Murphy A. (2006) The Financial Revolution: a supply-side story (for real)

Murphy, Anne L. (2006) “Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt”, History, 91/302, 200-17.

The sums involved in the so-called English Financial Revolution following the arrival on the throne of William III were altogether not that important: £6.9m from 1688 to 1702 while the government budget over the period reached £72m. However, “the impact of those novel methods of fund-raising was considerable”. In particular because small wealth-owners represented a large share of these early investors (p.201). Samuel Jeake, a merchant from Rye (East Sussex) was one of those small investors. He recorded his thought and his transactions in a diary and a few letters (p.202).

Sylla R. (2008) How Alexander Hamilton founded America (singlehanded)

Sylla, Richard (2008) “The Political Economy of Early U.S. Financial Development”, in Political Institutions and Financial Development, ed. Stephen Haber, Douglass C. North and Barry R. Weingast. Stanford: Stanford University Press, 60-91.

In only seven years, from 1788 to 1795, the US underwent a dramatic financial revolution; starting from scratch and swiftly acquiring all the key components of a modern financial infrastructure. By the time the westward expansion and the industrial take-off were ready to swing into action, a strong financial system was there to back them (p.62). But what allowed the US to develop these instruments?

Gelderblom O. & Jonker J. (2008) What really brought interests down

Gelderblom, Oscar & Joost Jonker (2009) “The Conditional Miracle. Institutional change, fiscal policy, bond markets and interest rates in Holland 1514-1713”, Utrecht University Working Papers.

This paper is available online (pdf).

Traditional explanation of the low issuing rate on public debt in the Dutch Republic emphasize the dramatic fall that occurred around 1600, but fail to explain why this level kept on falling from 1640 to 1725, until it had reached 2.5% (p.2).

Stabel P. and Haemers J. (2006) Financial revolution: the supply side story (… almost)

Stabel, Peter and Jelle Haemers (2006) “From Bruges to Antwerp. International commercial firms and government’s credit in the late 15th and early 16th century”, in Banca, Crédito y Captial. La Monarquía Hispánica y los antiguos Países Bajos (1505-1700), eds. Carmen Sanz Ayán and Bernardo J. García García, Madrid: Fundación Carlos de Amberes, p.20-38.

Introduction

The Financial Revolution – i. e. the gradual increase of government spending made possible by an increasing reliance on loans obtained from the capital markets – has essentially been studied from the side of the public demand. The ability of the markets to match this demand being regarded almost as a given. Meanwhile the impact the governments’ enormous financial needs may have had on private finance have hardly been addressed (p.22).

Interest rates in premodern Amsterdam

Ok it has nothing to do with the theme of the week (the Glorious Revolution), but I’m sure you hadn’t remarked there was a theme of the week anyhow.

So here is a very compeling story that explains better than anything else the process of financial revolution; here is a table showing the interest rates in 16th and 17th century for private loans used by small and medium businessmen:

Source: Dehing, Pit and Marjolein ‘T hart (1997) “Linking the fortunes: currency and banking, 1550-1800” in Marjolein ‘T Hart, Joost Jonker and Jan Luiten van Zanden, eds., A financial history of the Netherlands, Cambridge: Cambridge University Press, p.44-45.

Quinn S. (2001) Public debt to private finance: “Drop dead”

Quinn, Stephen (2001) “The Glorious Revolution’s Effect on English Private Finance: A Microhistory 1680-1705”, The Journal of Economic History, 61/3: 593-615.

Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).

Introduction

According to North and Weingast’s famous thesis, the investiture of William III of England in 1688, the “Glorious Revolution”, triggered a quick modernization of the British financial system – prompting in turn a fall of the interest rates. But the arrival of the new king also led the realm into a new war against France which lasted nine years and increased public debt from £1 million to £19 million (⅓ of the national income; p.593).

Temin P. and Voth H.-J. (2008) A case for deregulation… in 18th-century Britain

Temin, Peter and Voth, Hans-Joachim (2008) “Private borrowing during the financial revolution: Hoare’s Bank and its customers, 1702-24”, Economic History Review, 61/3, 541-564.

Introduction

The Financial Revolution is said to have allowed the British government to borrow widely and cheaply. Famously, North and Weingast added that it also had a profound and beneficial effect on private businesses (p.541). To assess the latter claim, the authors use data collected from the archives of a small London goldsmith bank, Hoare’s (p.542). It is likely that their sample is fairly representative since there were only a dozen such establishments around 1700s. The key event of the period is the lowering of the legal maximum interest rate from 6 to 5% in 1714 by the heavily indebted British government at the end of the War of Spanish Succession (p.543).

Fritschy W. (2003) A ‘Financial Revolution’ reconsidered

Fritschy W. (2003) “A ‘financial revolution’ reconsidered: public finance in Holland during the Dutch Revolt, 1568-1548”, The Economic History Review, 56/1, 57-89.

Introduction

A financial revolution is often mentioned as an important pre-condition for the rise of a modern state. Post-1689 Britain is the best-known example: a shift from short-term to long-term public debt guaranteed by the Parliament allowed the British government to increased substantially its budget (p.57). A roughly similar process is said to have taken place in the Netherlands at a provincial level, in Holland in the 1540s for instance state´s annuities (renten) are assumed to have replaced the cities’ short-term obligation (p.58).

Hoppit J. (1986) Financial crises in 18th-century England

Hoppit, Julian (1986) “Financial Crises in Eighteenth-Century England”, The Economic History Review, 39/1, 39-58.

Introduction

“Because the financial system in the 18th century was evolving and becoming more sophisticated, […] the nature of crises developed and changed”. Historians have long disagreed on the very definition of what constituted a crisis in early modern England (p.40). The author defines a crisis as a moment when expectations change leading owners of wealth to abandon a type of asset for another leading to the falls in prices of the former. The more widely available the newly-sought asset is, the lesser the crisis.

Fusaro M. (2006) Old and new commercial networks in the 17th-century Mediterranean

Fusaro Maria (2006) “Cooperating mercantile webs in the early modern Mediterranean. ‘Old style’ v. ‘new style’ commercial web”, paper given for the XIV International Economic History Congress Helsinki, session 37, 16 p.

Warning: this is the summary of a work in progress; all potential mistakes are mine.

The author’s goal in this paper is to address the question “did the Mediterranean trade networks experience an evolution of their structures as happened in the rest of the world” during the age of global expansion? She uses the Venetian possessions in the eastern Mediterranean – the so-called Stato da Mar from the loss of Cyprus (1571) to the beginning of the War of Candia (1646) as a case study to come up with an answer (1).