The Glorious Revolution and British Industrialization - Assignment Example

The Glorious Revolution and British Industrialization The political changes in the aftermath of Glorious Revolution had a decisive role in bringing about British industrialisation and the economic take off of Britain in the late 18th century. It was the new parliamentary form of government which evolved from the Revolution that ensured committment from the side of government towards private property rights and economic freedom (North and Weingast, 1989, p.807). This gave a new impetus to the economic activities in the country by relaxing economic control of the state (North and Weingast, 1989, p.828). Before the period when Parliament became more powerful than the crown, the King used to raise revenues through "forced taxes" and "monolopy grants" which was a sword hanging over those who were economically active (North and Weingast, 1989, p.809-810). The judges’ salaries were paid by the King and so in disputes involving the crown and the wealth holders, the judiciary always favoured the crown, thereby denying citizens their rights over their own property (North and Weingast, 1989, p.813). It was these restrictions on private property that eventually caused the decline of the crown and a political power rising over it in the form of the Parliament (North and Weingast, 1989, p.814). And this political power naturally promoted economy based on private property rights and markets, which became the major catalyst for the industrial revolution. After the Glorious Revolution, the right to impose taxes was exclusively vested with the Parliament (North and Weingast, 1989, p.816). The revenue eliciting devices of the King were reduced almost to nil, crown was made to approach the Parliament for revenues, Parliament was given the right to audit the government, and the Parliament also came to command veto power over government expenditures (North and Weingast, 1989, p.816). It is also observed that this kind of institutional reforms gave higher control for wealth holders on the decisions of the government (North and Weingast, 1989, p.817). More economic freedom became incorporated into the laws (North and Weingast, 1989, p.818). Another positive step for better economic freedom was the establishment of an independent judiciary, not controlled by political forces and which enforced these new laws of economic freedom (North and Weingast, 1989, p.819). There was correspondingly an effort to regularize the structure of public finance (North and Weingast, 1989, p.820). Yet another important development was the emergence of the banking system (North and Weingast, 1989, p.825). Availability of a stable set of securities, which gave the masses a safe method to invest their savings in, was a step that canalised “individual savings” into the public financial realm (North and Weingast, 1989, p.825). The basic premises of this newly evolved economic policy of the state included, a market oriented industrial policy, removal of barriers which prevented the movement of manufactured products, money capital, and labour across nationsand also a stable economy at macro level (Chang, year, p.42). This made available huge financial resources which could become the base for industrial growth. With the resources thus generated, Britain was able to improve its transportation network, agriculture saw the rise of private entrepreunership, fields of finance and commerse developed new forms of institutions and also investing in the debt funds of the government became the safest mode of investment (Clark, 1996, p.564). This also helped the growth of the British colonial empire, which made available huge resources for Britain for maritime development and expansion of the colonies (O’Brien, year, p.183). It was the wealth amassed from the colonies that directly supported Industrial Revolution but what made this successful mercantilism possible was the economic scenario built by the Glorious Revolution (O’Brien, year, p.183). 3) Illustrate the historical relationship between the state and economic growth (or stagnation) in Europe before 1900. Before 1900, in almost all the countries in Europe, the crown commanded absolute political power (Acemoglu, Johnson and Robinson, 2004, p.65-70). The economic scenario was also totally governed by the monarchs only in view of increasing their own revenues but never respecting the rights of the private property holders (North and Weingast, 1989, p.816-17). This gave rise to a conflict between the monarchs and the respective Parliaments in their countries, which stood for the rights of private property holders (North and Weingast, 1989, p.816-17). This was the beginning of the formation of the modern state. In this context, it can be seen, state in its modern sense saw as its major task, the creation of highly evolved markets by establishing the appropriate laws, standards, funding system and infrastructural facilities (Reinert, 1999, p.268). In England, the crown was an economically oppressive force before Parliament took over (North and Weingast, 1989, p.809-810). In Spain and Portugal, the spice trade and sea trade in general, which were the major sources of revenue, were totally controlled by the Kings (Acemoglu, Johnson and Robinson, 2004, p.70). France was also facing “a long-running fiscal crisis” precipitated by the huge expenses incurred by wars which the monarch imposed on the nation (Acemoglu et al., 2009, p.7). But England and Netherlands eventually made institutional reforms which curbed the political power of the King and enforced private property rights, thereby increasing financial credibility of the respective governments and opening up spaces for enhanced economic activity (Acemoglu, Johnson and Robinson, 2004, p.71). This helped British government to avail massive loans from private economic players by winning their trust regarding proper pay back. This in turn, helped Britain to keep its "war machine" well-oiled and win its colonies and increase