The Glorious Revolution's Impact on English Fiscal Policy

The Glorious Revolution’s Impact on English Fiscal Policy

Overview The Glorious Revolution of 1688 marked a significant turning point in the development of English fiscal policy. The ousting of Catholic James II and the ascension of Protestant Prince William of Orange led to a divergence from continental monarchies, particularly France. England adopted a professional civil service, gold standard, and parliamentary scrutiny of royal finances, while France continued with debasement of currency, privatized tax collection, and excessive generosity to investors in rentes and tontines.

Context The 17th century saw significant changes in European politics and finance. The Thirty Years War (1618-1648) had weakened the Holy Roman Empire, while the rise of absolute monarchies in France and Spain led to increased power for these institutions at the expense of parliaments. In England, the sale of crown lands before 1688 had strengthened parliament’s control over royal expenditure.

Timeline

• 1618: The Thirty Years War begins, weakening the Holy Roman Empire.
• 1648: The Treaty of Westphalia establishes a new European order, with a shift towards absolute monarchies in France and Spain.
• 1672: Charles II suspends payment on his bills (the “Stop of Exchequer”), highlighting England’s financial woes.
• 1688: The Glorious Revolution ousts James II and installs William III as king.
• 1717: England adopts the gold standard, eliminating debasement of currency.
• 1749: Sir Henry Pelham creates the Consolidated Fund to manage royal debts.

Key Terms and Concepts

1. Absolute Monarchy An absolute monarch is a ruler with unlimited power and authority over their kingdom or empire. France and Spain were examples of absolute monarchies in the 17th century.

2. Parliament A parliament is a legislative body that represents the people in a country. In England, parliaments had been gaining power since the sale of crown lands before 1688.

3. Gold Standard The gold standard is a monetary system where currency is backed by gold reserves. England adopted the gold standard in 1717 to prevent debasement of currency.

4. Consolidated Fund A consolidated fund is a centralized system for managing government finances, eliminating separate accounts and reducing debt. Sir Henry Pelham created the Consolidated Fund in 1749.

5. Rentes and Tontines Rentes and tontines are annuities sold on the lives of groups of people, often with excessive generosity to investors. France used these instruments to raise money but struggled to manage their finances.

6. Professional Civil Service A professional civil service is a system where government employees rely on salaries rather than peculation (personal gain). England developed this system after 1688, relying less on royal favoritism.

7. Debasement of Currency Debasement of currency occurs when a country reduces the value of its coins by increasing their metal content or reducing the weight. France continued to debase its currency throughout the 17th century.

8. Parliamentary Scrutiny Parliamentary scrutiny refers to the oversight and control parliaments have over royal finances. England adopted parliamentary scrutiny after the Glorious Revolution, with regular budgets and audits.

9. Privatization of Tax Collection Privatization of tax collection occurs when governments contract private companies to collect taxes on their behalf. France privatized its tax collection in the 17th century, leading to inefficiencies.

10. Bond Market A bond market is a financial system where government securities (bonds) are traded. England developed a thriving bond market by the mid-18th century, attracting foreign investors.

Key Figures and Groups

• William III: Protestant Prince of Orange who became King of England after the Glorious Revolution.
• Sir Henry Pelham: English politician responsible for creating the Consolidated Fund in 1749.
• The Stuart Dynasty: The royal family that ruled England from 1603 to 1714, including James II and Charles II.

Mechanisms and Processes

The adoption of the gold standard -> led to the elimination of debasement of currency Parliamentary scrutiny of royal finances -> reduced royal favoritism and increased transparency Professional civil service development -> relied on salaries rather than peculation

Deep Background

In the 17th century, European politics were characterized by:

• The rise of absolute monarchies in France and Spain
• Weakening of the Holy Roman Empire during the Thirty Years War
• Sale of crown lands in England before 1688, strengthening parliament’s control over royal expenditure
• Development of a professional civil service in England after 1688

Explanation and Importance

The Glorious Revolution’s impact on English fiscal policy was profound. By adopting parliamentary scrutiny, gold standard, and professional civil service, England diverged from continental monarchies. This divergence had significant consequences for the country’s financial system and contributed to its economic growth.

Comparative Insight

In contrast to England, France continued with debasement of currency, privatized tax collection, and excessive generosity to investors in rentes and tontines. The lack of a bond market and parliamentary scrutiny led to inefficiencies and financial woes for the French monarchy.

Extended Analysis

• 1. The Role of Parliament The sale of crown lands before 1688 strengthened parliament’s control over royal expenditure. This development laid the groundwork for England’s divergence from continental monarchies.
• 2. The Impact of the Gold Standard The adoption of the gold standard in 1717 eliminated debasement of currency and provided a stable monetary system, essential for economic growth.
• 3. The Development of a Professional Civil Service England’s development of a professional civil service after 1688 relied on salaries rather than peculation, reducing corruption and increasing efficiency.

Open Thinking Questions

• What were the consequences of England’s divergence from continental monarchies in terms of financial policy?
• How did the adoption of the gold standard contribute to England’s economic growth?
• What lessons can be learned from comparing England’s fiscal policy with that of France during this period?

Conclusion The Glorious Revolution marked a significant turning point in English fiscal policy, leading to a divergence from continental monarchies. The adoption of parliamentary scrutiny, gold standard, and professional civil service contributed to England’s financial stability and economic growth. This development had profound consequences for the country’s history and provides valuable insights into the importance of sound financial management.