“The whole life I place before myself is money, money, money and what money can make of life,” says Bella in Dickens’ Our Mutual Friend. The Victorian novelists wrote a lot about money, not just Dickens, but Mrs Gaskell (remember the bank failure in Cranford, the exigencies of factory life in Mary Barton), George Gissing (New Grub Street, The Whirlpool), Trollope (The Way We Live Now) and, across the Channel, Balzac (famously referred to by Thomas Piketty), Hugo, Zola.
Bella’s line is quoted in Ian Klaus’s Forging Capitalism: Rogues, Swindlers, Frauds and the Rise of Modern Capitalism. An irresistible title. The book gives an account of the essential role played by trust as capitalist markets developed through the century:
“Here is a fundamental point about free market capitalism and trust within it: without social exclusion or extensive processes of verification, trust is hard to come by. Whereas other risks could be hedged or managed through new assets or new types of insurance, the risk of fraud became more prevalent as the market expanded. Simply put, trust was sometimes a market inadequacy but always a market necessity.”
This central argument is illustrated through a series of brilliant stories about both the evolution of new assets and commercial relationships but also about a series of colourful rogues and swindlers. They played on the importance of reputation to pull off their confidence tricks; in a kind of arms race, new methods of verifying information were devised, such as audits, or detailed prospectuses - and new audacities were developed by the rogue fraternity. We ended with the modern system of ‘a series of overlapping institutions’ authenticating transactions.
The book starts with Adam Smith’s Wealth of Nations, noting its pairing with the Theory of Moral Sentiments. It ends with Friedrich Hayek’s The Road to Serfdom, a hymn of praise to markets, arguing that it has to be read alongside The Constitution of Liberty. Klaus writes: “The greatest intellectual salesmen of free market capitalism all supposed the market would be buttressed by morality. You could not possibly unleash the power of the one without the support of the other.” Unfortunately, of course, that’s just what happened in every period of turbulence in capitalism’s history, including our most recent. Now, just as in the early Victorian era, reputation is everything – because morality and institutions have let us down.
One final thought: will new technologies help bridge the gap? Dave Birch’s Identity is the New Money suggests the combination of ubiquitous mobile and social media means they might. Social connection, perhaps asset ownership and provenance, can in principle be verified now in a way the Victorians couldn’t have dreamed of.