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THE EVOLUTION OF FINANCIAL INSTITUTIONS – comprising banking houses, discount houses, the stock exchange, and insurance houses – constituted an important part of the development of the English economy between 1650 and 1850. The combined operation of these institutions structured the credit economy in England during and after the Industrial Revolution. Their importance in the development process can be viewed from different angles. Being part of the service sector of the economy, their independent contribution to the growth of national income and employment over time can be examined in its own right. Crafts has estimated that government and defense, and housing and services contributed 27 percent of British national output in the eighteenth century, and 26 percent in the period 1801–31. C. H. Lee takes a broader view of the service sector to include trade, transport, insurance, banking, financial and business services, professional and scientific services, public administration, and defense – in short, the residual of the national income after taking out the contribution of agriculture, mining, industry, and construction. Under his broad conception of the service sector, Lee computes that the contribution of the respective sectors to the estimated overall employment growth rate of 1.73 percent per annum between 1755 and 1851 was 54.9 percent for industry (including manufacturing, mining, and construction), 22.0 percent for agriculture, 19.1 percent for services, and unclassified, 4.0 percent. [ABSTRACT FROM AUTHOR]

THE RATHER LIMITED MODERN LITERATURE on English shipping is somewhat ambivalent on its importance in the development process leading to the Industrial Revolution. One of the best known authorities on the subject, Ralph Davis, thought its effects on the process “cannot easily be disentangled from those of trade,” and concluded: “The shipping industry was an important part of the English economy, both before and after the decisive decades of the Industrial Revolution, but it cannot be said to have made a contribution of a special character to the transition.” Robert Craig, another leading authority, viewing the relationship apparently from a different consideration, is more optimistic: “There can be little doubt,” he says, “that the capital invested in shipping represented one of the most important forms of fixed … capital in Britain in the period of industrialization.” The ambiguity in the literature probably arises from a consideration of shipping in isolation from the shipbuilding industry. Of course, conceptually the separation makes good sectoral sense, for shipping is a service industry, while shipbuilding produces a physical product and, therefore, belongs to manufacturing. However, for purposes of a more accurate assessment of the contribution of the shipping trade to the industrialization process, under the conditions of the mercantilist world of 1650–1850, it makes more practical sense to take the shipping and shipbuilding trades together. [ABSTRACT FROM AUTHOR]