How and Why Did the Culture of Credit Change between the Seventeenth and Early Nineteenth Centuries?

Abstraction characterises the change in the culture of credit from the seventeenth to the early nineteenth century. The customs and beliefs of credit relations that define this culture comprised a moral system superseded by increasingly sophisticated, impersonal, and amoral relations. Craig Muldrew revealed the ubiquity of credit in Early Modern England and its mediation of social interactions within communities, arguing credit relations were predicated by trust in a moral system.¹ Whilst the thrust of this was to better interpret early modern credit, Muldrew first alludes to the concept of abstraction.² Social histories have extended Muldrew's interpretation of the culture of credit to the eighteenth and nineteenth century, accounting for change by looking at demand side trends in England's economy such as the consumer revolution.³ Contemporaneous to this, economic histories have been reassessing the narrative of the financial revolution.⁴ This is exemplified by Carl Wennerlind's claim that the death penalty for coin clipping and counterfeiting bank notes was significant in founding the monetary system.⁵ These social and economic histories are disconnected, often challenging one another whilst not in conversation. This essay will seek to connect these historiographical constellations by placing William Hogarth's satirical prints, Daniel Defoe's pamphlets, and Samuel Pepys' diaries in the same setting as the Bank of England's balance sheet.

This essay will argue the culture of credit's abstraction was caused by trust shifting from the moral system to the monetary system. Beginning with an analysis of the concentration of credit relations in institutions at the expense of informal credit, it will then reveal the increasing exchangeability of money – both coinage and bank notes. Finally, the subversion of the moral facets of credit relations will be shown as it strengthened the economic meaning of credit.

Institutions that formed in the financial revolution of the 1690s increasingly defined the culture of credit and provided the impetus for a monetary system. Institutions consumed credit relations and formalised interactions with debt instruments and rates of return. In contrast, earlier customs and beliefs of Early Modern England are best interpreted in E. P. Thompson's 'moral economy' where a consistent set of "social norms and obligations" controlled the market.⁶ This paternalist model is evidenced by regulation hindering middlemen, sampling, and hoarding as well as riots in response to 'unfair prices'.⁷ This concept represents an historiographical turn that stresses the pareidolia of interpreting the early modern market as based on self-interest – a turn Muldrew has since acquired.⁸ Muldrew convincingly argued credit was endogenous to the 'moral economy', connecting communities in networks of trust.⁹ Informal credit often used oral bargains with trusted members of the community as witnesses and arbitrators of disputes.¹⁰ Sales credit was interest exempt and reciprocal debts were cut from accounts in a custom known as 'reckoning'.¹¹ Abundant textual sources of the culture of credit corroborate Muldrew's interpretation such as Pepys' 1665 diary entry reading, "Mr Andrews comes and reckoning with him I get 64l of him. By and by comes Mr Gawden, and reckoning with him gives me 60l."¹² Pepys' diary tells us credit relations were ubiquitous, woven into social networks, and custom bound. This is significant because relations were decentralised and moderated by reputation, losing creditworthiness was to lose reputation.¹³ In sum, the culture of credit in Early Modern England had a moral system that borrowers and lenders trusted.

Whilst personal reputation mediated trust in the seventeenth century, this shifted to the reputation of a centralised public debt in the financial revolution. Institutions, especially the Bank of England, dealt in public credit and the government's promise to repay. Defoe's didactic pamphleteering in the Complete English Tradesman (1726) demonstrates how this promise formed expectations by asserting "after the Exchequer had been shut up, parliamentary appropriations misapplied, and the public faith broken: who would lend?"¹⁴ Credit relations became impersonal and systematic to strengthen 'public faith'. This is evidenced by Parliament separating the Crown from public debt as well as inelastic customs such as tax smoothing (that allocated future taxes to specific long term borrowing).¹⁵ This abstraction was an historical throughline. The iteration of tax smoothing in the Napoleonic wars shows trust in increasingly esoteric debt instruments as the Bank of England's balance sheet bloated with short term debt.¹⁶ This public credit was mostly considered a moral good; contemporary commentary referred to it as flowing water or blood.¹⁷ However, this does not imply a moral system. Rates of return inherent to public credit delineates it from aforementioned community credit and suggests it was amoral.¹⁸ The capacity of the banking system also progressed from the financial revolution and was burgeoning in the early nineteenth century.¹⁹ In places, Muldrew uses anecdotal evidence, which undermines his argument that trading relationships were predicated on second hand accounts of social trustworthiness. Nevertheless, he reveals the growth of institutional credit dealing in trade.²⁰ Debt instruments used in this trade, such as inland bills, lessened the burden of sourcing the opposite party's social trustworthiness.²¹ Therefore, the culture of credit was increasingly comprised of institutions dealing abstract debt instruments – seeking a rate of return at the expense of community networks of trust.

