The City of London, that is, that 2.9-square-kilometer district in the heart of the city, is the financial capital of the world, a position disputed in recent decades by other megacities such as New York or Hong Kong.
From a historical point of view, London’s commercial – and therefore financial – importance dates back to AD 43. C., when the Romans founded Londinium. Up there, across the Thames, came the tide, which favored the construction of a port. A town was built, then a town and in a matter of a few years a city.
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At the end of the Middle Ages, it was the capital of a monarchy of international relevance and was inhabited by an enriched aristocracy and bourgeoisie. So much so that the Venetian ambassador could write in 1478: “London offers an abundant assortment of luxury goods. In a single street there are 52 goldsmiths, with a quantity of objects greater than in all the shops of Milan, Rome, Venice and Florence combined ”.
The Thames was crowded with ships waiting to unload their goods, brought from all over the world. Among them, rich fabrics, rugs, jewelry, spices, exotic fruits and the famous Sherry, or Jerez wine, as well as others from the Canary Islands and Porto. Everything was sold in London.
Los merchant venturers
In the 16th century, in the Tudor era, the guilds – of goldsmiths, silversmiths, tailors, tanners, haberdashers, grocers and dozens more – carried enormous weight. It was they who elected mayors, and they also had a monopoly on their sector.
The guilds embarked on international trade with the founding of the so-called merchant venturer companies (literally, “adventurous merchant companies”), which financed exploration and colonization trips to distant countries. The most famous would be the British East India Company, created in 1600. In London, the guilds would develop a commercial nucleus comparable to other large European ports, such as Amsterdam or Hamburg.
The House of the East Indies, headquarters of the company in London. Watercolor over etching by Thomas Malton, c. 1800.
The reconstruction of the capital after the Great Fire of 1666 catapulted its economic power. The Royal Exchange, or fish market, created in 1571 as a meeting point for merchants, was lavishly rebuilt in the place where it remains today, next to the Bank of England, in the same financial center.
Las ‘coffee houses’
It was during the seventeenth century, as a result of the importation of coffee, chocolate and tea, when the coffee houses (“Coffee houses”). They were the places to meet to exchange information, catch the latest news, and negotiate contracts while sipping the trendy concoction.
In the coffee houses public sales of shipments were also carried out. One of the best known was Garraway’s, founded in 1669. It was financed by the sale of furs from the Hudson’s Bay Company, which operated in the Canadian Arctic. At Garraway’s ships and lots of sugar, coffee, tea and spices were auctioned, arriving in London from Brazil and the East Indies.
The great fire of London in 1666 forced to rebuild the city.
The kingdom of insurance
The strength of the English capital in the international insurance market owes much to another coffee house: Lloyd’s. It was located near Lombard Street, a street known since the Middle Ages with that name for being the nucleus of the Italian bankers who operated in London. It was precisely the Lombards who introduced the concept of insurance.
Shipowners turned to Lloyd’s for a policy against the dangers of ocean voyages. It was there that, starting in 1760, the famous Lloyd’s Register of Ships, which is still used and maintains London’s role as an information center for international maritime traffic.
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In the city, since the end of the 18th century, fire insurance companies also had their offices, which covered risks all over the world. By 1861, nineteen English insurers were operating in Hamburg alone, and English agencies had been opened in North America, Latin America, South Africa, and East Asia.
In turn, insurance companies reinvested a high percentage of their large funds in the London capital market. It was estimated that three-quarters of universal commerce passed through London. The nature and volume of this trade made the city the world’s financial mecca.
This is where the money is
The goldsmiths were responsible for London becoming a global financial center. They loaned money to merchants while they awaited the arrival of overseas ships loaded with high-value products (pepper, nutmeg …), the sale of which brought enormous profits to importers.
It was the goldsmiths who introduced the use of banknotes, that is, promises to pay the amount mentioned in them in gold. In 1694 the Bank of England was founded as a vehicle to stimulate interest-paying investments. In 1708, this institution was granted a monopoly on the issuance of banknotes.
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The Bank of England, with its immense reserve of gold in the form of bullion and coins, maintained the financial stability of the nation despite the conflict with Napoleon and occasional financial panics, such as the collapse in 1846 of the overheated stock market for rail stocks.
Invest, you cursed!
In the 19th century, London was the largest capital on the globe, a city in constant expansion in a world that demanded manufactured goods and in turn offered raw materials. London has since been the center of investment and source of funds to respond to the needs of commerce.
The city was also in the 19th century the largest industrial center in England. Despite the expansion of the cities of the center and north of the country (Birmingham, Manchester, Leeds, Liverpool), in 1861, London, the most populated capital in the world, employed 15% of the active English population in the sectors of the manufacturing, and a higher percentage in construction, water and gas, transport …
Photograph of London taken around 1865. In the background, St. Paul’s Cathedral.
All the economic forces were concentrated in the city, but especially the financial ones. It would have been almost impossible to keep international trade moving without the credit advanced by the English banks.
Indeed, by the early nineteenth century it was clear that England had effective credit systems. In 1797, the government, in need of him to continue the war against revolutionary France, borrowed funds in the City to meet its inordinate expenses. The debt grew from £ 36 million to an unheard of £ 709 million in 1816.
The demands of war showed that in the organization of financial resources the City had no rival
In 1810, the London branch of the Rothschild house dealt with the payment of grants to England’s allies and the transfer of funds to Wellington’s army in Spain. The demands of war showed that in the organization of financial resources the City had no rival.
By the middle of that century, capital was pouring in, channeled from London to the railways, mines, water and gas companies, and insurance companies in various European and overseas countries. When the Bank of France could not pay its obligations after the military defeat of 1871 at the hands of Prussia, the Bank of England covered it.
A bus in London in 1865.
London was the city where most bills of exchange were received and sent from. On the other hand, the English capital was the only debt clearing house.
Catastrophe proof
During the 20th century, the City survived two world wars and repeated economic crises. In the last half century, a whole series of restrictive measures has been ended, allowing, among other things, the entry of foreign companies in the stock market.
London retains its status as a global financial capital, as evidenced by the number of branches maintained there by major banks around the world. Despite the doubts generated by the impact of Brexit on its activity, the City, the “square mile” of the primitive The city Romana, is today the center of the international currency market and one of the places where the greatest wealth is concentrated in a minimum space.
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