its wealth (Acemoglu, Johnson and Robinson, 2004, p.71). After the French Revolution of 1789, a comparable change happened to the French economy also because the Revolution destroyed the economic and political dominance of oligarchies and aristocratic individuals who were opposing the mass democratisation of the financial system (Acemoglu et al., 2009, Abstract). The immediate consequence of the Revolution was also the abolition of feudalism, which paved way for the development of capitalist economy (Acemoglu et al., 2009, p.7). All these changes in the nature of governance became a shot in the arm for economic growth. In view of the argument that development can be brought about only by establishing sufficient incentives for the various players in the field of economy, and in consideration of the instances discussed above, it can be argued that Europe before 1900 was in different stages of evolving the right political institutions necessary for creating incentives for economic growth (Acemoglu et al., 2009, p.1). The transformation from monarchy to a parliamentary form of governance, establishment of an independent judiciary and laws based on equality by the respective parliaments, and development of banks and full-fledged markets under the blessings of the new parliamentary system, were some major steps in this regard (Acemoglu et al., 2009, p.1). Institutional reforms happened in many countries in many forms and also some countries failed to bring in such reforms. Towards the end of 18th century, the French revolutionary army had conquered several countries and brought about institutional reforms in them (Acemoglu et al., 2009, p.1). For example, after annexing Belgium, France abolished the different pay offs that peasants and laborers owed to land lords and churches, and guilds respectively (Acemoglu et al., 2009, p.11). All citizens were also declared to be equal before law (Acemoglu et al., 2009, p.11).This freed the peasants and the labor force economically and politically, to certain extent. In this way, it was always the state, whether it be ancien régime or the modern state, that became a decisive actor in the economic growth or stagnation in the pre-1900 Europe. Section B -- Short Answer 5) How might Britain's unique 18th century price structure explain why the industrial revolution was British? The view that Britain's unique 18th century price structure is what led to Britain becoming the pioneer in industrial revolution, has its basis in the concept of “economic incentives” (Allen, 2011, p.358). Allen (2011), a theorist supporting this approach has observed that Britain of 18th century had a very unique kind of wage pattern and domestic pricing structure (p.358). Especially, the cost incurred for capital investment and the cost of fuels was very low in 18th century Britain, as compared to that in other European countries (Allen, 2011, p.358). Britain could give higher wages to its laborers and keep the domestic prices low because of two factors- one, its place as a winner in the global economic scene and secondly, its very big coal fields (Allen, 2011, p.364). The global trade victory was again a result of successful mercantilism (Allen, 2011; O’Brien, year). It is argued that this low prices combined with higher wages created a demand for new technologies and a wider market for consumer items which are usually bought only by an elite few and hence considered as a luxury (Allen, 2011, p.358). It is also reminded that with the prosperity brought in by lower prices and higher wages, the people in general were in a position to get better education, and to learn new technologies (Allen, 2011, p.358). This in turn resulted in an expansion in the human capital base who had assimilated the values of scientific culture (Allen, 2011, p.358). The huge and skilled work force thus created became the architects of industrial revolution. 6) How did the political and economic structure of the ancien régime throughout Continental Europe impede economic growth? In the ancien régime, the absence of enforcable property rights for the landowners, trade-related taxes imposed on merchants and the monopoly granting system that impeded the growth of the proto-industrialists, impeded economic growth (Acemoglu, Johnson and Robinson, 2004, p.6). Throughout continental Europe, the monarchs used to forcibly expropriate money from the producers of various goods (Acemoglu, Johnson and Robinson, 2004, p.7). They also arbitrarily taxed the public and wealth holders whenever they felt a need for revenue and also made decisions to give in the valuable public resources like land and mineral deposits to individuals close to them to receive back economic or political backing (Acemoglu, Johnson and Robinson, 2004, p.7). As a result, the economic institutions of that era could give not offer attractive incentives to those who wanted to make investments (Acemoglu, Johnson and Robinson, 2004, p.7). Also, in almost all countries of Europe, the peasants had to give the landlords and the church, tithe and seigneurial fee (Acemoglu et al., 2009, p.11). Similarly, in cities, there were entry restrictions imposed by guilds into various occupations (Acemoglu et al., 2009, p.9). These were hampering the economic freedom of peasants and the labor force. Whenever a war broke out (a frequent happening during that time), the monarchs used to tax the economic players heavily and also not respect the economic committments like loans taken from them for such purposes (North and Weingast, 1989, p.809-810). The entire political structure was centered around the monarchs, landlords, and guilds and hence there was no agency or powerful player to safeguard the private property rights of the wealth holders from the expropriation of the crowns and also no mechanism to protect rights of peasants and the labor force (North and Weingast, 1989, p.809-810). For example, in the 16th century, huge taxation was imposed in various countries by their rulers to meet the financial damages caused by various wars (Acemoglu, Johnson and Robinson, 2004, p.67). Sea trade was also under the monopoly of the crown and all the spice trade carried out by the merchants of Portugal and Spain was controlled by the King (Acemoglu, Johnson and Robinson, 2004, p.67-68). This kind of absolute political power of the crown and the rule of oligarchies in the form of land owners, church and guilds were what restricted private property rights and individual economic freedom, and thus affected the economic progress. 