White-Collar Crime in Modern England: Financial Fraud and Business Morality, 1845-1929.

Does this comment on business morality sound familiar to contemporary ears?

If we progress at the same rate for half a generation longer, commercial dishonesty will become the rule, and integrity the exception. On every side we see perpetually--fraud, fraud, fraud.... Can nothing be done to stem the torrent of corruption?

No, this is not a reaction to the scandals connected with the Bank of Credit and Commerce International, the Vatican bank, the Savings and Loans industry, the Boeskys and Milkens on Wall Street, the Saunders and Lyons of the Guinness takeover battle, and the current state of post-Thatcherite and Reaganite business ethics. It is the Illustrated London News in 1843 on the real values--not Margaret Thatcher's romantic version of them--of Victorian England. This laudable book argues that, although white-collar crime is as old as financial capitalism, Victorian England unleashed opportunities for turning a dishonest penny undreamed of in former times.

Within three years of the founding of the Bank of England and government stock in 1694, Parliament reported that a group of stockbrokers "unlawfully Combined and Confederated themselves together, to raise or fall from time to time the Value ... for their own Interest and Advantage." In 1711 "Queen Anne is dead" was no cliche but a rumor spread to cause panic--and a profitable bear market--on the Exchange. The South Sea Bubble produced so many corrupt profiteers and gullible victims that the Bubble Act of 1720 banned all joint-stock companies, except those established by separate Act of Parliament, for two centuries. Even then, white-collar crime flourished, with fraudulent bills of exchange, "long-firm frauds" (obtaining goods by false pretenses), dishonest bankruptcies, malversation of trust funds, and the like.

It was the Victorians, however, who began the current torrent of corruption. The Industrial Revolution, which some myopic economic historians now refuse to see, had at least one highly visible effect: the enormous proliferation of joint-stock companies, beginning with banks, insurance companies, canals and railways, culminating in an economy dominated by the twentieth century by five major banks, a score of merchant banks, a few dozen insurance companies, and a few hundred industrial corporations which produce most of Britain's manufactured goods. Since England then--and probably still now--had "the most permissive commercial legislation in Europe, if not in the world," the temptations to defraud, embezzle, and even legally to part fools from their money were beyond the dreams of avarice. Companies were neither regulated nor required to register nor, until 1900, to publish honest prospectuses and advertisements, or produce annual audited balance sheets. The free market was based on caveat emptor and the shareholders were supposed to inform themselves--without any right to information--the honesty and integrity of the promoters and directors. As Gilbert and Sullivan sang famously in Utopia Limited,

Seven men form an Association (If possible, all Peers and Baronets) They start off with a public declaration To what extent they mean to pay their debts. That's called their Capital

Aristocrats and gentry flocked to become directors (so much for their antipathy to industry in Martin Wiener's English Culture and the Decline of the Industrial Spirit), usually with large fees but no investment, and both Houses of Parliament were filled with company directors. They were supported by serried ranks of promoters, lawyers, accountants, bankers, engineers, surveyors, and other professionals, all of whom stood to gain by maintaining a free market in company law, if not in actual chicanery.

The result was a chain gang of upper and middle-class rogues, made famous in the fictitious villains of writers as diverse as Thackeray, Dickens, George Eliot, Trollope, Gissing, Galsworthy and Granville Barker. They were based on real-life criminals like John Sadleir of the Tipperary Bank, the model for Dickens' Merdle in Little Dorrit; the sanctimonious Jabez Balfour, who swindled the depositors of the Liberator Building Society out of millions of pounds before fleeing to Argentina; and fraudulent company promoters like George Hudson, the "railway king" and friend until bankruptcy of the Queen, Prince Albert and the Duke of Wellington; Harry J. Lawson, of the safety bicycle and would-be monopolist of the automobile industry; T. J. Hooley, the self-styled "Napoleon of Finance"; Whitaker Wright, floater of imaginary mining companies; and Horatio Bottomley, the chauvinistic editor of John Bull who made a swindle out of war bonds. Even when caught red-handed, a difficult feat since only two Scotland Yard detectives were detailed to pursue them and the cost of trying them went into thousands of pounds, they often earned derisory penalties: with some notorious exceptions made an example of, small fines, months rather than years in prison, or a judicial rebuke, since judges often thought that for a "gentleman" disgrace was punishment enough. "One law for the rich" was the rule in white-collar crime: in the 1890s ten years for a clerk who stole [pounds]72, three years for a solicitor who stole [pounds]4,000. Only in the twentieth century, perhaps because of the sheer effrontery of politically well-connected criminals, has the free market in chicanery begun, however ineffectually, to be tamed.

In 1860, Henry Mayhew estimated, the property stolen by thieves in London totalled [pound]71,000; in that same year one bank official alone embezzled [pound]260,000. Yet white-collar crime, which has always represented many times the value of all other crime combined, has been shamefully neglected by historians, who seem to prefer to concentrate on lower-class crime, either because it is "more threatening" or as a romantic form of "social protest." We must hope that this pioneering work (in which I take some pride, as the adviser for the dissertation on which the book is based) will start a trend towards restoring some balance to the history of crime.

Harold Perkin Northwestern University