The Financial Revolution was a set of

economic An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

and

financial Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

reforms in

Great Britain Great Britain is an island in the North Atlantic Ocean off the north-west coast of continental Europe, consisting of the countries England, Scotland, and Wales. With an area of , it is the largest of the British Isles, the List of European ...

after the

Glorious Revolution The Glorious Revolution, also known as the Revolution of 1688, was the deposition of James II and VII, James II and VII in November 1688. He was replaced by his daughter Mary II, Mary II and her Dutch husband, William III of Orange ...

in 1688 when William III invaded England. The reforms were based in part on Dutch economic and financial innovations that were brought to England by William III. New institutions were created: a

public debt A country's gross government debt (also called public debt or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit occu ...

(first

government bonds A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity da ...

were issued in 1693) and the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...

(1694). Soon thereafter, English joint-stock companies began going public. A central aspect of the financial revolution was the emergence of a

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange a ...

Dutch-influenced changes in the economy and parliamentarian politics

The elements of the financial revolution rested basically on the financial techniques developed in the Netherlands: the bill of exchange, both foreign and inland, which as a negotiable instrument became part of the medium of exchange; transferable shares in the permanent capital stock of

corporations A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

that were traded in an active secondary market; and perpetual, government-issued

annuities In investment, an annuity is a series of payments made at equal intervals based on a contract with a lump sum of money. Insurance companies are common annuity providers and are used by clients for things like retirement or death benefits. Examples ...

(known as

Consols Consols (originally short for consolidated annuities, but subsequently taken to mean consolidated stock) were government bond, government debt issues in the form of perpetual bonds, redeemable at the option of the government. The first British co ...

). Another piece of Financial Revolution which fundamentally altered the relations between the

English Crown This list of kings and reigning queens of the Kingdom of England begins with Alfred the Great, who initially ruled Wessex, one of the seven Anglo-Saxon kingdoms which later made up modern England. Alfred styled himself king of the Anglo-Sax ...

and the

English Parliament The Parliament of England was the legislature of the Kingdom of England from the 13th century until 1707 when it was replaced by the Parliament of Great Britain. Parliament evolved from the great council of bishops and peers that advised th ...

was the creation of the

Civil List A civil list is a list of individuals to whom money is paid by the government, typically for service to the state or as honorary pensions. It is a term especially associated with the United Kingdom, and its former colonies and dominions. It was ori ...

in 1698. This was how Parliament granted the Crown

revenues In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of a business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenue ...

to meet the costs of running the government and royal establishment. From this point, the Crown was reliant on Parliament's control of revenue for its day-to-day running.

Transition towards a constitutional monarchy

There is a strong connection between the Glorious Revolution, the Financial Revolution, and Britain's rise to global power in the eighteenth century. With the creation of a

constitutional monarchy Constitutional monarchy, also known as limited monarchy, parliamentary monarchy or democratic monarchy, is a form of monarchy in which the monarch exercises their authority in accordance with a constitution and is not alone in making decisions. ...

, the English Parliament had to approve any further government borrowing and any new taxes (to cover the costs of borrowing). Because bondholders' interests were hence directly represented in the decision-making process, they could be confident that the risk of default was low. Having such a "credible commitment" to the public debt, Britain could borrow more cheaply (at lower

interest rates An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...

) than was possible for absolute monarchies (such as the

Kingdom of France The Kingdom of France is the historiographical name or umbrella term given to various political entities of France in the Middle Ages, medieval and Early modern France, early modern period. It was one of the most powerful states in Europe from th ...

) in which bondholders' voices were not represented in government. Scholars debate whether its constitutional structure alone sufficed to make Britain a credible borrower (this argument, made in a very widely cited article by economic historian

Douglass North Douglass Cecil North (November 5, 1920 – November 23, 2015) was an American economist known for his work in economic history. Along with Robert Fogel, he received the Nobel Memorial Prize in Economic Sciences in 1993. In the words of the Nobel ...

and political scientist Barry Weingast has been challenged by David Stasavage whose analysis emphasizes the importance of

party politics ''Party Politics'' is a peer-reviewed academic journal that publishes papers in the field of political science. The journal's editor is Paul Webb of the University of Sussex, UK. It has been in publication since 1995 and is currently published b ...

References

1693 in England 1694 in England 1693 in economic history 1694 in economic history Financial markets Glorious Revolution Revolutions by type Social history of the United Kingdom William III of England {{finance-stub

Dutch-influenced changes in the economy and parliamentarian politics

Transition towards a constitutional monarchy

See also

References