Douglass North and Barry Weingast’s seminal article on ‘credible commitment’ has proven the most influential explanation of the economic and financial significance of the Glorious Revolution of 1688/89. They argued that the establishment of parliamentary supremacy over public finance created an environment in which investors could rely upon the state to meet its financial promises. The Financial Revolution, upon which Britain’s rise to great power status was founded, followed from this development.

While North and Weingast’s arguments have enjoyed wide acceptance among historians, economists, and political and legal theorists, their work has also attracted much criticism.
Patrick O’Brien, among others, has shown that the institutions necessary for good governance of the public finances were put in place prior to the Glorious Revolution. On the other hand, Ron Harris has argued that it was not until the nineteenth century that public creditors had at their disposal the tools for effective oversight of the public finances. A number of empirical studies have provided additional challenges to the ‘credible commitment’ thesis. In particular, interest rates did not decline substantially during the half century following the Glorious Revolution period, thereby casting doubt on the idea that 1688 represented a turning point in the British state’s borrowing capacities. These studies also show that political events rather than institutional changes had the greatest influence over the willingness of investors to commit capital to the British state. But, while critics have questioned North and Weingast’s explanation of ‘credible commitment’, they have failed to explain why it was that investors were still willing to place their trust and capital in the British state.

This lacuna in our knowledge is not only problematic for scholars of the European financial revolutions. The recent global financial crisis has renewed the spectre of sovereign debt default and thus made it essential that we fully understand the mechanisms by which states successfully foster public trust. Moreover, many Western politicians and public commentators see the North & Weingast thesis as vindication of the widely held belief that successful financial capitalism can only emerge in democratic societies with professional bureaucracies. This has fostered complacency about the economic potentials of states like Russia, India and China. But if North & Weingast’s explanation of ‘credible commitment’ has not withstood close scrutiny, then the applications of their hypotheses to new contexts may also be flawed.

The goal of this conference, therefore, is not only to draw together the revisionist scholarship on the ‘credible commitment’ thesis, but also to formulate a new understanding of the factors contributing to the successful adoption of financial capitalism in Britain.

Dr D'Maris D. Coffman, Newnham College
Dr Anne L. Murphy, University of Exeter