The Glorious Revolution is a celebrated event in English history. The bloodless overthrow of the autocratic James II by a grand coalition of civic-minded nobles has inspired the prose of three centuries of writers, all marveling at this great effusion of freedom, justice, and democracy. Edmund Burke captured the historical mood in his Reflections on the Revolution in France (1790): “The Revolution was made to preserve our ancient, indisputable laws and liberties and that ancient constitution of government which is our only security for law and liberty.” He and Thomas Babington Macaulay forged the “Whig interpretation” of 1688 as the dramatic coalescence of a public will in favor of England’s timeless institutions—Parliament and the common law. The Bill of Rights ensured that England, and soon Britain, would be a monarchy circumscribed by its elected legislature.
Exactly three centuries later, economic historians were swept up by the mythic tide. Writing in the December 1989 edition of The Journal of Economic History, Douglass North and Barry Weingast argued that the toppling of James and the accession of William of Orange constituted an assertion of Parliamentary supremacy over the arbitrary monarchy. This body was—if not fully representative—diverse and stocked with “wealth holders”: merchants, industrialists, landowners, and bankers, all united by a desire to protect private property. Moreover, Parliament’s control over the public purse would ensure that the Crown could not unilaterally breach contracts, encouraging investors to place their funds in the government and thereby deepening the country’s fabled markets for impersonal credit. As evidence, North and Weingast showed that Britain had subsequently gained access to unprecedented levels of loan finance: the national debt rose from £1 million in 1688 to £16.7 million a decade later, and then to £78 million by 1750. Yet throughout this period, the market rate charged on government bonds fell dramatically, from 14 percent in 1693 to just 3 percent (with the advent of the Consols) in 1739. North and Weingast took the lower credit risk assigned to the regime as a sign of credible commitment to maintaining contracts.
The authors argued that the spillovers would extend far beyond public finance. The same forces ungirding credible commitment to bondholders would also provide for secure property rights. The monarchy was thought capable of contesting the ownership, transferability, and use of assets, especially land, prior to the passage of the 1689 Bill of Rights. Such instability would have dissuaded private individuals from making long-term investments and effiency-enhancing transactions. Parliament’s control over and reform of the fiscal system should, on this view, have limited the Crown’s ability to directly expropriate the wealth of citizens by levying arbitrary taxes. In short, the institutional reforms of 1688, by shackling Leviathan, created the economic environment most favorable in European history for a commercial society and subsequent industrialization. Security of ownership incentivized investment, while the right to transfer and use assets increased economic efficiency by smoothing the operation of market mechanisms. The Glorious Revolution became the central case study for North’s New Institutionalist school, proving that organizations that safeguarded property and lowered transaction and monitoring costs could be sufficient impetus for modern growth.
Ambitious theories are always critique-magnets, but the slew of empirical challenges that ensued over the succeeding two decades reinforced Greg Clark’s (1996) argument that “Institutionalists were stretching a point when forging the link between the institutional changes of 1688 and the Industrial Revolution beginning in 1760.” Clark himself, for example, noted that interest rates on government debt showed no discontinuity after 1688, indicating that property and creditor rights were probably secure long before and after that date. But the Glorious Revolution is a horse that refuses to die, even after sustained beatings. Economists[1] Daron Acemoglu and James Robinson have made the event a centerpiece in their research agenda on the role of “inclusive” and “extractive” institutions in the economic rise of Western Europe. During the Middle Ages, they suggest, there was a “lack of property rights for landowners, merchants and proto-industrialists.” The Glorious Revolution, by “strengthening the property rights of both land and capital owners . . . spurred a process of financial and commercial expansion” that culminated in the industrial emergence of Britain (Acemoglu et al, 2005, p. 393).
In their best-selling book Why Nations Fail, Acemoglu and Robinson re-forge Clark’s link in an even more sweeping fashion:
The Industrial Revolution started and made its biggest strides in England because of her uniquely inclusive economic institutions. These in turn were built on foundations laid by the inclusive political institutions brought about by the Glorious Revolution. It was the Glorious Revolution that strengthened and rationalized property rights, improved financial markets, undermined state-sanctioned monopolies in foreign trade, and removed the barriers to the expansion of industry. It was the Glorious Revolution that made the political system open and responsive to the economic needs and aspirations of society. These inclusive economic institutions gave men of talent and vision such as James Watt the opportunity and incentive to develop their skills and ideas and influence the system in ways that benefited them and the nation. Naturally these men, once they had become successful, had the same urges as any other person. They wanted to block others from entering their businesses and competing against them and feared the process of creative destruction that might put them out of business, as they had previously bankrupted others. But after 1688 this became harder to accomplish. (Acemoglu and Robinson, 2012, p. 208).2
In Why Nations Fail, parliaments are “inclusive political institutions,” meaning that they permit broad majorities in society to participate in government; this, in turn, reinforces “inclusive economic institutions,” which protect generalized rights to private property, free choice of employment and contracting, and the entry of new businesses. Good political reforms thus lead to good political economy, and both are mutually supporting in a “virtuous circle.” For Acemoglu and Robinson, as for North and Weingast, Britain in 1689 is the paradigmatic case for the crucial role of Western-style open-access institutions in explaining differential growth between the West and the Rest. Why was England first? Because it was democratic first, of course!
