ABSTRACT
This dramatic change in the financial sector showed itself in the favourable conditions facing borrowers in the later seventeenth century. Despite the unprecedentedly low borrowing rates there seems to have been little difficulty in raising funds. A £2 million loan floated by the New East India Company - alleged to owe its origin to the dissatisfaction of would-be investors with the 'closed' borrowing policies of its rival - was oversubscribed in three days. There appears to have been no difficulty in mustering resources to make good the ravages of the Great Fire of London in Charles II's reign. Overall, Dr Davies suggests, there was a shortage rather of good investments than of ready money in late seventeenth-century England.57 Bearing in mind the exceedingly modest sums involved in capital formation in the industrial sector between, say, 1770 and the end of the Napoleonic Wars, it seems impossible to doubt that in terms of overall savings capacity England would have been able to finance the early industrial revolution up to a century before it happened. Whether, though, this investible surplus - held by merchants, 'bankers' and other traders and oriented for preference to overseas commerce, government loans and land mortgages - could have been successfully channelled to the nascent industrial sector, largely separated as it was from London financial circles by geographical, social and economic barriers, is another question. This brings us to the question of the sources of growth capital, and to this we must devote separate though brief sections,
'Direct* financing and intermediation in history Our interest in the sources of capital must be held firmly in check. The scope of this study extends, by and large, only to the overall contours of modern economic growth and to the more immediate determinants of its rate and morphology, such
158 T H E R O L E OF C A P I T A L as the supply of factor inputs, natural resources and technology. Behind these more immediate determinants there fans out, of course, an ever more complicated array of remoter causes, the pursuit of which in the case of capital formation proportions would soon lead us, via the factors influencing the propensity to save, deep into the social and psychological characteristics differentiating one human group from another. We are neither equipped nor required to enter this area. But between it and the process of investment interposes a layer of explanation drawing upon characteristics of the capital market and the distribution of wealth; and our examination of the role of capital in economic growth would be unsatisfying if it took the mere level of investment as given without saying anything about its determinants - particularly since hints have already been thrown out, towards the end of the last section, that often the severest constraint may have lain not in society's inability to spare an adequate margin of income from consumption needs but in its failure to mobilize the potential savings and channel them to those in a position to make productive use of them.
