Abstract
In a seminal 1989 article, Douglass North and Barry Weingast argued that by making the monarch more answerable to Parliament, the Glorious Revolution of 1688 helped to secure property rights in England and stimulate the rise of capitalism. Similarly, Daron Acemoglu, Simon Johnson and James Robinson later wrote that in the English Middle Ages there was a ‘lack of property rights for landowners, merchants and protoindustrialists’ and that the ‘strengthening’ of property rights in the late seventeenth century ‘spurred a process of financial and commercial expansion.’ There are several problems with these arguments. Property rights in England were relatively secure from the thirteenth century. A major developmental problem was not the security of rights but their feudal nature, including widespread ‘entails’ and ‘strict settlements’. The year 1688 had no obvious direct effect on property rights. Given these criticisms, what changes promoted the rise of capitalism? A more plausible answer is found by addressing the post-1688 Financial and Administrative Revolutions, which were pressured by the enhanced needs of war and Britain’s expanding global role. Guided by a more powerful Parliament, this new financial system stimulated reforms to landed property rights and the growth of collateralizable property and saleable debt, and thus enabled the Industrial Revolution.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
This essay extends some arguments in Hodgson (2015a). The author thanks Benito Arruñada, Michael Bordo , David Donald, Goncalo Fonseca, Anne Murphy, Sheilagh Ogilvie, Mehrdad Vahabi, two anonymous referees and participants at presentations (at the World Interdisciplinary Network for Institutional Research Symposium on Property Rights in Bristol, UK, at the Chinese University of Hong Kong in April 2016 and at the First International Conference on Cliometrics and Complexity in Lyon, France in June 2016), for very helpful comments and suggestions.
- 2.
From 1603, England, Wales and Scotland were ruled by the same monarch. Hence the invasion and accession of William of Orange in 1688 affected all three nations of Great Britain. But Scotland retained a partially separate legal system, even after the Act of Union of 1707 that created a single British parliament.
- 3.
- 4.
British slave-owners, however, did receive compensation. Much of this capital was invested in the railway boom of the 1840s.
- 5.
- 6.
If (economic) ‘property rights’ are defined in terms of possession or control (Alchian 1965; Barzel 1989), then evidence of their distinctive importance in promoting economic development is more elusive. But it would be mistaken to follow Angeles (2011) and others and eschew the general importance of ‘property rights’ in this context. Instead, ‘property rights’ need to be much better understood. This basic injunction flows from the approach dubbed as ‘legal institutionalism’ (Hodgson 2015a; Deakin et al. 2017).
- 7.
Feudal restrictions on landed property existed in pre-1789 France. But France was different from England in other crucial respects. There was a massive state bureaucracy, surmounted by a powerful King: lacking were adequate political checks and balances. Unlike England and the Netherlands in the 18th century, there ‘was no developed capital market upon which the state could market its debt. Rather, France raised money through a complex and cumbersome system of tax farms, private bankers and venal offices’ (Carruthers 1996: 23).
- 8.
It is unnecessary for the purposes of this argument to assess whether enclosures improved agricultural productivity or not. This has been a matter of some empirical investigation and dispute (Turner 1986). Ostrom (1990) showed that collective arrangements remained viable in many diverse circumstances. The more important point here is that enclosures made land saleable and usable as collateral.
- 9.
Pincus and Robinson (2014: 203) and Bogart (2011) pointed out that the immediate effects of post-1688 statutory authority acts led to surges in investment in road and river improvements from about 1690 to 1730. But Bogart’s (2005) own data show clearly that this early upturn of activity was minor compared with the much larger expenditures on infrastructural developments after 1730. Expenditure on turnpike roads alone tripled from 1730 to 1760, and grew impressively thereafter. Overall, while there were some infrastructural developments from 1690 to 1730, much more remarkable progress was made in later years.
- 10.
Thickets of property claims were the feudal version of the ‘anti-commons’ problem of multiple entangled rights in modern capitalism (Heller 2008).
- 11.
- 12.
Other data series for this period paint slightly different pictures, but concur in finding no discernible acceleration of growth after 1689. Ogilvie and Carus (2014) review the evidence on growth in Britain in the 17th and 18th centuries.
- 13.
Before the Reform Act of 1832, the franchise for parliamentary elections was confined to male property owners only—estimated at about 400,000 men (about 10 per cent of the adult male population) in England and Wales (Phillips and Wetherell 1995: 413).
- 14.
As Lindert and Williamson (1982) pointed out, the three surveys differed in their methodologies and rigour. Hence comparisons should be treated with caution, particularly when the reported differences are small.