But how different was Britain on her first day in the Brave New Institutionalist World? Did Englishmen first breathe the fresh air of liberty as the ink had dried on the Bill of Rights? It’d be convenient if true. Democracy, property, and freedom are congenial to most of us, so the establishment of a unique nexus between these virtues and broad-based economic growth seems appealing. As I’ve alluded to above, however, the empirical basis for the North-Acemoglu institutionalist interpretation of the Glorious Revolution is lacking.[2] 1689 was not the beginning of an age of novel political freedoms; rather, the eighteenth-century British government was not necessarily open and growth-inducing, and many of the aspects that were had been evolving in England for several centuries.
First, historians agree that the Glorious Revolution was largely defensive. Burke was right that the French version of a century later was of a wholly different character. Rather than embracing inclusive radicalism, the British revolutionaries were conservative, seeking to restore what they perceived to be infringed-upon rights. Parliament met more frequently after 1689, but the Declaration of Rights was vague in calling for this change, and various acts had sought to increase the number and duration of meetings for three centuries. Attempts to secure parliamentary oversight of the state finances had been made in 1624, 1644, and 1677. Commercial interests in Parliament had been increasing before the Revolution, and merchants were represented on both sides. Moreover, traders tended to be aristocratically or dynastically connected and became increasingly so after 1688. It is not clear that the Revolution was either fought for or by “new men” in the English political sphere. The creation of an open-access political order would be over a century in the making—following, not preceding, the Industrial Revolution. Connecting the new order of 1689 to the Great Reform Act of 1832, as Acemoglu and Robinson do, is an even greater stretch than asserting its economic relevance.
Strong parliaments, even when dominated by wealth-holders, are not straightforward recipes for growth. Poland’s Sejm, for example, prevented rulers from issuing legislation without their consent, yet the body ended up supporting the feudal rights of landowners over their serfs, lowering agricultural output. Lest one argue that a gentry-dominated body (which is, however, rather reflective of England’s) doesn’t fit the North-Acemoglu model, the Württemberg parliament is a telling counterpoint. Lacking a landholding nobility, the legislature was filled with bourgeois, usually merchants and industrial businessmen selected by their local administrative districts. They used their representation to give themselves monopolies, guild privileges, and cartels, leaving the country’s trade in the hands of a small group of licensed companies and delaying industrialization compared to neighboring polities. A merchant parliament with absolute control over the executive presided over the rise and fall of the Dutch Republic, which saw legislators seize access to rent-seeking opportunities as the country stagnated during the late seventeenth century. North and Weingast’s suggestion that “the natural diversity of views in a legislature” would prevent such behavior rings a bit hollow. The “long eighteenth century” saw Parliament repeatedly back special interests: they upheld slavery, subsidized colonial planters with mercantilist tariff policies, and passed the Corn Laws for landowners. The Glorious Revolution was no doubt a step toward ending rent-seeking, but egregious forms persisted well into the nineteenth century.
Was Parliament nevertheless a better manager of the public purse? Alas, the evidence is again suspect. O’Brien (2001) found that debt-holder property rights were secure throughout the 17th century, and more changes in the tax and borrowing systems occurred during the Civil War forty years before. Harris (2004) notes that insecurity remained high until the nineteenth century, when effective oversight mechanisms or monitoring budgetary outlays emerged. And studies by Stasavage (2002) and Sussman and Yafeh (2006) reversed the “interest rate discontinuity” hypothesis advanced by North and Weingast as the empirical foundation of government security, showing the large fluctuations—tied to the rise and fall of political parties—continued until 1740. Moreover, the Hanoverian British state was if anything more extractive, from a fiscal point of view, than the Stuart monarchs had ever been. While the 1689 Bill of Rights gave Parliament control over taxation, no popular or institutional checks were placed on that power. Between 1688 and 1815, real GDP increased by three times and real peacetime taxation by fifteen times; the Stuart take of 1.2-2.4 percent of national income was hiked to 8-10 percent as a consequence after 1688. What did Britain use the money for? If you guessed things like “infrastructure” or “welfare” or even “internal security,” you’re wrong. Taxed pounds were spent on wars against the French—in the Nine Years’ War, the War of the Spanish Succession, the War of the Austrian Succession, the Seven Years’ War, the American Revolutionary War, the French Revolutionary Wars, and the Napoleonic Wars. And while there were undoubtedly stimulative effects from these outlays, and backward linkages to sectors like metallurgy, it’s clear that for the vast majority of taxpayers, the returns were minimal if not negative. Williamson (1987), for example, has attributed some of Britain’s slow eighteenth-century growth to crowding-out.
