The City of London as an International Commercial and Financial Center since 1900

Abstract

The relative importance of financial services in national economies varied over the course of the twentieth century. Rajan and Zingales note that “by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels” and that “indicators of financial development fell in all countries after 1929, reaching their nadir around 1980. Since then has been a revival of financial markets.”1 This revival of financial markets over the last thirty years has led to the study of “financialization” that is variously defined with differing uses, but here is understood as “the growing importance of financial markets as a source of profits in the economy.”2 We mean this to indicate the transformation of economic activity away from physical trade and manufacturing, and toward the provision of financial services. In this article, we examine the financialization of the City of London over time. While the enduring success of the City of London has been as a financial center, prior to the First World War, commercial services were equally if not more important. Consisting of a dense grouping of merchants, commodity brokers, and markets, and served by an equally important collection of support services including shipping and marine insurance, the City was home to the largest cluster of commercial firms in the world. Through a network of intermediaries who both fed and received information and orders, the City was connected to merchants and markets overseas. This cluster was continuing to expand before the First World War, benefiting from such advantages as cheap credit provided by the cluster of financial institutions that were colocated in the City at that time. However, it has long been established in the literature on the history of the City that by the 1950s, the commercial cluster was …