Fair Enterprise or Extravagant Speculation: Investment, Speculation, and Gambling in Victorian England

When I was young, people called me a gambler. As the scale of my operations increased I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time.

--Sir Ernest Cassell, banker to Edward VII (qtd. in Chancellor ix)

As Cassell's humorous observation suggests, the line that separates gambling from other forms of financial risk has never been easy to draw, but that has not stopped people from trying to draw it. The economic historian Roger Munting, for example, devotes several pages of his study of British and American gambling to an examination of the question of whether market speculation should be defined as gambling, finally concluding, for very technical reasons, that it should not (1-3). But the need to draw that line has been more urgent at some times than others, and the choice of just where to draw it has varied as well. There seems to have been little urgency during the eighteenth century, for example. The English State Lottery, which operated from 1694 to 1826, combined, in its earliest years, the features of a lottery and a government bond to almost no one's distress (Ewen; Richards). On the other hand, drawing the line between gambling and other forms of financial risk had particular urgency during the Victorian period. The great expansion of the commercial economy that characterized the nineteenth century and particularly the developments that followed the passage of the Limited Liability Act of 1855 and the Companies Acts of 1856 and 1862 led, by the late Victorian period, to middle- and upper-class England becoming, in the words of George Robb, a "nation of shareholders" (3). By the end of the century, roughly two-fifths of the national wealth was invested in company shares and large numbers of upper- and middle-class people lived off dividends and interest from shares and other securities (91, 181). But as G. R. Searle has argued, this great expansion was accompanied by a desire that capitalism possess a moral component (xi, 22), and, for many Victorians, gambling was of questionable morality at best, even though a gambling industry flourished in late-Victorian England. In her study of nineteenth-century American gambling, Ann Fabian has argued that the construction of the nineteenth-century capitalist economy required the exclusion of those who gambled from what came to be seen as legitimate economic activity. Paradoxically, however, she argues, this process led to the legitimization of a new kind of gambling. "Gambling," she writes,

was marginalized only to be domesticated at the end of the century, when risk and rapid gain reappeared as essential ingredients in rational capitalist speculation. The "new" gamblers, who profited from the operations of stock and commodities exchanges, presented themselves as virtuous, rational citizens by delineating their differences from the "old" evil gamblers [...]. For the speculation to stay, the gambling had to go. (Fabian 3, 61)

This essay argues that a similar, but not identical, process was occurring in Victorian England. As was the case in America, speculative trading would only be accepted once it was purged of an association with gambling. This purging was essentially accomplished by the 1860s, and, henceforth, speculation increasingly came to be seen as a reputable economic activity and speculators as respectable economic actors. But the situation in England was to be complicated by the development, in the 1870s, of two new industries—one financial, the other sporting— that created a renewed convergence of gambling and speculation and that called into question the separation that had been so carefully drawn. A new breed of speculative brokers, known pejoratively as "bucket-shop keepers," using language, advertising techniques, and appeals that were suspiciously like those being offered by a new breed of sporting bookmakers, were offering a growing public the opportunity to become engaged in the world of speculative finance at relatively little cost...