The Financial Revolution was a set of

economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...

and financial reforms in Britain after the Glorious Revolution in 1688 when William III invaded England. The reforms were based in part on

Dutch Dutch commonly refers to: * Something of, from, or related to the Netherlands * Dutch people () * Dutch language () Dutch may also refer to: Places * Dutch, West Virginia, a community in the United States * Pennsylvania Dutch Country People E ...

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 oc ...

(first government bonds were issued in 1693) and the Bank of England (1694). Soon thereafter, English

joint-stock companies A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are ...

began going public. A central aspect of the financial revolution was the emergence of a stock market. 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 that were traded in an active secondary market; and perpetual, government-issued annuities (known as

Consols Consols (originally short for consolidated annuities, but subsequently taken to mean consolidated stock) were government debt issues in the form of perpetual bonds, redeemable at the option of the government. They were issued by the Bank of Englan ...

). Another piece of Financial Revolution which fundamentally altered the relations between Crown and Parliament was the creation of the Civil List in 1698. This was how Parliament granted the Crown revenues 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. 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, 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 rates of interest) than could absolutist states (such as France) 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 and political scientist Barry Weingast has been challenged by David Stasavage whose analysis emphasizes the importance of party politics).

References

1690s in England Financial markets Glorious Revolution Revolutions by type Social history of the United Kingdom {{finance-stub

See also

References