Based on Steve Pincus, 1688: The First Modern Revolution (Yale, 2009).
Charles II of England died in February 1685 and was duly succeeded by his son, James II. James hoped to rule as an absolute monarch, and to restore Catholicism as the religion of England. These ends were inconsistent with the rights and liberties that the English had won for themselves under previous monarchs, and by the summer of 1688, opposition to James II’s rule was widespread, cutting across both political and religious lines.1
With English encouragement, and with English material and financial support, William of Orange landed a Dutch army in the west of England in November 1688. Rebellions occurred across the country, and William was able to march to London without fighting a set battle. James II fled England for France in December 1688. The elected members of a Convention Parliament chose William of Orange as England’s next king. He ruled as William III.
This “Glorious Revolution” is often considered to be a turning point in English history. It firmly established an Englishman’s right to the security of his person and property, his freedom to speak against the policies of the king and the government, and the necessity for the king to consult Parliament and respect the laws that it passed. From the property rights perspective of North and Thomas, these changes laid the foundations for future prosperity.
There was, however, another important way in which the Glorious Revolution changed England. The proponents of an economic ideology that justified the power of the landowners became less influential. The proponents of an ideology that emphasized the value of labour, and the role of manufacturing and trade in realizing this value, became more influential. This power shift resulted in significant changes to England’s domestic and foreign policies.
Josiah Child, Governor of the East India Company and James II’s economic advisor, advocated the first of these ideologies. Carew Reynell, a “writer in economics,” was an advocate of the second ideology.
The Economics of Josiah Child
Child essentially argued that wealthy and powerful landowners should get to keep their wealth and power. The logic of the argument was most easily understood by wealthy and powerful landowners.
Child’s argument begins with the proposition that all produce is ultimately gained by harvesting the land and the seas. The farmer might plough the field, sow the seeds and harvest the crop, but it is the land that grows the wheat. Likewise, the value of a wrought iron tool resides in the iron ore and in the coal used to smelt it — both harvested from the land — and not in the labour and tools that went into the mining, smelting and smithing. In both of these cases the land is naturally bountiful, and the labourers simply choose the form in which they reap that bounty.
Child draws two conclusions from this proposition. The first is that land is the only true form of “property” and that property is therefore an endowment of Nature, not the product of human hands or human ingenuity. The second is that people without land ultimately rely on people with land for their livelihood. A farmer without land is nothing, and so is a smelter without iron ore, or a blacksmith without the iron made from that ore. Child then goes one step further: people with land should take precedence over people without land by virtue of the latter’s dependence on the former.
When the inhabitants of the earth began to increase and multiply; those who first gained possession [of land], and assumed to themselves a distinct propriety and right therein, had excluded the succeeding race of men from all other livelihood and subsistence, but what was subordinate to, and dependent on such proprietors, who having power and means to support them, did thereby claim a right to dominion over them.2
The dependence of the landless on the landed had immediate implications for taxation. Child argued that the government should replace taxes on land with taxes on consumer goods, “easing those few that are the proprietors of land, to lay [the burden] on those many that raise their estates out of the produce of the land.”3 Don’t bite the hand that feeds you!
Farms and fisheries were the basis of trade, which was little more than the exchange of one country’s commodities for those of another country. The volume of trade would always be limited — how much black pepper does England really need? — so the goal of trade should be to obtain foreign goods at the lowest possible prices. Since competition among English merchants for foreign goods drives up these prices, only one English trading company should be allowed to operate in each geographical area. The right to create these trading monopolies should reside in the king. In this way Child justified the existence of chartered trading companies like the Royal African Company (1672), the East India Company (1600) and the Hudson’s Bay Company (1670).
Since wealth is based on land, the English should aim to be more than just traders: they should seek control over foreign lands, using military force as required. Also, the natural limits on the extent of trade meant that one country’s gains came at the expense of another. Successful trading nations like England and the Netherlands were in a shoving match, and England should expect to use military force to win out. This view of trade provided the rationale for England’s colonization of India and other lands, and for war with the Netherlands.
The Economics of Carew Reynell
England’s flourishing manufacturers and merchants must have found Child’s ideas strange. They had watched the Netherlands become the most prosperous country in the world despite its nearly complete lack of natural resources. As one commentator observed, the Netherlands “affords neither grain, wine, oil, timber, metal, stone, wool, hemp, pitch, nor, almost, any other commodity of use; yet we find, there is hardly a nation in the world which enjoys all these things in greater affluence.”4 England itself seemed to be following the Dutch lead, with manufacturing and trade growing hand in hand. Other economics writers, among them Carew Reynell, understood the economy in ways that better resonated with England’s entrepreneurs.
