1 Introduction
A key problem for economic historians is to explain the innovations , rises in productivity and increases in the average standard of living that became evident in Great Britain by the nineteenth century and spread to other countries in the world.1 Sometime after 1700, GDP per capita began to take off in Europe, and accelerated further upwards. Western European GDP per capita was about twenty times larger in 2003 than it was in 1700. World GDP per capita in 2003 was about eleven times larger than it was in 1700 (Maddison 2007).
What enabled this unprecedented rise in production and innovation ? This question was a major concern of the late Douglass C. North. Regarding Britain, North and Barry Weingast (1989) stressed the importance of institutional changes following the Glorious Revolution of 1688. They claimed that it increased the security of property rights. Their argument has been followed by several others. But Northâs account has been subject to criticism. In particular, as several historians have pointed out, 1688 did not lead to major changes in property rights. It did mean a change in the de facto balance of power between the monarch and Parliament, but this was not a result of any major de jure legislation in the political settlement of 1689.2
Rather than changes in the security of property rights, the alternative account here underlines how 1688 ruptured Englandâs preceding international alliances and thrust the country into a series of wide-ranging wars against France and Spain, climaxing in the global Seven Yearsâ War of 1755â1763. These wars prompted the Financial and Administrative Revolutions, which rested on the 1689 accord between King and Parliament. The need to protect and maintain a growing trading empire pressured the British state to reform its finances, gather more taxes, and purchase industrial, agricultural and service outputs destined for its army and navy. The development of the financial system created new incentives and later possibilities for the use of landed property as collateral to finance investments infrastructure and industry.
Section 2 outlines the arguments of North and others concerning the alleged impact of the Glorious Revolution on the security of property rights. As a number of historians have pointed out, this revolution was essentially protective and conservative, and it involved few major legal changes.
Section 3 considers the evolution of property rights in England. Property rights, particularly in land, were relatively secure from the thirteenth century. A major problem for capitalist development was the feudal nature of those rights. But the most rapid progress in the reform of landed property began in the 1750s, when much land became usable as collateral to finance loans for other projects. Similarly, a marked rise in patentsâan important type of intellectual propertyâdid not occur until the 1760s. Some property rights were made insecure, such as legislation to abolish heritable jurisdictions in the early 1700s.
Section 4 examines economic growth in the seventeenth and eighteenth centuries and concomitant changes in occupational patterns. Economic growth picked up around 1650 (long before 1688) but it remained steady until it began to accelerate after about 1760 (long after 1688). Evidence on the growth of social strata involved in industry and commerce shows that their percentage contribution to national income rose only slightly from 1688 to 1759. Hence there is no evidence of a strong shift of the balance of class power in favour of the bourgeoisie from 1650 to 1760.
Section 5 looks at the Financial and Administrative Revolutions lasting from 1689 to the early decades of the eighteenth century. By contrast to aforementioned indicators, immediately after 1689 there is clear evidence of a growing state administration, increased taxation, and major developments in financial institutions. These changes were pressured by the growing needs of defence and war. In turn, these Financial and Administrative Revolutions extended the foundation for a capitalist system based on collateralizable property, negotiable debt, global trade, and state power.
Section 6 summarizes the argumentâwith its different chain of events connecting 1688 and the Industrial Revolutionâand concludes the essay.
2 1688, the Balance of Power and Property Rights
North and Weingast (1989: 803) argued that the development of Britainâs modern economy depended on âsecure property rightsâ and the âelimination of confiscatory governmentâ. The Glorious Revolution was allegedly crucial in this process, including the constitutional settlement of 1689 between the Crown and Parliament, where the Declaration of Right made the king subject to Parliament on matters of legislation and taxation.
Hence âreducing the arbitrary powers of the Crown resulted not only in more secure economic liberties and property rights, but in political liberties and rights as wellâ (North and Weingast 1989: 816). Accordingly, âthe credible commitment by the government to honor its financial agreements was part of a larger commitment to secure private rightsâ (North and Weingast 1989: 824).
North and Weingast (1989: 825â28) pointed to a number of subsequent changes in the financial system, including the formation of the Bank of England in 1694, reductions in interest rates, rising trade in stocks and in securities, and the growth and development of banks. They cited these financial developments as the major confirmation of their claim that the settlement of 1689 helped to secure property rights and laid the foundations of eighteenth-century economic growth.
Similarly, Daron Acemoglu et al. (2005a: 393) suggested that in the English Middle Ages there was a âlack of property rights for landowners, merchants and proto-industrialistsâ and that their âdevelopmentâ first occurred in the late seventeenth century, when âstrengthening the property rights of both land and capital owners ⌠spurred a process of financial and commercial expansion.â They highlighted the settlement of 1689, which limited the power of the monarch and facilitated âthe development of property rightsâ.3
But crucial elements in this argument have been criticised by historians. Leading scholars have played down the extent of the constitutional settlement of 1689 by stressing its âconservativeâ nature: it was aimed at the restoration of established rights, it salvaged previous constitutional arrangements after the turmoil of the Civil War and the Stuarts, and it was âdefensiveâ rather than innovative (Western 1972; Scott 1991; Jones 1992; Morrill 1992; Trevor-Roper 1992; Nenner 1997; Pincus 2009; Ogilvie and Carus 2014).
The settlement of 1689 ostensibly reinforced the de facto power of Parliament against the monarchy, but there was little rewriting of the rules. Although Parliament met more regularly after the Glorious Revolution, the Declaration of Right of 1689 was vague on this matter, and other legislation calling for frequent parliaments had been passed as early as the fourteenth century (Pincus and Robinson 2014: 197). âThere was also no new legislation enjoining the supremacy of the common lawâ after the Glorious Revolution (Pincus and Robinson 2014: 198). Steven Pincus and James Robinson (2014: 198) argued that legislation immediately following the Glorious Revolution was hardly innovative, and was preceded in 1624, 1644 and 1677 by other legislation attempting parliamentary oversight of state finances . Pincus and Robinson (2014: 201) summed up their critique: âWhile North and Weingast were right to insist on a radical change in English political behaviour after 1688 ⌠the mechanisms they have highlighted cannot have been the cause. ⌠The causes of Englandâs revolutionary transformation must be sought elsewhere.â
Nevertheless, while the constitutional effects of 1689 may have been exaggerated by North and Weingast , there were important new controls by Parliament over sovereign powers and revenues. Generally, Parliament placed sovereign promises under its control (Cox 2012, 2016). Financial legislation in 1690 ended most lifetime grants for the King and replaced them by time-limited stipends (Roberts 1977). The Mutiny Act of 1689 made Parliament indispensable for th...