The British Experience - Lecture 2

Question 1

What was the affect of the industrial revolution on the British Financial System?

Answer 1

.London central hub for global economy
.High-income advanced economy
.Growth of banking, stock markets
.Forefront of financial innovation

Question 2

How did the London stock exchange and the bank of England operate before the industrial revolution?

Answer 2

.Stock exchange traded debt issued by the government to finance the army, wars and administration
.The Bank of England confined its operations to London and acted as the governments bank

Question 3

The British economy needed a payments system, how was this met?

Answer 3

.Circulation of coins issued by the government and the use of bank notes issued by the Bank of England

Question 4

The British economy needed credit, how was this met?

Answer 4

Banks provided both a means of payment and a source of credit that could expand and contract in response to demand

Question 5

The British Financial system required the provision of capital, how was this met?

Answer 5

Most capital requirements could be financed from the savings of individuals acting alone or in small groups through partnerships

Question 6

What was capital primarily used for?

Answer 6

.Agriculture
.Coal mining developments
.Building and operation of factories

Question 7

The problem of raising capital arose in which areas of the economy?

Answer 7

.Areas which a large investment had to be made within a short period of time
.E.g. Canals in 1780 and Rails in 1820

Question 8

What was the solution adopted for raising capital to fund canals and railways?

Answer 8

.Issue transferable debt akin to that used by the government by way of National debt
.Canals and Railways became companies allowing for stocks and bonds to be sold
.Funds raised meant they could be complete

Question 9

In 1850 Britain had the highest income per capita in the world, what was its affect?

Answer 9

.Ability to save
.Building a collective wealth
.Rate of savings was 14% per annum

Question 10

By 1914, what % of houses were privately owned and rented out?

Answer 10

.90%
.Provided income to investors

Question 11

In 1830, those with savings largely invested in…..

Answer 11

.Agriculture (25.5%)
.Property (31.4%)
.National debt (19.6%)

Question 12

By 1913 the proportion invested in agriculture, property and national debt fell to….

Answer 12

.Agriculture (7.4%) - Foreign competition
.Property (26.4%)
.National debt (5.3%)

Question 13

Why did the national debt level remain constant from 1815-1914 and what was the level?

Answer 13

.0.7 billion
.No major wars between 1815-1914
.Government matched income and expenditure

Question 14

Investment began to change from 1830, what did those with savings choose to switch their investments for?

Answer 14

.Stocks and bonds issued by companies (Grew from 1.2% to 18.3%)
.Foreign assets (Grew from 2.7% to 17.8%)

Question 15

Why did foreign countries require investment from Britain?

Answer 15

.Low exchange risk
.Parts of the Empire settled by British Migrants looked to Britain to finance their new economies
.Railway construction in places like India

Question 16

What was the stock of overseas assets owned by British investors in 1850, 1870 and 1910?

Answer 16

.1850 - 6%
.1870 - 12%
.1910 - 26%

Question 17

What was the worth of British investors owned foreign assets in 1914?

Answer 17

18.3 billion