Reynell believed that labour, not land, was the foundation of the economy. He also believed that prosperity lay in manufacturing, not in the production of commodities. Manufacturing created an infinite loop that boot-strapped the country’s prosperity.
Where abundance of manufacturing people are, they consume and sweep away all country commodities, and the wares of ordinary retail trades, with all sorts of victuals, wearing apparel, and other necessaries, and employ abundance of handicraftsmen, in wooden and iron tools, and instruments that belong to their trades, and so maintain and increase abundance of husbandmen, retailers and artificers of all sorts, and they again increasing, take up more manufactures, and so they thrive one another ad infinitum.5
It is hard not to see the bones of the Keynesian multiplier in this passage. Reynell implicitly recognizes that one man’s expenditure is another man’s income. The purchase of goods by one party generates income for a second party, the seller of the goods. The second party uses some of his additional income to buy goods, generating income for a third party. The third party likewise uses some of his additional income to buy goods, generating income for a fourth party. This process continues indefinitely, ramping up both total production and total income. What separates Reynell’s argument from the multiplier is that Keynes recognizes that with each round, the increase in income becomes smaller, converging to zero, so that the infinite loop generates only a finite increase in total income.
Reynell argued that trade could be either good or bad. Bad trade involved the purchase of consumer goods with cash, as was commonly the case with the spice trade. Bad trade took purchasing power out of the country, and brought back only some frivolous luxury item. Good trade, on the other hand, facilitated the boot-strapping of the manufacturing sector. It involved the sale of manufactured goods for raw materials, which would then be formed into still more manufactured goods. For Reynell, there were no natural limits on trade. Competition among British merchants was desirable because it brought more raw materials into the country and placed more manufactured goods abroad.
Although the idea that a society should seek the greatest good for the greatest number was still a century in the future, Reynell seems to have been concerned for the welfare of a broad cross-section of the population. He believed that manufacturing and trade would benefit everyone.
The happiness and welfare of all people arises by having or acquiring, through some industry or other, such conveniency of livelihood, as may not only keep them from want and poverty, but render them pleasant and sociable to one another.6
Reynell expected the government to take a significant role in the promotion of manufacturing and trade. He argued that
…the chief things that promote trade and make it flourish are that it be free, naturalization, populacy, comprehension, freedom from arrests, certainty of property and freedom from arbitrary power, small customs, all conveniency and advantages for trading people: loans of interest, public places of charity for all wanting and distressed people, and also employments ready for all persons that want it.7
Note that Reynell lists property rights (specifically, the security of person and property) as one of the factors leading to prosperity. The English believed that these were rights that they already possessed. A pamphleteer writing at the accession of James II argued that each person in England was “assured that whatever he gains is his own property, and that not one farthing will be demanded of him, without the consent of prudent and worthy persons, freely chosen and entrusted by the body of the nation.”8 The English contrasted their own happy state with that of the French, who lacked these rights: “When I have named France, I have said all that is necessary to give you a complete idea of the blackest tyranny over men’s consciences, persons and estates, that can possibly be imagined.”9 It was James II’s infringement upon English rights and liberties — his presumption that he could rule like Louis XIV — that led to his ouster.
Ideology and Policy
The Glorious Revolution did not sweep out one ideology and sweep in a new one, but there was a discernible power shift that was reflected in England’s policies.
War was a major issue. At the time that he was deposed, James II was preparing for war against the Dutch. There was no single reason for the war. The Dutch were a threat to James II himself. The United Provinces of the Netherlands had come into existence by rebelling against the Spanish king, and had then grown exceptionally prosperous. James II and Louis XIV, both absolutist monarchs, believed that a successful republic constituted an unwelcome exemplar for their own citizens. James II was further provoked by the willingness of the Dutch to provide shelter to English dissidents (notably John Locke), print pamphlets critical of the English government for distribution in England, and meddle in English internal affairs. A major factor, however, was that the Dutch were a threat to the English economy. Trade was the foundation of the prosperity of both the English and the Dutch, and they were in direct competition in both India and the spice islands. If trade was limited (as Child believed), every Dutch gain was an English loss. Moreover, both the English and the Dutch appeared to believe that controlling foreign lands was central to their success. They had fought battles at sea, and they continued to fight ferociously and bloodily over the spice islands. The Netherlands were the enemy, and France was a natural ally.
With the Glorious Revolution, enemy became ally and ally became enemy. War on France was declared only a month after William III’s ascension to the throne. Louis XIV seemed intent on dominating all of Europe, making France a perpetual threat to the territorial integrity of all other European nations. France was also attempting to expand New France at the expense of the Hudson’s Bay Company and the American colonies, and France was accused of weakening England by impeding its trade. The Dutch were now portrayed as a people whose prosperity was the result of their own industriousness, and whose conception of a citizen’s rights and liberties matched that of the English.
