Introduction

The last quarter of the eighteenth century saw the start of a great economic expansion that changed corporate finance in fundamental ways. The age of global exploration was waning and the discovery of new lands in the Western Hemisphere brimming with untapped resources was no longer to be counted on to provide economic growth. Boundaries imposed by the closure of geographic horizons underlined the need for the conservation of dwindling natural stocks. Robert Malthus, for example, thought that the ultimate survival of the human race depended on a sharp restriction of population growth. Sensitivity to demographic pressure emanated from a high, constant birth rate, lowered death rates and the alienation of a growing portion of the population whose connections with the land were severed by estate enclosure. Others, such as David Ricardo, responded to the problem by arguing that a greater abundance could be achieved by allocating scarce resources more efficiently. This latter reaction took several forms. First, a growing body of scientific knowledge was used to develop improved products and manufacturing processes. Second, new forms of business organization and management were created to enhance productivity by more effective coordination and control of economic affairs. Third, new beliefs were emerging about the gains to be realized by eliminating distortive impediments to freer trade.

A major technological advance, the substitution of coal for wind and water as the energy source for industry, was maximized in Britain. Major improvements in steam engine design, introduced by Thomas Newcomen and James Watt, transformed two leading manufacturing sectors, textiles and iron, and catapulted Britain into the position of the world's leading industrial economy during the first half of the nineteenth century.