The monetary system formed by these intuitions untethered communities from complicated credit networks. The constrained money supply of early modern coinage, as well as the volatility of employment and prices, necessitated credit.²² Coinage, for instance, was scarcely indexed in probate inventories before 1660 and, if seen, it was used to smooth credit transactions.²³ Wennerlind convincingly argues that clipping debased coinage, highlighting aggressive polices to inhibit clipping. This is evidenced by highly public executions for filing the King's head, washing silver coins, and even the possession of unlicenced tools.²⁴ Despite the unreliability of money supply data owing to hidden coinage reserves, Wennerlind reinforces his argument by mapping the waning demand for alchemists supposedly transmuting metals to gold.²⁵ The increased use of coinage in household transactions also correlates with widespread copper tokens in circulation.²⁶ The limited social history that has engaged with Wennerlind's argument has loosely analysed the social composition of money manipulators.²⁷ They do not connect the formation of a monetary system to the culture of credit. However, the increasing exchangeability of coinage from 1695 lessened the money supply constraint and dislocated the culture of credit. The moral system was by no means obsolete, but coinage limited counterparty risk and, subsequently, limited scope for social communication in transactions. Signalling creditworthiness was intrinsic to the functioning of the moral system, but small day-to-day transactions were simplified. The reciprocity of Pepys' 'reckoning' and the reputations constructed by trusted parties in the community were an artefact of a money constrained economy. In turn, trustworthy coinage constrained the culture of credit by formalising transactions.

The historiography's social strand ascribes the rise of contracts to the culture of credit's dispossession of the moral system.²⁸ This essay will not dispute this argument, especially considering the undecided relevance of coinage in the eighteenth century.²⁹ Much of the changing structure of economic agency has already been discussed. However, what has not been discussed is how this discounts the ubiquity and trustworthiness of increasingly widespread credit money. In the eighteenth century, bills of exchange and promissory notes were superseded by bank notes that were payable to the bearer, and hence exchangeable. The Bank of England's promise to pay became money and, much like coinage, was bolstered by 618 convictions for new counterfeiting capital statutes.³⁰ Regional banks also issued notes and by the late eighteenth century these notes made up most commercially circulated currency.³¹ The Bank of Manchester's banknote collage, (Figure 1), reveals the disparities between informal credit and the credit money of the early nineteenth century's newly forming joint stock banks. The collage is a planned design of a note and thus it is uniquely positioned to tell us what characteristics were valued. The iconography of the crown and linguistic hallmarks of a Bank of England note suggests the collage sought to create a local representation of the pound. Therefore, exchangeability in the monetary system outweighed moral signalling. Despite this, earlier notes were denominated in values only appropriate for wholesale transactions, narrowing credit money's influence within the culture of credit. Except, where credit money was a sophistication of payments between institutions that abstracted the culture of credit from above, coinage was used in small transactions displacing credit relations from below.