- 15.
MacLeod (1858: 476–8) coined the term ‘Gresham’s Law.’ Mitchell Innes (Mitchell 1914: 9) credited him as the originator of the state theory of money. Commons (1934: 394) described him as ‘the first lawyer-economist.’ Schumpeter (1954: 718) judged him the only contemporary of Marx to make a systematic advance towards a credit theory of money.
- 16.
A more comprehensive account of the extent of the use of collateral to finance industrial projects in the late 18th and early 19th centuries is a matter for further research. Insufficient attention has been devoted to this topic, because of the inadequate recognition of the importance of collateralization and because of the widespread conflation by economists of ‘capital’ as things (such as machinery) with ‘capital’ as finance (which can be a means to purchase machinery, or the value of machinery which can be used as collateral to obtain further loans) (Veblen 1908; Hodgson 2014, 2015a, 2015b).
References
Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. New York and Profile, London: Random House.
Acemoglu, D., Johnson, S., & Robinson, J. A. (2005a). Institutions as a fundamental cause of long-run growth. In P. Aghion & S. V. Durlauf (Eds.), Handbook of economic growth (Vol. Vol. 1A, pp. 385–472). North Holland: Elsevier.
Acemoglu, D., Johnson, S., & Robinson, J. A. (2005b). The rise of Europe: Atlantic trade, institutional change and economic growth. American Economic Review, 95(3), 546–579.
Alchian, A. A. (1965). Some economics of property rights. Il Politico, 30: 816–829. Reprinted in Alchian, A. A., ed. (1977). Economic forces at work (pp. 127–149). Indianapolis: Liberty Press.
Allen, R. C. (2009). The British industrial revolution in global perspective. Cambridge and New York: Cambridge University Press.
Allen, D. W. (2012). The institutional revolution: Measurement and the economic emergence of the modern world. Chicago: University of Chicago Press.
Angeles, L. (2011). Institutions, property rights, and economic development in historical perspective. Kyklos, 64(2), 157–177.
Arruñada, B. (2016). Coase and the departure from property. In C. Ménard & B. Elodie (Eds.), The Elgar companion to Ronald H. Coase (pp. 305–319). Cheltenham, UK and Northampton, MA: Edward Elgar.
Ashton, T. S. (1955). An economic history of England: The eighteenth century. London: Methuen.
Bagehot, W. (1919). Lombard street: A description of the money market (first edition 1873). London: Murray.
Baker, J. H. (1979). The law merchant and the common law before 1700. Cambridge Law Journal, 38(2), 295–322.
Bank of England. (1970). The Bank of England: History and functions. Debden: Gordon Chalmers Fortin.
Barzel, Y. (1989). Economic analysis of property rights. Cambridge: Cambridge University Press.
Berman, H. J. (1983). Law and revolution: The formation of the western legal tradition. Cambridge, MA: Harvard University Press.
Berman, H. J. (2003). Law and evolution II: The impact of the protestant reformations on the western legal tradition. Cambridge, MA: Harvard University Press.
Beutel, F. K. (1938). The development of negotiable instruments in early English law. Harvard Law Review, 51(5), 813–845.
Bogart, D. (2005). Did turnpike trusts increase transportation investment in eighteenth century England? Journal of Economic History, 65(2), 439–468.
Bogart, D. (2011). Did the Glorious Revolution contribute to the transport revolution? Evidence from investment in roads and rivers. Economic History Review, 64(4), 1073–1112.
Bogart, D., & Richardson, G. (2011). Property rights and parliament in industrializing Britain. Journal of Law and Economics, 54(2), 241–274.
Bowen, H. V. (1995). The Bank of England during the long eighteenth century: 1694–1815. In R. Roberts & D. Kynaston (Eds.), The Bank of England (pp. 1–18). Oxford and New York: Oxford University Press.
Braudel, F. (1984). Civilization and capitalism, 15th–18th century, Vol. 3, The perspective of the world. London: Collins.
Brewer, J. (1988). The sinews of power: War, money and the English state, 1688–783. New York: Knopf.
Broadberry, S. N., Campbell, B. M. S., Klein, A., Overton, M., & van Leeuwen, B. (2015). British economic growth 1270–1870: An output-based approach. Cambridge and New York: Cambridge University Press.
Carruthers, B. G. (1996). City of capital: Politics and markets in the English financial revolution. Princeton, NJ, Chichester, UK: Princeton University Press.
