Ann Prior and Maurice Kirby’s chapter on ‘The Society of Friends and business culture, 1700-1830’ in David Jeremy (ed) (1998) argue that the key to understanding both the over-representation of Quakers among successful entrepreneurs in the 18th and 19th centuries and their remarkable longevity as businesses can be ascribed to one unusual attribute: trust. At a time when indebtedness was widespread and bad debts common, and when fraud around bankruptcy was regularly practised by bankrupts, creditors and lawyers, the Friends stood out through their honesty. Transaction costs to a business can be high: the cost of allocating resources, of buying from external suppliers for example, takes money out of the business. A company can gain control over some of that by internalisation: investing in and directly managing its own supply chain for example rather than having to buy in materials and services. In contrast to that, good relationships between contractual partners and co-operation between firms can achieve better results than even a merger might yield. So the quality of the business culture has proved to be of high value. The Religious Society of Friends was similar to an extended family group, thanks to its local and regional and national gatherings that allowed people to connect with one another and to provide personalised chains of credit to enable capital flows.
George Fox demanded of his followers that they act honestly and justly in their business dealings. Honesty in trade, including the avoidance of debt, thus became a condition of membership of the Religious Society of Friends from its inception in the 1660s. (p.117)
In the 18th and early 19th centuries it was relatively easy to start businesses, with low barriers to entry and minimal capital requirements. This encouraged many overambitious but inexperienced entrepreneurs to enter the market, making mistakes and failing in business. However the Quakers insisted that Friends who wanted to start their own business had to seek the consent of the meeting. A minute from a meeting as early as the year 1700 reveals that a man called John Parker wanted to go into the clothing trade. The minute records that three members of the Meeting House would “further discource him therein, giving their advise & consent as in the widom of God they see meete, & give an account to the next preparative Meeting.” (p. 118). In other words, there was an informal type of business mentoring programme in operation. Friends’ businesses did nonetheless become insolvent or find themselves into debt they could not pay, but there are records of other Friends stepping in to investigate and make sure they behaved responsibly and honestly in dealing with their creditors. Meeting Houses would communicate with one another so someone could not abscond to another location and start again: a ‘certificate of removal’ had to be issued by one Meeting House for giving to the new one, and there are examples of this being withheld in the case of individuals with unpaid debts.
“The Meeting House network thus facilitated the flow of information between localities, at a time when communications in general were poor. The resulting increase in market knowledge can be viewed as an aid to creditworthiness in upright migrant Friends, and also as a means of debt retrieval… Quaker firms were thus advantaged by valuable and exclusive externalities arising from the effectiveness of their support network. Collective responsibility for honesty in business led to the internalisation of guidance in good business practice, and improved commercial judgement. Transaction costs were reduced as confidence was increased.” (p. 129)