Arbitrating the England Problem: Litigation, Private Ordering, and the Rise of the Modern Economy

Abstract

Legal scholars, historians, and social scientists have long puzzled over how England—with its apparently irrational common-law system—gave birth to the Industrial Revolution. One prominent solution has been to suggest that eighteenth-century merchants used arbitration and other forms of private ordering to sidestep England’s defective legal system. This Article questions that story by offering a new account of how and why extralegal commercial arbitration declined in the early years of the Industrial Revolution. Until the middle of the eighteenth century, merchants could generally resolve their disputes without courts or lawyers. But that changed as new forms of lending arose, credit transactions became more impersonal, and disputes became more focused on short-term victory than long-term relationships. As a result, merchants sought more formal ways to settle their differences, and even “private” arbitration came to depend on state law. The law’s heightened importance, in turn, enhanced the state’s control over merchants. This historical account suggests that the rise of the modern credit economy reshaped the possibilities of private ordering. It also casts doubt on recent attempts to distinguish “private” arbitration from “public” litigation by suggesting that the line between the two has long been blurred.

Keywords: Arbitration,ADR,Legal history,Private ordering,Law and economic development,Credit