Castor, H. (2006). Blood and roses: One family’s struggle and triumph during the tumultuous Wars of the Roses. New York: Harper Collins.
Cipolla, C. M. (1965). Guns, sails and empires: technological innovation and the early phases of European expansion, 1400–1700. New York: Pantheon.
Clapham, J. H. (1966). The Bank of England: A history. Volume One, 1694–1797. Cambridge: Cambridge University Press.
Clark, G. (1996). The political foundations of modern economic growth: England, 1540–1800. Journal of Interdisciplinary History, 26(4), 563–588.
Clark, G. (2007). A farewell to alms: A brief economic history of the World. Princeton: Princeton University Press.
Cole, D. H. (2015). “Economic property rights” as “Nonsense upon stilts”: A comment on Hodgon’s article. Journal of Institutional Economics, 11(4), 725–730.
Cole, D. H., & Grossman, P. Z. (2002). The meaning of property rights: Law versus economics? Land Economics, 78(3), 317–330.
Commons, J. R. (1934). Institutional Economics – its place in Political Economy. New York: Macmillan.
Cox, G. W. (2012). Was the Glorious Revolution a constitutional watershed. Journal of Economic History, 72(3), 567–600.
Cox, G. W. (2016). Marketing sovereign promises: Monopoly brokerage and the growth of the English state. Cambridge and New York: Cambridge University Press.
Crouzet, F. (1990). Britain ascendant: Comparative studies in Franco-British economic history. Cambridge and New York: Cambridge University Press.
De Soto, H. (2000). The mystery of capital: Why capitalism triumphs in the west and fails everywhere else. New York: Basic Books.
Deakin, S., Gindis, D., Hodgson, G. M., Huang, K., & Pistor, K. (2017). Legal institutionalism: Capitalism and the constitutive role of law. Journal of Comparative Economics, 45(1), 188–200.
Dickson, P. G. M. (1967). The financial revolution in England: A study in the development of public credit, 1688–1756. London: Macmillan.
Dutton, H. I. (1984). The patent system and inventive activity during the Industrial Revolution, 1750–1852. Manchester: Manchester University Press.
Eltis, D. (2001). The volume and structure of the transatlantic slave trade: A reassessment. William and Mary Quarterly, 58(1), 17–46.
English, B., & Saville, J. (1983). Strict settlement: A guide for historians. Hull: University of Hull Press.
Epstein, S. R. (2000). Freedom and growth: The rise of states and markets in Europe, 1300–1750. London and New York: Routledge.
Heaton, H. (1937). Financing the industrial revolution. Bulletin of the Business Historical Society, 11(1), 1–10.
Heinsohn, G., & Steiger, O. (2013). Ownership economics: On the foundations of interest, money, markets, business cycles and economic development, translated and edited by Frank Decker. London and New York: Routledge.
Heller, M. A. (2008). The gridlock economy: How too much ownership wrecks markets, stops innovation, and costs lives. New York: Basic Books.
Hill, C. (1961). The century of revolution 1603–1714. London: Van Nostrand Reinhold.
Hodgson, G. M. (2014). What is capital? Economists and sociologists have changed its meaning – should it be changed back? Cambridge Journal of Economics, 38(5), 1063–1086.
Hodgson, G. M. (2015a). Conceptualizing capitalism: Institutions, evolution, future. Chicago: University of Chicago Press.
Hodgson, G. M. (2015b). Much of the “economics of property rights” devalues property and legal rights. Journal of Institutional Economics, 11(4), 683–709.
Hodgson, G. M. (2015c). What Humpty Dumpty might have said about property rights – and the need to put them back together again: A response to critics. Journal of Institutional Economics, 11(4), 731–747.
Honoré, A. M. (1961). Ownership. In A. G. Guest (Ed.), Oxford essays in jurisprudence (pp. 107–147). Oxford: Oxford University Press. Reprinted in the Journal of Institutional Economics 9(2): 2013, 227–255.
Hoppit, J. (2011). Compulsion, compensation and property rights in Britain, 1688–1833. Past and Present, 210(1), 93–128.
Ingham, G. (2004). The nature of money. Cambridge: Polity Press.
Ingham, G. (2008). Capitalism. Cambridge: Polity Press.
Israel, J. I. (1989). Dutch primacy in world trade 1585–1740. Oxford and New York: Oxford University Press.
Jardine, L. (2008). Going Dutch: How England plundered Holland’s glory. London: Harper.
Jones, J. R. (Ed.). (1992). Liberty secured? Britain before and after 1688. Stanford, CA: Stanford University Press.
