ABSTRACT
The ratio of fixed capital to circulating capital in British industry and commerce rose from parity in about 1750 to 3.3:1 by 1850 [163]. This is not surprising given that the second quarter of the nineteenth century saw a growth in the level of fixed capital requirements for the iron and coal industries, railways, the construction industry and engin eering, as the economy became geared to more capital-intensive investment. Before 1820, as we have seen, the relative lack of fixed capital required for many firms was not the result of a shortage of savings in the economy, and existing techniques were often sufficient to sustain industrial development. Jeffrey G. Williamson has argued that competing demands for government loans ‘crowded out’ invest ment until about 1825. Britain up to that stage, according to his argu ment, could not afford to pay for expensive wars and for industriali zation: a choice had to be made between the two, and military expenditure claimed the lion’s share [175]. This interpretation can nevertheless be challenged. It assumes that full employment was pos sible, when quite the opposite was the case, and that government bor rowing monopolized a single set of resources. Though the case could be supported by the low level of investment in urban housing and util ities before the railway age, it seems more sensible to argue that the fixed capital requirements of the British economy changed over the period of early industrialization, and that in the early decades of that process economic development was not held back by any ‘crowding out’ of funds from manufacturing industry [21].