Trust in the monetary system was coterminous with an ethical subversion of the moral system. Past 1650, consumers spent more to buy an ever widening selection of consumer goods, many of which were luxuries.³² This spending challenged interdependent credit networks as excessive spenders often repudiated obligations and placed a cost on the community, not just themselves. In Early Modern England, retail credit indicated a tradesman's trust in the reputation of a customer, but by the eighteenth century, accommodation notes and book debts were mostly seen as an instrument to grow sales. Julian Hoppit discusses extensive contemporary criticisms of credit for personal consumption and its connections made to gambling.³³ Whilst Hoppit greatly understates the ubiquity of early modern credit, he is compelling with reference to the social dislocation caused by luxury spending and seller risk taking to service these conspicous consumers.³⁴ Hoppit's argument is consistent with the disorder caused by pawning and the framing of moneylenders in Hogarth's 1751 satirical print series.³⁵ Gin Lane, (Figure 2), shows the vice of gin spreading in a hellscape of moral corruption. To convey this moral corruption, a third of Hogarth's scene portrayed a ragged women pleading with a busy pawnbroker to accept household items as payment.³⁶ This is juxtaposed with imagined prosperity in Beer Street, (Figure 3), where the ruins of the pawnbrokers are propped up by a plank of wood. This is not to say credit became a vice akin to gin, yet credit for personal consumption increasingly amassed connotations of decadence. Therefore, while the virtues of credit were debated an emerging monetary system was celebrated, contradicting credit's former religious and cultural morals.

The discussed subversion of the moral system was catalysed by crises. Whilst Muldrew's concept of the culture of credit's shift to economic utility is compelling, he severely understates the rate of change from the 'moral economy' to the market economy.³⁷ Whereas, Hoppit's topography of financial crises shows the expressions of the market economy immediately after Muldrew's community credit. The public credit crises before 1760 reveal that speculation became part of the culture's "state of mind."³⁸ Crises such as the 1720 South Sea Bubble demonstrates the propensity to buy stock on credit and seek the highest rate of return. Rates of return were commonly earned in early modern credit, indeed lenders often found ways around usury laws.³⁹ However, speculation explicitly evidences the profit seeking seen in the market of neoclassical economics, not the 'moral economy'. Similar to pawnbrokers, stockjobbers symbolised the perversion of the moral system. This perversion is exemplified by stockjobbers creating disorder with credit relations founded on avarice and paper value.⁴⁰ Commentary on these crises was widely disseminated, perpetuating narratives of moral corruption. The economic dislocation they caused was also widely experienced by the middling sort past 1770.⁴¹ The cyclical regularity of financial crises was sequential with household crises that populated debtors' prisons.⁴² These prisons demonstrate the breakdown of credit relations; they were a way for creditors to recover their funds as debtors experiencing misery often imprisoned their own debtors. Conversely, early modern disputes leaned into communities – even those not resolved before escalating to county courts were mostly settled before reaching a final judgement. Whilst consistently horizontal credit relations throughout the period can be gleaned from debtors' prisons, they better represent a change in the way the culture of credit engaged with unreliable debtors. Therefore, both financial crises and household crises corrupted the moral system and sped up Muldrew's rate of change.

In conclusion, the seventeenth century's culture of credit was barely observable by the early nineteenth century. Credit was ubiquitous throughout the period but community credit was disrupted by institutions dealing impersonal public and commercial credit. Whilst the historiography widely discusses these institutions, minimal analysis has considered the monetary system (formed by these institutions) as an exogenous constraint on the culture of credit. From the financial revolution, both coinage and credit money comprised a monetary system that was increasingly trustworthy and fluid. Counterparty risk in community credit was intrinsic to the social communication of the moral system – coinage eliminated this risk. This slowly redefined day-to-day transactions from below as credit money sophisticated and simplified transactions from above. Also effecting the culture of credit was an ethical subversion of the moral system. Contemporaries debated whether the speculation and luxury indulged by credit was good or bad rather than communicating whether they themselves were morally good or bad through credit. Crises catalysed this trend, as the formalisation of credit by no means lent itself to stability. Therefore, abstraction is the historical throughline that connects Pepys' 'reckoning' to Defoe's 'public faith' and finally to Hogarth's avaricious pawnbroker.