Keynes, J. M. (1930). A Treatise on money, Vol. 1: The pure theory of money, Vol. 2: The applied theory of money. London: Macmillan.
Kindleberger, C. P. (1984). A financial history of Western Europe. London: George Allen and Unwin.
King, S., & Timmins, G. (2001). Making sense of the industrial revolution: English economy and society 1700–1850. Manchester: Manchester University Press.
Lawrence, W. H. (2002). Understanding negotiable instruments and payment systems. Newark, NJ: Matthew Bender.
Lindert, P. H., & Williamson, J. G. (1982). Revising England’s social tables, 1688–1812. Explorations in Economic History, 19(4), 385–408.
MacLeod, H. D. (1858). Elements of political economy. London: Longmans Green.
MacLeod, H. D. (1872). The principles of economic philosophy (2nd ed.). London: Longmans Green.
MacLeod, C. (2002). Inventing the industrial revolution: The English patent system, 1660–1800. Cambridge and New York: Cambridge University Press.
Maddison, A. (2007). Contours of the world economy, 1–2030 AD: Essays in macro-economic history. Oxford and New York: Oxford University Press.
Mann, M. (1986). The sources of social power, Vol. 1: A history of power from the beginning to A.D. 1760. Cambridge: Cambridge University Press.
Marx, K. (1976). Capital., Vol. 1, translated from the fourth German edition of 1890. Harmondsworth: Pelican.
Mathias, P. (1983). The first industrial nation: An economic history of Britain 1700–1914. London and New York: Routledge.
McCloskey, D. N. (2010). Bourgeois Dignity: Why economics can’t explain the modern world. Chicago: University of Chicago Press.
McCloskey, D. N. (2016). Max U vs. humanomics: A critique of Neo-Institutionalism. Journal of Institutional Economics, 12(1), 1–27.
Mitchell, I. A. (1914). The credit theory of money. The Banking Law Journal, 31, 151–168.
Moore, B. (1988). Horizontalists and verticalists: The macroeconomics of credit money. Cambridge: Cambridge University Press.
Morgan, E. V., & Thomas, W. A. (1962). The stock exchange, its history and functions. London: Elek Books.
Morrill, J. (1992). The sensible revolution. In J. I. Israel (Ed.), The Anglo-Dutch moment: Essays on the Glorious Revolution and its world impact (pp. 73–104). Cambridge and New York: Cambridge University Press.
Murphy, A. L. (2009). The origins of English financial markets: Investment and speculation before the South Sea bubble. Cambridge and New York: Cambridge University Press.
Murphy, A. L. (2013). Demanding “credible commitment”: Public reactions to the failures of the early financial revolution. Economic History Review, 66(1), 178–197.
Neal, L. (1990). The rise of financial capitalism: International capital markets in the age of reason. Cambridge and New York: Cambridge University Press.
Nenner, H. (Ed.). (1997). Politics and political imagination in Later Stuart Britain. Rochester, NY: University of Rochester Press.
North, D. C. (1981). Structure and change in economic history. New York: Norton.
North, D. C. (1994). Economic performance through time. American Economic Review, 84(3), 359–367.
North, D. C., & Weingast, B. R. (1989). Constitutions and commitment: The evolution of institutions governing public choice in seventeenth-century England. Journal of Economic History, 49(4), 803–832.
North, D. C., Wallis, J. J., & Weingast, B. R. (2009). Violence and social orders: A conceptual framework for interpreting recorded human history. Cambridge: Cambridge University Press.
O’Brien, P. K. (1988). The Political Economy of British taxation, 1660–1815. Economic History Review, New Series, 41(1), 1–32.
O’Brien, P. K. (2006). Provincializing the first industrial revolution. Working paper 17/06, Global Economic History Network (GEHN), London School of Economics, January 2006. Retrieved February 20, 2016, from http://eprints.lse.ac.uk/22474/1/wp17.pdf.
O’Brien, P. K. (2011). The nature and historical evolution of an exceptional fiscal state and its possible significance for the precocious commercialization and industrialization of the British economy from Cromwell to Nelson. Economic History Review, 64(2), 408–446.
O’Gorman, F. (1997). The long eighteenth century: British political and social history 1688–1832. New York: Arnold Press.
Ogilvie, S., & Carus, A. W. (2014). Institutions and economic growth in historical perspective. In P. Aghion & S. Durlauf (Eds.), Handbook of Economic Growth (Vol. 2A, pp. 403–513). Amsterdam: Elsevier.
Olson Jr., M. (1993). Dictatorship, democracy, and development. American Political Science Review, 87(3), 567–576.
