17. You Need Money to Make Money
O
ne knows how the "first industrial nation" did it. Slow and easy.
Britain trained a factory labor force and accumulated capital as it
went. In those early days, machines were typically small and cheap.
Scale was small. Older buildings could be converted to industrial use.
In short, threshold requirements were modest. So British enterprise
could grow by plowing back earnings, by pooling personal resources,
by borrowing from relatives, by renting facilities. Financial intermedi
aries, except for such loan brokers as attorney/solicitors, played a very
small role. Banks confined themselves to supplying short-term or de
mand loans to facilitate real transactions. Some of this took the form
of lines of credit, renewed as paid down. In good times, such lines
were the equivalent of medium- or even long-term credit. In good
times. In bad, they could be called in, or maturities could be shortened.
With the passing years, all of this changed: machines got bigger and
heavier, required buildings to their measure. Scale economies and
throughput grew as transport facilities improved. Still, British enter
prise was rich enough to finance these outlays from within; if internal
funds fell short, one typically brought in additional partners.* But even
* Some industrial firms founded their own banks, pardy to facilitate their commer-