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Reviewed by:
  • Making the Market: Victorian Origins of Corporate Capitalism
  • Mary Poovey (bio)
Making the Market: Victorian Origins of Corporate Capitalism, by Paul Johnson; pp. x + 255. Cambridge and New York: Cambridge University Press, 2010, £55.00, $95.00.

Paul Johnson's entertaining scholarly study of the rise of nineteenth-century corporate capitalism takes square aim at economists and historians who argue that the development of the competitive market system was a natural evolution of an economy moving ever closer to self-regulating efficiency. Johnson also dismisses Marxist historians who argue that the market economy was created by rich and powerful capitalists determined to wring whatever profits they could from workers and the poor. Indeed, in his fascinating and painstaking examination of select bankruptcy prosecutions, the inequitable enforcement of labor contracts, incorporation laws, limited liability legislation, and Victorian companies' reluctance to make their operations transparent, Johnson generally debunks all master narratives that claim to find in history a systematic weave of causes and effects. Instead of evolution or conspiracy, Johnson identifies in the history of Victorian company law a series of decision points, at each of which diverse opinions and interest groups jockeyed for advantage. In nearly every case, he argues, accident and chance were as important as individual or collective schemes; custom and habit were often more efficacious than the rationality implicit in Adam Smith's idealized picture of the market; and inefficiency, as much as profit maximization, was sometimes the unintended consequence of legislation adopted for local, rather than theoretically coherent, reasons. [End Page 355]

I begin with a summary of the implications of Johnson's methodology rather than a catalogue of the cases he considers because Johnson's repudiation of accounts of the past that are designed to fit a theoretical hypothesis constitutes the most important contribution of this important book. Johnson's rejection of theoretical models, whether they take the form of economists' "efficient structure hypothesis" or historians' master narratives, has both practical and theoretical implications (188). Practically, Johnson's insistence that historical events are embedded in multiple and sometimes competing contingencies calls for historians to produce detailed analyses of individual cases that take seriously incidents that fall outside expected patterns. Theoretically, Johnson's demonstration that empirical evidence often fails to confirm theoretical models asks economists to reconsider the formalism that now dominates the discipline, to look at details of individual cases instead of simply constructing statistical aggregates, and to rethink the importance of factors that neo-liberal models, which assume that a competitive market distributes resources efficiently, do not typically accommodate.

In its detailed case studies, Johnson's book demonstrates why respecting contingencies makes for powerful historical explanation. Contrary to the idea that the corporate form naturally evolved from a market system seeking to maximize efficiency, Johnson demonstrates that the "institutional core of corporate capitalism" was created from a series of legislative measures that answered to a range of priorities (104), some of which did not foster—or even take advantage of—the efficiency that unregulated competition is supposed to promote. As he argues in chapters 5 and 6, the most persistent priority of Victorian company directors was to retain personal control over companies, even when dispersing ownership among many shareholders might have generated more capital and greater flexibility. Indeed, as Johnson's statistics show, even after Parliament allowed companies to seek the previously restricted right to incorporate, only a relatively small number of them did so. Equally surprising, although the number of corporations began to rise in the 1880s, the number of shareholders in each company remained small: "of the 1,328 companies registered in the first half of 1890, 87 per cent had ten shareholders or less" (126).

Moreover, even after the passage of limited liability laws at mid-century, which theoretically provided further economic incentives to incorporate, many British company owners decided not to take advantage of this legal protection. "Fully one-third of Britain's largest hundred companies in 1907 eschewed some of the major economic benefits of incorporation," Johnson writes; and in life insurance, one of the few industries in which a direct comparison of the relative efficiencies of corporate and mutual business forms is possible, "there is no evidence...

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