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Book Review
| Ron Harris, Industrializing English Law: Entrepreneurship and Business Organization, 1720–1844, Cambridge: Cambridge University Press, 2002. Pp. 348. $65 (ISBN 0-521-66275-3).
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| Industrializing English Law explores the evolution of business organization and the law in England between 1720 and 1844. It focuses, in particular, on the rise of joint stock companies. In the introduction, Ron Harris outlines two paradigms. The first argues that the law evolves in an autonomous fashion and does not respond to the needs of business. The second argues that the law evolves functionally in response to the needs of business. Harris describes these two paradigms as polar views and suggests that one may be more applicable in various time periods. For instance, he argues that between 1720 and 1820 the law was less adaptive than before 1720. He suggests that the situation reversed after the 1820s, when the Bubble Act was repealed and the General Incorporation Act was passed. |
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Throughout the book Harris stresses a multiplicity of factors. In the introduction, he argues that changes in the weight of sectors, changes in market structure, changes in jurisprudence discourse, and changes in political institutions were but four factors that led to the evolution of law and business organization (11). To illustrate the variety of forces involved, Harris begins by challenging the conventional view that the Bubble Act of 1720 was the main factor that stifled the diffusion of joint stock companies. According to Harris, joint stock corporations emerged during the 1500s and 1600s because they mobilized capital, diversified risk, and provided a source of loans for the Crown. Unincorporated joint stock companies followed in this path, but most failed by the early 1720s. Many scholars have argued the Bubble Act contributed to this decline by requiring incorporation through an Act of Parliament. Harris argues that the Bubble Act was passed for a different reason. He provides evidence that the South Sea Company promoted the Act in order to eliminate competition for funds in the emerging stock market. He also argues that the Bubble Act was too vague in its restrictions on joint stock companies, and that other factors played an equal, if not more important, role in limiting the spread of joint stock companies (81). |
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One of the most interesting chapters of the book draws a comparison between the transport infrastructure and insurance sectors. There was variation across the different modes of transport—road, river, and canal—but they all shared a common feature in that business organizations were created by Acts of Parliament and were similar to joint stock corporations. Despite repeated attempts, there were no joint stock corporations in insurance, outside of the London Assurance and the Royal Exchange Assurance. Harris argues that the different paths of organization were not caused by differences in the need for corporations and instead they were due to the king's refusal to grant charters and Parliament's refusal to pass incorporation Acts. Harris suggests that political actors reacted differently because competition was more intense in the insurance sector and therefore opposition from vested interests was greater (109). The interaction between market structure and political institutions is a subject that justifies greater research, and this chapter suggests some fruitful avenues for further inquiry. |
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Transport infrastructure was not the only sector where joint stock companies became common during the eighteenth century. Harris shows that they were common throughout the infrastructure sector, as well as in shipping. Harris measures the overall progress of joint stock companies in terms of the value of their capital. He estimates that their total capital was 90 million in 1810, which represents between 14 and 30 percent of the value of the capital stock in England (195). These are the first estimates of the contribution of joint stock companies to capital accumulation and should provide a benchmark for future studies. That being said, one needs to interpret the figures with some caution. Organizations such as turnpike trusts and harbor authorities were not joint stock companies in the strict sense because they issued bonds, rather than equity. By including the value of the bonds in the total capital, Harris is calculating an upper bound estimate of the importance of joint stock companies. |
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Harris emphasizes the economic significance of joint stock companies before 1810, but acknowledges that they were not widespread until the mid-nineteenth century. As in the earlier period, Harris argues that a multiplicity of factors contributed to this trend. He emphasizes the role of the business community in encouraging the spread of joint stock companies to emerging sectors. Harris also emphasizes that legal uncertainties were resolved when various courts agreed that joint stock companies had to be incorporated. In general, the book illustrates that the evolution of law and business organization was highly complex and could have turned out very differently. His most provocative claim is that joint stock companies were not necessarily destined to become the dominant form of business organization in nineteenth-century England. |
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| Dan Bogert
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| University of California, Irvine |
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