7) What is the relationship between economic institutions and political institutions? Economic institutions have a give and take relationship with political institutions. Economic institutions basically determine the "economic outcomes" in a society which benefit diferent social groups and individuals in different ways, and the greatest beneficiaries will most often be the politically influential groups who command the political institutions (Acemoglu, Johnson and Robinson, 2004, p.2). Thus economic outcomes are always designed in favor of the leading political power groups. Economic institutions, mainly comprising of the property right structure and the markets, on the other hand are facilitated to function by political institutions like the parliament (Acemoglu, Johnson and Robinson, 2004, p.2). The extent of prosperity that a country achieves depends on the nature of economic institutions in that country and this is again determined by political institutions (Acemoglu, Johnson and Robinson, 2004, p.3). But once the economic institutions are rooted in the society, they start determining the distribution of resources and they attain a decisive role in the functioning of the political institutions. Another aspect of this relationship is that though political institutions try to act in favor of creating economic institutions which give them maximum gains, there is a problem involved with collective action, because political power always stay divided among different groups (Acemoglu, Johnson and Robinson, 2004, p.4). This situation is what ensures certain amount of equality in the distribution of economic outcomes to various groups in the society (Acemoglu, Johnson and Robinson, 2004, p.4-5). 8) What forces or conditions explain cross-country differences in the adoption of mass, public education systems in the 19th century? Until towards the middle of the 19th century, only countries in North Western Europe and North America had proper mass education institutions (Easterlin, 1981, p.7). One theory has suggested that the cross-country differences in the adoption of mass, public education systems in the 19th century can be accounted by the differences in incentives available for learning, which again is caused by differences in institutional structures (Easterlin, 1981, p.5). But technological developments themselves create incentives in the form of new opportunities and also the threat new technologies pose to national sovereignty will force nations to give incentives to their people for learning them (Easterlin, 1981, p.5). Another major finding made by researchers (Easterlin, 1981) has been that economic growth of a nation is a factor in a nation adopting mass education systems (p.7). On the other hand, it is also observed that “sizeable payoffs to child labor that prevailed in many developed countries” had acted as a roadblock to the adoption of mass education (Easterlin, 1981, p.11). Adoption of mass education is generally viewed as an outcome of political dynamism within a society where politically powerful groups try to gain dominance through education (Easterlin, 1981, p.11). The different social equations involving these groups in different countries manifest either as the adoption of mass, public education systems or lack of adoption. For example, many countries under colonial rule adopted mass education systems only after their independence from the colonial rule (Easterlin, 1981, p.12). Nations which were monarchies, could establish effective formal schooling systems only after their democratisation (Easterlin, 1981, p.12). And it is observed that in developed countries, which adopted mass schooling in an earlier period, the catalysts were, the spread of protestantism, the mergence of renaissance values and humanism, and the growth of nationalism (Easterlin, 1981, p.13). References Acemoglu, D., Johnson, S., and Robinson, J. (April 29, 2004) Institutions as the fundamental cause of long-run growth, Handbook of Economic Growth, (Eds) Philippe Aghion and Steve Durlauf, Publisher location: Publisher. Acemoglu et al., (April 2009) The consequences of radical reform: the French Revolution, Cambridge, Massachusetts: National Bureau of Economic Research. Allen, R.C. (2011) Why the industrial revolution was British: commerce, induced invention, and the scientific revolution, Economic History Review, Vol. 64, No.2, pp.357-384. Chang, H. (year) The market, the state and institutions in economic development, Name of Book, Publisher location: Publisher. Clark, G. (Spring, 1996) The political foundations of modern economic growth: England, 1540-1800, Journal of Interdisciplinary History, Vol.26, No.4, pp.563-588. Easterlin, R.A. (March, 1981) Why isn’t the whole world developed?, The Journal of Economic History, Vol.41, No.1, pp.1-19. North, D.C. and Weingast, B.R. (Dec., 1989) Constitutions and committment: The evolution of institutional governing public choice in seventeenth-century England, The Journal of Economic History, Vol.49, No.4, pp.803-832. O’Brien, P.K. (year), State formation and the construction of institutions for the first industrial nation, Name of Book, Publisher location: Publisher. Reinert, E.S. (1999) The role of the state in economic growth, Journal of Economic Studies, Vol.26, No.4/5, pp.268-326. (Dear Customer, Please remember to add the name of the books, year of publishing and publisher information, wherever I have highlighted the text in red colour. You have not provided me with that information) Read More