Rules that shape trust

The Economy of Obligation
May 14, 1999

A buzzword in political science over the last decade has been "trust". Without trust, it is very difficult to cope with the unpredictability of life. We need to have trust that paper money will not be worthless, that banks will repay our deposits, that the government or insurance company will honour the promise to pay a pension in old age.

In complex, capitalist societies, trust relies heavily on bureaucratic rules and regulations, but as Craig Muldrew's impressive new book argues, trust was a very different matter in the later 16th to the early 18th centuries.

Here is a new approach to the transition from feudalism to capitalism: interpersonal emotional trust of earlier small-scale communities was challenged by the growth of a highly commercialised society, before the emergence of modern forms of impersonal trust.

Muldrew's analysis is impressively eclectic and wideranging, bringing together historical approaches which are too often compartmentalised. Tired old topics of trade and monetary history are made newly exciting, combined with the history of political thought, the role of the courts and litigation, changing patterns of charity and obligation, the culture of reputation, and representations of the self. This is economic history as it might be written by a combination of Quentin Skinner and Keith Thomas - a heady and intoxicating mix.

The starting point is provided by economic statistics, showing that more households were able to accumulate more goods, and that the scale and complexity of marketing increased. Sixteenth and seventeenth-century England had a very active market culture, with most households concerned with prices, profits and bargains. Above all, the growth of a market led to an expanding and complex web of credit, with many participants incapable of paying their debts on time. The issue of trust was crucial, and Muldrew teases out the implications for law, politics, society and economy.

The understanding of social relations changed from Christian love or the natural sociability of man to a notion of society as the product of countless interpersonal obligations through commerce. Creditworthiness had emotional connotations, and was central to the construction of a reputation for honesty and reliability on which success in business depended. Economic history cannot be separated from cultural history, for the reputation of a household as an economically reliable unit rested on a language of virtue, chastity and hard work. Neither can it be separated from the history of political thought. Reputation could not be achieved by blatant competition and individualism, for the community could only prosper by the maintenance of credit networks by means of sociability.

Thomas Hobbes reflected these realities of credit and debt in early modern England. Sociability was interpreted in more competitive and contractarian terms, and it was only possible to extend trust to others in confidence that the law would enforce promises. Here was the economic basis of Hobbes's view that man was competitive as well as sociable.

Despite the efforts to create a culture of creditworthiness, economic realities meant that trust very often broke down, with an explosion of defaults and serious consequences for many other people in the chain of debt and credit. The outcome was a high level of failure, with the ever-present threat of downward social mobility and the dissolution of social hierarchies. Wealth and status were highly mutable, resting on a process of ethical judgement about credit, reputation and trustworthiness. There was also a massive increase in litigation to enforce obligations, and to provide a public mark of loss of creditworthiness and social position.

Muldrew's exhaustive survey of urban court records shows that the rate of civil litigation expanded in the late 16th century to reach the highest level ever experienced in English history. But it was not simply a matter of litigation. There was also a decline in older notions of hospitality within a stable hierarchy, and a growth of charitable forgiveness of debts to the poor and unfortunate in a fluid market economy. The costs of forgiveness far exceeded the costs of poor law relief and charitable donations.

Litigation started to decline after the civil wars, falling to a low point in 1750. Muldrew's explanation is partly cultural, that households were more accustomed to dealing with credit, learning the virtues of caution, thrift and accounts. It is also partly institutional, with a greater reliance on local attorneys as a source of information, and the emergence of new forms of mortgage and banks.

There is a huge gap between the point at which his subtle and wide-ranging analysis stops in the early 18th century, and the present world of formalised, bureaucratic trust with which he starts.

The world of reputation and trust continued to be central to the economy after 1750: could a bill of exchange be safely accepted? was a share in a new company fraudulent? could paper money be relied on? could a shopkeeper assume that a woman had the right to pledge her husband's credit when she went shopping? could a native swear an oath and make a contract? would a working-class tenant flit before paying rent?

Muldrew's excellent book points the way forward to a cross-fertilisation of legal, cultural, intellectual and economic history in the 200 years after, as well as before, 1750.

Martin Daunton is professor of economic history, University of Cambridge.

The Economy of Obligation: The Culture of Credit and Social Relations in Early Modern England

Author - Craig Muldrew
ISBN - 0 333 62571 4
Publisher - Macmillan
Price - £47.50
Pages - 453

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