The last leg of the North-Acemoglu position is the most important: private property. A core tenet of institutionalism is that secure rights of ownership, transfer, and use are necessary (and sometimes sufficient) conditions for growth to occur. Transitioning from insecure monarchical England to secure parliamentary Britain protected these rights and laid the foundations for the Industrial Revolution. Let’s hear from Acemoglu and Robinson again: “Most land was caught in archaic forms of property rights that made it impossible to sell and risky to invest in. This changed after the Glorious Revolution... Historically unprecedented was the application of English law to all citizens” (Acemoglu and Robinson, 2012, p. 102). Pluralism and fiscal responsibility fall by the wayside depending on whether this framework applied to Britain. The preponderance of evidence suggests that, insofar as Britain had strong generalized property rights during the Industrial Revolution, they antedated 1688 by some margin. Ownership of land was believed secure by the eleventh century, at least by contemporaries, and this applied to commoners and gentry alike. Landholders could also sell, lease, mortgage, bequeath, or alienate their plots as they saw fit. Royal, ecclesiastical, and manorial courts all competed to protect ownership and transfer against arbitrary seizure or alteration. The Bill of Rights imposed no limits on Parliament’s ability to confiscate property and did not mandate compensation in the event of this occurring, so what constraints did exist had been slowly building up since the signing of the Magna Carta, if not earlier.
It’s not even fully clear that Hanoverian property rights were stronger than those of the Stuart age. The Civil War and Restoration produced reciprocal redistributions between the followers of Cromwell and the Crown, but these were neither expected in advance—so investors would not have been deterred—nor genuinely more significant than the upheavals of the eighteenth century. There were post-medieval confiscations of property, such as the seizure of monastic lands by Henry VIII or the forced loans of James I and Charles I, but the frequency of such events—theft or default—was low compared to most places on the continent. Hodgson (2017) notes that the institutionalists emphasize events that are “too early and too late. Property rights in England were relatively secure for the minority by the 13th century, but legal rights for the majority were insecure even during the Industrial Revolution.” One of the most important institutional changes resulting from 1688, the increasing incidence of parliamentary acts (estate, enclosure, and turnpike) for reorganizing land use, involved increasing state power to redefine property rights. Even these measures incurred censure and only started to occur frequently after 1750. Entail and strict settlement continued to block the commercialization of the land market, not because of any institutional factor, but because the landed elites were strongly opposed to making changes. In short, property rights in 1769 were stronger than they had been in 1500, but the path to getting there had been slow and incremental, with no discontinuity around 1688. This is reflected, in part, in the concomitant lack of an economic discontinuity. Britain was precociously urban, commercialized, and wealthy long before industrialization, the recipient of centuries of gradual Smithian commercial expansion. Property rights were clearly good enough to make seventeenth-century London a commercial hub, stimulate agricultural specialization, and even kickstart British technical ingenuity. Institutions improved incrementally with economic development, one catalyzing the other.
The New Institutionalist World of 1689 was, in many ways, the opposite of the pluralistic limited state envisioned by North and Acemoglu. Most British men outside the propertied classes couldn’t vote, and even non-elite mercantile interests found themselves struggling to unseat the traditional aristocracy. If the monarch was shackled, Parliament was not, and it started to exercise its powers to redefine property rights during the eighteenth century via the passage of estate and enclosure acts. The legislature approved fiscal levies that made the British people the world’s most taxed and used the proceeds to borrow exorbitant sums for wars against the French and mercantilist supports for interest groups while neglected increasing demands for infrastructure investment and internal security. I’m not arguing that Britain was an inhospitable place for economic growth during the eighteenth century—far from it. Her people were relatively free, and the wooden walls of the Royal Navy did protect them from foreign incursions on land and sea; in a mercantilist, militarized world, defense spending on the fleet was a key instrument of economic policy. Free speech meant that the coffee-houses sang with the clamor of commerce, art, and invention, while the docks grew crowded with merchant vessels whose financing and passage were safeguarded by the state. But this was true in 1687 as well as in 1689. It’s just not clear that the long eighteenth century was an era of exceptionally inclusive economic and political institutions by British standards. We should seek a motive force elsewhere.
I am making clear that these individuals are not economic historians (for better or worse), but rather economists doing historical political economy. This is totally valid, of course, but there is a distinction (or so I’m told).
I should make clear that I am discussing only this particular aspect of the British experience; Why Nations Fail has implications for and derives lessons from a wide range of other international episodes, from the American South to Rhodesia.