Trust, Capitalism and Contract in English Economic History: 1500-1750

Abstract

As most market transactions involved the extension of informal credit because of a lack of ready cash, this meant that interpersonal trust was of central importance, and, as a result, a reputation for honesty and fair dealing in the community was vital to being successful. Money was used only in a limited number of exchanges, and credit, in the form of household reputation, was a “cultural currency” of trust used to transact most business. Trust, belief, and credit all went together, and no distinction was made between economic and social credit, as credit produced wealth and status of the middling sort. As the market expanded in the late sixteenth century, networks of credit became more intertwined over longer geographical distances, and thus trust became more problematic, and disputes over debts led to contention. These produced an enormous amount of litigation as the common law was increasingly used to enforce contracts. This led to much downward mobility through over-indebtedness, which reinforced the social importance of having good credit, and consequently the culture of credit became increasingly legalised. Although competition for credit together with the need to maintain household profitability put stress on the social maintenance of trust in the market, the economy could not work without it. As a result, the increase in commerce was seen as an essentially sociable activity because it required trust. Trust gradually came to be interpreted as the basis of justice, and the necessity of keeping promises, as the foundation of all social organisation. But by 1750 litigation had collapsed to a very low level, and self- control and politeness on the part of rational individuals came to play a more important role in dispute settlement than legal means. Whereas in the early modern period conflict occurred and was dealt with after its occurrence, self-control aimed to prevent inter-personal conflict and litigation before they happened. As a result, the concepts of “capital” and “savings” developed in the eighteenth century, and the structure of credit networks was changed.