The Financial Revolution was a set of economic and

financial Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

reforms in Britain after the

Glorious Revolution The Glorious Revolution; gd, Rèabhlaid Ghlòrmhor; cy, Chwyldro Gogoneddus , also known as the ''Glorieuze Overtocht'' or ''Glorious Crossing'' in the Netherlands, is the sequence of events leading to the deposition of King James II and ...

in 1688 when

William III William III or William the Third may refer to: Kings * William III of Sicily (c. 1186–c. 1198) * William III of England and Ireland or William III of Orange or William II of Scotland (1650–1702) * William III of the Netherlands and Luxembourg ...

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 (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 date ...

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 English Government's banker, and still one of the bankers for the Government of ...

(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, as ...

. 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). Another piece of Financial Revolution which fundamentally altered the relations between Crown and Parliament 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 of Canada, India, New Zeal ...

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 Douglass Cecil North (November 5, 1920 – November 23, 2015) was an American economist known for his work in economic history. He was the co-recipient (with Robert William Fogel) of the 1993 Nobel Memorial Prize in Economic Sciences. In the wor ...

and political scientist Barry Weingast has been challenged by

David Stasavage David Stasavage is an American political scientist. Stasavage attended a bachelor's degree at Cornell University in 1989, then obtained his doctorate from Harvard University in 1995. He subsequently went to Europe, working successively for the Wo ...

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