Anthony Sampson: Our northern cities don't need regional assemblies - they just need more ambition

The explosion of wealth came from the rise of a confident business culture which perpetuated itself through local families

Do northerners really have the will to take more of their future into their hands, away from the long arm of London and Westminster? Certainly voters in the North-East on Thursday decisively rejected the idea of a regional assembly, with very limited powers, which they saw as a mere talking shop. And plans for devolution elsewhere in the North are now virtually a dead duck.

Yet the regeneration of enterprise must depend on their leaders escaping from their dependence on the South, and acquiring more confidence in their local opportunities and communities: the more local, the stronger.

And it is now becoming clearer that the original growth of commercial activity in the North in the 17th century - which would set the pace for the whole industrial revolution - was a very local achievement, based on people and capital in a small part of Britain, remote from the influences of London.

I have been reading a new book, Capital and Innovation, which provides a unique insight into the local development of entrepreneurs in one of the key regions of the Industrial Revolution after 1500: the area of South Lancashire and Cheshire south of Warrington and the Mersey river.

The book is written by a historian, Charles Foster, with a remarkable double background. For nearly 20 years he was himself a practical entrepreneur, having owned and run a successful precision engineering firm making telecommunications tools for BT.

But he is also a scholarly amateur historian, and after he had married into an old Cheshire family which owned Arley Hall near Warrington, he discovered the ancestral archive which held continuous records about local landholdings and businesses over 800 years.

With this treasure trove he set about studying how this region acquired its special industrial enterprise by rigorously studying the account books, local records and wills. He found that the ownership of capital in this area had developed differently from most of England: much of the original wealth had passed from rich landowners to smaller farmers of the "middling sort" who had some spare money to invest, who established their own "business culture" with great energy and ingenuity, moved into the local towns and invested in new technologies.

In his second book, Cheshire Cheese, Foster revealed how from 1650 the dairy farmers began to export special cheeses by sea to London, so that Cheshire cheese became a national brand name (sold in several London pubs of that name).

The spread of trades and business activities began to stimulate the whole region, and soon transformed the port of Liverpool, which overtook Bristol and soon thrived on exporting goods round the world - and also on exporting businessmen to America, who became still more successful entrepreneurs.

Foster's new book Capital and Innovation, just published, pulls the threads of his local investigations together, to provide an explanation which is much more human and comprehensible than most accounts of the industrial revolution, filled not just with detailed local statistics but with individual businessmen, discovering the full scope for investing their modest capital. "After reading debates by cliometricians," writes Professor François Crouzet of the Sorbonne in the introduction, "it is refreshing to come down to grass-roots level and to get to know 'real' individuals and families."

Foster shows that the local burst of enterprise increasingly came, not from the landed nobility or gentry who left their fortunes to their eldest sons, but from the new families in the towns who divided their inheritance, enabling younger sons to set up as traders, craftsmen or businessmen. The capital that first originated from the land went into new industries, like sailcloth in Warrington which transformed English shipping.

The consequences of this enterprise were spectacular. "The 130 years from 1650 to 1780," writes Foster, "saw the development of an industrial-commercial complex in the north-west of England that was larger than anything of the kind that had appeared in the world before."

So what was the real secret behind the creation of these entrepreneurs? After analysing the accounts of local businessmen and landholders, Foster gives three linked explanations.

The redistribution of wealth allowed many individuals on the land to become entrepreneurs. The business culture of their families was much more dynamic than the settled attitudes of the gentry and aristocrats who owned most of the wealth elsewhere in England.And the growing trade with America hugely increased their opportunities - while the success of American entrepreneurs reciprocated and reinforced the confidence of the north-western English.

All this was in striking contrast to the rest of the world outside America, as Foster shows in his conclusion. The French had great wealth and natural resources, but they failed to develop them. The Austrian aristocrats in Vienna inherited a great trading centre but were intolerant of the business community. The Japanese had many advanced technologies but they were all related to the needs of the ruling aristocracy of the samurai who did not work. The Chinese had made some striking progress in technology and transport, but were held back by the Confucian ordering of social classes, with scholars at the top.

Foster's book, with its flesh-and-blood examples cuts through the generalised economic theories and shows clearly how the explosion of energy and wealth in the North-West came primarily from the emergence of a confident business culture which perpetuated itself through local families.

It was beyond his task to explain how that energy expired, and was followed by the sad decline and depression which followed in the late 20th century. But anyone who revisits Warrington and Liverpool today, with their magnificent but faded industrial relics and dockyards along the empty Mersey, feels compelled to ask again the question: what has happened to the entrepreneurs?

The economic explanations are obvious and compelling: the manufacturing industries were overtaken by Americans, Europeans and Asians; the ports were superseded and bypassed by container ships in ports closer to Europe. The control of finance and industry moved to London, where it stayed, and thence to international banks and capital.

Yet Foster shows that the first surge of innovation in the region was caused more by the enterprise of the people than by the local resources - which were available in many other countries which made little of them. And the original traders and entrepreneurs in Liverpool and its region owed little to Londoners.

Today many Northerners are looking for a revival of that spirit, with some ground for optimism. Mancunians are showing a a new confidence, and Liverpudlians are looking for new opportunities as the European Capital of Culture in 2008.

But their success will not ultimately depend on being granted favours from Brussels, or being offered regional assemblies by John Prescott in Westminster. They will need to assert their local ambitions, based on an authentic "business culture" and demand autonomy which they have worked out for themselves, if they are really to rediscover their old entrepreneurial energy.