conflated working-class investment practices with the assumed social disorder of gambling.¹⁶ The history of bucket shops provides a particular case in point.¹⁷ The term bucket shop actually referred to a range of practices that subsisted largely without gover...

Table of contents

• Title Page
• Copyright
• Dedication
• Contents
• List of Illustrations
• Acknowledgments
• List of Abbreviations
• Introduction
• 1. “A Wonderful Growth”: Investment Culture from 1840 to 1980
• 2. Over the Counter: Speculation and the Small Investor
• 3. Shopping for Shares: The Rise of Financial Consumerism
• 4. “The Moneymen’s Sunday Sermon”: The Making of a Mass-Market Financial Advice Industry
• 5. Yuppies: Finance and Investment in Popular Culture
• 6. Are We Rich Yet? Investment Clubs and Investor Activism
• Conclusion
• Notes
• Bibliography
• Index