Pincus discusses a pair of “before and after” court cases that highlight the redefinition of property.10 In East India Company v. Thomas Sandys (1685), the East India Company accused Thomas Sandys of trading in their territory without a license. His defence was based in part upon a liberal definition of property.
…the king cannot by his letters patents take away the subject’s property, and I do not know a greater property than freedom of trade and labour; the king cannot take away six-pence that a man has got by his trade, much less can he take away his whole trade…11
The Court specifically rejected this argument in siding with the Company: only land was property, and decisions concerning foreign lands were the king’s alone. With his authority reaffirmed, James II extended the powers of the East India Company, which then began to impose itself as a “sovereign power” on Indian territory. In Nightingale v. Bridges (1689), merchants sought restitution from the Royal Africa Company after their vessels were seized while trading in the Company’s territory. The defence argued that the ships and their cargoes were property, that the trade in which they engaged had been legal before the Company was given its charter, and that “the king cannot by any prerogative whatsoever, create either a new cause or a new mode of seizure.” Altering the conditions under which property can be employed requires an act of Parliament, which is “the fittest way…because each subject’s vote is included in whatsoever is to be done: an act of Parliament hath the consent of many men, both past, present, and to come.” The Court accepted this argument, broadening the legal definition of property and initiating an era of free trade.
This decision radically changed the status of the trading companies. Not only did the companies lose their monopolies, but their operations were brought within the purview of Parliament. Concerned that the growing volume of textile imports from India harmed English manufacturers, Parliament levied taxes on East Indian goods.
The tax system was changed to reflect the new understanding of property and prosperity. Parliament, under Charles II, had imposed a tax on hearths. The burden of this tax had fallen disproportionately on manufacturers because fire and heating were an important part of many manufacturing processes. The new Parliament, recognizing manufacturing and trade as the source of the country’s prosperity, eliminated the hearth tax. It replaced that tax with a tax on land, inverting Child’s preferred tax policy.
Another important change was the creation of the Bank of England, which was originally an institution that accepted deposits, paid interest, and most importantly, made loans to manufacturers and traders. Its primary purpose was to provide liquidity for England’s expanding economy, but another role was in sight from the beginning. The technology of war was changing, making it more expensive (here). The English government could not finance its war against France out of current revenues, so it took out loans organized by the Bank of England. England’s success in its wars against France was at least partially the result of its “deeper pockets.” The flip side of greater military strength was the emergence of England’s national debt, which grew from £12 million in 1700 to £850 million in 1815, when Napoleon was defeated at Waterloo.
The Glorious Revolution saw the rise of one economic ideology and the fall of another, a shift that was clearly reflected in England’s economic policies.
- Pincus states that many English Catholics ultimately opposed James II. The king adhered to a form of Catholicism advocated by French Jesuits and adopted by Louis XIV of France. This “Gallican Catholicism” argued that a king was sovereign within his own territory—not even the Pope could limit his power—and rationalized the forced conversion of Protestants. Pope Innocent XI strongly opposed both of these claims. English Catholics were forced to choose between their king and their pope, and many chose the latter. ↩
- Child, A Discourse Concerning Trade and That in Particular of the East Indies (1689), quoted in Pincus, p. 374. ↩
- Child, A New Discourse on Trade (1694), quoted by Pincus, p. 374. ↩
- J. Evelyn, Navigation and Commerce, their Original and Progress (1674), quoted in Pincus, p. 51. ↩
- Carew Reynell,A Necessary Companion; or, The English Interest Discovered and Promoted (1685), quoted in Pincus, p. 370. ↩
- Reynell, A Necessary Companion, quoted in Pincus, p. 370. ↩
- Reynell, A Necessary Companion, quoted in Pincus, p. 370. Naturalization matters because foreigners often introduced new industries or new production techniques into England. Population matters because labour was believed to be the bedrock of the economy. Comprehension was a limited form of religious tolerance: if a church’s practices differed from those of the Church of England in ways that were not fundamental to the faith, they were to be permitted. ↩
- Robert Grove, Seasonable Advice to the Citizens, Burgesses, and Free-Holders of England (1685), quoted in Pincus, p. 102. ↩
- Gilbert Burnet, A Sermon Preached before the House of Peers (1689), quoted in Pincus, p. 336. ↩
- Steve Pincus, 1688: The First Modern Revolution, pp. 376-8 and 385-8. ↩
- Thomas Bayly Howell, Thomas Jones Howell, William Cobbett and David Jardine, Cobbett’s Complete Collection of State Trials (Bagshaw, 1811, available through Google Books), p. 387. ↩