for a long time it was the policy of the law to separate the two; it is curious to observe that merchants very nearly became an estate of the realm and occasionally we find what looks like a parliament of merchants;1 there was a chance that in England as in some other countries there might have grown up a House of Merchants in Parliament. The separation of commerce from the normal occupation of the nation was further emphasised by the fact that the merchants had their own organisation and their own law.2 It is only as a result of many centuries of history culminating in the industrial revolution that these barriers were broken down; it is familiar knowledge that such bodies of mercantile law as those relating to bankruptcy and negotiable instruments for a long time pertained exclusively to merchants; indeed, a separate organisation was set up to supervise the affairs of insolvent debtors who were not merchants and therefore outside of the law of bankruptcy. It was only as late as 1690 that the law considered the possibility of a non-merchant being a party to a bill of exchange.3
MERCHANTS AND FINANCE
Although the middle ages were so predominantly agricultural, it is still possible and indeed very necessary to trace in them the beginnings of commerce. In English history two commodities are of particular significance, wool and wine. Wool-growing was the great source of England’s position in international politics during the middle ages. The wool which was grown in England was exported to Flanders, and there in the great Flemish fairs it was distributed throughout Europe. England’s monopoly of wool was so effective that the Crown could afford to leavy heavy taxes upon its export, and upon occasion could bring powerful pressure to bear on foreign nations by diverting the wool trade from one port to another, or even by suspending it altogether. Financially, the wool trade was conducted on a capitalistic basis. In its early days, the leaders of the industry were the Cistercian monks whose mode of life was to build their abbeys in remote places among the hills and occupy themselves with sheep farming. As for the smaller growers of wool, it seems that arrangements were made to buy up their crops in advance, the sale being effected through the assistance of foreign capital. It is significant that credit took the form principally of advanced payments to the growers for future delivery.4 Middlemen were a prominent feature of the trade and behind them stood great foreign capitalists. The same was true of the important import trade in wine. It is obvious that we have here complicated relationships involving very important interests, and we may be certain that the result must have been the development of a good deal of commercial law. It is typical of the middle ages, however, that this law should be not the law of the land but the law of a particular class of people, developed through their custom and enforced through their own organisation. As for the capitalists whom we have mentioned, their place becomes increasingly important through the middle ages. In England a large part was played by the Jews until they were expelled by Edward I. Their place was then taken by various groups of bankers from the cities of northern Italy—the financial centre of London is still called Lombard Street. A considerable place too was occupied by certain religious orders whose international organisation was a convenient machinery ready-made for large-scale banking.1 Their considerable wealth also enabled them at one time to undertake capitalistic operations (although by the close of the middle ages many monasteries were in financial difficulties as a result of heavy royal and papal taxation). Indeed, this tendency of large religious organisations being deeply involved in finance persisted into modern times; in more than one country the principal cause for the expulsion of the Jesuits in the eighteenth and nineteenth centuries was a fear of their financial activities.
As for manufacturers, development was at first most rapid in Flanders where English wool was made up on a large scale. It was to Edward III that credit is largely due for the establishment of the textile industry in England. His Queen was Flemish, and it may be her connection with Flanders which led him to invite some Flemish weavers to settle in England.2 Nevertheless, the English textile industry was still purely domestic, that is to say, carried on in the home of the worker, and not in a factory.
THE INDUSTRIAL REVOLUTION
The transition from this state of things to conditions which are familiar to-day was effected principally in the eighteenth century. Wool-growing had increased enormously and was conducted on a very large scale. This became possible through the great enclosure movements of the sixteenth and eighteenth centuries whereby a great deal of common land, together with land which once had been arable, was turned over to sheep farming. Besides this great change from crop-raising to sheep-rearing (which was the cause incidentally of a great deal of unemployment and agrarian unrest), the textile industry also underwent a great change. The already existing tendency for a number of textile workers to become dependent upon one employer was immensely increased by the introduction of machinery, and here we reach the greatest single cause of the industrial revolution. By means of machinery more work could be done at less expense and with less labour. Soon it became clear that the price also was reduced, and the great movement began whereby trade gathered an ever-increasing momentum. The more there was produced the more the demand increased, and in the end the manufacturers were able to some extent to set the pace of industrial development. The introduction of water power, and very soon afterwards of steam power, gave England a tremendous advantage, for ample supplies of coal were easily accessible. Consequently the industrial revolution pursued a much more rapid course in England than in the rest of Europe.
LEGAL CONSEQUENCES
The task which faced the law was to meet these new requirements. Land was no longer to be its principal concern; other forms of wealth were demanding protection. As the growth of machinery proceeded, the cost of equipping a factory became considerable and usually exceeded the resources of a single manufacturer. Various forms of co-operative effort had been inherited from the middle ages which had long been familiar, at least on the continent, where there was a developed law of partnership in several varieties. Such forms of joint enterprise in seventeenth-century England were usually employed in colonial expansion or distant foreign trade. The law had now to consider some means of placing these advantages within the reach of smaller men who did not require the elaborate organisation of such bodies as the East India Company, or the Bank of England. It was also a growing necessity that banking should be developed, and out of the practice of the London goldsmiths who would receive deposits and issue against them interest-bearing notes,1 there arose, first of all, the Bank of England (1691), and soon a large number of private banks in different parts of the country. The law had, therefore, to consider all the complicated relationships which were being created through the machinery of credit and joint enterprise. It is to the eighteenth century, therefore, that we must look for the rise of most of the law which is of a distinctly modern character, that is to say, of personal property in general (and especially of stock, shares and the like), of companies and their stock, partnerships, of negotiable instruments, contract, bankruptcy, and master and servant. In effecting these developments the eighteenth century achieved the transition from mediaeval to modern times.
Politics had its part in the history of this development. The fall of James II had been due, in some measure at least, to the fact that the City of London and the financial interests thoroughly distrusted his policy. Although his opponents were, of course, drawn largely from the nobility, nevertheless City interests played a considerable part. One of the most significant results of the Revolution of 1689 was the foundation of the Bank of England, which was designed primarily to finance the French War, the founders lending a considerable sum of money to the government and using this government debt as part of their capital. In consequence the bank was closely connected with the Revolution settlement; it was generally felt through the country that any restoration of the Stuarts would imperil the bank, and as the bank’s activities grew wider the country was less and less inclined to take this risk. The Whig party had, therefore, a marked commercial character, while the Tories were still apt to be representative of the landed interest.
The legal consequences of the industrial revolution were effected, partly through legislation, but more largely through the development of case law, and a little group of judges who were far-sighted enough to divine the direction in which events were moving were able quietly and without commotion to perform the great work of taking over the existing