Olson Jr., M. (2000). Power and prosperity: Outgrowing communist and capitalist dictatorships. New York: Basic Books.
Ostrom, E. (1990). Governing the commons: The evolution of institutions for collective action. Cambridge: Cambridge University Press.
Phillips, J. A., & Wetherell, C. (1995). The Great Reform Act of 1832 and the political modernization of England. American Historical Review, 100(2), 411–436.
Pincus, S. C. A. (2009). 1688: The first modern revolution. New Haven: Yale University Press.
Pincus, S. C. A., & Robinson, J. A. (2014). What really happened during the Glorious Revolution? In S. Galiani & I. Sened (Eds.), Institutions, Property rights, and economic growth: The legacy of Douglass North (pp. 192–222). Cambridge and New York: Cambridge University Press.
Powell, E. T. (1915). The evolution of the money market (1385–1915): An historical and analytical study of the rise and development of finance as a centralised, co-ordinated force. London: Financial Press.
Quinn, S. (2001). The Glorious Revolution’s effect on English private finance: A microhistory 1680–1705. Journal of Economic History, 61(3), 593–615.
Roberts, C. (1977). The constitutional significance of the financial settlement of 1690. The Historical Journal, 20(1), 59–76.
Roll, E. (1930). An early experiment in industrial organisation: Being a history of the firm of Boulton and Watt 1775–1805. Abingdon: Frank Cass.
Roseveare, H. G. (1991). The financial revolution. 1660-1760. Harlow: Longman.
Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Cambridge, MA: Harvard University Press.
Schumpeter, J. A. (1939). Business cycles: A theoretical statistical and historical analysis of the capitalist process (Vol. 2 vols). New York: McGraw-Hill.
Schumpeter, J. A. (1954). History of economic analysis. Oxford and New York: Oxford University Press.
Scott, J. (1991). Algernon Sydney and the restoration crisis, 1677–1683. Cambridge and New York: Cambridge University Press.
Steiger, O. (Ed.). (2008). Property economics: property rights, creditor’s money and the foundations of the economy. Marburg: Metropolis.
Sullivan, R. J. (1989). England’s “age of invention”: The acceleration of patents and of patentable invention during the Industrial Revolution. Explorations in Economic History, 26(4), 424–452.
Sussman, N., & Yafeh, Y. (2006). Institutional reforms, financial development and sovereign debt: Britain 1690-1790. Journal of Economic History, 66(4), 906–935.
Temin, P., & Voth, H. J. (2005). Credit rationing and crowding out during the Industrial Revolution: Evidence from Hoare’s Bank, 1702–1862. Explorations in Economic History, 42, 325–348.
Trevor-Roper, H. (1992). Counter-reformation to Glorious Revolution. Chicago: University of Chicago Press.
Turner, M. (1986). English open fields and enclosures: Retardation or productivity improvements. Journal of Economic History, 46(3), 669–692.
Veblen, T. B. (1904). The theory of business enterprise. New York: Charles Scribners.
Veblen, T. B. (1908). Professor Clark’s Economics. Quarterly Journal of Economics, 22(2), 147–195.
Veitch, J. M. (1986). Repudiations and confiscations by the medieval state. Journal of Economic History, 46(1), 31–36.
de Vries, J., & van der Woude, A. (1997). The first modern economy. Success, failure, and perseverance of the Dutch economy, 1500–1815. Cambridge and New York: Cambridge University Press.
Ward, J. R. (1974). The finance of canal building in eighteenth-century England. Oxford: Oxford University Press.
Wennerlind, C. (2011). Casualties of credit: The English financial revolution 1620–1720. Cambridge, MA: Harvard University Press.
Western, J. R. (1972). Monarchy and revolution: The English state in the 1680s. London: Blandford.
Winthrop, W. (1920). Military law and precedents (2nd ed.). Washington, DC: Government Printing Office.
Wray, L. R. (2012). Modern money theory: A primer on macroeconomics for sovereign monetary systems. London and New York: Palgrave Macmillan.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
Hodgson, G.M. (2018). 1688 and All That: Property Rights, the Glorious Revolution and the Rise of British Capitalism. In: Vliamos, S., Zouboulakis, M. (eds) Institutionalist Perspectives on Development. Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-98494-0_2
Download citation
DOI: https://doi.org/10.1007/978-3-319-98494-0_2
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-98493-3
Online ISBN: 978-3-319-98494-0
eBook Packages: Economics and FinanceEconomics and Finance (R0)